Media: All about ... UK cinema advertising

Why do the sales houses fail to realise their potential, Alasdair Reid asks.

It seems unfortunate that cinema has failed to capitalise on the renaissance of interest in what we have been learning to call out-of-home advertising.

In recent years, as the outdoor business reinvented itself with a digital and ambient twist, it began selling itself on the fact that younger demographic groups spend an increasing amount of time out and about - and they're certainly not to be found moping about their flats listening to the radio or slumped on the sofa in front of the television.

A profitable line it has been too - the out-of-home medium has laid claim to a remarkably robust market share and it's arguably continuing to punch well above its weight.

Cinema, you might think, should be well placed to clamber aboard this particular bandwagon. It is, after all, the most sophisticated and powerful of all out-of-home media, loved disproportionately not just by the advertising community but by audiences too.

It's the only environment in which you'll actually see a well-crafted commercial getting a round of applause. And it's a hugely impactful medium - boasting unrivalled advertising recall scores.

So you'd expect this to be a sector in robust health. And indeed, last summer's dreadful weather helped cinema admissions recover after a disappointing 2006 - and that, in turn, helped the medium lure in the likes of Pizza Hut and Woolworths, who'd not really used the medium before, and tempt back lapsed customers such as Ikea.

Total revenue bounced back in 2007 after a couple of relatively poor years.

But this is not a business in anything like fine fettle - and its modest successes arguably border on the miraculous when you consider the parlous state of its UK sales houses, Pearl & Dean and Carlton Screen Advertising.

Pearl & Dean's owner, SMG, has been trying to sell it for two years and has become so desperate that it has more or less written it off as an asset in the corporate books.

Carlton Screen Advertising has slightly more value. But not by much. Two weeks ago, its owner, ITV, agreed to sell a 50 per cent stake to two of its clients, Odeon Cinemas and Cineworld Group, for £500,000.

1. Carlton Screen Advertising is the market leader with a 75 per cent share of the nation's 3,586 cinema screens. Formerly known as Rank Screen Advertising, it was acquired by Carlton Communications in 1996 and ownership passed to ITV plc when Carlton merged with Granada in 2004. It sells on behalf of Odeon, Cineworld, Showcase Cinemas, Empire, Picturehouse and IMAX.

2. Pearl & Dean was acquired in 1999 by SMG during its great drive to diversify beyond its traditional commercial television base in Scotland. It sells mainly for the Vue Entertainment chain.

3. As with all other media, audience levels drive revenues - but unfortunately, the medium's great recovery in viewing figures seems to have stalled. Cinema admissions collapsed to their lowest point ever during the 80s, and across the decade they remained stuck below 100 million a year. But in 1991, the fightback began, and by 2002, they'd built back up to 175.9 million, the best figure since 1971. But by 2006, they'd slipped back to 156.6 million. Last year's figure, buoyed by the likes of Harry Potter and the Order of the Phoenix, Pirates of the Caribbean: At World's End and Shrek the Third, was 163.4 million.

4. According to Nielsen Media Research figures, cinema revenues rose by 10 per cent year on year in 2007, reaching £170 million from £154 million in 2006. Orange, which has long been the biggest supporter of the medium in the UK, was again the biggest spender, with a commitment of £13.3 million. Then came Unilever (£7.8 million), Apple Computer (£7 million), COI (£5.7 million) and Volkswagen (£4.6 million).

5. Cinema is generally sold at a modest premium to the nationally equivalent cost per thousand rates realised in the television medium. Cinema justifies this premium by pointing to research (albeit Cinema Advertising Association research) showing that advertising recall for a cinema ad is eight times higher that for the equivalent television commercial.

In a recent study covering three brands (Lexus, Brylcreem and British Airways), awareness was also higher that in TV, and the cinema audience also responded more favourably when asked about their enjoyment of the ad.



- Cinema has many underlying strengths as an advertising medium and its two sales houses employ many talented and energetic people - but it's hard to have faith in a medium when the likes of SMG and ITV seem to have written it off as a bad lot.

- The two parent companies will argue that the problem isn't the medium itself, rather in the difficulty of selling it at a profit - and one of the biggest barriers to profitability is the fact that production costs are so high. It's horrendously expensive having to send a canister of lovingly crafted celluloid to every cinema (and indeed to each individual projection booth) on the schedule.

- And that, indeed, is the rationale behind the Carlton sale. ITV reckons that the cinema chain owners are best placed to introduce the digital distribution and projection technology that will not only make cinema advertising's cost base more manageable, but also allow it to evolve into a more flexible medium, offering far more precise targeting. We shall see.


- Ian Richmond, the media manager at Orange's buying agency, Initiative, argues that advertisers should keep faith with the medium through this difficult phase in its evolution. He says: "I actually think the future looks good. I think some of the changes we might see (as a result of changes in ownership arrangements) will make it easier to sell the medium to advertisers."