Entertainment Marketing

IntroductionLecture One

Dr. Melodie R. Phillips

The Entertainment Industry

•Mediated Entertainment– Filmed Entertainment

• Movies• TV

•Recorded Entertainment•Live Performances– Art– Concerts– Theatre

•Destinations or Places– Vacation Activities

•Sports, Gambling•Books, Magazines, Novels•Collectibles•Video games

Why Study Entertainment

Marketing?•Great % of disposable income spent here•Unique approaches to marketing these products/services•Prosperous economy shows tremendous growth potential•Advances in technology – video games, Internet•Increasing importance of leisure time– Ex: Europe vs.

U.S. vacation time

Recent entertainment Events!

* Can we survive the success of “Here Comes Honey Boo Boo? “ Toddlers and Tiaras spin off drawing 2.3 million viewers and climbing ..*Holiday specials ranged from 3.4 million (Halloween) to 2. 19M for ThanksgivingDuck Dynasty is A&E’s highest rated show

At the Movies•Box Office for Summer 2012 disappointing.

–Slightly down revenues of $4.4 billion–Avengers and The Dark Knight the big winners–Blockbusters fizzled•Men in Black 3•Battleship•The Amazing Spiderman

–Surprises•TED•Magic Mike

–Flat Out Duds•Dark Shadows, Rock of Ages

The Successes• The Avengers

– $1.4 billion global take– $203 million open (best

ever!)– Disney’s $4 billion

purchase of Marvel pays off big!

– Sequel to debut May 2015

– Helps ease sting of John Carter

• The Dark Knight opens with $160 million (best ever non-3D). Total b.o. tops $1.08 billion ($250M)

Lessons from summer•The “Star” system is tarnished … Tom Cruise, Adam Sandler, Will Smith all had disappointments; affordable stars like Tom Hardy were breakouts•Movies are far too expensive - $225M for MIB3•Seth Grahame-Smith tanked! Wrote Dark Shadows and Abraham Lincoln: Vampire Hunter

Lessons From Summer• Indie films are

doing just fine! The Best Exotic Hotel Marigold – surprise hit

• Never bet against animation – Brave, Ice Age 4 and

Madagascar 3 all did well

Why are DVD Sales Hurting?

Recession – yet rental revenue virtually same over last year

Content and Quality of films offeredDigital Downloads

Transition to High Def – Blue RayFor the first time since 2002 – more consumers went

to the theater than rented or purchased DVDs(and box office not great … more $, less people!)

What to do? This used to be the profit base!

Strategies to improve sales? Rentals too easy and cheap! Profits in sales (not rentals)Cut out bonus features from rentals, offer 2 discs with BluRay

Grow BluRay market – cut prices and increase diffusion of innovation 3 billion units to 8 billion units in 2009

Diffusion rate from VHS to DVD went from 12 yrs to 4 years

First Sale Doctrine

• First Sale Doctrine - retailers have the right to rent any legally purchased copy of a movie. Video stores could go buy copies of movies with these extras at Wal-Mart or Best Buy and then rent them to consumers!

• Studios challenged video store owners over this doctrine in the 1980’s

iPad Cumulative Sales figures• June 2011 - 25 million• March 2011 - 19 million• Jan. 18, 2011 - 14.8 million• Sept. 2010 - 7.5 million• July 21, 2010 - 3.27 million• May 31, 2010 - 2 million• May 3, 2010 - 1 million• April 8, 2010 - 450,000• April 5, 2010 - 300,000

• **365 million units of iPod, iPod Touch and the iPad have been sold since 2007

• This quarter iPad’s sales will increase 60% yr to yr first quarter 2013

Entertainment EthicsNews• PR coverage often involves deals• “News” shows must generate ratings• “News” is no longer objectiveFilm Reviews• Is the quote legitimate?• Press Junkets and trips for criticsRadio – pay for play

Films and Movies – Art or Commerce

•Entire industry that has only been around 100 years or so•It is a mixture of art and commerce•Has a profound effect on behavior, culture, politics, and economics

Entertainment as Commerce

•Idea is to make movies that attract customers •Goal to attract enough customers to cumulatively pay for costs to be recouped •Additionally must make enough profit to satisfy investors

Movies as Product

• Extremely perishable commodity–Value only as long as it is on people’s minds and is relevant to their frame of reference

