How do you pick a movie to see – whether at the theatre or at home?  The movie studios think you pick movies by what you see on TV ads, according to the Los Angeles Times "Studios struggle to rein in marketing costs." 

I remember the old days when my friends and I grabbed a newspaper and shopped the ads looking for a flick to go see.  And we were influenced by television ads as well.  But, as time went by, we started asking each other, "Is that movie any good, or are all the best parts in the ad?"  (Admit it, you've asked that question too.)  Then we found out we could get sneak peaks from shows like "Siskel & Ebert at the movies," so one of us would try to watch that and see if we liked the longer scenes.  And we didn't ever agree with the critics, but we could listen to hear if they described a movie we would like.  Now, not only myself but my sons follow the same routine.  Only we go to the internet looking for a YouTube! clip, and for reviews from all kinds of people – not just critics.  Mostly when we see a TV ad we hit the mute button.

Everywhere, businesses are still wasting money on old business notions.  For movie studios, they keep trying to get people to watch a big budget by advertising the thing.  (To death.  Until nobody watches the ad any more because they have it memorized.  And get angry that the ad keeps showing.)  But even the above article admits that studios know this isn't the best way any more.  With the internet around, we all listen less to advertisements, and gain access to more real input.  From web sites, or Twitter, or friends on Facebook, or colleagues on Linked-in.  We watch a lot less TV, and what we watch is more targeted to our interest and available on cable.  Or we download our TV from the web using  Yet, the studios are so Locked-in to their outdated Success Formula that they keep spending money on TV ads – even though they know the value isn't there any more.

So why do the studios spend so much on advertising?  Because they always haveThat's Lock-in.  Lacking a better idea, a better plan, a better approach that would really reach out to potential viewers they keep doing what they know how to do, even as they question whether or not they should do it!  The industrial era concept was "I spent a fortune making this movie, and distributing it into theatres, so I better not stop now.  Keep spending money to advertise it, create awareness, and get people into the theatres."  The studios see movie making as an industrial enterprise, where those who spend the most have the greatest chance of winning.  Spend a lot to make, spend to distribute, spend to advertise.  To industrial era thinkers, all this spending creates entry barriers that defends their business.

And that's why movie studios struggle.  It's unclear how well those ideas ever worked for filmmaking – because we all saw our share of blockbuster bombs and remember the "American Graffiti" or "Blair Witch Project" that was cheap and good.  But for sure we all know the world has now permanently shifted.  Today, small budget movies like "Slum Dog Millionaire" can be made (offshore in that case – but not necessarily) quite well.  The pool of new actors, writers, directors, cinematographers and editors keeps growing – driving production quality up and cost down.  And distribution can be via DVD – or web download – between low cost and free.  A movie doesn't even have to be shown in a theatre for it to be commercially successful any more.  And any filmmaker can promote her product on the internet, building a word of mouth driving popularity and sales.

From filmmaking to recordings to short programs to books, the market has shifted.  Things don't have to be big budget to be good.  The old status quo police, like Mr. Goldwyn or Mr. Meyer, simply have far less role.  Digitization and globalization means that you don't need film for movies – or paper for books.  Thus, democratizing the production, as well as sales, of "media" products.  Thus the old media companies are struggling (publishers, filmmakers, magazines, newspapers and recording studios) because they no longer have the "entry barriers" they can Defend to allow their old Success Formulas to produce above average returns.  And they never will again.  The world has changed, and the market has permanently shifted.

Is your business still spending money on things that don't matter?  Does your approach to the market, your Success Formula dictate spending on advertising, salespeople, PR, external analysts, paid reviewers or others that really don't make nearly as much difference any more?  When will you change your approach?  The movie studios are preparing to spend hundreds of millions of dollars on summer ad promotions for new movies.  Is this necessary, given that the downturn has increased the demand for escapist entertainment?  Is your business doing the same? 

If you want to cut your cost, you shouldn't cut 5% or 10% across the board.  That won't help your Success Formula meet market needs better.  Instead, you need to understand market shifts and cut 90% from things that no longer matter – or that have diminishing value.  Quit doing the things you do because you always did them, and make sure you do the things you need to do.  You want to be the next "Slumdog Millionaire" not the next "Ishtar."  You want to be Apple, not Motorola.  You want to be Google, not Tribune Corporation.  Spend money on what pays off, not what you've always spent it on.