High Cost of Luring Audience : Movies: Last year, $1.5 billion was spent on TV commercials for films. The place to be is Thursday on NBC.

With the fall television season rapidly approaching, Hollywood studios are bracing for another year of runaway advertising costs.

Knowing that television commercials are a vital tool in their overall marketing campaigns, studios say they have no choice but to spend tens of millions of dollars buying commercial time on such highly rated shows as “ER,” “Friends,” “Ally McBeal” and “NFL Monday Night Football.”

Some studio executives, however, complain that the networks are squeezing them, making spots available at the last minute on their top-rated shows but forcing the studios to pay premium prices. The networks say it’s just a business of supply-and-demand.

No one disputes that the cost of marketing movies is soaring.

According to Competitive Media Reporting, a New York-based media research firm that tracks advertising activity and expenditures, movie commercials on TV cost $1.5 billion last year--up from $1.38 billion in 1997.

Studios and independents are now buying more commercials and paying more per commercial than they did in 1997, even though fewer films are being produced. Indeed, the total number of movie ads on network TV alone rose from 11,205 to 12,037 last year, a 7.4% gain over the previous year.

On the Big Four broadcast networks--ABC, CBS, NBC and Fox--Hollywood spent an average of $72,908 per commercial, a 3.7% jump over 1997. The average price per commercial on smaller networks--UPN, WB and PAX--was $24,525, a 16.1% increase over the previous year.

Overall, there were 886,735 movie commercials that aired last year on network TV, cable TV, local TV and syndicated TV, according to CMR. The average price for those commercials was $1,672--a 10.2% jump from the previous year.

The impact on studio marketing budgets is obvious. Last year, Disney’s overall motion picture advertising expenditures jumped from $293.6 million to $323.1 million, according to CMR, while Warner Bros.’ costs went from $205 million to $268.2 million.

This escalation has directly impacted the overall budget of movies. The Motion Picture Assn. of America calculated that the average cost of marketing a major studio movie climbed 13% last year to $25.3 million. MPAA President Jack Valenti said the studios had no control over advertising costs.

Although studios are notoriously guarded about divulging their marketing strategies, last May’s sweeps period illustrates just how expensive marketing movies on the tube has become.

Universal Studios, for example, spent an estimated $10 million in May on network TV ads for the Julia Roberts-Hugh Grant romantic comedy “Notting Hill” and another $6 million on “The Mummy” starring Brendan Fraser. Both films became runaway hits.

Where the money was spent may have been crucial to the success of both films. The tracking firm estimated that Universal spent about $1.1 million to buy commercial time for “Notting Hill” on the Fox network’s popular legal series “Ally McBeal,” which has a strong female audience, followed by $763,500 on “Friends,” $632,000 on “ER” and $507,400 on the four-hour ABC movie “Cleopatra.”

As for “The Mummy,” CMR estimated that the studio shelled out $650,000 on the four-hour NBC drama “Noah’s Ark,” $632,000 on “ER,” $517,000 on “Will & Grace” and $266,300 on “The X-Files” during the May sweeps.

By monitoring advertising activity on TV and then calculating the ad rates charged by the networks, CMR said it is able to estimate how much advertisers spend. The actual costs may vary, CMR noted, if special deals are in place or if networks give studios substitute air time when ratings fail to meet expectations.

Ironically, Hollywood’s reliance on TV advertising comes at a time of persistent erosion in network viewership. The six major networks saw their viewership drop an average of 8% during the 1998-99 season.

Dealing With a Fragmented TV Market

The ramifications for film studios are enormous. Where once the studios could count on reaching their audience simply by taking out ads on such widely watched NBC programs as “The Cosby Show,” “Cheers” or “Seinfeld,” today’s typical household might find dads watching the NBA playoffs in one room, moms viewing the Lifetime channel in another, and their kids are upstairs plopped in front of “Buffy the Vampire Slayer” or MTV.

“There was a time when everyone sat home on Saturday night and watched ‘The Mary Tyler Moore Show,’ ” said Bruce Feldman, who has coordinated movie marketing campaigns at both Universal and PolyGram. “Today, it is a fragmented market.”

