November 26th, 1998

Increasingly, Movie Showings Pitch Messages from Sponsors

By Greg Johnson
Los Angeles Times

Hollywood traditionally has turned a cold shoulder to sharing the silver screen with commercials from Madison Avenue. But theater chains that are spending heavily to erect costly cineplexes are warming up to the idea of the added revenue that pre-movie advertising can bring.

"The others who haven’t got commercials running are looking at it," said Dennis Fogarty, Screenvision Cinema Network’s president and chief executive.

"Multiplex operators have maximized the flow of people to their concessions stand, and they’re making a good buck on things like video game centers. But they’ve maxed out most of those opportunities, and they’re hungry for more revenue streams."

Big-screen commercials aren’t the only sales pitches being made to movie patrons. Theater operators have invited marketers into their lobbies to pitch everything from fast-food kid’s meals to computers and software. For decades, local retailers have targeted early birds with advertising slide shows playing in the hour before the movies start. And in the last year, more than 11,000 theater auditoriums have added audio advertising programming distributed by Clearwater, Fla.-based Theater Radio Network.

But it’s the on-screen commercials for cars, computers and other consumer goods that spark the most debate.

Movie theater chains that accept on-screen advertising generally limit the commercial break to two or three minutes before the trailers. But that’s plenty of time to generate a healthy revenue flow.

"We’ve estimated that by not taking on-screen commercials we’re leaving six figures on the table," said Dan Harkins, president and chief executive of Harkins Theatres, a Phoenix-based chain with 174 screens in Arizona. "At this point in time, we feel our customers would find it offensive to see rolling film advertisements. . . . But at some point, we may be forced by economics to consider it."

Fogarty said surveys show that only a handful of consumers are adamantly opposed to in-theater commercials. But he acknowledged that opposition is stronger in Hollywood’s backyard, where several local theater chains, including the 375-screen Pacific Theatres, refuse to show ads not linked to the movies.

"L.A. has always been different," Fogarty said. "It’s a place that lives and breathes the movies. And in some cases, that leads to a purist attitude."

Professor Advises Against Hard Sell

USC marketing professor Valerie Folkes doubts that ad-weary consumers are surprised to see more commercials playing in movie auditoriums.

"Consumers are so used to being bombarded by commercial messages in all sorts of venues," Folkes said. "At a sporting event they see players dressed in outfits with sponsors’ logos on them, and there are even stickers placed on fruit at the supermarket."

But consumers who go to the movies expecting to be entertained are likely to rebel if advertisers insist on using a hard sell.

"This is an occasion where they’ve paid to go to the event," she said. "So I’d think there’s a potential for a lot more negative response to ads than you might find with commercials on TV and radio."

Fearing a customer backlash, some theater chains restrict on-screen commercials to the coming attractions and an occasional public service announcement.

"We echo the belief of our customers who say that once the lights go down and the curtain goes up, the movies should remain a holy experience that’s void of anything not related to the movies," Harkins said.

Other operators allow advertising that’s tangentially associated with the movies--like the one-minute Coke commercials that run in United Artists theaters, or on-screen Los Angeles Times ads, which emphasize the movie industry. Those ads are deemed acceptable, industry observers say, because they promote the overall experience of going to the movies.

New York-based Loews Cineplex Entertainment, the chain created in October when Sony merged its Loews holdings with Canada’s Cineplex Odeon, will drop on-screen advertising at the end of this year. But the screen won’t stay dark. Rather, the chain will use its 2,900 screens to plug concession stand and gift certificate sales. Loews Cineplex also will reserve screen time for advertisements from a limited number of corporate sponsors now being recruited.

As theater operators scramble to wring added revenue from their auditoriums, they’re increasingly likely to accept big-screen commercials for a wide range of products, including cosmetics, automobiles, computers and television shows. And with the spread of digital theater sound systems, marketers are using radio-like programming to pitch everything from Internet service providers to hit TV shows.

Industry experts caution that the most effective advertisements bury the product pitch under a healthy helping of entertainment.

"It’s not about hitting them over the head with a 40-foot Coke bottle," said Coca-Cola Vice President Steve Koonin, who oversees the Atlanta-based soft drink company’s slide show marketing program.

The same goes for audio programming that begins an hour before the movie rolls. Patrons watching movies on Regal Cinema’s 3,600 screens in 400 locations now hear slick radio-like advertising programs from Theater Radio Network. The programs broadcast over state-of-the-art digital theater sound systems include hit music, Hollywood interviews and ads for companies such as America Online and ABC, which in October pitched its hit Drew Carey TV show.

While Walt Disney isn’t shy about advertising its television shows on audio advertising programs, the company generally prohibits movie theater operators from running on-screen commercials prior to its movies. Theater chain operators say that New Line Cinema and Warner Bros. also refuse to allow on-screen advertising in auditoriums where their films are playing.

Theater chains such as United Artists say they abide by the restrictions. But a United Artists spokeswoman said the theater chain is free to run on-screen commercials prior to about 75% of its feature film presentations.

Advertisers argue that commercial restrictions will likely fall to the wayside as theater operators look for ways to fund construction of expensive megaplexes.

"Whether you or I like it or not, every conceivable space is going to be filled with some type of advertising," said Theater Radio Network co-founder and Chief Executive Jeff Arthur. "The key is that what we’re doing is not going to turn off listeners."

Ad Presentation Seen as Important

Advertisers also know that moviegoers remember what they see or hear while at the movies. Theater Radio Network research suggests that 87% of moviegoers remember a product an hour after seeing a commercial--up from 23% when a TV commercial is involved.

Marc Pascucci, vice president of advertising and publicity for Loews Cineplex Entertainment, says sales of gift certificates rose by 40% this year compared with last year, in large part because of on-screen advertising.

Theater operators know that their customers will be quick to criticize poorly produced commercials or television ads that were simply reformatted for the big screen. Chrysler Corp., for example, is screening a longer version of a 30-second TV ad for its new Jeep Grand Cherokee. The commercial includes some of the elements seen on television but "the copy is all taken out," Fogarty said. "You see the car . . . and you hear a summary ‘sell line’ at the end. You’re not inundated with data about the shock absorbers and the suspension system."

Theater operators and advertising industry executives say some products--like mufflers and toothpaste--simply don’t fit on the big screen.

Screen Play

A wave of consolidations has been reshaping the nation’s movie theater chains, and they are beginning to use revenue from on-screen advertising to help finance their expansions. Regal Cinemas, now the nation’s largest chain, has acquired several competitors, including Act III. Sony Corp. also merged its Loews theater chain with Canada’s Cineplex Odeon. The nation’s largest chains, ranked by number of screens:

Regal Cinemas, Knoxville, Tenn.: 3,600

Loews Cineplex Entertainment, New York: 2,900*

Carmike Cinemas, Columbus, Ga.: 2,745

AMC Entertainment, Kansas City, Mo.: 2,557

United Artists, Dallas: 2,200

*Includes Canadian locations.

Source: Company reports, National Organization of Theater Owners.

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