Theater Advertisers May Consider Deal
If you're looking for a compelling drama at the movies this summer, check out the ads — or, more precisely, the companies that sell them. Two firms, National CineMedia (NCMI) and Screenvision, control the 20 minutes or so before showtime at the vast majority of theaters. But they soon may try to merge, which would raise the curtain on a debate about concentration of power in one of the few resilient media businesses in this miserable economy.
"I'm not sure that (a combination) is possible from an antitrust perspective," says Lazard Capital Markets analyst Barton Crockett. "It would affect some advertisers, studios and independent theater chains that like to play those two (companies) against each other."
Yet Screenvision's owners, French technology company Thomson and British TV network iTV, need cash. They've hired UBS to sell the firm.
"The process is commencing shortly and should be completed by the end of the year," Screenvision CEO Matthew Kearney says.
National CineMedia is intrigued with the prospect of controlling an industry that generated about $658 million in sales last year, up 56% since 2004. The company is publicly traded but controlled by the three largest movie theater chains: Regal Entertainment, AMC and Cinemark.
"We're interested in Screenvision as we'd be in any media company that would make sense for our shareholders," says Cliff Marks, National CineMedia's chief marketing officer.
If they try to unite, then antitrust regulators would have to decide whether it would be a whale in the market for movie ads or a minnow competing with TV networks and newspapers for national ads. "We don't consider ourselves to be in the cinema market as much as in the national media arena," Marks says.
National CineMedia and Screenvision typically transmit ads via satellite to digital projectors they install next to the ones used for feature films. That enables them to tailor ads to the audience by film and location.
Because it costs theater owners little to run ads, the revenue is "very significant," National Association of Theatre Owners CEO John Fithian says. "It's one of the reasons in the last five years we've been able to keep ticket prices reasonable."
Executives say this year's ad sales likely will be flat but should take off again when the economy recovers. To encourage that, the firms are trying out 3-D ads and interactivity — for example, enabling audiences to vote via cellphone on a music video to run.
"You really prove the quality of your product in bad times," Kearney says. "2009 has been one of the grimmest years that anyone's ever experienced, and Screenvision's doing fine."
By David Lieberman, USA Today
