Why Mark Cuban Needs The Value Per Action Ad Model
Mark Cuban issued an open challenge on his blog this week for ideas on helping the movie industry come up with a new customer acqusition model. According to Cuban, the current economics are killing the industry, with studios commonly spending $8 to $12 per customer for an opening weekend movie run.
Why not the Value Per Action advertising model? Instead of interrupting and annoying me with wasteful movie advertisments, billboards, banners, etc., why don’t the studios bring me directly into the value of their advertising by sharing back a portion of the advertising fee with me each time I book a ticket online. Get rid of the waste and inefficiency of traditional advertising and use your ad dollars to drive demand in a risk free, verifiable fashion. The system could work very similar to the initial Jellyfish.com retail shopping experience.
I would propose the following:
- Partner with Fandago, Moviefone, Movietickets.com and other online ticket services to leverage their ticketing infrastructure
- Integrate the Jellyfish VPA sharing concept within this online ticketing system and promote a new online ticket service (VPAMovieTix.com)
- Allow the studios to bid for sales using their advertising dollars, driving demand with pricing promotion in this new risk free channel
For example, I want to take my kids to a movie this weekend and visit VPAMovieTix.com. I look for the latest childrens’ movies, watch trailers, read reviews, etc., and select which movie tickets to buy. When I buy, the site gets paid a commission for the sale (the per sale advertising fee paid by the studio) and shares back at least half of that commission with me to lower my effective price. In this way, I directly benefit from interacting with the movie advertising and have extra money in my pocket to buy more popcorn (how the theatres make most of their money, I believe). The studios get an efficient channel and could spend lots more to drive demand for movies that weren’t hitting their numbers, and less for blockbusters that were doing well. And again, all of this advertising would be risk free because the studio would pay only for sales and they could directly set what they want to pay per customer.
Once this system is up and running there are a number of powerful means to drive additional demand. These include:
- Syndication: Click on a banner and watch a movie trailer or advertisement; buy your ticket for this coming weekend and get a cash discount
- Promote to Friends: Get your friends to book their tickets at VPAMovietix.com and earn revenue
- Push Recommendations: VPAMovietix.com knows what movies you like and could suggest new movies that you might be interested in (with your permission and with a cash discount if you buy a ticket)
These are just a handful of possibilities, but I think they represent the potential when you connect the end consumer directly to the advertising value chain using Value Per Action advertising. This is one way that the movie industry and others that are seeing diminishing returns with traditional interruptive advertising can adapt to the reality of today’s marketplace and empowered consumer.
September 25th, 2006 at 9:08 am
I wonder, though, how many people go to the movies to just go to the movies. It seems to me that there are a few instances where movie ticket purchases are driven by need rather than want. You may have hit on one: children. I can think of a couple others: dates and escaping the heat for the comfort of air conditioning. Even for date, I’d say a vast majority are driven to movies by the “hey, I just saw an ad for that new [insert actor] movie, would you like to go?” mentality.
The problem, then is that aware consumers will now simply employ your rebate program and save a few bucks which will subvert the value of any “additional demand,” right? That is, the movie theatre will be doubly charged for the same advertising.
Maybe I’m missing something.
October 18th, 2006 at 11:44 am
Mark,
I think you make a some great points but I think there are additional economics in the works. Specifically the payoff from advertising and buying mindshare up front pays dividends down the road.
As you mention they lose money on advertising each film for the their current release period. The big five movie studios spent, on average, $34.8 million to advertise a movie and earned, on average, just $20.6 million per title, in the theatre.
2. The big opening-weekend advertising dollars, even if they are expensively acquired, may pay off in later markets—specifically video, pay-TV, and foreign release. Of course these economics have changed dramatically with pirate foreign distribution, Walmart using DVD’s as a loss leading traffic driver stealing market share from blockbuster, pay-TV shifting from movies to premium shows like Sopranos and Rome. All of these changes add up to a growing disconnect between the money poured into advertising for a large theatrical gross and the earnings realized in the markets that the studios depend on for their money.)
3. Places like Blockbuster peg their orders, which could range from 5,000 copies to 100,000 copies for a single title, proportionately on the results of the theatrical opening. So does HBO.
I think the ad budget should be compared to the net revenue stream of the movie rather than its theatrical revenue. I wonder whether movie studios depreciate ad expense over the useful lifetime of the movie or if they take it upfront.
Btw the domain VPAMovietix.com looks like it is available if you have any funding left over from your October round
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