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In 1999, two young directors found their target audience by creating a website purporting to investigate sightings of the Blair Witch. “The movie was an extension of the website,” noted a studio executive. When
The Blair Witch Project
earned over $130 million in the United States, distributors woke up to the power of the Internet. Now every film has a web page, enticing viewers with plot information, star biographies, games, screen savers, and links to merchandise. Distributors have realized that web surfers will eagerly create “viral marketing” if they’re allowed to participate in getting the word out. Fan sites such as Harry Knowles’s Ain’t It Cool News can publicize upcoming films through steady leaks and exclusive access. Online contests can harvest email addresses for promotion of products and other films. Building on the thriving
Lord of the Rings
web culture, Peter Jackson sent nearly 90 Production Diaries of
King Kong
to a fan site, and they were later released as an elaborate boxed set of DVDs. Wireless communication became the next logical step, with trailers downloaded to cell phones and text-messaging campaigns such as that for
Cry Wolf.

Merchandising
is a form of promotion that pays back its investment directly. Manufacturing companies buy the rights to use the film’s characters, title, or images on products. These licensing fees defray production and distribution costs, and if the merchandise catches on, it can provide the distributor with long-term income from an audience that might never have seen the film. Although
Tron
did poorly in theatrical release in 1982, the
Discs of Tron
video game became a popular arcade attraction. Today nearly all major motion pictures rely on merchandising, if only of a novelization or a sound track CD, but children’s films tend to exploit the gamut of possibilities: toys, games, clothing, lunch boxes, and schoolbags. There were
Shrek
ring tones, bowling balls, and hospital scrubs. The basis for George Lucas’s entertainment empire came from his retention of the licensing rights for
Star Wars
merchandise.

A similar tactic is
cross-promotion,
or
brand partnering,
which allows a film and a product line to be advertised simultaneously. The partner companies agree to spend a certain amount on ads, a practice that can shift tens of millions of dollars in publicity costs away from the studios. MGM arranged for the stars of the James Bond film
Tomorrow Never Dies
to appear in advertisements for Heineken, Smirnoff, BMW, Visa, and Ericsson. The five partner companies spent nearly $100 million on the campaign, which publicized the film around the world. As payback, the film included scenes prominently featuring the products. For
Shrek 2,
several companies committed to cobranded ads, including Burger King, Pepsi-Cola, General Mills, Hewlett-Packard, and Activision. Baskin-Robbins stores featured cardboard stand-up figures of Shrek, Donkey, and Puss-in-Boots grouped around a giant “Shrek’s Hot Sludge Sundae.” The U.S. Postal Service was drawn into the act, stamping billions of letters with a postmark featuring Shrek and Donkey. Less mainstream fare has relied on cross-promotion, too. Starbucks filled its stores with posters, coffee cup sleeves, and other promotional material for
Akeelah and the Bee.
The documentary
Hoop Dreams
was promoted by Nike and the National Basketball Association.

We’re most familiar with the exhibition phase of the business, the moment when we pay for a movie ticket or drop in a DVD or download a movie.
Theatrical
exhibition involves screening to a public that pays admission, as in commercial movie houses. Other theatrical sites are city arts centers, museums, film festivals, and cinema clubs.
Nontheatrical
exhibition includes all other presentations, such as home video, cable and satellite transmissions, and screenings in schools and colleges.

Public movie exhibition, however, centers on the commercial theater. Most theaters screen wide releases from the major distributors, while others specialize in foreign-language or independent films. In all, the theatrical moviegoing audience is not a colossal one. In the United States, admissions average around 30 million per week, which sounds like a huge number until we realize that the weekly television audience numbers about 200 million. Only about a fifth of the population visits movie theaters regularly.

