High Movie Marketing Costs a Factor in Lions Gate 2Q Loss
Lions Gate's $14.1 million loss for the Second Quarter of 2005 is mostly attributed to a $26 million dollar loss from marketing the late summer releases 'Lord of War' and 'The Devil's Rejects,' Reuters reports.
According to company statements, Lions Gate spent a combined $35 million to market both titles, but neither of them generated the theatrical revenues to make up for the spend. However, the studio is still confident that they can make up the deficit on the home video front. That is, of course, if they can keep the additional marketing spend required for the home video release under check.
In analyzing the marketing-to-production spend for these movies, you can see why the industry is freaking out about rising marketing costs. The combined production budgets for both of these films was approximately $49 million dollars (roughly $42 million for 'Lord of War' and $7 million for 'The Devil's Rejects' according to IMDBpro.com). That would put the marketing costs at around 71% of the production budget -- an alarming figure at any rate.
Consider for a moment what Dawn Taubin was quoted as saying when interviewed for in article about the recent Warner Bros. layoffs:
"Marketing costs are just skyrocketing, and if we don't address this we are going to put ourselves out of business"
That 71% percent the Lions Gate spent looks even worse when you compare it to marketing spend figures touted in that same New York Times article
Consider this: the average cost to market a film domestically in 2004 was $34 million, roughly half the $64 million average price tag to make one, according to the Motion Picture Association of America. Blockbusters cost even more to market: as much as $60 million.
Given Lions Gate's strategy of marketing lower budget pictures as if they were bigger releases, they could potentially get themselves into a whole heap-o-trouble with even a minor slump...
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