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'Spray and Pray'

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There is a lot of discussion about the future of the film industry. Jeffrey Katzenberg predicted recently at the Milken Conference that movie distribution will be completely reinvented in 10 years from now.

One major focus of the upcoming Digital Hollywood conference in LA is exploring technological innovations to help tackle some of the challenges facing filmmakers today. Since Veronica Mars, crowdfunding has gained a lot of momentum, often in hopes that crowds will help fund a film's production budget.

Often overlooked, one potentially more exciting application of crowdfunding on filmmaking is yet to be fully realized: Bringing studio P&A decision-making into the digital age.

"P&A" stands for print and advertising, and it involves all the advertising that goes on before a movie is released in theaters. What has been termed "spray and pray," these pre-release marketing budgets are often tens of millions of dollars. As a rule-of-thumb, a film's P&A budget should be roughly equal to its entire production budget. For a tent-pole studio film that means "spraying" $100 million or more across TV, Internet, billboards and buses. (And lots and lots of praying.)

Given a film's potential lifetime earnings or "ultimates," this level of marketing spend might actually be a sound investment. The problem is, no one really knows for sure.

Aside from likely intractable principal-agent problems associated with the idea "No one ever gets fired for hiring the best advertising firms," there has yet been a really robust way to measure P&A ROI. One simple problem is that it's hard to understand how much P&A would be necessary to get us to go see the new Star Wars film in part because no major film is ever released without a massive P&A budget behind it. There is simply no pre-release "control group." (In fact, often, if early tracking proxies are worrisome, studios will increase P&A spend.)

Crowdfunding and the access to audience data that comes with it has the potential to start bringing more information in earlier thereby enhancing strategy decision capabilities for studio CMOs. One example: the enhanced opportunities for market segmentation and resultant channel strategy decisions through analysis of the data collected in the crowdfunding campaign.

The sheer scope of studio marketing spend has started attracting attention from social media marketing firms all of which promise using Facebook and Twitter to inform P&A decision making.

Only the robust data and direct sales that accompany crowdfunding campaigns have the promise to one day end the spraying in Hollywood. I think we can all live with the praying.