The road to recovery for the movie theater business has been tough.
The supposed COVID-era moviegoing catalyst “Tenet” underperformed, the majority of cinemas in the two biggest domestic moviegoing markets remain closed, and big movies are still getting delayed or skirting theaters completely.
So AMC Theatres’ announcement on Tuesday that it could run out of cash by the end of the year or early 2021 wasn’t too shocking.
That announcement was surely not met with excitement by studio execs. But it also has implications for other businesses that benefit from the success of movie theaters and are probably thought of less in this conversation: advertisers.
If more cinemas were to close, that would mean fewer opportunities for brands to run campaigns on movie theater screens that hold brand-safe inventory and reach a captive audience before films start.
That’s why cinema ad spend is forecast to shrink by 51% in 2020, according to media agency Zenith.
Cinema advertising may not be a big expense for many companies, though its value shouldn’t be underestimated at a time when inflammatory content on digital platforms flourishes. A recent study by the nonpartisan policy organization German Marshall Fund found users now engage with outlets on Facebook that regularly post misinformation more than they did in 2016, for example.
But COVID-19-induced closures hurt companies that look to capitalize on this demand for brand-safe movie theater advertising.
National CineMedia (NCM), a leading movie theater advertising company that reaches over 20,000 screens, is estimated to generate $97 million in revenue in 2020, according to B. Riley Securities. That figure is down 78% from about $445 million in 2019.
To prepare for an uncertain near-term future that may involve more theater closures, National CineMedia (which counts AMC and Regal as partners) should look for more ways to bolster its non-movie theater-reliant revenue streams. That includes running ads on its digital properties such as its Noovie web platform and Noovie trivia app.
It’s no wonder NCM released an investor presentation in September that listed expanding its digital ecosystem and user base of NCM-operated products as goals.
It also helps explain why Screenvision Media, another big cinema advertising company (also owned by NCM) that’s partnered with AMC, has diversified since the pandemic started. Screenvision on Tuesday struck a deal to become the national sales rep for certain brands advertising with medical waiting-room network Outcome Health. The company also extended its ad inventory in May to include electric car charging stations.
In the interim, while AMC theaters are still vying for moviegoers across the country, it seems that some cinema ad demand is returning. Amazon Prime has become NCM’s largest advertiser and only certain types of brands like airlines and theme parks have pulled ad deals, according to B. Riley Securities.
Still, the diversifying businesses NCM and Screenvision provide their clients with some assurance that they can still target moviegoers in other settings should more theaters close.