Some film industry pundits feel Hollywood is reeling down. The key revenue streams that have traditionally driven the Hollywood economy—box office receipts and DVD sales and rentals—have hit a plateau.

"The formulas that the industry relied on for years to get consumers into theaters are no longer as effective as they once were," said Paul Verna, eMarketer senior analyst and author of the new report, Digital Movie Marketing: Engaging the Online Audience.

"There is a growing sense that the studios’ core audience of 12- to 24-year-olds does not respond to newspaper advertising and is increasingly tuning out TV commercials through the use of DVRs and other time-shifting devices," he said.

Since Hollywood has no choice but to engage this audience, online marketing is becoming more important in the overall mix.

"In 2006, studios spent an average of 3.7% of their marketing budgets on Internet advertising," Mr. Verna said. "While that is a small fraction, it is on the increase, and eMarketer projects that by 2011, an average of 11% of film marketing budgets will go toward new media channels."

"Any advertiser marketing to the 12-to-34 age group is finding it more challenging to reach those people through traditional media," Vince Messina, national director of entertainment sales at Microsoft Digital Advertising Solutions, said in an interview with eMarketer.

"That customer is harder to find through print and television," he said. "So the challenge that studios have is, ‘How do we get to that audience, which is the lifeblood of the movie audience?’

"Well, they spend a heck of a lot of their time playing games, instant messaging and going on social networks," Mr. Messina said. "Studios are paying greater attention to how to get the eyeballs that matter the most."

The growth in online advertising by studios is likely to come at the expense of traditional media such as network TV, spot TV and newspaper advertising, all of which showed net declines between 2002 and 2006, according to the Motion Picture Association of America.

"From the studios’ perspective, their online marketing efforts will be directed at their primary objective: to excite as much advance interest in films as possible and get the masses into movie theaters on opening weekend," Mr. Verna said. "If Hollywood can succeed in leveraging new media channels toward that goal, ancillary revenue streams—whether through conventional or high-definition DVDs, download or streaming services—will fall into place."

Via eMarketer