• Can achieve a level of rejuvenation when enter international and video life cycles

Life Cycle of the Movie Product

Theatrical exhibition – First Tier• Up to 90% gross to distributor (Ex: The Grey)• 40 - 60% goes from $1.50 theatres, drive ins

2-4 months later – DVD rentals and sales – Second Tier (Ex: DRIVE)• Share based on a % of sales or purchase at “for rent”

priceHome TV Pay Stations (HBO, Showtime, etc.) (9-12

months post b.o.) – Third Tier (Ex: Black Swan)• Based on a fee of % of subscriber fees

Network Television Viewing – Fourth Tier (2-3 years post b.o.)• Negotiated payouts triggered by each run• Made for TV Movies can be sold to local affiliates or

overseas markets for additional revenueExceptions – Rocky Horror and weekends

Comparisons to Other Industries

•Similarities– Production

encompasses R&D, manufacturing

– Distribution can be compared to wholesaling

– Exhibition compares to retailing

•Differences• No other industry is a

single product manufactured for tens of millions of dollars with no real assurance of purchase

• Public takes away with them a piece of the product in terms of memories

• First dollar deals – stars, directors and producers take % of every revenue dollar even if studio has not recovered production costs

2x2 Marketing Analysis of a Film ProductProduct

Cast – Dark ShadowsSpecial Effects – Avatar Soundtrack – Saturday Night Fever, The Matrix, O Bro Where art Thou?Plot – Sixth Sense, Fight Club, Donnie Darko, Planet of the ApesCinematography – Inception, Hugo, The Aviator

PriceCost of Production – Avengers $220M) b.o. $1.52BNapoleon Dynamite ($400k) Marketing Expenses – Independence DayBox Office to DateAvatar ($2.78B); Napoleon Dynamite ($44.5M)

PlaceTiming of release – Scorpion King, The Avengers; BattleshipWide (Dark Knight Rises) vs. Tiered Release (Silver Linings Playbook)Rating of the Film – Beverly Hills CopPoor – South Park (R), Dinosaur(PG)

PromotionPR – Beautiful MindEvent marketing – Days of ThunderPromotions – Finding Nemo, Star WarsAds and Trailers – Independence Day, The Dark KnightMerchandising – Lion King

2x2 Analysis Form for Quiz 2.

ProductCast –Special Effects –Soundtrack – Plot –Cinematography –

PriceCost of Production –

Marketing Expenses –

Box Office to Date

Place

Timing of release – Wide vs. Tiered Release

Rating of the Film –

PromotionPR –

Event marketing –

Promotions –Ads and Trailers Merchandising –

Measuring Celebrity Power

• Paid Attendance– B.O. receipts, concert tickets sold, attendance at

political fundraisers, charity giving at celebrity cause

• Q Factor– Measures how much a celebrity is liked or disliked

by the public– How familiar the public is with the celebrity

Q Factor Performer

Celebrity graded by the public on 6 factors• In your opinion indicate: The

performer is …•One of my favorites•Very good•Good•Fair•Poor•Someone I have never heard of or seen• Yields familiarity and appeal

Celebrity Power Measures

Polling Research• Assess public’s attitudes regarding•Believability•Compatibility with causes and products•Overall communications skills•Ability to change impressions or attitudes

Ratings Services• TV, radio

Incidental measures such as size of fan base, # letters written to celebrity, posters, calendars, videos/DVD sold, gossip column mentions, covers, log-ins and searches

Trend or Changes in the Industry

•Originally product developed just for theatrical release•Later embraced television, airplane and college viewings•Now the single most lucrative market is video•Year to date spending on DVD purchases is $10.2B flat as compared to last year; rentals up 1%

Additional Outlets and Profit Arenas

•Movie Companies are now into:

– Satellite. Laser, Pay per View licensing – any venue to get the movies exposed to the consumer

– Movie theatres, book publishing, theme parks, music, merchandising and real estate

History - Vertical Integration

•In the late 40’s U.S. Justice Department forced some divestment of vertically integrated firms: lost exhibition•Legal environment changed and now see syndication, home video, music and merchandising in the family of companies

History of the Movie Business

• Through 1960’s• Pictures released locally and advertised with a

mix of newspapers and local TV• Distribution company named Sunn Classics

began experimenting with network TV and this has had a major impact on cost increases!