The big winner has been NBC, with its powerful Thursday night lineup of top-rated shows such as “ER” and “Friends.”

Last year, movie ads accounted for $36.7 million on “ER,” $31.1 million on “Seinfeld” and $29 million on “Friends,” according to CMR. Also popular was “The Tonight Show With Jay Leno,” which raked in $22.7 million.

Thursday night on NBC is the “last powerful moment” studios have to hype their films coming out the following day, said Robert Levin, president of worldwide marketing at Sony Pictures Entertainment.

But Levin noted that the days of relying only on major network programs are long gone.

“You used to be able to look at it and say, ‘If I buy a selection of prime-time shows, I’d get these kind of ratings,’ ” he said. “Now, if you want kids, you go to Nickelodeon and the Cartoon Network. If you want women, you go to Lifetime. . . . You’re having to be a lot smarter in how you use network television versus cable television.”

Last November, with Christmas movies and end-of-the-year Oscar contenders coming out, studios scrambled to buy commercial time on “ER.”

The popular medical drama ran 13 spots for 10 films: “Elizabeth,” “The Prince of Egypt,” “Siege,” “Babe: Pig in the City,” “Meet Joe Black,” “American History X,” “Living Out Loud,’ “You’ve Got Mail,” “Enemy of the State” and “The Waterboy.”

“What really gets to be crazy--and it’s sort of annoying--is when more than one big movie is opening on Friday,” said DreamWorks marketing chief Terry Press. “You look at NBC’s Thursday night lineup and it’s all movie ads. It’s hilarious. It’s like there is no breathing room because everybody knows you have to be there, so everybody is there.”

Finding Viewers Becoming Costly

But with cable channels multiplying like rabbits, studios are finding it more and more expensive to reach viewers.

“If the studios didn’t feel it was worth it, they wouldn’t pay it,” said Michael A. Vorhaus, managing director at Frank N. Magid Associates, a Los Angeles-based entertainment media and Internet research and consulting company. “If you’ve put $75 million to $100 million on a big summer movie bet, then you are going to spend that extra money to make sure you have a strong advertising campaign.”

“The stakes have never been higher,” said Gerry Rich, president of worldwide marketing at MGM. “To reach a consumer is more difficult now than it has ever been.

“Before the cable era, there was a three-network buy and you were able to buy all the audience through those three networks,” Rich explained. “Now, it is infinitely more fragmented and as you continue to experience the network erosion in viewership . . . you have to take more of a shotgun approach and, in doing so, your costs are going up.”

For that shotgun approach, the film industry is paying dearly.

For example, CMR estimates that last year, Hollywood spent $25.1 million to reach hip, younger viewers who tune in to watch “The X-Files” on Fox; $18.3 million to reach women who wouldn’t miss an episode of “Ally McBeal”; $13.3 million to reach the male-oriented audience that regularly tunes in to watch ABC’s “NFL Monday Night Football”; and $6.9 million on “Dawson’s Creek” and $5.8 million on “Buffy the Vampire Slayer,” two shows on the WB network that are popular with teens.

In today’s competitive environment, where movies live and die on the strength of their opening weekend box-office grosses, studios have to rely on TV advertising.

“It’s a war every weekend,” said Arthur Cohen, president of worldwide marketing at Paramount Pictures.

The networks, knowing there will always be studios desperately seeking last-minute commercial time, demand premium rates. While studios complain they are being squeezed, the networks counter that it’s all governed by the law of supply and demand.

Sometimes It Pays to Play Waiting Game

It’s worth pointing out that NBC and CBS aren’t aligned with any studios, so they don’t have to worry about ticking off a corporate relative in the way that Fox, ABC, the WB and UPN might have to answer to a higher authority to justify jacking up prices.

In the days before “Forces of Nature” made its U.S. debut earlier this year, DreamWorks marketing chief Press faced an agonizing decision. The studio was looking to place ads for the romantic comedy starring Sandra Bullock and Ben Affleck on “ER” and “Friends” but commercial time slots were unavailable to studios that week because NBC had already promised them to other large advertisers.

