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HIVE EXCLUSIVE: AD-ing and Subtracting

4 Jun, 2001 By: Joan Villa

VHS rental titles that enjoyed large-scale consumer ad campaigns in the 1990s are getting the short end of the stick when it comes to studio and retail advertising.

While studios say their overall ad spending has remained the same or even grown along with DVD’s acceptance, those budgets now have to drive two markets: VHS rental and DVD sales.

As a result, video commercials are often developed for the DVD consumer with fingers crossedthat VHS renters will go along for the ride. Studios will tag their product ads with the two-fold message, "Available to rent on VHS or own on DVD," but often place the spots on shows the DVD demographic will be watching.

"It’s a new phenomenon where you have a piece of product that pre-DVD was thought to be just a rental item that now can serve both segments of the marketplace," says Robert Wittenberg, executive v.p. of sales for MGM Home Entertainment.

The shift that puts every VHS rental title into consumer hands as a potential DVD purchase also means most studios aren’t sinking valuable dollars into post-street-date advertising. Their job, as they see it, is to create awareness and drive traffic into stores for a big opening weekend — atheatrical phrase video executives are borrowing more frequently.

"A year to six months ago, most studios were spending dollars in the rental area three weeks after street date because major retailers were heavily promoting the street date window," says ParamountHome Entertainment v.p. of publicity Martin Blythe. "That’s all changed. Now our advertising on therental front is designed to chime in within a week of street date and that is a product of two things: one, we have DVD coming out at the same time and two, the rental windows have becomecompressed."

With the launch of its new summer ad campaign, Blockbuster is also shifting the promotional message of its television spots earlier in the product cycle, with an eye to generating “excitement” fornew releases on or before street date, according to George Williams, senior marketing v.p. “We are doing everything we can to promote the rental side of the business through the DVD Rental Pass and the rental satisfaction guarantee and manage all that while we continue to satisfy the majority of our customers who prefer the VHS," Williams says.

The juggling act that attempts to "target both sides of the consumer marketplace" is not all bad news for VHS rental, explains Stacy Lowe, USA Home Entertainment’s v.p. of marketing. DVD draws attention and dollars to the video sector within studios. "With the shift of VHS rentals to DVD we’reall taking a step back and evaluating how we’re positioning our ads," she says. "We have to be a lotmore strategic in how we spend our dollars." However, the growth of DVD "helps our bottom line which generates more marketing dollars that we can use," she points out.

DVD has also been "very influential" in boosting ad budgets at Universal Studios Home Video, says Ken Graffeo, senior v.p. of marketing. With special edition DVDs streeting at the same time as a theatrical sequel, such as The Mummy: Ultimate Edition DVD and The Mummy Returns, Universaltook the innovative marketing tack of attaching a free movie ticket to the DVD packaging at retail.

The studio will repeat the unique cross-promotion this summer with an American Pie special editionDVD and its theatrical sequel, as well as DVD editions of Jurassic Park and The Lost World timed to the box office opening of Jurassic Park 3.

"Because of the units we can drive on DVD and the upside we can achieve through additional marketing support, we have been aggressively putting campaigns behind it," Graffeo explains.

After the studio generates national awareness, typically it’s up to retail to take over with mailers, newspaper inserts and in-store merchandising to clinch the sale. Past Blockbuster and Hollywood Video ads, for example, generated title awareness that often spilled over to local independent stores and regional chains. Today, however, sellthrough retailers such as Best Buy, Circuit City and Wal-Mart have cornered a large chunk of video visibility.

"If I see an ad that says ‘Buy it now on VHS or DVD’ in the Circuit City catalog, I’m thinking they’re really talking DVD," observes Bob Alexander, president of research firm Alexander & Associates. "I don’t see ‘Coming soon to arental store near you,’ which not too long ago was not uncommon."

Hollywood Video entirely eliminated television and radio ads in the first quarter as a cost-cuttingmove, utilizing only direct mail going forward. Blockbuster also relies extensively on direct mail,reserving broadcast messages for brand awareness and Blockbuster-specific "news," such as its DirecTV partnership or the launch of a summertime "entertainment pass."

This Blockbuster-specific advertising that differentiates the nation’s No. 1 retailer from itscompetition has been "very successful," Williams notes. When the company veered off that path last year by promoting major new releases, "to see if we could drive the business even further by trying to own title-specific product, we didn’t get the results we had hoped for," he adds.

In fact, Blockbuster ad spending overall has declined, according to the company’s annual report. Asa percentage of total revenue, advertising dropped from 5.2% in 1999 to 4.3% last year.

One executive says the cutback has had a dire impact especially on second-tier studios that don’t have big budgets of their own.

"It used to be when you had a big title, you’d always try to get Blockbuster to carry it as a guaranteed rental because they would do your advertising for you," he says. "That’s not the caseanymore."

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