• As studios recognized the cost efficiency of national ads – they had to release nationally so print runs increased fro 500 to 1000 to 2000 or more to maximize audience access.

History – 1960’s – 1980’s

• Massive releases of 2000+ leaves little room for independent distributors• Strategy of the independent is to carve

out limited release patterns and then ride a wave of positive WOM and profits (i.e., Blair Witch).• Breakout independents can be hugely

profitable because their costs are generally a small percentage of studio products.

Star Wars – The Economic Impact

•Rewrote the economics of the movie business•Released in 1977 broke upper limits of traditional grossing

– $798M WW•Redefined worldwide income in books, records and other media

Star Wars Saga Economic Impact Star Wars: Episode IV - A New Hope 1977 • Budget $13M US Gross $461M WW Gross $798M

Star Wars: Episode V - The Empire Strikes Back 1980 • Budget $18M US Gross $290M WW $534M

Star Wars: Episode VI - Return of the Jedi 1983 • Budget $32.5M US Gross $309M WW Gross $573M

Star Wars: Episode I - The Phantom Menace 1999 • Budget $115M US Gross $431M WW Gross $922M

• Rerelease in February 2012 yielded another $40MStar Wars: Episode II - Attack of the Clones 2002 • Budget $115M US Gross $311M WW Gross $648M

Star Wars: Episode III - Revenge of the Sith 2005 • Budget $113M US Gross $380M WW Gross $848M

Total Budget $406M US Gross $2.18B WW Gross $4.32B

Ancillary Revenues from Ancillary Revenues from Star WarsStar Wars

• Soundtrack netted 2 top ten radio play hits, the original theme and the Cantina Band song.

• Both the Star Wars and The Phantom Menace soundtracks have been certified platinum by the RIAA.

• Attack of the Clones and Empire Strikes Back are certified gold by the RIAA.

• Over 100 video games spurred from both film material and the Expanded Universe• Games released for almost all platforms

including Sega, PS3, Xbox 360, Nintendo, Wii

Star Wars – the Bottom Line

Initially released on May 25, 1977Re-released on 7/21/78, 8/15/79, 4/10/81, 8/13/82

and 1/31/97Ad budget of $4 millionGross receipts of $798M worldwideRental $270.92MDVD Box set - $100M first dayBlue Ray release of Star Wars: The Complete

Saga set Blueray record $84M week 1 ($140 set).• 515,000 copies in North America

U.S. TV rights - $11M Spike TV 2008-13Series has grossed over $1.8B (6 films) vs. James

Bond (21 films) $1,272B and Harry Potter 1,119.0B (4 films)

Star Wars – Attack of the Star Wars – Attack of the Toys!Toys!

• In 1977 movie licensing was hardly a business• No tie-in toys• No fast food promotions

• Star Wars series generated $10.5B in merchandise sales

• 400 licensing agreements worldwide granted for Revenge of the Sith alone

• Merchandise sales to date are 3X box office receipts of the movie franchise

• Studios generally make 10-12% on licensing; Lucas negotiates even better %’s

Soundtrack

Composed by John Williams (former maestro of the Boston Pops)

Composed all 6 Star Wars filmsNominated for 45 Oscars; 5 have won including

Star Wars: A New HopeRevived grand symphonic scores in late 1970’sUsed technique called “leitmotif” in which a

melodic cell signifies a character, place or mood

Soundtrack

• Research shows that consumers that of those willing purchase soundtracks, 50% do so within 1 week of seeing the film

• Main theme only used for title crawl in subsequent Star Wars movies

• Walt Disney is the only individual to have more academy award nominations than John Williams

Future Revenue Plans

• Video games• TV programming• Book publishing• 3-D release of the original films (Phantom Menace opened

this month in 3D)• Hasbro has toy licensing deal through 2018 and is re-

releasing empty boxes with certificates for the original four action figures from 1977

Fan Involvement

• Multiple Star Wars fan sitesMultiple Star Wars fan sites• www.rebelscum.com• News on Star Wars collectiblesNews on Star Wars collectibles• www.theforce.net

Revenues

• First 5 films $5.7 billion• $10.5 billion in toys and merchandise• $4.3B in DVDs, VHS and video games

(video games ongoing as are releases in 3D and Blueray)• TOTAL REVENUE $20 billion +

