AOL Time Warner’s Marketing Wizardry

By now, kids all around the world can tell you the story of Harry Potter: A young wizard discovers how to use his inherent magical powers to make things happen.

A tale they may not know is how a media giant harnessed its own internal powers to help transport the 11-year-old hero of J.K. Rowling’s literary phenomenon to worldwide multimedia fame.

The plot revolves around AOL Time Warner Inc., the world’s largest entertainment company. With its Hollywood studio, Warner Bros., AOL leveraged its promotional and advertising might across its empire of Internet, cable TV, movie, music and magazine outlets to ensure that kids, parents, teens and everyone else knew that “Harry Potter and the Sorcerer’s Stone” was debuting in theaters Nov. 16.

In the days leading up to the film’s release, tracking studies showed an extraordinary 100% awareness among moviegoers that “Harry Potter” was coming. The film has smashed several box-office records--including the biggest opening ever with more than $90 million--and this weekend broke through the $200-million barrier.

The behind-the-scenes story also tells how AOL Time Warner capitalized on “Harry Potter” fanatics’ hunger for the first movie based on Rowling’s best-selling book series to drive AOL’s 32 million Internet subscribers and other potential customers to its supermarket of media products--cable networks HBO, CNN, Turner Broadcasting, the WB TV network, Kids WB, Cartoon Network, such popular magazines as Time, Entertainment Weekly and People, and online ticketing company Moviefone.

In corporate speak, AOL Time Warner achieved “synergy”--the most overused word in the new media age--by synchronizing its interlocking parts to help mass market a movie and using the movie to sell its other products. AOL even put the movie’s image on the CD sales tools it sends to prospective members to promote itself as the world’s top Internet provider.

“This drove synergy both ways,” said Richard Parsons, AOL Time Warner co-chief operating officer. “Not only did we use our promotional and advertising platforms to help create awareness, we used the film to drive traffic to those vehicles.”

Parsons’ counterpart, Robert Pittman, calls the company’s cross-promotional push “a great example of how we are creating a new paradigm for marketing movies and other entertainment content. It illustrates our ability to maximize the penetration, promotion and profitability of our products across all our brands.”

Although it’s nearly impossible to measure AOL Time Warner’s impact on “Harry Potter,” media analysts say the company’s cross-pollination of its new media and traditional assets is a testament to the power and reach of the nearly 1-year-old merger of the world’s leading Internet provider and world’s largest entertainment conglomerate.

“‘Harry Potter’ is the kind of picture that can define the opportunities that exist in a vertically integrated media company in the new digital age,” said Christopher Dixon, a media analyst with UBS Warburg.

Promotional Planning Likened To D-Day

AOL Time Warner’s grand plans for marketing the film took flight last spring in the company’s Time Life Building in New York’s Rockefeller Center, where Parsons, Pittman and AOL Time Warner Chief Executive Gerald Levin meet twice a month with the CEOs of all the business divisions and about a dozen other top executives.

It was there that “Harry Potter” was identified as one of the major corporate initiatives from a companywide marketing and promotional perspective. Concurrently, marketing heads from all divisions began developing integrated programs around the identified properties, which also included the upcoming adaptation of J.R.R. Tolkien’s “The Lord of the Rings: The Fellowship of the Ring,” produced by AOL Time Warner’s New Line Cinema.

“It was kind of like D-Day,” Parsons said. “It was all in the coordination of the moving parts to have an effective campaign.”

Diane Nelson, Warner Bros. senior vice president of family entertainment, was appointed the “Harry Potter” brand manager to ensure that the various business divisions of the Burbank studio and AOL Time Warner coordinated their promotional efforts and adhered to guidelines created to protect the brand from overexposure and overcommercialization, as Rowling had demanded.

AOL’s exploitation of “Harry Potter” underscores the increasingly pivotal role the Internet plays in raising consumer awareness and influencing the purchase of everything from movie tickets to merchandise in cyberspace.

AOL Moviefone, for instance, has sold more than 1 million tickets to “Harry Potter” online, setting a record and exposing new customers to the service.

The media giant’s other entertainment units also benefited from the cross-promotion of the film.

When the teen-skewing WB aired an exclusive sneak peek at a scene from the film Nov. 9 during its hit show “Reba,” ratings spiked for the network’s entire Friday night comedy lineup.

Time For Kids, a weekly Time magazine spinoff for 5-to 13-year-olds, received 15,000 e-mails responding to its “Harry Potter” coverage. It normally gets about 1,200 e-mails a week on all topics. Traffic on its https://www.timeforkids.com “Harry Potter” mini-site, which ran contests and deployed student reporters to cover the film’s premiere, was off the charts.

Even the film’s soundtrack, an orchestral score by John Williams produced and distributed by AOL Time Warner-owned Atlantic Records, has defied expectations, selling nearly 150,000 cassettes and CDs--far surpassing what is usual for a classical movie score.

AOL used its Internet prowess to promote the soundtrack. AOL’s online listening party featured a 30-day download of the track “Hedwig’s Theme” and promoted the soundtrack in the AOL Kids gallery and Shop@AOL page. Ten days before its Oct. 30 in-store release, the album was streamed through AOL Music, attracting more than 1 million listeners.

