From Warner Bros. collapsing the theatrical window by releasing all their 2021 films online at the same time as in theaters, to AMC launching private screenings and theatre spaces – the movie industry has certainly gotten creative under the crushing strain of the Coronavirus crisis. Just before Covid-19 numbers spiked towards the end of 2020, one of the world’s largest movie theater scenes in India saw major drops in cinema advertising, even as theaters reopened.
Respected media veteran, chief executive, and personality Ashish Bhasin indicated that advertising was down 15-20% overall with cinema advertising taking an especially hard hit: “Digital will still show growth, but (maybe) not as much as the previous year. Some other media (print, cinema, outdoor, etc.) will record negative growth, as compared to the previous fiscal year.”
The scenario suggests theater traditions of the past may change permanently if advertisers will no longer pay the same rates for cinema showings – even after lockdowns end. But does this spell the end of cinema ads altogether, or simply the beginning of their next phase of digital transformation?
Cinema ads projected to skyrocket – and instead plummeted
Projected to rake in a whopping $15.5 billion in 2023, cinema ad spend in China was expected to become the largest traditional advertising market on earth–surpassing the American movie theatre ad market and revenue from all other traditional ad formats globally, according to CNBC in August 2019. And it’s no surprise why.
Cinema ads are one of the most effective traditional advertising methods for their more straightforward pricing structures and especially their psychological context. “There is zero ad fraud – everyone who buys a ticket and sits in a seat is an actual human being and not a bot. The audience is forced to see a gigantic screen that cannot be turned off with ad blockers. People are together in happy, receptive moods. Advertisers know how many people saw their ads due to the ticket sales. What more could marketers want?” argued The Drum.
This assessment isn’t just a rosy perception either; the numbers have demonstrated real success: “[Many] businesses consider it to be the “brass ring” of the advertising world,” says the Houston Chronicle. “Cinema advertising is eight times more effective at making your brand stand out from the crowd than television. If you show people an unbranded still from an ad, three times as many cinemagoers will actually recall which brand it is for, when compared with TV viewers. Cinema audiences are four times more likely to be emotionally engaged than a television audience, and those exposed to ads in the cinema are twice as likely to recall a brand compared to TV.”
Yet with an emerging new strain of Coronavirus causing a lockdown in Britain and migration of the strain recently discovered in New York, movie theater re-openings look a long way off. The world’s largest movie theater chain, AMC, lost $561 million in a single quarter in 2020 and saw overall revenue, including ad spend, down a combined 99% from the same quarter a year before. With global viral hotspots like the United States facing record cases at the start of 2021, seeing movie ad revenue seems an even further aim.
As subscriber streaming accelerate, movie ads move with it
It is not simply the pandemic that has shifted trends in cinema ad spend with theater closures, but also the advancement of streaming movies online that is changing the cinema advertising ecosystem. This shift had already been occurring in some ways, but with so many people stuck at home, companies like Disney increased their focus on digital platforms with exclusive movie streaming releases, content, and unique platform partnerships.
Market analysts at DigitalTV Europe outlined the harmful domino effect created by theatre closures…and the lifeboat offered by digital Premium Video On-Demand (PVoD):
“With traditional theatrical windows typically including a 90-day theatrical release window, 14-day EST period, followed by a 90-day VOD digital rental and physical retail window, followed by availability on subscription services and pay TV, PVOD represents a drastic change. Maria Rua Aguete, senior director, media and entertainment at Omdia said: “Covid-19 also created a bottleneck of new releases which puts into question the traditional windowing model as downstream revenue sources suffer from the lack of new releases onto other platforms in 2020 and 2021. It has also created a unique opportunity for studios to experiment with other distribution models such as PVOD or and to a lesser degree straight-to-streaming without equivalent relationship damages as before.”
Some entertainment companies seeing major hits to their in-person cinemas have found benefits creating new viewing options and advertising potential in digital spaces instead. Their ingenuity bodes well for the future, regardless of what happens with traditional theaters and their release structures post-Covid-19.
National CineMedia, for example, has lost staggering millions in revenue from their theatres, but found digital entertainment and digital advertising a welcome space to pivot for now and in the future, according to NCM Executive VP and Chief Revenue Officer Scott Felenstein. “Digital has actually been a real bright spot for National CineMedia while some theaters in our network have remained temporarily closed due to the pandemic…NCM is placing ads on its digital properties like the Noovie web platform, the Noovie trivia app and the Noovie Arcade gaming app. These partnerships will allow us to further expand the reach of our Noovie Trivia and other movie-centric content to continue to engage movie audiences when they’re not in our theaters, while also giving brands additional touch points to further interact with movie fans in the community.”
The strategy makes sense in context of some reasons cinema ads are already successful. Subscriber data still offers clear tracking abilities, and some key psychological components making cinema advertising so effective may yet remain in at-home showing contexts. Though time will tell, it seems likely digital advertising in PVoD spaces will garner many of the benefits held previously by traditional cinema advertising.
Traditional cinema advertising still holds profit potential
Though the market may evolve dramatically and take time to fully recover, it is unlikely that theatres themselves will completely dissolve. Even if they offer some parallel contexts ad-buyers can count on, at-home viewings ultimately still fail to offer the same meaningful social experience afforded by communal cinema.
Some executives, like Kathryn Jean of Pearl and Dean, view the evolution of the industry as a profitable prospect for the future, rather than the one-dimensional and destined end of cinema and cinema advertising.
On Campaign, Dean suggested a view in which PVoD and cinema experiences coexist beneficially: “The latest Disney announcement and its further investment in its streaming platform Disney+ should not be seen as a major threat to cinema. In order to encourage users to stream, there needs to be a consistent run of new content, and a lot of this new investment is going to be bespoke content based on film spin-offs, which fit well with the streaming format…[yet] Disney’s announcement of its cinema-exclusive titles showed that “they still place a lot of value in cinema. It is a very strong and well-established revenue driver for them. We must stop thinking of cinema and streaming as an either/or situation as there are benefits to enjoying both experiences.”
The savviest of advertisers will be able to hold a pulse on the progress of both digital and traditional advertising in the movie industry post-Covid-19 and take advantage of the differences the two spaces offer, rather than fixating on what one or the other may lack.
Marketing expert Samuel Scott has already offered one such projection for The Drum, namely that advertising in cinema spaces could be viewed with more prestige and luxury and advertisers could buy accordingly.
Theaters in Hong Kong have presented what Scott believes to be a model of a luxury cinema experience, and advertisers in both digital at-home and in-person theater viewing spaces could consider ways to ad spend with this in mind: “[After] the pandemic, the high prices and mass availability of cheaper options will still hold cinemas back. If you charge a high price, then your product or brand must be worth it. So, I have a solution…When the pandemic is over, cinemas should position themselves as luxury brands and experiences – and charge a premium price that will be even higher than before….Create pods of two seats each. Make the chairs very comfortable and let them recline. Have a privacy wall on the sides of each pod. Show fewer ads, and charge more for them.”
The strategy is novel, and given the effectiveness and reliability of traditional cinema ads before Covid-19, the new approach could add value to some brands, even as they embark on entering new digital markets. But regardless of what happens with cinemas themselves, the lifeline streaming and digital advertising created for the movie industry will continue to evolve as a force all its own in the years to come.