The numbers behind the industry.
The secretive research group that helps run the movie business.
By Edward Jay Epstein
July 18, 2005
"People of the same trade seldom meet
together, even for merriment and diversion, but the conversation
ends in a conspiracy against the public, or in some contrivance
to raise prices."—Adam Smith, The Wealth Of Nations
In Hollywood, thanks to the services of a secretive research
firm called NRG, rival studio executives do not need to
meet together and conspire. NRG helps them coordinate openings
in such a way that their movies do not compete head-to-head
for the same demographic slice of the audience. Founded
in 1978 as the National Research Group, NRG—now a
part of Nielsen Entertainment—supplies the same weekly
"Competitive Positioning" report to each of the
six major studios. NRG's founder, Joseph Farrell, signed
all of the studios to exclusive contracts, ensuring that
the data from his telephone tracking polls became the accepted
standard. Because of this monopoly of information, the report
provides the studios with a common basis on which to make
their scheduling decisions.
Here is how the research is compiled. The NRG telephone
pollsters ask a sample of likely moviegoers first whether
they are "aware" of a specific movie and, if so,
what is the likelihood that they will see it when it opens.
They also ask the age and gender of the respondents. The
NRG analysts break down the data from these tracking polls
into four basic groups, or "quadrants": males
under 25, males over 25, females under 25, and females over
25. (In some cases, the respondents are also divided by
race.) From these results, NRG projects how well upcoming
movies will do against each other in each audience quadrant
should they open on the same weekend.
studios, the Competitive Positioning report is critical
reading. Why? Once upon a time, Hollywood merely had to
produce movies for a habitual audience. Nowadays, it has
to create an audience for each and every movie via ad campaigns,
appropriately called "drives" (as in "cattle
drive"). "If we release 28 films, we need to create
28 different audiences," a Sony marketing executive
lamented to me. Audience creation is a hugely expensive
exercise, costing an average of $30.6 million per studio
movie in 2004. For a drive to work, it must not only round
up a herd of moviegoers who favor the movie, it must also
get this herd to move at a specific time: opening weekend.
feat almost invariably requires buying a slew of ads on
the limited number of television and cable series that the
prospective herd grazes on during the week preceding the
opening. To make sure they get the herd's attention, the
ads are usually repeated eight times, which is why these
drives cost so much. The multimillion-dollar drive runs
into a serious problem, however, if a rival studio goes
after the same herd that same week—for example, under-25
males—by also buying a parcel of ads on the same shows.
The herd then might be cross-pressured and confused, and
certainly divided. Such a competition would likely spell
failure for both rivals, since even the winner stands to
lose a part of the audience to the rival film. To win, then,
studios must avoid such conflicts, even if it means yielding
to each other.
NRG. The major studios can—and do—avert such
titanic disasters by consulting the NRG Competitive Positioning
report. Each studio gets an early warning from the NRG report
when one of its films is on a collision course with a competitor's
film that appeals to the same herd. By comparing the projected
turnouts for both films in the crucial quadrant(s), the
studios know which film will lose the matchup, and the losing
studio can reschedule its opening to a different weekend,
even if it's a less advantageous time period (i.e., not
the summer and not the holidays).
how Paramount captured the highly prized Fourth of July
weekend this year for War of the Worlds even though
Warner Bros. had a major contender in Batman Begins and
20th Century Fox had Fantastic Four. In the NRG tracking
polls, all three films did well with males under 25 (aka
teens), the audience quadrant that's easiest to find clustered
around TV programs and, hence, the easiest to stampede toward
a July 4 weekend opening. But War of the Worlds was also
strong in the under 25 female quadrant, so it would easily
best both Batman Begins and Fantastic Four.
(In fact, it led in all quadrants.)
Bros. averted a head-to-head competition by opening Batman
Begins in mid-June, and 20th Century Fox opened Fantastic
Four on the weekend following July 4. As a result,
all three films won their weekend box office and could advertise
themselves, as Fantastic Four did, as "America's
No. 1 hit." No Adam Smith-type conspiratorial meetings
were necessary between the rival studio executives of Paramount,
Warner Bros., and 20th Century Fox in order to advantageously
stagger their film openings so they did not collide.
course, the weaker contender might try to bluff his way
through. For example, in 2002, Disney's subsidiary Miramax
had a direct conflict with Dreamworks SKG concerning the
openings of their two competing films Gangs of New York
and Catch Me If You Can, both starring Leonardo
DiCaprio and both scheduled to open on December 25. Even
though the Miramax film had a slightly higher "awareness"
level in the targeted males-over-25 audience, Dreamworks
refused to yield. At that point, Harvey Weinstein, the president
of Miramax, and Jeffrey Katzenberg, a founding partner of
Dreamworks SKG, had breakfast in New York to discuss their
movies' release dates. As Katzenberg later explained in
an interview with the New York Times: "He [Weinstein]
and I had many conversations about why releasing the movies
on the same day was in none of our interest ... as both
companies have a big investment in Leo DiCaprio." A
few days later, Miramax blinked by moving Gangs of New
York to a different, and less favorable, opening date.
To be sure, NRG's services to the studios go well beyond
telephone tracking or supplying projections. The research
firm is now analyzing much larger issues for the studios,
essentially helping them to rethink their entire business
models by examining the movies' declining share of the public's
"wallet" and "clock" as they compete
with music, DVDs, cable TV, and other forms of home entertainment.
In the long run, this research may prove far more crucial
to the studios than the Competitive Positioning reports,
which, in the end, merely avert unpleasant fender benders.
Edward Jay Epstein is the author of The Big Picture: The
New Logic of Money and Power in Hollywood
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