The future of ITV-owned Carlton Screen Advertising hangs in the balance, after it emerged that ITV’s weak cinema advertising revenue has forced it to renegotiate its advertising contract with Cineworld.
CSA, the country’s biggest cinema advertiser, which sells Cineworld’s advertising has also asked it to allow CSA to move to monthly payments, away from contractually stipulated six-month upfront payments.
CSA’s contract with Cineworld is believed to worth around £20m in revenue a year to the cinema chain. CSA was due to make a half-yearly payment on December 23, but has now asked to pay monthly while it renegotiates the deal.
Some analysts have commented that the situation could prompt ITV to consider closing down CSA, the UK’s biggest cinema advertiser.
In a statement CSA says the contract, signed in 2005, was based on a long-term growth forecast for advertising revenues. But now it adds: “Due to a general slowdown in traditional UK advertising revenues our forecasts have proven to be too optimistic. Therefore, we have approached Cineworld to propose an amendment to our existing contract.”
Carlton Screen Advertising was bought by Carlton TV, now ITV, in 1996 and has a market share in excess of 60% including deals with Odeon, Cineworld, Empire, Showcase and Picturehouse circuits.
Cineworld, the second biggest cinema chain in the UK with 73 multiplexes
and 758 screens, saw its share price hit by the announcement.
One observer commented: “Cineworld negotiated a cracking deal with them and now they are being penalised because Carlton can’t pay up.” Another industry expert says that there were warnings of trouble ahead from ITV in July and that Pearl & Dean would also have to renegotiate its contracts in the future.
According to the Advertising Association cinema advertising was worth £188m in 2006 and accounted for 1% of the market.