Studios mull ad cuts for local papers

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Top movie studios are eyeing substantial cutbacks in local newspaper advertising, a move that could have major implications for the $900 million the industry spends annually on newspapers.

At least one major studio, Universal Pictures, already has begun a survey that probably will result in reducing by two-thirds the 300 markets where it currently concentrates its newspaper budget. Universal, according to executives, spends $75 million a year on newspaper advertising.

While not confirming any details, Marc Shmuger, the vice chairman of Universal recently elevated from president of marketing, said, "We are looking at [cutbacks] right now. In the media mix, we are looking at all our options. There are going to be cuts in some areas."

According to movie-industry executives, at least three other big studios are contemplating similar pullbacks in newspaper spending. "We have [already] cut our newspaper spending. It's very expensive," said a veteran movie studio media buyer, adding "It's something we'll be watching in the future."

Movie studios believe consumers increasingly are using newspapers as a way to determine when a movie is playing, rather than as a means to choose a particular film. That's because consumers already are aware of upcoming movies, especially wide releases, from in-theater trailers, and outdoor, radio and especially TV advertising.

"Newspapers essentially serve as a directory, and it's a directory without the intelligence of an online directory," said Mr. Shmuger. "It seems to me a less effective way of connecting with the consumer." About 10% to 25% of the average $20 million marketing budget for a wide-release movie currently is earmarked for newspaper advertising.

That's despite the fact that some movie studio research has shown movie newspaper ads don't encourage people to see a specific wide-release film. By the time a consumer reads an ad in a newspaper, movie executives maintain, consumers already have made up their minds. "A newspaper ad has rarely come up, in our information, as being able to turn `awareness' into `interest,"' said Mr. Shmuger.

Although Universal has been looking at slashing newspaper budgets for some time, the studio was emboldened by the Los Angeles Times' decision two weeks ago to raise movie studio ad rates 9%. The move surprised some marketing executives, who said the readership levels at the Times, now owned by Tribune Co., have declined or held steady in recent years.

"With respect to circulation, there's a real value proposition in advertising in the LA Times, particularly in the calendar section, where display advertising, or where entertainment advertising appears," said an LA Times spokeswoman. "The rate is appropriate to the competitive environment. Our entertainment rate is still lower than other national newspapers," she added.

Top markets like New York and Los Angeles, in fact, won't be trimmed from Universal's media buys, although budget allocations may decrease for those markets.

"If you're a hot and heavy network spender and you don't do local support in those smaller markets, that's OK," said the veteran studio media buyer. "Those markets usually over-deliver on network anyway."

Which budgets will be cut may depend on the demographics of the movie being advertised. Newspapers tend to skew to older consumers, while teens generally are more Internet-savvy-and less inclined to pick up a newspaper- so studios with teen-oriented movies would do well to cut back on newspapers and focus more on Internet options, according to movie marketing executives. Newspaper ads would continue to target older viewers, and small-budget art house films-which depend almost entirely on newspaper advertising and editorial to create buzz-would continue to use newspaper ads.

The widespread budget cut from major studios is the latest setback for local newspapers, which weathered a blow late last year when theater chain AMC Theaters announced it was cutting off co-op advertising for a number of small film distributors, including Artisan Entertainment, Lions Gate Films and Destination Films. Co-op movie advertising represents about 10% of the $900 million in newspaper movie advertising.

A rash of bankruptcy actions by several theater chains last year also forced theater exhibitors to cut back in many areas.

Mort Goldstrom, VP-display advertising, Newspaper Association of America, said he didn't "want to challenge" Mr. Shmuger's assertion that newspaper ads serve as a directory. "Most advertisers can make intelligent choices on their own," he said. "The objective of any advertising is to reach consumers the way they like to reached, as close to the decision-making process as possible."

Mr. Goldstrom said NAA research conducted with the National Research Group found that "moviegoers turn first to newspapers to make decisions about attending movies. I don't know how that plays against what [Mr. Shmuger] is saying. But my sense is that we as an industry have not done as good a job in terms of proving that point to him."

Contributing: Jon Fine

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