With Cineworld on the verge of bankruptcy, what does this mean for cinema advertising?
Cineworld, the world’s second-largest cinema chain and owner of Regal Cinemas in the United States, has confirmed it is considering bankruptcy as it struggles with $5 billion in debt. We explore what this news means for the future of cinema and – most pressing – what advertisers should do here and now.
As Cineworld sinks, does it take the publicity medium of cinema with it?
If Cineworld cannot be saved, some 4,620 screens – representing around a quarter of the market – will shut down in the UK. In the United States, where it operates the Regal Cinemas chain, approximately 7,200 screens will disappear from the country’s 40,000 movie theaters. In total, some 751 sites and 9,189 screens in 10 regions are now at risk…and with them, potentially, the future of the cinema advertising industry itself.
The news coincides with National Cinema Day in the UK, where cinema admissions will be heavily reduced on September 3 – a good opportunity for the industry to rebuild the habit it so badly needs. Hope remains that this is an avoidable disaster movie and that Cineworld will find a savior, but its finances make for a dire read. For the tax year ending December 31, 2021, the company recorded a pre-tax loss of $708.3 million. Post-Covid, it needed a huge resurgence but admitted it had failed to rebuild enough, blaming a “limited film slate” for its ongoing issues.
On paper, Cineworld shouldn’t have been affected by a slowdown in advertising at least. UK spending returned to 2019 levels fairly quickly as the pandemic waned. In 2020, UK cinema companies were optimistic about reopening after a period of lockdown where spending had collapsed by 80% compared to 2019.
Indeed, even now, as the world’s second-largest cinema chain is on the verge of bankruptcy, media buyers insist they are convinced the sector has a future.
Rob Breese, managing partner of Havas Media UK, says cinema remains a “critically acclaimed channel” for the brands he works with and adds that it gets disproportionate attention compared to other channels.
The agency was excited about the slate of films in 2021, which Cineworld should have been able to capitalize on. Spider-Man: No Way Home was watched by a third of all 16-34 year olds – a promising statistic when advertisers struggle to attract younger audiences on linear TV.
As such, Breese’s colleague Harry Packshaw, audiovisual partner at Havas Media Group UK, believes there is a “realistic chance” that another actor will swoop in to save the company. The managers of the boards are also convinced that this is not the end for Cineworld.
“Obviously the pandemic has hit every aspect of the film industry hard, but the success of films like No Time to Die and Spider-Man: No Way Home last year and Top Gun Maverick this year show that there is still a significant demand for cinema among audiences,” Packshaw says. “With studios finally managing to complete projects delayed over the past 12 months, the 2023 roster looks very strong and admissions are expected to be within 10% of pre-pandemic levels.”
But should the worst happen and Cineworld and the Picturehouse chain it also owns are both forced to close in the UK, auction house DCM will allow brands to bank the value for a later date, even if the admission levels are not met. They can also cancel for free – which means that in theory there is little risk in continuing to spend on the medium, despite the uncertainty.
Packshaw adds that there are “encouraging signs of unlikely frenemies – streaming services”, with the likes of Disney+ acknowledging the importance of a bigger theatrical release window for its blockbuster releases as it does. did with Thor and Dr Strange earlier this year. The three-month exclusivity window helps build anticipation when viewers see the film in the best possible environment.
“These high-end, high-attention environments that cinema provides remain of great value and shouldn’t be overlooked while they’re still in play,” Packshaw says.
Despite uncertainty over Cineworld’s future, a spokesman for a major UK auction house said it would be “business as usual” to fill in as much operating inventory as possible.
Meanwhile, Dave Sederbaum, executive vice president and head of video investments at Dentsu Media US, says “we are neither optimistic nor cautious.”
Cinema has always played a role in the media plan and will remain so (as long as it can). “There has of course been a slowdown during the pandemic; however, box office resilience made a very healthy comeback. For the right advertiser and the right creative message, we believe cinema will be a viable way to reach consumers for the foreseeable future. »
But that doesn’t mean there’s sailing ahead of us. Media analyst Alice Enders recently warned in the Financial Times that “Cineworld will not be the last theater to fail.”