Uncertain times for cinema advertising after ITV sales house disposal

ITV’s agreement to sell loss-making advertising sales house Carlton Screen Advertising (CSA) releases the broadcaster from onerous and unaffordable contract obligations.

The deal, which sees the UK’s two largest cinema chains take on “certain assets” of CSA for £500,000, throws into question the future of the UK’s other cinema sales house Pearl & Dean, which is owned by Scottish television company SMG.

Odeon Cinemas and Cineworld Group have formed Digital Cinema Media (DCM) to house the business, with a transfer due to be completed by June. It is not yet known if CSA will eventually take on the DCM name.

ITV will hope the sale draws a line under CSA’s recent performance, despite stronger cinema admissions and increased ad revenue. In December last year it was forced to renegotiate its contract with Cineworld after it was revealed CSA could not keep up with its monthly payments (MW December 13, 2007).

The contract was worth about £20m to the cinema chain and is similar to the one competitor Pearl & Dean – which is also in the process of being sold – has with Vue. One industry insider says the contracts in place are “onerous” and “unachievable”, adding that Pearl & Dean must pay £11m a year to Vue for the right to advertise there.

CSA marketing controller Fleur Castel says the acquisition will give the company stability and freedom and establish it as a media owner. Meanwhile, Cineworld chief executive Steve Wiener says DCM will develop “a more flexible, targeted and timely service” for advertisers.

Marketing mix

Starcom group buying director Erica Taylor is unconvinced on what buy-outs mean for the media. She says that cinema remains a small part of the marketing mix and advertisers will not use the medium if prices become too expensive.

“The contracts are bullish,” adds Taylor. She also speculates whether other cinema owners will choose Pearl & Dean if CSA is owned by their rivals. “Is it better the devil you know or the devil you don’t?”She says Starcom booked more brand ads last year, in line with increased audience figures. “Cinema has a nice buzz about it,” says Taylor. “The mood and mindset makes the audience more receptive to advertising.”

Mediaedge:cia broadcast manager Emma Nichol says that brands like to be behind big films, even though cinema is “quite an expensive” medium. However, it remains a niche, unlikely to form the backbone of an advertising schedule, she says.

ITV inherited CSA in 2004, when Carlton and Granada merged. Nichol says that ITV had been looking to sell CSA since 2004. “It negotiated some pretty poor contracts,” she adds.

ITV said in July last year that CSA would report a loss for the first half of the year. Contract negotiation lost the company £9m and a further £28m was then slashed from the value of the business.

Last week ITV also confirmed it was selling its stake in Liverpool Football Club’s broadband business as the broadcaster focuses on its core assets and ITV brand.

Cinema advertising declined 2.5% in 2006 but bounced back in 2007, with admissions rising 4% to £162m, giving ad revenues a 10% boost. Pearl & Dean head of research Jackie McCarry says deals with John Lewis, Virgin Media and Citroën specifically contributed to the upturn.

Complex contracts

There are tough times ahead for cinema advertising. With a buy-out announcement imminent, Pearl & Dean faces an uncertain future, while competitors Odeon and Cineworld may have an uncomfortable relationship working together to revive a medium riddled with self-inflicted, complex contracts.

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