Harry Potter and the Marketer's Millstone

Placating J.K. Rowling meant passing up a slew of tie-in deals

Even we muggles may be unable to withstand it: children on flying broomsticks, terrible trolls, and mail-carrying owls. By Nov. 16, when Warner Bros. Inc. releases its eagerly anticipated film of Harry Potter and the Sorcerer's Stone, even those of us who live in a world without wizards and goblins will know a major film event is upon us. Yet for all the hype and hoopla that will precede it, Harry Potter arrives with relatively few of the Happy Meals, sweepstake giveaways, and wall-to-wall product placements so common to blockbuster wannabes.

Yes, a Time magazine cover is planned, and there will be Harry Potter watches, T-shirts, and backpacks. A barrage of TV commercials is coming. But by the time 11-year-old British actor Daniel Radcliffe brings to the big screen the bespectacled hero created by author J.K. Rowling, Harry won't have appeared on any Coke cans or cereal boxes. Warner has cut no deals with fast-food chains, cookie companies, or potato-chip makers. In all, industry insiders say the studio has signed one-third as many merchandise and sponsorship deals as other recent films, such as Universal Pictures' How The Grinch Stole Christmas. "With any other film, this would be a huge risk," says Hollywood marketing consultant Peter Graves, a former marketing executive at Metro-Goldwyn-Mayer Inc. (MGM ) "But this is a film that millions of kids out there can't wait to see."

GOING IT ALONE. So why is the bestseller--its U.S. publisher, Scholastic Corp. (SCHL ), estimates more than 100 million books in the series have been sold worldwide--still seen as a big-budget wager for Warner? Made for an estimated $109 million, the effects-laden film opens two weeks after Disney's (DIS ) heavily hyped film, the animated Monsters Inc. Unlike other films, in which Warner shared the costs with other companies, the studio kept Harry Potter to itself. But extra money from burger chains and others could have given a needed boost to AOL Time Warner (AOL ), which revised its 2001 revenue and cash flow targets downward following September 11.

Warner isn't talking, but privately it has told sponsors it didn't want to overexpose the Potter franchise too early. The studio also took pains to indulge Rowling, who abhors overmarketing her books and has three more to deliver in her planned seven-book Potter series. "They can say all that stuff about not wanting to overcommercialize their movie," says DreamWorks SKG marketing chief Terry Press, "but this is about keeping their author happy."

Rowling, who declined comment for this story, maintained a firm hand on the film almost from the beginning, including chasing off Steven Spielberg as director by insisting that only a British child could play Harry. (Spielberg wanted Haley Joel Osment.) Rowling also insisted on limits on how major marketing partner Coca-Cola Co. (KO ) could spend the $150 million it pledged in advertising: no images of Harry on Coke cans or Minute Maid and Hi-C juice boxes allowed. Coke couldn't use any movie footage for its three commercials, one of which will stress reading, a pet cause of Coke and former teacher Rowling. Coke also agreed to give more than 1.5 million books to 10,000 U.S. libraries and is giving away 100,000 $4 coupons for kids to buy books.

JUST FROGS. It's not as if Warner, which paid $1.4 million in 1998 for the movie rights for the first two books, has sworn off all promotions. There will be many of the usual tie-ins for kids' movies, including Mattel (MAT ) play sets, video games from Electronic Arts (ERTS ), and trading cards from Hasbro's (HAS ) Wizards of the Coast unit. But Warner turned down potential deals with Burger King, Kraft Foods, and Baskin-Robbins. And it sent some candymakers off in a huff when it agreed to license only Chocolate Frogs and jelly beans called Bertie Bott's Every Flavor Beans--Harry's favorites. Hasbro's Cap Candy unit won the U.S. candy rights. Mars Inc. received the foreign rights.

Warner kept an iron fist over all aspects of publicity as well, even limiting access by sister AOL companies. Studio execs nixed the typical Home Box Office behind-the-scenes special and refused access to Time Inc.'s Entertainment Weekly, which then ticked off studio execs by publishing an unauthorized cover story. Ads and products went through an unusually tough approval procedure often requiring Rowling's O.K. Gund Inc., which is making Potter plush dolls, delayed its ads a month awaiting Rowling's nod.

All this Potter-coddling gave Warner enough leverage to charge fat licensing fees, almost enough to make up the cost of the movie. But will the muted campaign help or hurt the movie's prospects? Steering clear of the usual barrage may improve its prospects with teens and adults, who might rebel against the cereal and fast-food tie-ins associated with kiddie flicks. That could mean a windfall for AOL Time Warner, says UBS Warburg analyst Christopher Dixon. He figures the movie will do $300 million at the box office and, with foreign and DVD rights, generate $150 million in operating profits for AOL Time Warner.

But the celluloid Harry could backfire, too. Kids, already steeped in everything Potter, may rebel against a drab movie that doesn't convey the magic of the wizard school Hogwarts or the soccer-on-broomsticks game Quidditch. If that's the case, Warner may wish it had signed on every cauldron maker that came calling a few months back.

By Ronald Grover in Los Angeles

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