The big picture: UK cinema ad expenditure

As cinema adspend approaches its highest level on record, Warc’s James McDonald looks at what’s driving the sector.

UK cinema advertising expenditure rose 2.7% to £84m over the first six months of 2015, buoyed by a particularly strong first quarter, according to the latest results from the AA/Warc UK Expenditure Report, released this week.

Data provided by Nielsen for the purposes of the report show that adspend reached £44m over the first three months of 2015 – an all-time high for a first quarter – while spend of £40m over the second quarter was solid, but down 10.8% from a particularly strong Q2 last year.

Despite the annual dip in second quarter adspend, total cinema advertising expenditure rose 2.7% from 2014 over the first six months of this year, and we forecast a faster growth rate of +6.8% during the second half of 2015.

Indeed, we expect the fourth quarter this year to be the highest three-month adspend period on record, boosted by increased admissions surrounding blockbuster releases such as the new Star Wars and James Bond films.

This underpins our expectations of 5.1% growth in cinema ad expenditure for 2015 as a whole, with spend just below the record-high £215m seen in 2012. We do, however, expect that total to be topped next year following annual growth of 2.3%.

An interesting dynamic worth highlighting is the changing composition of cinema advertising revenue over the last five years. The chart below ranks AA/Warc product categories by the cinema adspend totals recorded in H1 2010, which is still the highest first half on record for the medium, at £87m.

The most noticeable shift is the decline in industrial advertising at the cinema, particularly since its 2012 peak.

Telecoms is by far the largest sector, accounting for some 90% of this form of industrial marketing, so it acts as a sufficient bellwether for the category overall. Over the first six months of this year, telecoms adspend stood at just over £7m, and this was down over 63% from three years ago.

This comparison is somewhat skewed however, as 2012 was a good year for the UK advertising industry, boosted by the nation’s hosting of the Olympic Games that year. But comparing telecoms adspend during H1 2015 to the sector’s five-year average between 2010 and 2014 still shows a marked fall, of around 43%.

Conversely, ad revenue from the service sector has more than doubled between (a notably weak) H1 2012 and the first half of this year. At £18m, H1 2015 advertising spend for services was up 52% from five years ago, and some 26% on its 2010-2014 average.

This category is comprised of three sectors: Travel & Transport (around 39% of all services adspend on cinema in H1 2015), Entertainment & Leisure (35%), and Media (26%).

The first two are driving growth in this category; Travel & Transport cinema adspend in H1 2015 was up approximately 28% on its 2010-2014 average, while Entertainment & Leisure grew an impressive 55%. Media adspend by this measure was, however, flat.

Along with services, rising advertising spend from brands in the financial category (and to a lesser extent retail) over the period has helped to make up the shortfalls elsewhere. Overall, cinema ad receipts were down 6.5% during the first half of 2015 from the record high in 2010, but up half a percent on the five-year average.

We have recorded UK cinema adspend as part of the Expenditure Report for over 20 years and it’s fair to conclude that today the industry is in good health, with spend continuing to rise.

Further, supplementary data from Digital Cinema Media (DCM) suggest that box office takings were up 10% year-on-year over the first six months of 2015, while admissions also rose during this time.

Karen Stacey, CEO of DCM, explains further: “2015 has been a phenomenal year for cinema advertising. Not only are revenues up year-on year, the box office is also at an all-time high, set to hit £1.2bn for the first time ever.

“Admissions are also up, with the first nine months of the year up over 7% on the equivalent period 12 months ago, and with SPECTRE, The Hunger Games and Star Wars: The Force Awakens still to come, that figure is only going to increase, with strong revenue and admissions figures also forecast for 2016.

“In the last few years, cinema has gone through a metamorphosis as advertising on the big screen has become easier to plan, more flexible and even more affordable. With reliable audience profiling and the ability to align not only by film, but by audience, by cinema or particular showings, brands can be sure they’re reaching their target audiences with minimum wastage. This strategy resulted in huge growth in revenues in 2014, which only continued into 2015.

“This year, the industry also transformed the fortunes of the Gold Spot, the most iconic spot in cinema advertising, selling it on a film-by-film basis. This opened up more opportunities for advertisers, making it even easier for them to engage with that all important early-adopting, socially savvy cinema going audience, while also significantly altering the Spot’s, and the industry’s, revenue results.

“We believe 2016 will be even stronger as we continue to work hard to evolve the deepening relationship between brands and cinema. All in all, it’s an extremely exciting time to be part of the cinema advertising world.”

James McDonald is a research analyst at Warc.

—-

To find out more about subscribing to the AA/Warc Expenditure Report please visit the website.

Mediatel subscribers can also now gain access to adspend and revenue figures by medium and aggregated forecast trends by medium from AA/WARC, Carat, eMarketer, GroupM and ZenithOptimedia in the Media Landscape tool.