Business Week
It's the stuff of a movie mogul's dreams. You're about to release a new flick but you're not sure which theaters will give you the most mileage for your marketing buck.
How, for example, will it play in Peoria? So you dip into your company's computerized database, which is constantly updated with new information on how movies are faring in specific theaters around the country. In a flash, you can analyze which spots have rung up the most box-office receipts with similar films in the past. You can even get an idea which crowds prefer Wesley Snipes, say, over Nicolas Cage. Right away, you know where to pump the most ad dollars and where to save yourself the cost and bother. Wham! Bam! Just like that.
Sound like some techie's celluloid fantasy? Not at Twentieth Century Fox (FOX). Since April, box-office figures have been tabulated and dissected for just such decisions at the Hollywood movie and TV studio owned by Rupert Murdoch's News Corp. (NWS) Here, the Internet is emerging as the latest weapon in Hollywood's never-ending battle of the budget.
SMASH HITS. And what a battle it is. Sure, superstars are demanding ever greater sums. But the fastest-growing expense for studios these days comes from increased marketing costs--up more than 80% in the past five years. "We're killing ourselves by competing with each other to get folks into the seats," laments Tom Sherak, Fox's president of worldwide distribution. Last year, Fox raked in $4.4 billion from such box-office smashes as Titanic and There's Something About Mary, but it spent an estimated $1.7 billion to make and market those and other films. For Fox, gaining even a percentage point or two for the 30-odd films it releases each year could result in big savings.
That's why Fox came up with Eight Ball, the code name for a $1 million project that taps the Internet to boost revenues and cut costs. Since spring, Fox distribution executives in Los Angeles and three regional offices have been able to mine a huge database of more than 43 million box-office and movie records that go back for years. There, they have stashed information on the number of tickets sold for films made by Fox and all its rivals -- at any theater in any neighborhood.
And the numbers are updated faster than you can take your seat at the multiplex. Using the Net's communication links, theaters and ACNielsen/EDI --which tracks box-office receipts in more than 80% of the country -- zap fresh data about how movies are faring to Fox first thing next morning. In Fox's offices, movie execs use a specially tailored spreadsheet to quickly slice and dice the information. Let's say, for example, that Titanic is a turkey in Topeka. Execs can yank it -- or boost advertising for it in areas where interest appears to be building. All this information even helps them predict which movies will be popular on nearly 30,000 theater screens around the country. By not making a copy of a movie for one theater, the studio can save $3,000 in film-duplication costs alone.
All these numbers also come in handy on Monday mornings, when studios renegotiate with theater owners the revenue split on film receipts. That's because Fox can then compare how well their film is doing compared with a rival's movie playing on the next screen in the multiplex.
In the cutthroat world of moviemaking, Fox won't reveal cost savings other than to say it will be significant.
Already, Eight Ball seems to be influencing Fox's distribution strategy. For instance, Fox released the new Brad Pitt movie, The Fight Club, on an estimated 1,950 screens, 150 fewer than Universal's new Bruce Willis film, The Story of Us. By cutting that many theaters, Fox could save an estimated $450,000 by not having to duplicate or ship as many copies of The Fight Club -- which seems less promising.
Fox also used Eight Ball to help the chances of its Melissa Joan Hart teen comedy, Drive Me Crazy, by targeting the releases to theaters where similar films had played well, near suburban malls, industry experts say.
The film grossed $3,084 per screen on the 2,220 where it played, a decent showing that gave Fox a better bang for the money it spent to get it into theaters.
Eight Ball is just one of the many ways Fox hopes to use the Internet to reduce costs and get a leg up on the competition. These days, the studio has taken to using the Net to zap promotional materials to its home-video sales staff overseas. Today, executives in more than 30 territories can log onto the password-protected site, insidefox.com, for information, such as currency-rate fluctuations and sales support figures. The site also includes a bulletin board where executives can brainstorm. In one posting, for example, Gary Fong, a Hong Kong-based executive, asked his colleagues for suggestions on how to jazz up Fox's in-store displays.
Just linking Fox's headquarters to its Tokyo office, for example, saves the studio more than $6,000 in monthly phone costs. Nader Karimi, Fox's executive director for client computing services, predicts that the company will shave expenses by $600,000 a year because of e-mail and the new ability to swap documents over the Web.
Still ahead: a project, code-named Atlas. Fox won't discuss details, but industry insiders say it will extend the benefits of data like that collected by Eight Ball to Fox's international home video executives. Atlas would give video marketers the same kind of detailed information that film distributors now get through Eight Ball. Marketers also will be able to figure out which videos are selling -- as well as how and where to aim their advertising dollars. If a idea isn't selling well in Paris, for example, execs will be able, in hours, to tweak the ad budget to compensate.
While Fox is taking the most ambitious steps on the Internet, Warner (TWX), Universal, and DreamWorks are all noodling ways to automate distribution and marketing. The studios hope to be ready for the day, five or 10 years from now, when films such as Fox's Anna and the King and TV shows will be digital, making them instantly available to viewers. "This is a very, very, very competitive business, and no studio wants to be the last one in," says Joe Butt, executive vice-president of Forrester Research Inc. "Fox is the first one."
Ironically, not long ago Fox was considered the Luddite of Hollywood studios. Even in the mid-1990s, Fox was feeding an outdated mainframe reams of box-office sales data that it was incapable of analyzing. And much of that data was still in paper files. "Our mission on Eight Ball was to give Fox the ability to use the Web to analyze those records quickly, so that they could make effective management decisions," says Abe Wong, associate partner with USWEB/CKS, a Santa Monica (Calif.) consulting firm that's helping Fox to formulate and put in place its Net strategy.
Credit 39-year-old Justin Yaros, Fox's chief information officer and senior vice-president. Eight Ball is his baby. To make Eight Ball a reality, Fox in mid-1998 licensed a program from two-year-old software developer Hollywood Software, which was founded by entertainment-industry strategic planner David Gajda and former Savoy Pictures CIO Robert Jackovich. Yaros customized Hollywood Software's Theatrical Distribution Software, putting it together with Fox's proprietary Falcon System software in 1998, which lets Fox tabulate its box-office receipts.
What's next for Fox? This month it is expanding the Net's reach to include its international TV sales staff as well as foreign TV stations that buy such Fox-made programs as The X-Files and The Simpsons, along with Fox movies. To foster closer ties with those stations, says Yaros, the technology will allow individual station operators to log onto the site and pick and choose the marketing materials that they want. That could be a big boon for Fox: The company now spends an estimated $10 million a year just to prepare and mail out press releases and other sales support materials to TV stations worldwide.
All this new digitized and linked information is impressive. For now, however, Hollywood remains a town where many entertainment executives rely on hard copy, not cyberspace, for the important stuff, says Tom Borys, president of EDI, the ACNielsen unit that distributes box-office numbers. The morning after a big film release, he says, "we act like a newspaper, sometimes, and make sure some of these guys have it at their Malibu homes at 6 a.m." For Fox, that's already half a day too late.
**Reprinted from Business Week, October 22, 1999