Theater chains hoping customers sit still for new commercials

Associated Press
Published Saturday, March 08, 2003

LOS ANGELES (AP) -- Bob Morales and his wife sat through advertisements for the Cartoon Network, the NBC show "Boomtown" and AOL Broadband.

There was a pitch for the U.S. Army, another for The Tonight Show with Jay Leno.

Morales would have accepted the promotional barrage at home in front of the television, but it annoyed him to go through it at the movie theater.

"That's why we come to a theater, so we wouldn't see advertising," said Morales, at a Regal Cinemas Theater in Pasadena for a weekend matinee of "About Schmidt."

Going to the movies always has included some advertising -- usually low-tech, slide-show style pitches -- and the coming attractions, of course. Now, cash-strapped theater chains are looking at increasing advertising, using digital technology, as a way to boost profits beyond the sales of tickets and popcorn.

While common in Europe and elsewhere abroad, the ads are annoying lots of U.S. ticket buyers. The industry believes customers will adjust.

Some ads appear just before the previews, the period known as "lights down," and have sparked complaints that audiences are being deceived about the true start time of a movie. The published time usually indicates the beginning of the whole program, including coming attractions, pitches for the concession stand and some paid advertising.

In the past year, theaters have been installing national digital networks and small digital projectors so they can show short films and national ads before the lights dim, replacing the decades-old slides for local businesses, trivia questions and scrambled movie-star name games.

The film-screen ad industry grew 20 percent last year and is projected to grow by 30 percent this year, said Matthew Kearney, president of the Cinema Advertising Council, a group formed to promote in-theater ads.

Regal says its internal surveys show that patrons react well to the pre-show ads and that acceptance is growing week by week.

Danny Kim, also at the "About Schmidt" matinee, falls into that category. "I didn't mind it," he said. "It killed the time."

The industry has recovered from its woes of the late 1990s, when a glut of screens and the debts from building state-of-the-art movie houses forced 12 chains into bankruptcy. Last year was the best box-office year since 1957, success that's expected to continue with the release of likely blockbusters this year including two "Matrix" sequels, "Terminator 3" and the last installment in the "Lord of the Rings" trilogy.

But profit margins remain slim, and theater owner are looking beyond tickets and popcorn sales. They are offering theaters for corporate meetings and pay-per-view events, and selling those commercials.

"Finding other ways to supplement that revenue base so we can keep ticket prices affordable is an important part of the business plan of our members," said John Fithian, president of the National Association of Theater Owners.

Advertisers also are looking for more ways to get their message in front of consumers, as new channels fracture the television audience and people find new ways to skip commercials.

"From Regal's perspective, they have an attendance level of 200 million plus. Nearly 70 percent of the U.S. population goes through their doors in a year," said Kavir Dhar, an analyst for Jefferies & Co. "If you're an advertiser, that's something that makes you stand up and take notice."

"My concern would have been a lot of people look at a theater as a sanctuary from advertising," Dhar said. "As a consumer, you can elect to come to the theater later, but what is the tradeoff? You might not get the best seat."

A Chicago English teacher filed a lawsuit against Loews Cineplex last month for showing advertising after the lights go down. The suit, which seeks class-action status, asks that theaters state films' actual start times in their advertisements or pay up to $75 per patron as "lost time" damages. Loews called the suit "ludicrous."

The trend toward in-theater advertising is only likely to accelerate, as industry-sponsored research suggests that the ads have a much higher recall rate than television commercials.

"People are there because they like movies and like entertainment," said Brad Siegel, president of Turner Entertainment Networks, which recently signed a deal to produce programs and commercials for Regal cinemas. "We think they are more open to our messages."

The most ambitious effort is being undertaken by Regal Entertainment Group, which formed a new division last year to create a nationwide digital network that can be used to beam advertisements to theater screens as well as to newly installed flat-panel screens in theater lobbies. It created a 20-minute block of programming called "The 2wenty" and signed deals with Turner, NBC, Vivendi Universal Entertainment and others.

While the program contains some ads identical to television versions, Regal's goal is to replace them quickly with programs made exclusively for theaters.

Similar efforts are planned by AMC and Loews.

Industry executives said they are sensitive to the dangers of pushing too much advertising on audiences.

"Our goal is to create a pre-show program customers actually like," said Kurt Hall, Regal CineMedia's chief executive. "If we did it poorly or we did too much of it, we would scare away customers."