MOVIE INDUSTRY PROMISES AD CUTBACKS

By: Randy Dotinga

Newspapers Look For Ways To Keep Their Business


A little over a year ago, when 1999 ended in a blaze of cinematic
fireworks, it passed into history as a banner year for the movie
business, which was so full of cash that it had dropped $1.1
billion into the coffers of the nation’s newspapers.

But the Hollywood honeymoon may be over. “Chapter 11” has
replaced “megaplex” as the hottest buzzword in the movie-theater
business, while studios are busy flirting with the Internet and
ticketing services such as Moviefone. One theater executive
recently declared that movie ads in newspapers are becoming
“obsolete.”

Movie studios, meanwhile, are threatening to rebel against higher
ad rates at two of the nation’s most influential newspapers,
promising overall ad cutbacks. A huge theater chain is slashing
its advertising budget.

It’s enough to make newspaper ad managers fret about their box-
office appeal, and consider some cosmetic surgery. “Obviously,
we’re very concerned,” says Mike Rogers, vice president of
marketing for Knight Ridder newspapers. “There’s a significant
threat if their business is diminished even marginally.” The 32-
daily Knight Ridder chain is so worried that it’s launching an
initiative to keep studios and theaters from spending their
dollars elsewhere. The Newspaper Association of America (NAA) is
stepping up its efforts, too.

Just last week, Universal Pictures revealed that it is studying
its newspaper advertising expenditures – reportedly, $75
million a year – with an eye toward making major cuts.
Universal may shrink ads and reduce their frequency, spokeswoman
Terry Curtin told E&P. For example, ads scheduled for the
middle of the week may be downsized if research shows that they
don’t help sell tickets, she says.

The studio, which had a banner year producing such hits as “Erin
Brockovich” and “How the Grinch Stole Christmas,” may also cut
back on duplicate advertising in markets that are served by
several daily and alternative newspapers, she explains. While
newspapers are still a valuable tool to tell moviegoers where and
when to see a film, she says, “We don’t believe newspapers
necessarily sell the tickets. Our research tells us that the
consumer’s mind is fairly made up prior to turning to the
newspaper.”

In the long term, Curtin says, “We’re looking at reaching a
moviegoer through alternative mediums,” such as the Internet and
Moviefone. When asked what newspapers could do to prevent
erosion, she replies, “I don’t think there’s one answer. It’s a
challenge that both industries will face together.”

If movie advertising does shrink, it could spell big trouble for
the bottom line at newspapers. In Minneapolis-St. Paul, for
example, the movie and theater businesses make up the second-
largest group of advertisers at the Star Tribune. Only the
Minnesota-based Target Corp., which has three store chains in the
Twin Cities, buys more ads each year in the newspaper, says
Charlie Hoag, the Star Tribune’s vice president and
director of sales. The movie business is unusual, and coveted,
because it buys advertising every day of the year, says Hoag,
who’s been in the newspaper business for four decades.

But for a growing number of movie-goers, newspapers aren’t the
only ticket to Tinseltown.

Goodbye yellow brick road?

Newspaper ads aren’t as important as they used to be, for a
variety of reasons. For one, giant “megaplexes” have changed both
the moviegoing experience and how people prepare for it. “In some
markets, theaters have pulled out of newspaper listings,” says
Rogers of Knight Ridder. “They’re testing the proposition that
they really don’t need it. The underlying hypothesis is that
people don’t use newspapers to get theater listings. They just
show up and pick a movie and go.”

Another threat looms from the Internet, where Web sites have
found that free movie listings are a big attraction. In San
Diego, for example, movie listings can be found via a variety of
Web sites, including America Online (AOL), Hollywood.com,
SanDiegoInsider.com, and Yahoo!. The two local daily newspapers,
The San Diego Union-Tribune and the North County
Times, also offer online listings.

One of the most popular film Web sites nationwide is
Moviefone.com, a spinoff of the popular telephone ticketing
service. In major cities, patrons can either call 777-FILM or go
online for movie times and order tickets in advance. They can
then pick up the tickets at the theater.

Moviefone, owned by AOL, was born 12 years ago. Each week, about
2.5 million people visit its Web site or use the telephone
service, says spokeswoman Jay Jay Nesheim. Moviefone is largely
subsidized by film studios, which pay for commercials and online
ads; theater chains don’t pay anything. “People who are calling
Moviefone generally are on their way to the movies. We try to get
them at their moment of decision,” Nesheim says. “You might have
two or three movies you’re interested in seeing, but when you
hear an ad for ‘Cast Away,’ you decide to see it.”

