Digitising cinema screens and sales has reinvigorated a niche ad medium, but the sector can still grow
Cinema advertising revenues are making the jump to light speed as global cinema pulls in record profits. The combination of Star Wars: The Force Awakens and the James Bond movie Spectre have sent revenues soaring, while a record $38 billion was pulled in by cinemas across the globe in 2015.
Worldwide cinema is enjoying a mini renaissance, even if less films are providing the majority of the profits. In December, Variety reported that 2015’s top 10 movies at the North American box office accounted for close to 35 per cent of overall ticket sales, against a corresponding figure of 25 per cent in 2014.
In the United Kingdom, revenues at the country’s biggest cinema sales house, Digital Cinema Media (DCM), were up 27 per cent last year – ahead of box-office admissions, which rose about 9 per cent. Revenues in the first quarter are also on course to rise 25 per cent. Although momentum is likely to slow later in the year, Karen Stacey, DCM’s chief executive, is forecasting annual growth of 5 to 8 per cent.
This represents a turn-around for a medium that saw ad sales, including production costs, slump between 2008 and 2013, according to Group M.
Aside from blockbuster films, the key driver has been the digitisation of cinema screens and ad sales that only completed in 2012. An analogue industry, with lead times of four weeks and 35mm film production costs of up to $150,000 per commercial, has been transformed. It is now a dynamic digital business where an ad can be made ready in days. It costs as little as $5,000 to convert a TV spot into a big-screen version.
Group M says TV inflation, no late-booking fees and ‘immunity’ from problems such as online ad-blocking and viewability are further reasons why cinema is buoyant.
Stacey argues that film-going also makes an emotional connection with consumers at a time when “there is a lot of talk about the challenges around ad receptivity”, with too many brands having focused on promotion rather than persuasion. She adds that the cinema is ‘a haven’ – an uncluttered environment where we want to lean back, offer our undivided attention and be wowed.
It is also a medium where consumers cannot skip the ad, which is why DCM has a policy of refusing political ads.
Stacey’s big idea since taking the job a year ago has been to persuade advertisers that cinema isn’t a niche medium. Instead, she believes it should be seen as part of a bigger category – audio visual (AV) – that includes TV and video-on-demand. “My whole mantra is that we are just a big TV,” says Stacey. “Cinema should be on every AV [media] plan.”
Cinema is not a substitute for TV, but Stacey points to research from BrandScience that found a brand should spend between 5 and 10 per cent of its AV budget to gain optimum reach and effectiveness – particularly with audiences that TV doesn’t reach.
At present, cinema only has 2 per cent of AV (in the UK), so there is room for the sector to grow, and Stacey is aiming for 5 per cent. Some ad categories ‘over-index’. Motoring brands spend more than 8 per cent of their AV budget on cinema; alcoholic drinks spend more than 12 per cent. Others, such as pharmaceuticals, electronics and DIY, invest only 1 per cent or less of AV on cinema. Stacey is targeting TV advertisers that shun cinema. Aldi, Argos, DFS and Mars each spent more than $30 million on TV and zero on cinema in the 11 months to November 2015. Apple was another notable absentee. But Google bought the Gold Spot – the final spot on the 12-minute advertising reel before the film begins – during Spectre screenings.
Stacey is optimistic about the medium term. The cost of opening new cinemas has fallen because of digital, and 4DX screens, which offer sensory enhancements such as smell and water spray, are pulling in younger customers. Advertisers can also make cinematic-quality branded content to sit in a paid-for spot on the ad reel – just like a B-movie before the A-movie.
They are all reasons why Stacey maintains that cinema is thriving in the era of Netflix.
