Why does digital advertising spend for movies lag behind other sectors?

Ben Johnson on 7 April 2014

According to the PWC report the Global Media Industry is poised to Top $2 Trillion in 2016. For those people unfamiliar with what a trillion looks like its a lot of 000’s (2,000,000,000,000 to be exact). Of the 13 sectors that make up the Entertainment & Media industry, film will grow at the seventh-fastest pace worldwide. The fastest is Internet advertising, which will grow 13.1 percent annually from 2013-2017. The biggest growth in film will come from “over the top” streaming services like Netflix, Hulu and Amazon.com. In 2013, OTT will generate $6.569 billion in revenue; in 2017, it’s projected to reach $17.438 billion, representing growth of 27.2 percent annually. The laggard in the worldwide film business, not surprisingly, is physical rental and sell-through home entertainment products, the combined revenue of which will sink from $38.197 billion in 2013 to $31.341 billion in 2017, a 4.9 percent decrease annually.

These numbers look great for the entertainment global forecast but there’s several things bothering us that we think require deeper investigation. If the trends are growing or stablizing why are we not experiencing proportionally greater amounts of money moving into technology associated with the marketing and advertising of all this great content. The best numbers we could find were the research by Kantar Media (2010) as quoted in Marketing to Moviegoers by Robert Marich (3rd Edition). In the USA TV consumed 75% of the available $3.6 billion advertising budget for theatrical releases¬†(that’s 3,600,000,000 USD and does not include overheads such as design and personnel costs) . ¬†Online advertising comprised only 4%. Out of that Kantar media estimates that distributors in US spent $142million in 2010 on banner advertising (>60% from 2008) for theatrical and hom entertainment. Even though this is a lot of money, it’s still a drop in the ocean terms of the overall budget. Taking this factoid in context, online advertising spend for retail is generally around 12.5% of the budget (and growing) while entertainment lags significantly behind at 4 – 5%.

Spending by sector

This opens up some very interesting questions for us at Gruvi, given that film and other E&M content verticals lend themselves so heavily to social, mobile and web based marketing, why are the budgets so small proportionally despite the length of time the industry have been using the internet to promote new content? Possible reasons for this could be a combination of the following:
1. Marketing’s focus on creative and a lack of understanding about the process of advertising online
2. The fragmentation and complexity of the media landscape
3. Lack of industry expertise on performance based digital marketing
4. Fragmentation of responsibilities in the media buying process and complexities and costs that arise, as demonstrated brilliantly by this diagram from Lumascape

Screen Shot 2014-04-07 at 4.08.08 PM

From personal experience, the marketing departments we have met often lack personnel who understand the process of advertising online. The focus in ad production is adaptation and localization of creative content. Ad buy and ad planning is specifically handled by the media agencies, who in turn subcontract to advertisers, networks and other agencies. It’s my feeling that this distancing from the process fundamentally inhibits the distributors ability to get the most from the spend, develop methodologies for establishing a clear ROI and prevent them from developing valuable in house competencies for getting to grips with this challenging yet potentially powerful advertising medium.


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