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GM Going Hollywood in Warner Bros. Deal

Four-year agreement will give the car maker access to far-ranging entertainment properties and provide the studio new financial support.

August 05, 1999|GREG JOHNSON | TIMES STAFF WRITER

General Motors Corp., which has been struggling to lure more consumers into its dealer showrooms, is forming an extensive joint marketing venture with Warner Bros. that gives the car maker unprecedented access to the entertainment giant's movie, broadcast and music properties.

The alliance, valued at at least $30 million, builds upon past deals in which GM used cartoon characters Wile E. Coyote and Tasmanian Devil to pitch cars.

The four-year deal, to be announced today, represents a drop in the advertising bucket for GM, which spent more than $2 billion in 1998 to market its cars, trucks and vans. The partnership could pay dividends, observers said, if the Hollywood connection prompts customers to consider buying GM vehicles--particularly in such important regions as Southern California, where GM's market share has been sliding.

For Warner Bros., the deal provides a cash-rich partner that can help to absorb the ever-increasing costs associated with promoting new movies, CDs and cartoons. The deal could turn GM's dealer showrooms--as well as the car maker's direct-mail and credit card programs--into marketing venues for new movies, CDs and other entertainment projects.

"It's all part of something called psychographics and segmentation extension--which basically means if you like one thing, chances are good that you'll like another," said Michael Schau, editor of New York-based Entertainment Marketing Letter. "But it's all going to come down to whether Warner and [GM] can finesse this into something smart, not something cloying or that makes you want to gag."

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The first promotion in the deal will be a special-edition Chevrolet Venture van carrying Warner Bros.' familiar "WB" logo on the outside and an entertainment package including a flip-down LCD video monitor, free WB videos and compact discs and discount programs at WB retail stores and theme parks. The van will sell for about $30,000.

Other elements of the deal haven't been determined, but GM executives have signed on for 15 "multimillion-dollar promotional partnerships" involving such divisions as the WB television network and Warner Bros. Studio Stores.

Warner Bros. and GM executives disputed a trade magazine report that set the potential value of the deal at $200 million. Executives at GM said the cash value of the deal has a "floor" of $30 million, but that the actual value could grow much higher as future marketing programs are initiated.

The deal follows in the tire tracks of partnerships announced earlier this year by Universal Studios Inc., which has formed marketing relationships with Coca-Cola Co. and the Dodge division of DaimlerChrysler. Marketing industry observers said the deal also is similar to a 10-year marketing agreement that Walt Disney Co. signed in 1996 with McDonald's Corp.

Such long-term packages are "beneficial for us to have," said Phil Guarascio, GM's vice president for advertising and corporate marketing. "These kinds of deals are very powerful when it comes to long-term planning."

But they also have a downside. Marketing opportunities for GM will depend upon the success that Warner Bros. enjoys at the box office, in television ratings and in the mercurial world of popular music. Absent huge hits, the marketing deals could fizzle. Indeed, some McDonald's franchisees have groused that the deal with Disney has prevented them from linking promotions to hits from other studios.

And even a blockbuster doesn't ensure success, as franchisees of Taco Bell, KFC and Pizza Hut have learned with their recent "Star Wars" tie-in.

Warner Bros. executives say the deal should lead to better planned marketing deals that are necessary in the increasingly high-priced world of entertainment. "We now know that we've got a partner for the next four years, so we don't have to think about selling a property, we can get right into implementing programs of mutual interest," said Dan Romanelli, president of WB's Worldwide Consumer Products division.

"We're working on a film right now that involves a lot of cars," Romanelli said. "The project isn't green-lit yet, but one of the first stops we'll make is with GM, to describe the opportunities, the things we could do together. This allows both parties to be proactive instead of reactive."

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Guarascio said the deal will pay for itself if the Warner Bros. connection pulls potential buyers into its showrooms--something traditional advertising is failing to do. Guarascio said that more companies with products to sell will be forging links to Hollywood: "From a marketing point of view, the entertainment industry has been under-leveraged by non-indigenous companies, including car companies."

Insiders say that GM initially opened discussions with Disney, hoping to piggyback on an existing deal that led to the opening of a GM "Test Track" ride at Epcot in Orlando, Fla. When those talks broke down, GM entered negotiations with Warner Bros.

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