Cinema Advertising Prepares for a Big 2016
on October 18, 2015
Plans for a merger between National CineMedia and Screenvision were scrapped earlier this year, leaving many to wonder what the future would hold for cinema advertising. Any lingering pessimism over the immediate future of the business, however, was quickly assuaged in April, when the Cinema Advertising Council revealed the latest revenue figures from its members.
Since its founding in 2003, the CAC has tracked annual spending from advertisers on the silver screen. The first set of published data, covering 2002, showed CAC members receiving a combined $185.8 million in revenue. That figure rose by 47 percent the following year, to $273 million, and continued its ascent until crossing the $600 million mark in 2010. Today, the CAC reports that cinema advertising has brought in over $600 million annually for five consecutive years.
Critics would suggest the performance signals a leveling off in interest from advertisers, a conclusion that frankly doesn't hold, considering the massive shifts currently evidenced in the video advertising market. Competition among cinema advertising companies remains strong as fragmentation and viewer erosion continues to affect the bottom line for television. Five years of consistent earnings suggests cinema advertising has the required foundation to innovate and grow as advertisers look for new platforms and destinations for their commercials.
"The macroeconomic climate is very favorable for us on two fronts," explains NCM chairman and CEO Kurt Hall. "First of all, I think the ad market overall is pretty healthy right now and secondly, there are things going on in the TV marketplace that are very favorable for us. If you look at what's happening with DVR and the change in viewing habits by consumers and all the over-the-top ways of getting programming and its related fragmentation, which has led to the decline in ratings for TV, all of that is very good for us. Advertisers are going to be looking for new platforms for video advertising where they'll know their ads are going to be seen. That's one of the real strengths of cinema."
A record year at the box office doesn't hurt either. This year's string of movies has helped advertisers realize cinema's potential to bring captive audiences together with a minimum risk of distractions, according to John McCauley, chief marketing officer and executive vice president of strategic alliances for Screenvision. "TV continues to underdeliver vis-a-vis the live ratings," he explains. "The box office and attendance continue to be very stable over the last 10 to 15 years, and in particular this year it really has been a star performer, exceeding our expectations at the beginning of the year. When you have these moments with box office records, it really starts to get into the public consciousness and [convince] our agency partners that cinema is a hot business."
Brands are starting to take note. In 2014, a total of 121 new national or regional brands began to advertise cinemas-up from 93 additions in 2013-despite a downturn at the box office. The 2014 CAC Revenue Report lists the leading cinema sales categories in alphabetical order as apparel, auto, broadcast TV, business and consumer services, cable TV, cell phones/devices, digital media, entertainment and amusements, insurance (auto/home), and travel/tourism. The same report cites new activity coming mostly from a range of sectors, including personal care, business services, digital media, energy, Internet, retail, toys and games, transportation, and utilities categories.
Some brands, however, tend to target more specific demographics and are better served by niche providers. That's precisely the specialty of Spotlight Cinema Networks, according to company president Michael Sakin. "Our whole concept is to be a niche vertical player in cinema," says Sakin. "We already had a vibrant art-house world and we started seeing a new crop of very upscale theaters opening across the country, selling food and alcoholic beverages, and there's a different demographic that goes to them. We're talking about 25- to 49-year-olds that are college educated, and there are advertisers that want to have their commercials in front of those eyeballs-and that might not necessarily be part of NCM and Screenvision's audience. We started Spotlight looking to appeal to that niche, upscale moviegoer." Brands have responded to Spotlight's calling. The company currently maintains a variety of high-end clients, such as Porsche in the automotive category, the Italian beer Peroni, and newer tech players like Airbnb.
The distinction has helped launched Spotlight into the national conversation in cinema advertising. While NCM (20,097 screens) and Screenvision (14,094 screens) continue to command the national market, Spotlight appears as a growing alternative for specialty venues, with its 181 theaters and 702 screens, according to the CAC's 2015 Q2 Market Representation Report.
Business was down nationally in 2014, however, with national accounts falling 6.8 percent year over year in 2014, down to $631.9 million from 2013's $677.9 million. CAC president and chairman Katy Loria is quick to highlight the specific market factors that might have caused the decline, noting that "the cinema advertising industry was on pace for a record year, but uncertainty around the merger plans disrupted the market and in particular impacted national sales revenues in subsequent months. Local sales, however, were not impacted by this uncertainty and were up in 2014." In fact, local sales saw a 5.6 percent bump year over year, up to $155.6 million from 2013's $147.3 million.
Local players have benefitted from the onset of digital cinema to provide a more streamlined service to their customers. On the Wall! was founded in 2001 and specializes in small- to mid-sized markets in the western states. "In the smaller markets, the marketing opportunities don't exist like they do in major markets. Usually there is one weekly newspaper; radio and TV have too large of a broadcast footprint to target locally," says Rik Zelman, senior vice president and director of sales. "The local movie theater is the center of entertainment and social activities in these towns. Everyone goes to the movies, as other social activities are limited."
The growth of local players like On the Wall! can be tied to a simultaneous acceptance of the format by audiences and advertisers alike. Before the Movie has enjoyed rapid growth since its founding in 2008, being named as one of Inc. magazine's fastest-growing companies for the last two consecutive years. "We really aren't seeing any obstacles in our business since cinema ads are more accepted by the public," says Before the Movie founder and CEO Corey Tocchini. "Much of Before the Movie's growth has come from local advertisers, who are finding cinema advertising to be very affordable and desirable for reaching their customers." Before the Movie is now the third largest local/regional cinema advertiser, representing 417 screens across 46 theaters and trailing NCM (1,592 theaters / 19,914 screens) and Screenvision (1,141 theaters / 10,733 screens), according to the CAC.
Opportunities abound for cinema advertising in both the short and long term. "From a pure evolution of technology and the speed of innovation, peppering in the box office and fragmentation, it's a super exciting time," says Screenvision's John McCauley. "We're at the cusp of some real change in the business and we're excited to be here and bring advertisers on screen to get a tremendous impact with their audience. We're also trying to innovate and be current and bring some solutions that add to the impact of on-screen."
Big data promises to be the next big evolution in the business, as leading companies ramp up their efforts to track consumers beyond the four walls of the cinema. The true impact of those initiatives will be interesting to watch in the years ahead, as will the overall effect they have in bringing additional advertising revenue into the sector. The big merger announced last year might not have gone through, but if business is any indication, it looks like the competition among cinema advertisers hasn't missed a beat.