2. Entertainment Marketing Introduction Lecture One Dr. Melodie R. Phillips

3. 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

4. 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

5. 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 Thanksgiving Duck Dynasty is A&E’s highest rated show

6. 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

7. 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)

8. 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

9. 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

10. Why are DVD Sales Hurting? Recession – yet rental revenue virtually same over last year Content and Quality of films offered Digital Downloads Transition to High Def – Blue Ray For the first time since 2002 – more consumers went to the theater than rented or purchased DVDs (and box office not great … more $, less people!)

11. 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

12. 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

14. 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

15. Entertainment Ethics News PR coverage often involves deals “News” shows must generate ratings “News” is no longer objective Film Reviews Is the quote legitimate? Press Junkets and trips for critics Radio – pay for play

16. 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

17. 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

18. 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

19. 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” price Home 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 revenue Exceptions – Rocky Horror and weekends

20. 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

21. 2x2 Marketing Analysis of a Film Product Product Cast – Dark Shadows Special Effects – Avatar Soundtrack – Saturday Night Fever, The Matrix, O Bro Where art Thou? Plot – Sixth Sense, Fight Club, Donnie Darko, Planet of the Apes Cinematography – Inception, Hugo, The Aviator Price Cost of Production – Avengers $220M) b.o. $1.52B Napoleon Dynamite ($400k) Marketing Expenses – Independence Day Box Office to Date Avatar ($2.78B); Napoleon Dynamite ($44.5M) Place Timing of release – Scorpion King, The Avengers; Battleship Wide (Dark Knight Rises) vs. Tiered Release (Silver Linings Playbook) Rating of the Film – Beverly Hills Cop Poor – South Park (R), Dinosaur(PG) Promotion PR – Beautiful Mind Event marketing – Days of Thunder Promotions – Finding Nemo, Star Wars Ads and Trailers – Independence Day, The Dark Knight Merchandising – Lion King

22. 2x2 Analysis Form for Quiz 2. Product Cast – Special Effects – Soundtrack – Plot – Cinematography – Price Cost of Production – Marketing Expenses – Box Office to Date Place Timing of release – Wide vs. Tiered Release Rating of the Film – Promotion PR – Event marketing – Promotions – Ads and Trailers Merchandising –

23. 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

24. 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

25. 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

26. 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%

27. 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

28. 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

29. 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.

30. 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.

31. 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

32. 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 $40M Star 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

33. Ancillary Revenues from Star 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

34. Star Wars – the Bottom Line Initially released on May 25, 1977 Re-released on 7/21/78, 8/15/79, 4/10/81, 8/13/82 and 1/31/97 Ad budget of $4 million Gross receipts of $798M worldwide Rental $270.92M DVD Box set - $100M first day Blue 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 2008-13 Series has grossed over $1.8B (6 films) vs. James Bond (21 films) $1,272B and Harry Potter 1,119.0B (4 films)

35. Star Wars – Attack of the 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

36. Soundtrack Composed by John Williams (former maestro of the Boston Pops) Composed all 6 Star Wars films Nominated for 45 Oscars; 5 have won including Star Wars: A New Hope Revived grand symphonic scores in late 1970’s Used technique called “leitmotif” in which a melodic cell signifies a character, place or mood

37. 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

38. 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

39. Fan Involvement Multiple Star Wars fan sites Multiple Star Wars fan sites www.rebelscum.com www.rebelscum.com www.rebelscum.com News on Star Wars collectibles News on Star Wars collectibles www.theforce.net www.theforce.net www.theforce.net

40. 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 +

41. 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

42. Film Genre Thrillers Mystery Film Noir Comedy Action Documentary Adventure Western War Horror Sci-Fi Drama Romance Crime Animation Fantasy Musical Children’s

43. 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

44. 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

45. 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

46. 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!

47. 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

48. 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

49. 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

50. 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

51. Three Essential Creative Contributions Tier One – Director – Writer – Composer Tier Two – Production designer – Editor – cameraman

52. 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

53. 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

54. 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

55. 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

56. 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

57. 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!!!

58. 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