The most heavily patronized theaters belong to chains or circuits, and in most countries, these circuits are controlled by a few companies. Until the 1980s, most theaters housed only one screen, but exhibitors began to realize that several screens under one roof could reduce costs. The multiplex theater, containing 3 or more screens, and the megaplex, with 16 or more, lured far bigger crowds than a single-screen cinema could. Centralized projection booths and concession stands also cut costs. The boom in building multiplexes allowed exhibitors to upgrade the presentation, offering stadium seating, digital sound, and in some cases Imax and 3D. Multi plexes can also devote occasional screenings to niche markets, as when live opera broadcasts are shown digitally or a weekly morning matinee is aimed at women with babies. Multiplexes are now the norm in North America, Europe, and parts of Asia, with snacks adjusted to local tastes—popcorn and candy nearly everywhere, but also beer (in Europe) and dried squid (in Hong Kong).

The United States is the most lucrative theatrical market, contributing 32 percent of global box office receipts. (See chart.) By nation, Japan comes in second, chiefly because ticket prices are very high. Western European and Asian-Pacific countries follow. Providing about 25 percent of the global box office, western Europe (including the United Kingdom and the Nordic countries) is the most important regional market outside North America. For these reasons, filmmakers around the world aim for distribution in these prosperous countries.

The less significant markets are Latin America, eastern Europe, mainland China, India, the Middle East, and Africa. The multiplex strategy has been the wedge opening up these territories. They have few screens per head of population, and entrepreneurs have launched ambitious multiplex projects in Russia, China, and Latin America. Hollywood distributors see overseas multiplexes as a golden opportunity. By investing in theaters overseas, they are guaranteed an outlet for their product. (U.S. antitrust law blocks them from owning theaters at home.) Historically, Hollywood distributors have withheld films from many countries when the local ticket prices were too low to yield much profit. In 2000, the average ticket price in the Philippines hovered around 70¢; in India, 20¢. As underdeveloped countries expanded their middle class, comfortable multiplexes began to attract upscale viewers who wouldn’t visit aging single-screen cinemas. By 2007, thanks largely to multiplex expansion, the global average ticket price was $3.73, an all-time high.

In 1999, four of the 3126 theaters in which
Star Wars: Episode I—The Phantom Menace
played had digital projectors. Those four made headlines, though, and many people predicted that theaters would steadily convert to digital. The advantages were obvious. The thousands of 35mm prints needed for such a wide release cost an enormous amount, and the shipping costs were a burden to distributor and theater alike. Films delivered to theaters on compact hard drives would be far cheaper. With no film to thread, high-paid projectionists would be eliminated; a theater manager could press buttons to start showings, no matter how many screens a theater had. No scratches or dust would accumulate on the print.

The obstacle was that outfitting a single screen with digital projection would cost $150,000 or more, while 35mm projectors cost only around $30,000—and many theaters already had projectors that would last for years. The rate of conversion to digital was slower than expected, and the Hollywood studios pressed reluctant exhibitors hard, offering rental discounts. Producers like Jeffrey Katzenberg of DreamWorks Animation and directors like James Cameron wanted to work exclusively in 3D, which required digital projectors. In mid-2008, when the scope of the world financial crisis was beginning to become apparent, only 4847 screens of the total 38,159 in the United States had converted to digital projection. The severe economic downturn slowed the changeover even further. In 2009, Katzenberg had to abandon his plan to release
Monsters vs. Aliens
on over 5000 3D screens. He had to settle for about 2000.

Although films are shown in venues like museums, archives, and film clubs, the most important theatrical alternative to commercial movie houses has become the
film festival.

The first major annual film festival was held in Venice in 1938, and although it had to be suspended during World War II, it was revived afterwards and endures today. Festivals were mounted in Cannes, Berlin, Karlovy Vary, Moscow, Edinburgh, and many other cities. Today there are thousands of festivals all over the world—some large and influential, such as the Toronto Film Festival, and others aimed primarily at bringing unusual films to local audiences, such as the Wisconsin Film Festival in Madison. Some festivals promote specific genres, such as the Brussels International Festival of Fantastic Film, or specific subject matter, such as the New York Gay and Lesbian Film Festival.