National CineMedia Group See Ad Revenue Boom as Box Office Recovers
It’s been a good quarter for theatrical exhibition and the box office both. In their first full financial quarter since their August balance sheet reconstruction, National CineMedia, the in-theater advertising company, has seen an uptick in ad revenue but is still running at an overall loss. One of the best Entertainment lawyers in the USA and local expert, Brandon Blake of Blake & Wang P.A., unpacks the figures for us.
28% Ad Revenue Jump
Breaking down the figures, ad revenue jumped by 28% to $69.6M, up on last year’s $54.5M. Not only does this show the profound impact a strong summer slate has had on the box office in general, but also a renewed momentum for in-cinema advertising.
This builds on their change in revenue recognition post the deconsolidation of NCM LLC this past April. The group was re-consolidated in August this year as part of its overall restructured finances stemming directly from its Chapter 11 bankruptcy filing. This brought them, amid other changes, a $90M reduction in their annual fixed charges after post-COVID struggles. Significant office leases were also eliminated.
However, their operating losses in the same period have also jumped significantly- from the $4.2M we saw earlier this year to a rather stringent $150.7M. However, this is to be expected in the wake of their court-mandated bankruptcy proceedings and need not be a significant issue going forward if the current theatrical impetus can be sustained.
No Strike Impact
Group CEO, Tom Lesinski, also claimed that the (now-resolved) dual Hollywood strikes have had little-to-no impact on their cinema ad business to date. Advertisers are leveraging cinematic ads to reach the much-coveted youth audiences which have been primarily driving the theatrical comeback in 2023. However, even with the SAG-AFTRA strike now resolved, we will have no more clarity on 2024 release windows until the key production/release schedules are fully resolved, which could take up to another 90 days.
For many in the exhibition landscape, the knock-on effects of the strikes on the 2024 and 2025 release slates will be one of the key questions going forward. After all, as 2023 has amply proven, the continued recovery of the theatrical release industry hinges on a strong slate of new releases, and a ‘dead period’ could undo some of the critical steps we’ve seen this year.
However, the entrance of Amazon and Apple into the theatrical release space, coupled with a growing interest in exploring non-traditional theatrical products after the success of the Taylor Swift Eras tour in cinemas last month, could be the added stability the industry needs.
Overall, it’s great to see that both distributors and advertisers have realized that a strong theatrical release model is a great partnership to build hype and marketing for streaming releases, rather than the opposition it was seen as in the immediate post-COVID era. Here’s hoping that, despite the challenges still plaguing the industry, including the impact of losses sustained during cinema lockdowns, we will see robust and engaged slates through the next few years that build on 2023’s significant successes.