Hollywood Blames Failure of Newspaper and Television Advertising For Its Box Office Slump. Threatens Diverting Advertising to Where the Young Congregate – The Internet

Philip M. Stone August 20, 2005

Hollywood is going through its worst slump in some 20 years, and the problem, according to the movie moguls, is not that their films are bad – a matter of opinion -- but rather the hundreds of millions of dollars they are spending on newspaper and television advertising are being wasted on age demographics that don’t go much to the movies.
Go To Follow Up & Comments

If you want to catch the young, and those aged 14 – 24 are the movies’ prime audience, then the place to catch them is the Internet. The  $100,000 full page color ads in the entertainment sections of many weekend newspapers in large cities just don’t catch the young any more, and with less people watching television – or zapping the commercials via their digital video recorders  – that doesn’t work as well either.

Movie studio advertising is really big business for newspapers and television. But already not as big as last year -- movie studios cut their ad spend by a whopping 11.2% in Q1, 2005. Goldman Sachs estimates that some 14% of a newspaper’s advertising revenues come from entertainment advertising, and the huge bulk of that is Hollywood.

And while one can argue about the crop of movies released this year – Bewitched, Honeymooners, Lords of Dogtown etc., and whether any amount of advertising in any medium could have helped them -- there is, regretfully, a case to be made about the demographics.

The younger you are the more likely you are to go to a movie and your preferred venue to gain news and information is the Internet (90% of those aged between 12- 17 access the Internet, according to the American Life Project). The older you are the more you stay with print and television, but the less likely you are to go to the movies.

According to the Scarborough Research Top 50 Market Report in the US, the largest group of newspaper readers is aged 35-54, then comes those over 55, then a much smaller proportion in the 25-34 bracket, and lastly the 18-24s who hardly show. And to whom is all that expensive full-page color display advertising targeted at – that’s right, to the 18-24s who are not looking.

So either newspapers do something mighty fast to get that young readership back, or they are going to lose a major cash cow. And the writing on the wall is that the young are extremely difficult to bring back to print.

That’s one reason why journalism pundits have been decrying the “dumbing down” of the entertainment pages of even the most “conservative” of American daily newspapers. To attract the young you need to write about what the young are interested in – so out, or buried deep inside the entertainment section, goes the blanket coverage of the opening night of the opera and in comes an interview with some pop star.

The way Hollywood sees it, and many other advertisers agree, newspapers are charging ever increasing rates for color advertising for a product that each year actually loses overall circulation (readership) let alone the prime demographic group most sought after. Why continue? If the readership  numbers are down then why not the advertising spend?

And while there are many counter-arguments to explain the movie malaise – the cost of taking the family to a movie these days is getting pretty expensive, DVDs are flooding the market, some at prices comparable to just one movie ticket, and DVDs are being released very soon after a movie is released – the truth is that the Hollywood anguish at rising advertising costs for declining circulations that fail to deliver the right demographics is a point that should have all newspapers very fearful for the next logical step.

It’s no wonder that major media groups like News International, The New York Times Company, Dow Jones and others are spending fortunes now buying Internet sites so those advertising revenues can augment the near stand-still revenues of print. Some newspaper groups like Knight-Ridder are also resorting to buying up their own shares in order to boost share prices that are near yearly lows.

Movie box office revenue dipped some 10% this summer on a 12% attendance drop.  While not good, ticket sales account for only about 35% of most studios’ bottom line. According to PwC, Hollywood generated a record $15.2 billion in 2004 DVD sales, up 30% from a year earlier, compared to $9.4 billion from the box office.

 

 

 

A DVD failure -- "only" 35 million sales

Incoming Disney President Bob Iger has suggested that DVDs might be released at the same time as a movie’s theatrical release -- to get that money in the house faster. The National Association of Theater Owners didn’t take kindly to that idea, accusing Iger of wanting to kill off (or reduce the cut) of movie theaters.  That debate continues.

Buying and renting DVDs since the year 2000 has gone up 675% according to the Motion Picture Association of America, but there are real signs this is dramatically slowing down, not just in the US but also overseas. In Q2, 2005.  DreamWorks, for instance, got caught having to take back some 20 million unsold DVDs for Shrek2 – the film made more than $400 million at the box office but sold “only” 35 million DVDs (which gives an idea of how much money studios make on DVDs), but they had budgeted to sell 55 million -- and those returns meant a loss for the quarter.

And because DVD sales now look like they are maturing, or at the very least the spend is being spread out between more product – in 1997 there were just 1,522 DVD movie releases, last year there were more than 11,000 -- the studios are again focusing more on ticket sales, and in turn the advertising mediums being used to get the young John and Jane Q. Public through the doors.

Bad as it is for newspapers, it may be worse for television that has always been the most important part of any movie’s launch. The “real” money for a movie launch is often spent on network television campaigns. But with viewers now having far more television choices – including watching programming via Internet broadband --  and armed with the technology to be rid of commercials, and perhaps being a bit tired of being “let down” by all the advertising hype for a movie’s launch, studios are looking to see if there are not better ways of spending on television campaigns, perhaps spreading more of the spend beyond the networks to cable, local stations, and Internet streaming.