“We’ll sell at least 1 million units and that would make it one of the top three score records in history,” said Val Azzolli, Atlantic Group co-chairman and co-chief executive. With “Harry Potter,” AOL ran its most aggressive online movie campaign, dedicating major “real estate” to the film on its Welcome Screen and promoting it across all its Web properties, which include Netscape, CompuServe and Roadrunner. It ran exclusive online contests, chat rooms and first looks at posters and movie trailers.

Merrill Lynch media analyst Jessica Reif-Cohen said AOL Time Warner’s ability to leverage its communications assets added to “Harry Potter’s” broad appeal.

“There is no question that AOL Time Warner’s cross-promotional campaign has made this the most anticipated movie in recent memory,” Reif-Cohen said. If its worldwide box-office gross hits $600 million and revenue from home video and DVD, TV and merchandising sales are counted, the film will contribute at least $250 million in before-tax dollars to AOL Time Warner’s bottom line over the next two years, she said.

Although all studios and entertainment giants use the Internet to promote their movies, none owns an online pipeline on the scale of AOL’s.

“The Internet is what separates this company from a Viacom and a Disney,” said Wall Street analyst Tom Wolzien of Sanford Bernstein.

Still, there are those who believe that owning Internet distribution is not essential to success, and that AOL did nothing revolutionary in marketing “Harry Potter.”

“I wouldn’t say it’s particularly groundbreaking,” said Jeff James, group manager of entertainment marketing for rival MSN, Microsoft Inc.’s online Internet service provider. MSN, he said, can offer many of the same services through partnerships and joint ventures without having to own media properties itself.

But, Parsons said, there are huge benefits to owning a wide array of media assets.

“Theoretically, another company could buy the same package,” he said. But by owning all the pieces, “everything goes to the same bottom line.” And, Parsons said, there’s another not-so-obvious benefit: keeping your customers happy.

“Members pay $23.95 a month and get the usual services--like accessing your e-mail and instant messaging--but when a special promotion comes along and you have chat rooms and things like the AOL Wizard shop where people can buy merchandise, being on AOL becomes a richer experience,” he said.

‘Harry Potter’ Had Built-In Mass Appeal

Katherine Borsecnik, president of AOL brand programming and product operations, said promotions such as the ones for “Harry Potter” help differentiate AOL from other Internet service providers. The company used “Harry Potter”-themed contests to drive AOL members to online features they may not have used before, such as personal Web pages and online photo albums, she said.

But some analysts suggest that “Harry Potter” might not be the best gauge of AOL’s synergistic success.

“‘Harry Potter’ was so embedded into the fabric of everyday life that if AOL has done something unique and wonderful, it’s only icing on the cake,” said Frank Catalano, an independent marketing strategist.

Rather than promoting a product with built-in mass appeal, Catalano said, “the real test will be when they have a movie that’s a borderline dog and they can turn it into a popular success.”

It is also difficult to quantify whether AOL or its business units are attracting new subscribers because of “Harry Potter.”

And, though Parsons is the first to acknowledge that, he says he’s confident that AOL Time Warner’s “Harry Potter” promotional and advertising blitz is helping drive subscriptions across its platforms, particularly AOL.

Still, not everything turned out as planned.

An example of how corporate synergy didn’t take is AOL Time Warner’s fiercely independent magazine unit, whose editors say they make decisions strictly based on their journalistic discretion.

Marketing executives at Warner Bros. are still furious with the editors at Entertainment Weekly for running what they considered an “unauthorized” cover story on the film while they were trying to negotiate an exclusive with Time magazine.

Warner was hoping to get a Time cover by giving reporter Jess Cagle a first look at the movie and access to exclusive photos for his story. But the events of Sept. 11 prompted the editors to feature President Bush as the main cover art, and a mug of the bespectacled wizard on a corner flap.

Steve Koepp, Time’s deputy managing editor, said the editors originally had considered putting “Harry Potter” on its Nov. 5 cover strictly out of interest in the highly anticipated movie rather than any corporate mandate. In fact, one of the film’s harshest reviews came from Time critic Richard Corliss, who wrote that director Chris Columbus stuck too closely to the book and “made a movie by the numbers.”

Despite mixed reviews, the film has charmed audiences and is expected to continue playing strongly through the holidays.

This bodes well for Warner Bros., which has begun shooting the second “Harry Potter” movie and has commissioned the screenplay for the third.

The studio expects to bring all seven of the books planned in Rowling’s series to the big screen and is banking on the potentially lucrative franchise to rival the “Star Wars” and James Bond movie series, which have generated billions of dollars in revenue over decades for competing studios.

Analyst Wolzien said AOL needs to apply the “Harry Potter” model of cross-promotion to future properties, including “The Lord of the Rings,” scheduled to be released Dec. 19.

Many on Wall Street are impressed with what AOL Time Warner has accomplished by marshaling forces behind the film.

“After seeing this level of performance, you’ve got to realize this is the best of content and the best vehicles of distribution tied together,” Wolzien said.

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Time staffers Edmund Sanders and Jon Healey contributed to this report, Sanders from Washington, Healey from Los Angeles.