As Cineworld verges on bankruptcy, what does it signal for cinema advertising?
Cineworld, the second-largest cinema chain in the world and owner of Regal Cinemas in the US, has confirmed it is considering bankruptcy as it grapples with $5bn of debt. We explore what this news means for cinema’s future and – most pressingly – what advertisers should do here and now.
As Cineworld sinks, does it take the advertising medium of cinema with it?
If Cineworld cannot be saved, some 4,620 screens – accounting for about a quarter of the market – will go dark in the UK. In the US, where it operates the Regal Cinemas chain, around 7,200 screens will disappear from the nation’s 40,000 movie theaters. In total, some 751 sites and 9,189 screens in 10 regions are now in jeopardy... and with them, potentially, the future of the cinema advertising industry itself.
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Hope remains that this is one disaster movie that can be averted and Cineworld will find a savior, but its finances make for dire reading. For the tax year ending December 31 2021, the company posted a pre-tax loss of $708.3m. Post-Covid, it needed a huge resurgence but admitted it failed to rebuild sufficiently, blaming a “limited film slate” for its ongoing troubles.
On paper, Cineworld should not have been affected by an ad downturn at least. UK spend returned to 2019 levels fairly quickly as the pandemic lessened. In 2020, cinema’s UK sales houses were optimistic for the reopening following a period of lockdown closure where spend had collapsed 80% compared to 2019.
Indeed, even now, as the world’s second-largest cinema chain battles bankruptcy, media buyers insist they are confident the sector has a future.
Rob Breese, managing partner of Havas Media UK, says cinema remains a “critical fame channel” for the brands it works with and adds that it delivers disproportionately high attention uplift compared to other channels.
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The agency was enthused by the movie slate in 2021, which Cineworld should have been able to capitalize on. Spider-Man: No Way Home was watched by one-third of all 16-34-year-olds – a promising stat when advertisers are struggling to attract younger audiences on linear TV.
As such, Breese’s colleague Harry Packshaw, AV partner at Havas Media Group UK, believes there is a “realistic chance“ that another player will swoop in to save the business. Sales house officials are also confident it is not the end for Cineworld.
“Obviously the pandemic has hit all aspects of the cinema 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 there is still a significant demand for cinema among the public,“ Packshaw says. “With studios finally managing to finish delayed projects over the past 12 months, the slate for 2023 looks very strong and admissions are forecast to be within 10% of pre-pandemic levels.“
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But should the worst happen and Cineworld and the Picturehouse chain it also owns are both forced to close their doors in the UK, sales house DCM will allow brands to bank value for a later date, even if admission levels are not reached. They can cancel free of charge too – meaning that in theory there’s little risk in continuing to spend on the medium, despite the uncertainty.
Packshaw adds that there are “encouraging signs from unlikely frenemies – the streaming services,“ with the likes of Disney+ recognizing the importance of a bigger theatrical release window to its blockbuster releases like it did with Thor and Dr Strange earlier this year. The three-month exclusivity window helps anticipation build as viewers see the movie in the best possible environment.
“Such high-attention premium environments that cinema offers remain of great value and shouldn’t be overlooked while they’re still in play,“ Packshaw says.
Despite the uncertainty on Cineworld’s future, a spokesperson for a prominent UK sales house said for them it would be “business as usual“ filling whatever operating inventory they can. This weekend (September 3) will play host to National Cinema Day in the UK, where movie admissions will be heavily discounted in a move the industry hopes can help rebuild the much-needed habit.
Across the Atlantic, meanwhile, Dave Sederbaum, executive vice-president and head of video investment at Dentsu Media US, says “we aren’t on either extreme of being bullish or cautious.“
Cinema has always played a role in the media plan and will continue to (as long as it can). “There was of course a downturn during the pandemic; however, the resilience of the box office has made a very healthy comeback. For the right advertiser, and the right creative messaging, we believe that cinema will be a viable way to reach consumers into the foreseeable future.“
But that does not mean there’s clear sailing ahead. Media analyst Alice Enders recently warned in The Financial Times that “Cineworld won’t be the last cinema to go bust.”