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Could This Be the Future of Film Marketing?

Sky-high marketing costs, usually half the budget of a movie, weigh heavily on studios balance sheets preventing them from taking more risks on releasing more movies. That's precisely why Hollywood is so carefully watching a little tiny movie called "Paranormal Activity" from Paramount , which may prove that a new model, hinging on the power of social media, really works.

"Paranormal Activity" is literally a tiny movie, costing just an estimated $15,000 to produce, just one tenth of one percent the cost of a typical studio blockbuster. It's being compared to "Blair Witch Project," which cost just slightly more to produce and generated nearly $250 million in global box office - one of the biggest home runs in movie history.

Paramount is taking a pretty unprecedented approach to marketing and distribution: instead of putting huge promotional resources behind a movie that could turn out to be a bomb, it's letting viewers do the marketing work. Paramount started the film in 12 college towns, then asking fans where to expand it, asking that they type in the city where they want to see the movie. The Web site's request is compelling - touting the "first-ever major film release decided by you," and that if the counter, now hovering below 500,000, hits "1,000,000 demands" then the movie will open nation-wide. When you request the movie come to your zip code the web service coordinating the campaign, Eventful.com asks for your year of birth and email address -- what better way to get detailed information about your fan base - then encourages you to spread the word through Twitter, or a Myspace or Facebook posting. The movie's Facebook page has nearly 38,000 fans and it's all over Twitter.

This past weekend the film played in only 33 U.S. theaters, screening only at midnight on Thursday, Friday, and Saturday nights. Nearly every screening was sold out, and it brought in the second highest per-screen average of any film this weekend, bringing its total box office to nearly $800,000. That may not compare with a film from the "Saw" franchise, but it's huge considering that the film cost next to nothing and the studio didn't risk a massive marketing spend. The response has been significant enough to demand a wider release, so the whole industry will be watching if demand keeps up as it hits more theaters this coming weekend. This wouldn't work for all films, but the horror genre in particular lends itself to word of mouth, as horror's target audience - teens - often trust peers on social networking sites more than ads or reviews.

Why not let moviegoers determine what limited-release movies come to town? Last summer I reported on how the presidential candidatesused Eventful.com to measure local demand and determine what cities to visit. More commonly the site allows bands or stand up comedians to figure out what cities to hit when they go on tour. Now that more theaters are outfitted with digital projection systems, that eliminate the costly and time-consuming step of physically shipping film reels across the country, the option of making last-minute decisions about where to distribute films is a reality.

Questions? Comments? MediaMoney@cnbc.com