Flops take toll as Hollywood pulls back ads.

When Hollywood sneezes, it seems that magazines, television networks and especially newspapers catch a cold.

That's the worry on the minds of media executives as studios chalk up weekend after weekend of disappointing box office grosses and begin to tighten their ad budgets.

Some outlets are reporting below-par revenue from studio advertising so far this year. But it could get even worse with pared-down ad budgets for DVD releases and future studio releases.

"We've seen a decline that's directly related to box office revenue," said Doug Hanes, senior vice president of advertising and marketing for the Los Angeles Newspaper Group, which publishes eight daily newspapers, including the Daily News of Los Angeles.

Movie advertising in all media has seen a 4percent decline in the first quarter of 2005 compared with the like period a year earlier, according to the consulting firm Universal McCann, which cited the sector as contributing to a softening of growth in overall ad spending for the rest of the year.

The quarterly drop was especially pronounced among newspapers, where movies account for about 15 percent of total ad revenues. Movie advertising in newspapers was down more than 8 percent in the first quarter of this year, according to the Newspaper Association of America.

The worries are mounting, especially as studios shift some of their focus to DVDs, which typically get less promotion. Moreover, those promotions tend toward more specialized media, such as magazines and cable channels, rather than broader-based newspapers and television networks.

Some media buyers say that with studios having more options than ever to promote movies--the Internet, video game tie-ins and even world-of-mouth "guerrilla marketing"--newspapers should lower their rates.

"Newspapers are their own worst enemy. The cost is so high that it was bound to create competition at some point," said Roger Schaffner, president of Palisades Media Group Inc. in Santa Monica.

None of the major studios or advertising agencies contacted would speak publicly about their plans, noting the competitive nature of their industry. But one executive at a major studio agreed that studios are searching for new advertising outlets to reach younger audiences who have largely abandoned newspapers.

Not all newspaper outlets are suffering equally.

Todd Brownrout, senior vice president of advertising for the Los Angeles Times, said movie advertising at the Tribune Co.-owned paper has increased marginally this year. He credited that to a newly created unit that offers more non-traditional advertisements, such as an unusually shaped ad for the animated 20th Century Fox release "Robots."

Brownrout remains troubled by the long-term trend. "We can make no guarantees that things going forward will be as OK as they have been so far," he said.

There are some hopeful signs. Although promotional budgets for DVD releases still pale compared to the theatrical debut, some studios may begin to spend more on promoting home videos. An example would be Sony Pictures Home Entertainment's wide-ranging, multimedia promotion of the DVD release, "Hitch."

"Home entertainment was seen as secondary and not quite up to the same standard as the theatrical release, but now it's not seen that way," said David Samuels, president of Samuels Motion Picture Advertising in Hollywood. "It's now where the money is."

Robert Coen, senior vice president of forecasting at Universal McCann, said he couldn't predict whether movie promotional spending will reverse its current decline. But he suggested that the current drop-off could simply reflect the paucity of major releases this year compared to last year--47 so far in 2005, compared with 55 during the same period last year.

And there's one other thing. "We thought it might be just because they're doing lousier movies," Coen observed.

Ripple Effect

Movie industry advertising has fallen
across media channels.

National Television     -6%
Local Television         0%
Magazines               -6%
Overall                 -4%

Source: Universal McCann

Note: Table made from bar graph.