Related Effects of Star Wars

•Solidified the publishing offshoot proving that orchestral movie scores could hit the top of the charts and pop scores would soon top the day•Examples: Saturday Night

Fever, Ghost, Batman

Film Genre

•Thrillers•Mystery•Film Noir•Comedy•Action •Documentary•Adventure•Western•War

•Horror•Sci-Fi•Drama •Romance•Crime •Animation•Fantasy•Musical•Children’s

Emergence of Home Video

•There was once a time that you were not only prohibited from owning a movie – but you couldn’t even see it on TV at your convenience•Today every studio has a home video division – all because of the VCR!•Now the customer dilemma if whether or not to leave home to view a film

The Eighties and the Cost Spirals

•Dual increases in production budgets and marketing costs•Production increases– rationalized as

needed for special effects and complicated physical production

– Higher salaries and gross points vs. net

– Home Video•Marketing– Further benefiting

markets after the theatrical release

Eighties Cost Spirals

•Picture Budgets rose by 185% and marketing rose by 169%•Home Video/DVD growth has slowed as entered mature stage and now appears to be dropping into decline

Movie Production – The Players

•The Creators– The Producer– The Director– The Writer– Independent

Filmmaker•The Property

– The Screenwriter– The Literary agent– Story Editor– Exploiting Book-

Publishing Rights

•The Deal– The Entertainment

Lawyer– Business Affairs– Talent Agent

•The Selling– Distribution and

Exhibition– Motion Picture

Marketing

•The Audience!

The Creators• “The producer has one absolutely crucial week

on a movie; it may even come down to three days: the Wednesday, Thursday and Friday of the second week of shooting…” David Puttnam

• Must option the material to be used – options may go as long as three years to see through to filming

• Many producers conceive of the stories used or find them in the newspaper – then hire scriptwriters to fit the material

The Producer’s Role

•Primary Goal – to make the project as risk averse as possible•This may mean taking a strategy of bringing in bargain pictures under budget

– American system – bring in a good movie in a timely responsible manner and it bombs, you are not regarded as a failure – are under European system

The Producer

•Do you ever walk away– Can’t be made on

studio project– Too complex for skills

•Once given the green light– Avoid fixed release

date– Building around one

important cast member’s name

– Budget pressure before locations are scouted

– Don’t fudge budget to get the ok

The Producer

• Insist that certain budget areas never be cut• Medical, security and fire

• Keep aside sequences not necessary to the film and place them at the end of the schedule – if need to cut out can! Also a valuable tool for a tired director

• Plan action sequences after crew has had a chance to meet and get accustomed to one another

Three Essential Creative Contributions

•Tier One– Director– Writer– Composer

•Tier Two– Production

designer– Editor– cameraman

The Producer and the Director

The pivotal relationship in the filming process• One of trust about financing, timing, etc.• Communication important

Producer should limit appearances to end, beginning of day or lunchtime

Producer must reserve wrap control! SWAT Team• Production manager • First AD• Production accountant

The Producer – Going Over Budget

•Recognize the patterns early – delays•Confer frequently with the director to correct•If truly need the extra week – cut from below the line items

– Travel times to locations

– Currency – buy up front; no fluctuation

•Do not impose ridiculous work hours

•Editor’s work begins during shooting and the editor must be truthful with the director•Composer should be brought in early

Producer – Importance of Previews

Two types of Preview– Production•Allows to identify strengths and weaknesses of film and make changes– Distribution •Addresses marketing issues and positioning•Already a finished product•Marketing Head

–Cut trailers–Print ads–Release Patterns and theatre dates

Producer Role After Opening

• Not much control now!• Opens stronger than anticipated –

chase with resources to maximize• If opens poorly in broad release – not

much to do• If opens poorly in platform release

can salvage if:– Critics and exit polls strong

The Director

•“Everytime the director says ‘Lets try it this way,’ and not ‘Let’s do it this way,’ money is being spent at enormous rates….” Sydney Pollack

The Director•May identify source material like the producer•Role of Director in Writer’s task–May not want

a lot of input and just present completed script – GAMBLE!!!

The Director and the Writer

•Several meetings best prior to beginning the script •Present in 50-60 page increments enables changes to be easier•Or – the director and writer may work locked up together on the script