Cracks emerging in cinema’s facade

Cinema box office managers across the nation rubbed their hands with glee last month. On February 20, the British public spent a staggering &£14.4m to watch Toy Story 2, The Beach and American Beauty – the UK’s highest weekend takings to date.

The record box office figures come in a period of frenzied activity in the UK cinema market.

This week French company UGC Cinemas announced a &£50m investment to launch eight outlets – with a total of 100 screens – over the next two years, and a &£5m rebranding of the Virgin Cinemas chain it bought for &£215m last October.

And last week, leisure group Rank sold its Odeon cinema chain to venture capitalist Cinven for &£280m. The company plans to merge the acquisition – which is the UK’s largest chain with 75 cinemas and 470 screens – with its 57 ABC cinemas.

And Warner Village Cinemas is on the hunt for its first marketing director to develop the group’s state-of the-art multiplexes (MW February 24).

This upbeat mood has jolted advertisers. According to Cinema Advertising Association (CAA) estimates, cinema ads broke the &£100m barrier for the first time in 1999.

According to the CAA, cinema revenues have grown 150 per cent over the past decade, and now account for about 1.2 per cent of all advertising spend.

Advertisers are attracted by cinema’s ability to reach ABC1s, 69 per cent of whom are the elusive 15- to 34-year-olds, according to advertising contractor Carlton Screen Advertising (CSA).

Advertisers can also target audience segments – adults only or housewives with children, for example – with ads which are viewed as part of the cinema-going experience.

But some industry observers believe there are barriers to further growth of the medium. Motive head of cinema Jez Groom says a lack of accountability to advertisers is holding the cinema format back.

It is rare for advertisers to receive feedback which establishes whether sales or the appeal of their brand have increased as a result of an ad campaign, says Groom. What’s more, there is no way of checking whether ads have been shown at all or how many people were in the cinema at the time. “As the medium grows, clients are increasingly asking for accountability,” he says.

Last year witnessed a sea-change in companies using the medium.

The drinks industry – alcoholic and soft drinks – has traditionally topped the spending table, but the sector slashed its cinema spend by 40 per cent from &£21.1m in 1998 to &£12.5m in 1999. This is in part due to Scottish Courage – the main advertiser in this sector – pulling its ad spend out of cinema, and the fact that two of last year’s biggest grossing films were aimed at children – Star Wars Episode I: The Phantom Menace and A Bug’s Life.

Instead, the top slot was taken by food companies, which boosted spend by 95 per cent from &£7.1m to &£13.9m, according to AC Nielsen-MMS.

The motor industry increased its ad spend by 96.7 per cent to &£9.7m, with Peugeot, Honda and Ford in particular searching for young, upmarket consumers.

And Groom believes spend from telecoms and dot-coms will continue to increase. AOL advertised before the film You’ve Got Mail, and ran posters, scratchcards and commercials around the film.

But this cinema “boom” isn’t as clear cut as it may at first seem.

Cinema admissions in 1999 totalled 139.5 million. Although trumpeted as a record, it only matched the 1997 figure, which was a record due to surprise hit The Full Monty. In 1998, admissions dipped to 135.5 million.

If a blockbuster movie can account for ten per cent of admissions, it follows that the absence of a blockbuster could reduce admission spend by ten per cent.

Box office takings for 1999 totalled &£569m, according to data from Dodona Research, up from &£492m in 1997. The increase partly comes from customers trading up from the old cinemas to new, more expensive, multiplexes.

Dodona forecasts 165 million admissions by 2004. But the increase will be outstripped by the number of new screens being built. Major operators plan to add 661 cinema screens to the current number of 2,825 by 2001.

Although 94 per cent of the UK population is within 20 minutes drive of a cinema, market penetration lags behind Europe and the US. In the US, cinema attendances average more than five times a year per individual, whereas in the UK only 2.35 visits were made during 1999.

But Dodona business development executive Katharine Couling says: “[Cinema owners] are looking to increase box office takings rather than admission numbers.”

However, cinemas need other ways to increase returns than hiking admittance prices. Otherwise they risk pricing themselves out of the market. For instance, Virgin operates a “Premier Screen” which offers unlimited popcorn, the use of a separate bar and reclining armchairs for &£12, and Iwerks Extreme Screens – a 60ft-wide, 40ft-high screen showing documentary films.

Cinemas are also facing another hurdle. Warburg Dillon Read leisure analyst Julian Easthope points to the new technology which could revolutionise the medium: “Digital cinema is the future. Having invested heavily in old-fashioned cinema screens, cinema owners may have to change format to digital.”

Easthope says digital cinema would provide huge savings for the US film studios in processing, print and distribution because films could be sent through telephone lines.

Cinema owners may find themselves forced by the film studios to change to digital, which has already made its first appearance in the UK. Odeon Leicester Square screened Toy Story 2 in digital format on February 4.

“If cinemas were digital, they could show football matches or pop concerts. It’s early days but digital cinema could quickly become the new medium,” claims Easthope.

This will be a sobering thought for cinema chains investing millions of pounds in new screens and multiplexes across the UK. But advertisers will no doubt be counting the days.