Cinema sales houses look to renegotiate ad contracts

by Ann-Marie Corvin Media Week 07-Aug-07

Cinema sales houses Pearl & Dean and Carlton Screen Advertising are coming under increasing pressure to renegotiate their contracts with cinema outlets following poor financial results.

Both businesses are currently operating at a loss and neither has
predicted a turnaround in the latter part of the year.

ITV's half-year results in June reported that CSA, which it owns, is

expected to make a trading loss in the full year and took a £9m

charge against "onerous" contracts.

Pearl & Dean's parent company SMG released interim results last
September showing that the sales house made a loss of £300,000,
and warned shareholders that it expected a "tough year" ahead.

The ad commitments that the sales houses agreed to pay cinemas were
negotiated more than two years ago, when cinema admissions were at least
20 million higher than they are now, and before advertising in general
was on the decline.

Aggressive bidding for the contracts between the two rival sales houses
are said to have contributed to their recent loss-making.

SMG and ITV are both believed to be keen to dispose of their cinema
sales houses.

However, in their current state neither company appears to be attracting
buyers with the prospect of ongoing contracts shackling both to their
reluctant owners.

After ITV put CSA up for sale, cinema chain Cineworld reminded ITV's
investors that it was in a long-term contract with CSA, with minimum
guaranteed payments every six months. Cineworld - owner of cinema chain
UGC - added that this contract had "significantly more than half its
term" to run.

The two sales houses, which between them control the entire cinema
advertising market, have both seen the departure of their chief
executives since the current terms were negotiated. Carlton's Debbie
Chalet left last November, while Pearl & Dean's Christine Costello left
the company in early 2006.

Some media agencies remain optimistic about the market, however, with
MindShare's head of programming, Simon Willis, predicting a 7% rise in
cinema ad revenues this year.