How much does movie marketing matter?

Fri Jun 11, 2010 3:17am EDT
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By Larry Gerbrandt

LOS ANGELES (Hollywood Reporter) - When a movie hits big, almost no one cares what was spent; when a release fails to make opening-weekend estimates or has a 60 percent drop-off during its second week, everyone begins pointing fingers.

Consider MGM's $30 million to tub-thump "Hot Tub Time Machine," which cost about $35 million to make: First-week gross was $20 million, dropping 60 percent the following week and winding up with $50 million in domestic gross.

Or Disney's $200 million production "Prince of Persia: The Sands of Time," which has raked in $63 million domestically to date against a prints-and-advertising spend stateside of $75 million.

On the other hand, Disney's "Alice in Wonderland," similar in cost and marketing budget to "Prince," has grossed $334 million domestically and $1 billion worldwide.

In short, there might not be a more daunting challenge than opening a major motion picture: Create an internationally recognized brand name that lasts a lifetime, and do it in a couple of weeks with no second chances to course-correct. It's little wonder that the average P&A (prints and advertising) spend for major releases last year topped $37 million, according to Baseline Intelligence, the highest number since 2003, when the six largest studios spent an estimated average of $39.5 million on P&A in North America.

For the past seven years, domestic P&A has accounted for 34 percent-37 percent of combined production and domestic-releasing costs for movies released by the six big studios. In fact, after taking a big jump in 2003, the combined negative plus domestic P&A has hovered around the $100 million-a-film mark, with last year hitting $102.3 million, up from $87.9 million in 2008, according to Baseline Intelligence.

Looked at another way, for every dollar spent on producing a major film, the studios have been spending 51 cents-58 cents to release and market it in the United States and Canada. Assuming distributors get an average of 55 percent of domestic ticket sales, the average 2009 release had to gross $186 million to recoup production and domestic-releasing costs -- an unrealistic goal for all but a handful of titles -- which is where the international brand-building challenge kicks in.

The connection between production budgets and P&A spend is repeated at the individual studio level. Last year, Paramount had the highest average negative cost ($87.7 million) and highest P&A average ($50 million a release). Universal had the lowest average negative cost ($51.7 million) and lowest P&A ($30.4 million).   Continued...

<p>Actor Johnny Depp (L) and Director Tim Burton pose at an event to promote the movie "Alice in Wonderland" in Tokyo March 22, 2010. REUTERS/Kim Kyung-Hoon</p>