Now that it is owned by AOL, Moviefone can only grow, says Tommy
McGloin, its senior vice president and general manager. “In a
typical metro city, America Online reaches more households than
the local newspaper,” he asserts.

Newspapers, meanwhile, are hobbled by their aging readership.
“You’re not reaching a younger audience, which is the prime
moviegoing audience,” he says. “That’s a problem. And you’re not
providing information on the go for people who might not have a
newspaper handy.” Indeed, a 1999 NAA survey found that while 85%
of moviegoers over 50 read a newspaper regularly, only 55% of
those ages 18 to 24 do.

“As electronic alternatives, including Moviefone and
MovieTickets.com, evolve, newspapers are becoming obsolete as a
way of getting movie information,” AMC Theaters Film Marketing
President Richie Fay told Inside.com this month. (AMC declined to
make Fay available for an E&P interview.)

Moviefone.com isn’t the only online ticketing service. In a TV
commercial seen around the country, the Hollywood.com Web site
struck at what may be the Achilles’ heel of newspapers – the
shrinking size of the movie ads themselves. The commercial shows
a young couple using a huge microscope to read the tiny print of
movie times in a newspaper ad. (They might just as well be trying
to decipher a punch-card ballot in Florida.) The microscope,
which takes up nearly an entire living room, eventually sets the
newspaper on fire.

The commercial’s message is simple: The Internet is easier to use
(and read) than a newspaper.

The ad is funny, but tiny print is no joke at The News Tribune, a
McClatchy Co. newspaper in Tacoma, Wash. The Regal theater chain,
which has the most screens in the country, shrank its ads about
18 months ago, says News Tribune Advertising Director John
Kelly. The ads, which list show times, no longer include movie
ratings or film logos. The type size is smaller, too. “We get
complaints about that on a regular basis, even though it’s not
our fault,” Kelly says.

AMC you later

If readers don’t like miniscule movie listings, they won’t be any
happier when some listings disappear forever. That’s a real
possibility now that the 2,600-screen AMC theater chain is taking
a stand that may downsize movie ads across the country. AMC, the
nation’s third-largest theater chain, announced this month that
it will no longer pitch in to help defray the costs of “co-op”
ads for movies produced by independent studios.

There are two types of movie ads in newspapers: co-op ads and
directory ads. The latter are bought by theaters and simply list
locations and show times.

Co-op ads are often much larger and promote individual movies,
such as “Traffic” or “Miss Congeniality.” The bottom one-fifth of
a co-op ad is devoted to a list of theaters that are showing the
film; show times do not usually appear. Studios pay the cost of
the ads, but they are subsidized by the theaters.

AMC is tired of the hassle of reimbursing the studios for the
ads, according to Rick King, a company spokesman. Also, AMC felt
it was duplicating its own efforts. “People who want to see the
movies are
going to refer to our directory ads anyway to get the show
times,” he says.

In Tacoma, The News Tribune may be forced to retaliate if
chains such as AMC pull out of co-op ads, says Advertising
Director Kelly.

Like many newspapers, The News Tribune runs free, staff-
produced listings of show times adjoining the paid movie ads. But
if the paid ads are cut, the free listings might disappear, too.
“We’d have to take a real hard look at how much space we dedicate
to the theater category,” Kelly says.

Breaking the chains

Although it’s engaging in high-profile cost-cutting, AMC Theatres
is actually one of the rare financially healthy theater chains
left in the United States. Over the past year, four major movie
chains – Carmike Cinemas, Edwards, General Cinema, and
United Artists – have gone bankrupt. They’ve all filed under
Chapter 11, giving them breathing room to reorganize instead of
closing their doors.

The Regal Cinema and Loews Cineplex chains – the first- and
fourth-largest in the country – will probably go bankrupt
soon, says John Helms, a senior research analyst at Tejas
Securities in Austin, Texas. Of the six largest chains, only
Cinemark and AMC may be able to squeak by, he says.

“These are very difficult times for the industry,” says Brian
Callaghan, spokesman for the 800-screen General Cinema company.
“It’s probably the most competitive time this industry has ever
faced.” The problem with the theater business is simple: There
are too many screens that cost too much money and too many old
theaters that nobody goes to anymore.

AMC ignited the megaplex craze in 1995 by building huge theaters
that hold a dozen or more screens, Helms says. Other chains
followed suit, as the frills of the megaplexes – comfortable
chairs, stadium seating, cup holders – attracted moviegoers
in droves. “Everybody wants to go to a megaplex, and they’ll
drive by an old theater to get there,” Helms observes. The
theater chains, in response, “just went overboard with all this
money coming in from financial players.”

