UK/Irish cinema screen advertiser Carlton Screen Advertising (CSA) is officially in the chopping block with the most likely buyer being Pacific Equity Partners, which bought the exhibitor Australian cinema chain Hoyts last year. Having once been the biggest and most profitable screen advertiser in the world, CSA’s decline has been as steep and fast as it has been sad. Despite the OK-ish box office year 2007, CSA (2,900 screens in 500 sites) was not able to capitalize on the small growth as it was saddled with large up-front payments to some of the UK’s largest circuits. With one of these, Cineworld, being publicly quoted, CSA’s move to switch from 6-month up-front payment to month-by-month forced it to flag this to the stock market. This in turn forced CSA’s parent ITV to announce that the screen advertiser was indeed for sale – at a rock bottom price. As Sunday Times notes:
Once worth £80m, analysts now value CSA at nothing, despite healthy cinema attendances. ITV may even have to pay someone to take it off its hands.
The business is estimated to be liable for another £200m in upfront payments to customers, chiefly Odeon and Cineworld, to satisfy onerous advertising contracts that stretch to 2012.
Those agreements mean CSA has struggled to make money despite total cinema advertising income growing 10% to £170m last year, according to Nielsen figures.
The most likely outcome is that any future owner will try to merge CSA with smaller rival Pearl & Dean. The likelihood of this being approved by the UK competition authorities is greater if CSA’s largest customer Odeon makes good on its threat to take advertising in-house in conjuncture with the circuit going digital. If PEP wins the bidding, it will be interesting to see what it will do with CSA’s 50 per cent stake in Screenvision (jointly owned with Thomson/Technicolor) and how it might integrate CSA and/or Screenvision with the Val Morgan cinema advertising business that it got through the Hoyt acquisition.
Full disclosure: Having worked for Unique Digital, which is CSA’s digital technology provider, I can’t help but to feel that the Carlton’s failure to fully embrace digital is partly to blame for its current woes. While it would not have been a magic cure-all that staved off the up-fronts related problems, it could have meant Carlton setting the agenda rather than having digital foisted upon it. It could also have grown the proportion of ad revenue from local and regional advertising – as Norway’s CAPA and Sweden’s SF Media (both Unique customers that switched completely to digital) did with great financial success – to the point where it would have balanced money going out for up-fronts.