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The saying, "You have to spend money to make money," is definitely true in Hollywood.

In 1995, the entertainment industry spent nearly $2 billion in media advertising, up 38.8%, according to Competitive Media Reporting. Those dollars flogged about 400 releases, up from 382 in '94.

On the surface, the reason for the increase appears obvious: "There's just so many damn movies!" says Michael Schau, editor of The Entertainment Marketing Report.

"The greatest force contributing to the rise in ad spending is competition," concurs Howard Lichtman, VP-marketing and communications at Cineplex Odeon. "The more movies Hollywood cranks out, the more money will be spent on advertising."

Apart from competition, the biggest factor driving up ad expenditures is cost of ad space and time. With new releases hitting the market on Fridays, studios are spending increasingly more on Thursday nights.

Not coincidentally, NBC has built a powerhouse of programming for that night. An average spot on NBC's "Must See TV" lineup costs $400,000. As the cost of network prime time rises and becomes more scarce, more studio advertising is flowing into spot markets.


Still, studios need to be in prime time on Thursday nights. So to get better ad rates, they're spending more commitments upfront.

Local newspapers are the other major media venue for the studios, and ad linage rates took off last year as publishers absorbed soaring newsprint costs.

The huge event films that bear great promo potential outside theater attendance-"Batman Returns," "Pocahontas," "Casper," and "Toy Story" in '95-are coming down the Hollywood pike more frequently than in the past. These movies cost a lot to make, and there's a lot of pressure to make them pay off.

"The stakes get higher every year. Movies in general are becoming incredibly expensive, and the bigger the budget, the bigger the marketing muscle that's needed," says Mr. Schau.


What makes this even more risky is that bigger ad budgets don't guarantee box office success.

Buena Vista Pictures, the Walt Disney Co. distributor for Walt Disney, Hollywood and Touchstone labels, backed 37 films with $430.6 million in '95, up from 36 films and $295.9 million in '94. Buena Vista's market share slipped, however, from 19.3% to 18.7% of a slightly declining box office, according to Daily Variety. In both years, Disney led the industry in revenue and market share, although each market share point cost Disney 50% more in '95.

Disney's response: It plans to halve the Buena Vista output in '97 from this year.

Other studios won't likely follow Disney's move. Disney can afford to cut its production while others can't. Disney is the one brand name in Hollywood capable of putting people in theater seats on the strength of its name alone. Disney also has a wealth of content it can recycle in new ways, from direct-to-video sequels to animated features.

Making fewer films doesn't mean advertising costs will decrease exponentially, because studios are looking far beyond pushing new releases at the box office. They're launching "brands" that can be translated into media and other products-soundtracks, home video, merchandise-that require extended marketing.


Then there are the promo partners to coddle. Studios look to the fast-food franchises to help promote movies, which means increased spending levels for the studios.On average they dish out $14 million to market each release; sometimes its a lot more. Warner Bros. laid out $22 million in media ads for "Batman Returns" last year; McDonald's spent an estimated $35 million in media and promos for its share in a "Batman" tie-in effort.

As movie marketing becomes more refined, strategic and competitive, studios will have to spend as much if not more to make those alliances pay off. Disney, for example, must prove to McDonald's that its decade-long $100 million contract with Disney will pay off.

"Media and promo partners are going to spend more on movies because they see the kind of return they can get, but that means the studios are expected to return the favor," says Mr. Schau.

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