Magazine article Variety

Costs Run Wild

Magazine article Variety

Costs Run Wild

Article excerpt

In the year before his death, Ste Jobs told the audience at a digital conference that movie-makers were on the verge of taking a page from the playbook of their compatriots in the music business.

"What the studios need to do is start embracing the front end of the business," he said, "to start knowing who their customers are, and to start building mechanisms to communicate with them, and tell them when their new product is coming out." Within two years, the Apple CEO predicted, selling films "is going to get a lot more interesting, more precise, cheaper, efficient."

But, some five years after the marketing genius's death, Hollywood is still struggling with how to efficiently reach audiences and contain mushrooming marketing costs.

Global P&A expenditures for big event movies rarely fall under $150 million, and can spiral to twice that amount, several studio insiders say. It is money that experts say still overwhelmingly - 70% or more, in most cases - goes to buy television time, while once-modest digital spends also are escalating.

"There has been talk for years that there is a new wave coming, and TV buys will be reduced," says one studio chief, who asked not to be named discussing internal strategy. "But I don't see that change any time soon. It's a revolution that is always on the next horizon."

One reason the marketing revolution has yet to materialize is that distributors still lack the kind of granular customer profiles that Jobs envisioned. "The studios are gaining more information," notes one marketing consultant. "But we still have an intermediary, the theater owners, in between us, and our ignorance of our consumers is still extreme."

Marketers know the power of digital media, but also are becoming more cognizant of its limits. Several executives say they are not convinced, for example, that trailers posted online aren't just as readily avoided by consumers as are TV ads skipped in the age of the DVR.

"You only know for sure that the consumer saw the first second or two of your trailer. After that, it's unclear," suggests a marketing consultant. "And was the volume even turned on? We don't know. We need better verification of who is really watching and hearing what."

Also disappearing is the sense - from early in the Internet era - that grabbing an audience online or on a mobile device comes cheap. One producer notes that the standard rate for prime placement across the top of YouTube's home page is $725,000 per day. Those dollars can add up quickly when buying even a one-weekend perch on the video platform.

"On any site where there is proof that people are actually landing, it is going to cost you," says a producer, who asked not to be named discussing private negotiations with the giant video network. "In the paid media space, there are no bargains anymore."

The intense pressure marketing chiefs are under to perform also contributes to the relentlessly high costs of film releases. Marketing executives say that second-guessing over a campaign is more likely to fall on those who commit errors of omission, so better to buy too much, rather than too little.

"It feels like guilt-driven business," says marketing veteran Russell Schwartz, a co-principal in consulting firm Pandemic Marketing Group. "'Who am I missing? …

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