It’s also a reason why the billions of dollars Hollywood – movies and television – now earn from product placement are so important, and look to be an even bigger cash supplier for the future. And why studios, as part of product placement promotions, now extend campaigns to the Internet, using the web sites of the product being promoted to also promote the movie. A win-win for Hollywood and the product.

Important movie marketing campaigns have been waged successfully on the Internet, and based on the early successes this is set to grow. The Internet is, after all, where the young people are, so it’s just a matter of attracting their attention.

But for television and print media there is a fearful message. The days are numbered for advertisers coughing up more money each year to reach less people, and the wrong people at that.

The young congregate on the Internet, whether it is for news, information, video games, meeting people on social sites and the like.

Can Spider-Man be far behind?

ftm Follow Up & Comments

That Los Angeles Times Mission: Impossible III promotion that went badly wrong results in a $75,000 settlement - April 16, 2007

See our item dated May 2, 2006 below about a Los Angeles Times promotion that went badly wrong.  The Times now reports that it, Paramount Pictures and the advertising company whose smart idea it was to have red wires hanging out of the vending boxes making some people think they may have been wired up to explode  have paid $75,000 to settle with the US Attorney’s office.

The Feds got involved because a patient at the Veterans Administration’s Los Angeles Medical Center thought there was a bomb, alerted the hospital, and the hospital evacuated. According to the US Attorney’s office the money will go to compensate the hospital which said the entire episode had cost it $92,855.77.

Drop In Movie Advertising Still Hurts LA Times - October 21, 2006

The Los Angeles Times is still suffering from Hollywood cutting back its newspaper movie advertising, with the spend down 17% this year, and 10% in just the 3rd quarter.

Hollywood is usually responsible for about 10% of the Times’ advertising revenue, so those cutbacks, plus the cutbacks by the automotive industry in what is considered to be the world’s largest single city auto marketplace, clearly demonstrate why the newspaper is being asked by its parent Tribune Company to make as many cost cuts as possible even though it still produces a 20% plus operating margin.

The newspaper says the movie ad problem is due to Hollywood taking out smaller ads promoting new releases, and also there are shorter runs at the theater which cuts back on the number of weeks a film is promoted. What it didn’t say, but what is also happening, is that some of the spend has been redirected to digital venues such as the Internet.

Some Great Promotional Ideas Just Don’t Work Out As Expected! - May 2, 2006

With the Los Angeles Times down some $10 million in its movie advertising bookings this year, it was only natural the newspaper would go to extraordinary lengths to do deals with Hollywood.

So someone had the really smart idea that with the launch of Mission Impossible III coming up this week wouldn’t it be just great that every time someone opened a Los Angeles Times newspaper box to buy a newspaper that they also got to hear the Mission Impossible theme. Got to admit that’s 10 out of 10 for promotion.

On the other hand, the execution got –5 out of 10. All those wires connected from the news rack opener to a very suspicious looking box at the back – well in this day and age that looked a bit too suspicious to be a good thing.

So one enlightened customer called the bomb squad. And they did what they did best. They blew up the news rack.

The Times is now busy calling all the law enforcement agencies telling them not to be concerned by wires from the back of some 4,500 newsracks leading to the micro-switch on the news rack door.

But in these days when we are all being asked to keep a lookout for everything suspicious would you open that newsrack with the wires protruding? Would you?

Times officials said these music-playing boxes were the first of their kind. Probably the last, too.

Movie Advertising Down 18% -- $10 million – At L.A. Times - April 20, 2006

The movie industry in its home market – Los Angeles – pulled back its first quarter spending in the Los Angeles Times by 18% in Q1 and it all depends on whose spin you want to believe on the reason why.

According to Hollywood insiders (just love that expression) the movie studios have been closely looking at their newspaper advertising for the past year given that newspapers are continually charging more for color ads while the main target for those ads – the under 35s -- are continually looking to the Internet for their news and information.

The studios believe they get far better value on the web than in newspapers – the web provides them audience they want to reach at a fraction of the cost of newspaper advertising -- although no studio has come right out and said so verbally; but they do seem to be saying it with how they spend their money.

According to the Times, however, it’s just circumstances that caused a drop in what should have been movie advertising’s most prolific quarter. A newspaper executive said that many of the films nominated for Academy Awards this year came from independent companies and therefore the major studios did not spend as much this year promoting movies for the Awards.

Also the executive said there were more movies than usual in the quarter, but most weren’t very good, had a short exhibition life, and therefore a short advertising life.

Whatever the reason – probably a lot of what the studios are saying privately plus a bit of what the newspaper is saying publicly -- given the drop in automotive advertising, and the possibility of a GM bankruptcy if Delphi goes into bankruptcy, the last thing major metropolitan newspapers need is to see one of its major ad producers – the movies – cut back, too.