Media: All about ... Cinema advertising

By Alasdair Reid, campaignlive.co.uk, Friday, 30 April 2010 12:00AM

Pearl & Dean's sale could ultimately help the medium.

It's almost obligatory to begin any article on Pearl & Dean with an attempt to evoke the company's legendary theme tune. Just as, not so long ago, any mention of the company now known as Digital Cinema Media would involve a namecheck for J Arthur Rank (this is no smirking matter) and the glistening bodybuilder bloke bashing his gong (nor is this).

And before you know it, you've conjured up a glamorous world. A West End wonderland of bright lights, red carpets and sparkling jewels. A glamorous and, by implication, rather prosperous world.

Unfortunately, the world of Pearl & Dean has, in recent years, been anything but prosperous. That's why last week's deal, which saw Pearl & Dean bought by Image Limited for (nominally) £1, could be such a landmark moment for the business.

True, it reminds everyone of the mistakes of the past - but it could, and should, also draw a line under a somewhat dismal and accident-prone era for the medium that stretches back more than a decade.

DCM's predecessor company, Carlton Screen Advertising, arrived on the scene in 1996 when the ITV franchise holder Carlton Communications acquired Rank Screen Advertising.

And when Carlton merged with Granada to create ITV plc in 2004, this new powerhouse company, in its first flush of optimistic arrogance, decided it was going to dominate audio visual advertising as a whole by cornering not just television airtime trading but the cinema market too.

So it began "buying in" business in order to achieve an unassailable share of the market. Previously, cinema sales operations had contracts with cinema chains whereby they'd share revenues. In good times, both would prosper; and in leaner times, both would suffer proportionately.

From 2004, however, CSA offered the sorts of stupendously generous revenue guarantees that no sane cinema chain could refuse. Its only rival, Pearl & Dean (then owned by SMG, a company that has since morphed back into STV, reflecting its core Scottish television interests), had no alternative but to respond in kind - or face being wiped off the media map.

Thus Pearl & Dean's ruinous contract (under terms renegotiated in 2005) with the Vue chain that has defined its recent past. Sadly, it watched in horror as ITV found a loophole. When the downturn made a nonsense of all of the major cinema revenue guarantee contracts, ITV wriggled out of the business by closing down CSA in 2008 - forcing its two main clients, Cineworld and Odeon, to set up their own successor company, DCM.

STV had no such loophole because the plc rather than its subsidiary was responsible - and it had to grin and bear the losses while it attempted to sell the company. Which, at last, it has now done. So last week's deal isn't really just for £1. Image will also be buying out the last £9.1 million of Pearl & Dean's revenue guarantee to Vue.

1. Image is a company backed by Thomas Anderson, who owns the Empire Cinemas chain. It accounts for 4 per cent of UK cinema admissions and its advertising contract is currently with DCM. When it shifts this into its new sister company, Pearl & Dean will have a market share of around 40 per cent, with the rest held by DCM. Speculation will now shift to the Vue contract (representing 15 per cent of the market), which will be up for grabs at the end of the year.

2. Image has made it clear that it has every confidence in Pearl & Dean's current management, led by the chief executive, Kathryn Jacob, and the enterprise director, Mike Hope-Milne.

3. Pearl & Dean made a loss of £13 million in 2009. Despite the best efforts of both DCM and Pearl & Dean to talk the market up last year, it was not believed to be immune from the downturn. Agencies report that a recovery is underway and forecast growth of 5 per cent for 2010. The cinema ad market is worth a total of roughly £100 million.

4. Ironically, admissions figures have been better than they've been in a generation, buoyed by a golden era in blockbusters. 2009, for instance, began with Slumdog Millionaire and ended with Avatar. There were 164 million admissions in 2008, with 173 million in 2009.

WHAT IT MEANS FOR ...

PEARL & DEAN

- In a word - continuity. Kathryn Jacob and Mike Hope-Milne are highly rated in the marketplace. They've not only received a vote of confidence from their new employers but have been given a promise of renewed financial backing.

- As Jacob puts it: "My view is that this means a more equitable market. A Pearl & Dean backer that not only has a strong interest in the medium but is also prepared to invest has to be a strong situation for the cinema advertising market."

- Pearl & Dean will now be able to make the right sorts of investment to serve a market moving towards digital copy distribution and 3D production.

ADVERTISERS AND AGENCIES

- Simon Willis, the head of cinema at Group M, agrees that this is great news for the medium. He comments: "It's better for advertisers to have two cinema sales teams than just the one. It means that the Pearl & Dean personnel will be retained - and they have strong agency and client relationships. So, in a sense, it is business as usual. It's good news too that it has been taken over by someone who's passionate about cinema, through his ties with the Empire chain. Other backers might not have been keen to make the right sorts of investment."

- Willis adds: "And it's timely because the medium is doing brilliantly in audience terms. Audiences blew us away last year and I think they're going to be pretty good again this year, with the new Harry Potter, Shrek Forever After and Toy Story 3 on their way."

This article was first published on campaignlive.co.uk

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