MEDIA: FORUM; Who should worry if Carlton buys Cinema Media?

Carlton Communications has its eyes on Cinema Media, the leading cinema ad sales operation. What are the implications for the cinema medium as a whole? What do agencies and advertisers think? And is there a danger Carlton would be tempted to abuse its virtual monopoly in cinema advertising? Alasdair Reid reports

Carlton Communications has its eyes on Cinema Media, the leading cinema

ad sales operation. What are the implications for the cinema medium as a

whole? What do agencies and advertisers think? And is there a danger

Carlton would be tempted to abuse its virtual monopoly in cinema

advertising? Alasdair Reid reports

Carlton has always been at the cutting-edge of the audio-visual

industries. It is a 21st-century company, right down to the way it runs

its ITV franchises. It is involved in all aspects of video production,

from facilities houses to home video distribution. In addition, through

its ownership of SelecTV, it is at the forefront of the cable business.

And you can bet that when interactive TV becomes viable, Carlton will be

one of the players.

That is why it is slightly surprising to see the company trying to buy

into a 19th-century technology. Cinema, as the industry itself keeps

reminding us, is 100 years old this year. Cinema Media might be slightly

younger than this but, in its various incarnations, it goes back to the

days of the immortal J. Arthur Rank and films that were introduced by an

immodestly dressed body-builder bashing a big gong.

Last week, it emerged that Carlton was in negotiations to buy Cinema

Media (Campaign, 7 June) - although, in time-honoured fashion, it would

make no official comment on its intentions.

So what is Carlton up to? Not only is cinema a very old medium, it is

also a small one. Cinema Media may have 80 per cent of the UK market,

but the medium only takes 1 per cent of national display ad revenue.

One Carlton insider points out that the move would effectively turn the

Carlton ITV franchise from a five-day into a seven-day operation. The

size and quality of the audience attracted by London’s cinemas on Friday

and Saturday nights compares favourably with the television audience

pulled in by LWT.

Should this please, or worry, advertisers? Cinema Media has a very

powerful position in its markets and agencies report that it often tries

to sell on a conditional basis, giving big discounts for solus use.

Support from Carlton would give it the confidence to use that position

even more effectively. And wouldn’t Carlton’s TV clients come under

pressure to use cinema more often? In any case, would that be a bad


Peter Howard-Williams, the managing director of Cinema Media’s only real

rival, Pearl and Dean, is less than happy about the situation. ‘There is

a potential upside to Carlton’s involvement. An organisation of that

size and power can attract the advertisers cinema has failed to win over

in the past few years,’ he concedes. ‘The obvious downside is that we at

Pearl and Dean have been on the wrong end of a David and Goliath

situation. Advertisers are offered big incentives not to use us, but we

have fought hard - and successfully - to combat conditional selling. Now

it will be a case of David versus Goliath and his very large friend,

Michael Green [the chairman of Carlton].’

Howard-Williams says that, if a Carlton takeover of Cinema Media

radically changes the market conditions, he will immediately approach

the Office of Fair Trading. ‘There are precedents for this. Capital

Radio, for instance, had its knuckles rapped for its sales practices in

the London market. We will not just sit around and watch our business

disappear. And we would also expect the Institute of Practitioners in

Advertising and the Incorporated Society of British Advertisers to have

strong views about this. They have to make their concerns clear, or else

where is it going to end?’ he asks.

But the IPA may not be prepared to ride to Pearl and Dean’s rescue. Nick

Phillips, the director general of the IPA, is inclined to sit on the

fence: ‘My initial view is that Cinema Media already has a very big

percentage of the cinema market and, for that reason, we have to be very

careful in our relationship with it. We have had discussions with the

company recently concerning its attempts to introduce a levy on the

reproduction of film prints and I’m glad to say that it has withdrawn

those proposals. Now we are having discussions about its intention to

introduce a late copy surcharge.

‘Our initial view is that someone coming in as a new owner doesn’t

necessarily change the extent of Cinema Media’s monopoly powers. It

would depend entirely on how that new owner behaved. If conditional

selling became a problem, then we would have to consider our position. I

don’t see why that should necessarily happen just because the new owners

were Carlton.’

Robert Ray, the deputy managing director of the Media Centre, is not

prepared to be so even-handed. He argues that Cinema Media should have

been monitored more carefully than it has been. After all, agencies took

on Capital for similarly monopolistic practices. ‘For some advertisers,

cinema will always be an important part of their marketing strategy, but

for others, such as fmcg advertisers, it is just icing on the cake,’ he

points out. ‘But even the advertisers who use it to target younger

audiences have other opportunities these days - such as radio and

satellite television.

‘Carlton has obviously taken note of the fact that Cinema Media is a

profitable operation and doubtless it believes that it can extract even

more from the business. But I have to say right now that, if there is

even the slightest whiff of conditional selling or artificial rate

hardening, advertisers will have no hesitation in pulling their


Lorna Tilbian, a media analyst at Panmure Gordon, doesn’t believe the

OFT will have much sympathy with Pearl and Dean. ‘If it is OK for Cinema

Media to have 80 per cent of the market now, why shouldn’t it be OK for

Carlton to have 80 per cent? At the moment, Carlton has no exposure to

the medium whatsoever,’ she points out. ‘Let’s face it, Carlton’s one

third share of the TV market is significant - 80 per cent of less than

1 per cent of display advertising revenue is neither here nor there.

‘Cinema Media is a good prospect, though. The medium’s performance is

linked to audience figures and they are the highest they have been for

30 years. I take my hat off to Michael Green. Carlton currently has the

fastest earnings growth of any media company on the FTSE.’