As she scoured the programming schedule looking for high-rated shows on competing networks, Press decided to go with the one ABC show she thought could deliver the kind of younger adult viewership that the movie appealed to: “Spin City” starring Michael J. Fox.

There was only one hitch, Press said. ABC knew it, too.

Normally, she said, a 30-second spot on “Spin City” cost about $300,000, but because NBC’s Thursday lineup was unavailable, ABC hiked its rates.

“So, all of a sudden, a show that cost $300,000 for a 30-second spot now cost $680,000 because they know you are stuck,” Press said. “ABC is sitting there saying, ‘We know our show only delivers this share, but you can’t go to NBC.’ ” Ironically, “Spin City” is produced by DreamWorks, which the network pays a license fee for the right to air the show.

Press recalled that prior to the release of “Forces of Nature,” ABC was asking premium rates for commercials on what was expected to be a top-rated special event: Barbara Walters’ interview with former White House intern Monica Lewinsky.

“Pre-sale, they wanted $750,000 for a 30-second spot,” Press said. “Now, granted, it is directed at the audience that ‘Forces of Nature’ is right for, but I would not spend it. I said, ‘Wait for the fire sale.’ . . . The day before it aired, I said to my media person, ‘Now go see what the price is.’ There were still unsold spots, so I got it for five-something, which was like a fire-sale price.

“I’m taking a risk [not being on the show],” she added, “but no matter what it was, it wasn’t worth $750,000. I said, ‘I’m not going to pay any more than I would pay to go on ‘ER,’ and the average rate on that show is half-a-million dollars.”

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Money Watch

Top movie advertisers on TV during the May ratings sweeps period.

MOVIE: “Notting Hill” (Universal)

NETWORK: $9,955,000

CABLE: $1,388,450

SYNDICATION: $601,600

TOTAL: $13,648,600

*

MOVIE: “The Mummy” (Universal)

NETWORK: $6,179,400

CABLE: $1,538,700

SYNDICATION: $152,250

TOTAL: $9,154,290

*

MOVIE: “Instinct” (Buena Vista)

NETWORK: $5,994,400

CABLE: $557,630

SYNDICATION: $670,200

TOTAL: $7,682,480

*

MOVIE: “Tarzan” (Buena Vista)

NETWORK: $3,637,200

CABLE: $1,433,660

SYNDICATION: $251,500

TOTAL: $5,438,800

*

MOVIE: “Entrapment” (20th Century Fox)

NETWORK: $2,434,400

CABLE: $884,940

SYNDICATION: $66,300

TOTAL: $4,649,500

*

MOVIE: “A Midsummer Night’s Dream” (Fox Searchlight)

NETWORK: $1,365,100

CABLE: $1,057,900

SYNDICATION: $0

TOTAL: $4,492,230

*

MOVIE: “Love Letter” (DreamWorks)

NETWORK: $2,979,700

CABLE: $297,600

SYNDICATION: $0

TOTAL: $4,389,900

*

MOVIE: “The General’s Daughter” (Paramount)

NETWORK: $2,125,100

CABLE: $1,080,920

SYNDICATION: $197,100

TOTAL: $4,121,390

*

MOVIE: “Big Daddy” (Sony)

NETWORK: $3,331,500

CABLE: $187,440

SYNDICATION: $0

TOTAL: $3,518,940

*

MOVIE: “Election” (Paramount)

NETWORK: $1,380,100

CABLE: $989,970

SYNDICATION: $409,900

TOTAL: $3,464,190

*

MOVIE: “Star Wars: Episode I The Phantom Menace” (20th Century Fox)

NETWORK: $1,310,600

CABLE: $458,360

SYNDICATION: $405,600

TOTAL: $2,636,160

*

MOVIE: “Eyes Wide Shut” (Warner Bros.)

NETWORK: $2,165,000

CABLE: $0

SYNDICATION: $0

TOTAL: $2,550,740

Source: Competitive Media Reporting