Now, the chains are busy closing older multiplexes. At the end of
1999, there were 37,185 movie screens in the nation. Helms
estimates the number has since dropped to 36,000, and may slip to
33,000 by 2002. “It probably needs to be under 30,000, and some
people say 25,000,” he says.
As screens disappear, “that advertising will go away,” Helms
predicts. Potential mergers of theater chains could mean even
fewer screens – and less money for ads.

The bankrupt General Cinema chain still likes newspapers, but it
also is keeping an eye on free listing services provided by Web
sites and alternative newspapers, spokesman Callaghan says. In
some cities, General Cinema has dropped newspaper listings or
limited them to Fridays, Saturdays, and Sundays, which make up
80% to 85% of the theater business.

“There have been times when we’ve spent more on staffing a
theater and a newspaper directory ad than the theater brings in
that day,” Callaghan reveals.

The studio system

While theater chains are a growing focus of concern for newspaper
advertising managers, movie studios may be another danger area.

On the one hand, movie studios are in much better shape
financially than the theaters that show their products. National
box-office revenue rose to $7.7 billion last year, from $7.5
billion in 1999.

But studios, too, are taking a second look at newspaper
advertising, especially since the Los Angeles Times just
raised its rates for movie ads by at least 9%. The New York
Times also has recently raised its rates, by a healthy 6.5%.
Each Sunday, the Los Angeles Times and The New York
Times run numerous full-page ads for new movies. The ads are
much bigger than those that appear in other urban newspapers
– some run over two pages – reflecting the influence of
the film business in the nation’s two biggest cities.

Movie studios, which currently allocate up to 25% of their
marketing budgets for major films for newspaper ads, are balking
at the price hikes. “We’re obviously not going to just accept
them out of hand,” says Robert Friedman, vice chairman of
Paramount Pictures. A representative of another major studio says
it’s likely that the huge ads will become a thing of the past. “A
lot of people are willing to push back,” says the representative,
who requested anonymity.

The rate increases aren’t getting a pleasant reception in the
newspaper industry, either. “I’m concerned that the studios look
at newspapers as a necessary evil, and they look at their major
newspaper partners as indicative of the entire industry,” says
Becky Bucci, the NAA’s director of marketing and advertising.
“I’m concerned that the whole industry will get punished.”

Movie studios have already indicated that they want to divert
money to TV ad campaigns, observes Rogers of Knight Ridder. “It’s
an obvious medium for them to exploit,” he adds. “But I don’t
know how much of [what they say] is real.”

The Internet also looms as a major advertising vehicle for movie
studios, says Friedman, the Paramount Pictures vice chairman.
Some newspapers are trying to get ahead of the curve by selling
the movie business on joint print-online promotions. The News
Tribune in Tacoma, for example, is creating advertising
packages in conjunction with its regional portal site,
SouthSound.com.

Newspapers must integrate print and Internet advertising, says
Barbara Needleman, vice president of entertainment products for
Tribune Media Services, which produces movie-directory ads and
free movie listings for 300 newspapers.

“It’s not an either/or proposition,” she says. “You tie them
together, so the exhibitors feel they’re getting more for their
dollar.”

Newsroom drama

The NAA is trying to halt any trend away from newspaper
advertising in its tracks. By the end of this year, the
association expects to have spent $500,000 over a three-year
period to boost the newspaper industry’s profile in Hollywood.
The NAA shows up at major movie industry conventions, hosting
hospitality suites and independent-film festivals. It will be
designing house ads encouraging newspaper readers to attend
movies, says the NAA’s Bucci, who adds, “This is another way to
show the studios that we care about their business.”

Other efforts are afoot. Coming soon is an NAA brochure
proclaiming the power of newspaper movie ads. “Our research shows
that 80% of moviegoers do look at the newspaper to decide where
and when they’ll see a movie,” Bucci says. “We want to do some
exit interviews to really show that newspapers bring people to
the theater, because the studios don’t believe it.”

Rogers gives two thumbs-up to the ongoing promotion of newspapers
in Hollywood. He’s leading Knight Ridder’s effort to convince
movie moguls that big ads aren’t yesterday’s news.

“The industry has to continue to court the theater companies as
well as Hollywood in a more organized fashion to maintain their
awareness of us and reinforce the importance of newspapers,” he
says. “A lot of times, we forget why we’re such a good medium.
Nobody can provide the reach we can into households. We just
don’t sell that. We’ve taken the business for granted.”



Randy Dotinga is a free-lance writer based in San Diego.



Copyright 2001, Editor & Publisher.

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