Media Forum: Is cinema still a good deal?

Does cinema remain a powerful medium, Jennifer Whitehead asks.

Three is the magic number when it comes to luring audiences into UK cinemas. Admissions soared by 28 per cent this June compared with the same month last year, as people flocked to see the third outings in the Pirates of the Caribbean, Shrek and Ocean's franchises.

The bad weather might just have helped, too. This strong June performance was followed in July by blockbuster releases such as Harry Potter and the Order of the Phoenix and The Simpsons Movie.

Yet, despite the 11.8 million bums on seats during the month, cinema sales houses are struggling to make a profit. Revenue at Pearl & Dean was flat during 2006 (excluding the loss of its UGC contract), and it recorded an operating loss of £4.2 million. Its owner, SMG, put it up for sale last September, but has struggled to find a buyer.

Over at Carlton Screen Advertising, owned by ITV, things are also tough. Revenue fell by £4 million in the first half of the year, which ITV blamed on the increased cost of operations and guarantees on long-term contracts with cinemas. It said that without "significant increases in cinema ad revenues" the losses would persist and called contracts - which are based on cinema admissions calculated two years ago - "onerous".

Consolidation of the cinema operators and increasingly tough targets for sales houses have arguably made it a less attractive medium to sell than previously.

And yet those in the industry remain positive about the future of cinema as a medium. The Advertising Association reported a 10 per cent increase in cinema spend during the first quarter, and Simon Willis, the head of cinema at Group M, has forecast a 7 per cent rise in cinema ad revenues across the year.

Ian Smith, the head of media at Orange (the UK's biggest spender on cinema), says the medium's attractions are obvious.

"Apart from popcorn rustling, there are no distractions at the cinema. Cinema for Orange still offers an unmatched opportunity to showcase our creative messages in full, with enormous standout, reinforcing our position as the number-one brand associated with film in the UK," he says.

Nicky Homes, the commercial director at Carlton Screen Advertising, admits there are problems. Cinema admissions fell by almost 5 per cent in 2006, and that is a challenge for any media owner.

However, she argues that in an environment where people face more demands on their attention, cinema advertising has taken on a new significance.

"It is still the most impactful medium you can buy," she says. "In all other media, less attention is being paid to advertising."

Homes also says the industry is attempting to introduce new options for advertisers, including Bluetooth and "live" ads in foyers. The next major development is set to be digital screens, which have been slow in coming, owing to the large start-up costs involved for the cinema owners.

An unsurprisingly strong sell from the largest cinema sales house perhaps, but it's clear that creatives are still keen on cinema for the big canvas it provides for their ideas.

Tony Davidson, the executive creative director of Wieden & Kennedy London which created Pizza Hut's recent "family film gold spot" ad, says: "Cinema is a fantastically flexible medium in that there are no set restrictions as to the length of the ad you're creating. You can create an eight-second ad or a 73-second ad."

And media buyers are now interested in cinema opportunities beyond the screen. "The foyer gives advertisers a unique opportunity to engage consumers," Willis says. A recent campaign for Kodak, for instance, encouraged people to take pictures of each other, which were later projected on to the screen to build audience engagement.

While cinema undoubtedly faces issues with attracting admissions all year round and implementing new technology at a more urgent pace, its creative potential remains its strong suit.

YES - Simon Willis, head of cinema, Group M

"Cinema, in my eyes, is doing well. Sales and promotions have a lot to offer cinema, and I think the cinema sales houses are becoming more commercially aware to exploiting all the opportunities cinema offers."

YES - Ian Smith, head of media, Orange UK

"Cinema advertising is still a viable medium because it remains a huge industry. Cinemas contain captive audiences, which continue to respond well to our cinema ads."

YES - Nicky Homes, commercial director, Carlton Screen Advertising

"Almost five million people turned out to see The Simpsons Movie and Transformers open, proving cinema still has the ability to deliver significant audiences who are as engaged by the advertising as ever."

YES - Tony Davidson, executive creative director, Wieden & Kennedy London

"It's a great medium - how big is that screen? You have an entirely captive audience, some of whom have ensured they arrive in time to see the ads, and you can't fast-forward through them."

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