Aug 9, 2005
Like the theatrical sector, the DVD business now lives and dies by first-week activity. Sixty% or more of a title's overall sales usually occur in that span, driven in large part by competitive environments at stores such as Wal-Mart and Target, which use DVDs as loss leaders and routinely sell top hits for less than $15 -- $2-$3 below wholesale cost -- during their first week of release.
Compounding the issue is a shelf-space crunch that further impels studio marketers to drive sales during the increasingly short period in which even a potential blockbuster is considered "fresh" and thus commands prime retail space.
"We're basically opening DVDs the same way theatrical marketers are opening movies," says Peter Staddon, executive vp marketing at 20th Century Fox Home Entertainment. "It's all about opening boxoffice and opening week, and so are we."
Not surprisingly, then, home entertainment marketing costs are rising. Nielsen Monitor-Plus estimates that the top nine studios combined to spend a record $1.08 billion to market their titles last year, up from $887.5 million in 2003 and $705.6 million in 2002.
Buena Vista Home Entertainment again finished on the high end among individual studios in 2004 with an estimated $354.2 million in hard-media expenditures for 124 releases. Warner Home Video placed a distant second with $149.6 million on 198 releases, followed closely by TCFHE ($127.4 million, 87 releases), Universal Studios Home Entertainment ($112.4 million, 74 releases) and Sony Pictures Home Entertainment ($101.3 million, 121 releases).
The 2004 tallies mark the inaugural inclusion of Internet spending and Spanish-language media buys, and the estimated totals are based on published rates -- which major studios rarely pay because most are part of large media conglomerates. Nonetheless, large sums of money are being spent to convince consumers to buy DVDs, and unlike marketing techniques for most other packaged goods, the same message is not being reinforced repeatedly: Each week finds a new batch of product arriving in stores with a unique target audience and demographic appeal.
That goes a long way toward explaining why an estimated $854.9 million, or nearly 80% of the 2004 industrywide total, was spent on network, cable, spot and syndicated television, the quickest way to reach the broadest possible audience in the shortest amount of time.
DreamWorks spent the highest percentage of its 2004 budget on TV advertising (88.8%), particularly network TV (60.9%). But the studio also boasted the year's top-selling DVD in "Shrek 2," which sold nearly 34 million units before Jan. 1. DreamWorks spent an estimated $35.6 million to market the "Shrek 2" DVD, including $20.5 million in network TV buys.
Fox, known for campaigns that target minorities and TV DVD fans, led the studio field in percentagewise cable buys last year, committing 35.6% of its marketing dollars to that sector. Paramount Home Entertainment led percentagewise in the print category, spending $37.5 million, or 41.4% of its 2004 marketing outlay, on magazine advertisements alone.
The top-selling titles also tended to command the highest marketing costs last year, though in the case of "Shrek 2," the year's most expensive title to market, record-breaking sales put the average cost at barely more than $1 a copy. The second-most-expensive title to market was Buena Vista's direct-to-video "The Lion King 11⁄2," with total costs estimated at $20.7 million based on published rates; with sales of more than 9 million units, "King's" per-unit marketing cost finished at about $2.
After that came Buena Vista's platinum-edition DVD of "Aladdin," for which $19.7 million was spent on marketing, followed by Fox's "Star Wars Trilogy" ($17.7 million), Sony's "Spider-Man 2" ($17.4 million), New Line Home Entertainment's "The Lord of the Rings: The Return of the King" ($16.4 million), Warner's "Harry Potter and the Prisoner of Azkaban" ($15.4 million) and Buena Vista's "Brother Bear" ($15.1 million).
Clearly, aiming for a family audience is key to wide margins on DVD sales. On the other hand, though, one of 2004's biggest marketing bargains was the considerably nonfamily Comedy Central series "Chappelle's Show: Season 1 Uncensored," released on DVD by Paramount. Marketing costs for that title totaled merely $211,929, a sum spent entirely on cable TV, but the triple-disc set has sold nearly 3 million units at a suggested retail price nearly twice that of most regular DVDs.