02.22.2011

Strategic Vision: with new ownership, cinema advertiser is poised for growth

By Andreas Fuchs

“I just found everything to be a great match,” exhibition-industry veteran Travis Reid says about his decision to become the chief executive officer of Screenvision Cinema Network LLC (www.screenvision.com). “Cinema advertising is a growth industry. And within that industry, Screenvision continues to establish its own growth curve. We have a strong team in place that has accomplished many innovations. Screenvision has a great vibe and culture. Everybody really works hard and pulls for the company. The interaction between departments is very solid and very productive.”

Reid worked with Screenvision in years past, when he was still on the exhibitor side. “They were great partners,” he notes, “and have maintained that status over the years.” For him, the proof lies in “how many circuits have been with Screenvision for as long as they have. The renewal rate is extremely high. Exhibitors are happy and they keep signing up.”

Around the same time Reid came on board in mid-October 2010, the cinema-advertising services and alternative content provider (with over 15,150 screens at 2,400+ theatres in the U.S.) finalized a change in ownership as well. Shamrock Capital Growth Fund II (www.shamrock.com) purchased the full ownership stake from U.K.-based ITV, along with the majority of Technicolor’s shares in Screenvision. As part of the deal, and with a minority interest retained, Technicolor continues as Screenvision’s provider of film and digital services with their film processing and distribution agreement extended through end of life. Thirdly, Carmike Cinemas entered into an amended exhibitor agreement that solidified an existing 20-year relationship for another three decades. In addition to a cash payment of $30 million this past January, Carmike received a 20% ownership interest in Screenvision.

With both an exhibitor shareholder and former exhibitor at the helm, what does that mean for Screenvision? “I think it is often good for a company to have a new investor with fresh perspectives,” Reid says, giving first credit to Shamrock’s strategic expertise. Shamrock runs a small and focused shop, he contends. “While they don’t overwhelm you with manpower, the guys we are working with are extremely helpful and smart, easy to work with and true partners. Shamrock is a huge positive for Screenvision, and that represented a major attraction to me when deciding to come on board.”

Another advantage is that, based on the foundations that Roy E. Disney laid, Shamrock’s investments focus on communication, media and entertainment opportunities alone. “That experience is very relevant to us,” Reid attests. “As you know, they are just coming off an extremely successful investment in RealD. So, while they have not invested in the exhibition industry per se, Shamrock has a real good knowledge of how our industry works. That has been, and will continue to be, very helpful to me and to the company as a whole.”

This is quite an endorsement coming from an executive who has been at the forefront of theatrical exhibition. “I’ve known Screenvision for a very long time,” he explains. “At Loews, we did what I think was really the first pretty large-scale and long-term agreement for onscreen advertising about ten years ago.” Reid further mentions innovative programs and activities that were launched together. That included many firsts, such as digital onscreen advertising, 3D advertising and live streaming to movie theatres.

In addition to working at Loews Theatres and guiding the circuit through numerous corporate transformations from 1995 until its sale to AMC Entertainment in 2006, Travis Reid has other legendary exhibitors on his resume as well, such as General Cinema, Cinamerica Theatres and Century Theatres. “It seemed like my experience could be helpful in a couple of places,” he politely understates his role at Screenvision. “My years of experience in exhibition will be helpful in understanding the needs of our more than 150 exhibitor partners. The relationships I have developed at the studios,” he hopes, “could help us improve our content deals with them.” His most recent accomplishment at Digital Cinema Implementation Partners (DCIP)—closing the key deal on d-cinema deployment for AMC Entertainment, Regal and Cinemark—will be instrumental in “figuring out our way through the digital transition that is going on in the industry.”

Carmike’s ownership position with Screenvision is very positive as well. “We now have our largest customer on the company board, who can give us excellent feedback on how we’re doing and what they would like to see us do differently, perhaps.” To Reid, this “real-time exhibitor feedback from a very high level” is crucial in that it is based upon “a dual interest in what’s best for Carmike and what’s best for Screenvision… We are going to be partners for a very long time. So Carmike won’t necessarily just have a short-term view, but they also take a big-picture view that will be extremely helpful to us.” Last but not least, “we’ve actually gotten positive feedback from the other exhibitors about Carmike’s involvement.”

This may explain the large number of recent new signings, such as Paragon Theaters (see our profile in this issue) and CEC Theatres, as well as extended agreements with existing exhibition partners like National Amusements, Harkins Theatres, Rave Cinemas and Malco Theatres. “Our top six exhibitors all re-upped over the last 24 months,” Reid confirms. Even better, “they all signed very long-term deals averaging 19 years,” adds Darryl Schaffer, Screenvision’s executive VP, operations and exhibitor relations. “We had some key additions in recent years. In 2009, for instance, we added Marcus Theatres and Bow Tie Cinemas; in 2010 CEC Theatres and Santikos. So while we are certainly growing the network, the other key piece of information is that we’re signing key renewals with key partners which are longer-term.”

While this might be coincidental as numerous contracts were up for renewal, it also helped “to secure the network and to strengthen the position for the new investors,” Reid attests. Not to mention the growing importance of cinema advertising to exhibitors as another revenue stream. “The holdouts are very few at this point,” he says. “Every exhibitor realizes that cinema advertising has become an accepted practice. All research will tell you that the preshow is well accepted by the patrons. Screenvision has pretty good data for those exhibitors that are still on the fence about it. The patrons certainly don’t object to it and again, as research shows, many enjoy it very much, in fact. We also give the exhibitor some control over what we put on screen and they do approve the creative. We want to be flexible. If our partners are concerned with a particular spot, we don’t run it in places where they don’t want to show it.”

Most exhibitors, however, do “realize that the preshow is entertaining.” Schaffer declares, confirming research with both moviegoers and advertisers that the recent redesign of the digital preshow programs has been a success. The traditional host format has been replaced with the introduction of CMOR (SM)—the service-marked new mascot, also known as Cinematic Marketing Optimization Robot. “Using an animated character creates a seamless show and allows for more integration opportunities,” she explains. “CMOR can do all sorts of different things, such as holding a Sprint phone or driving a BMW, for example.” And donning 3D glasses.

“With at least 31 movies coming up for this year in 3D,” Reid expects indeed that “we’ll see quite a bit of activity in that area. Screenvision has already done around ten different campaigns in 3D. The recall rates have tested much higher, in addition to being a very rich and differentiating media.” 3D technology also brings up another trend in that it can only be properly presented with 2K or 4K digital-cinema projectors and the Technicolor 3D on 35mm film solution, of course. “You need that higher resolution,” Reid advises. “For alternative content as well, everybody believes that using d-cinema projectors will be a big benefit for improved presentation.”

Already, there are some 3,000 Screenvision screens that have advertising and alternative programming integrated into their DLP Cinema and Sony SXRD projectors. “Our preshow is delivered to a satellite dish on the roof,” Schaffer explains. “From the site server it then goes to a playback device at each auditorium which, in turn, is connected to either the screen advertising projector or d-cinema projector.” For the latter cases, Screenvision actually utilizes “a converter box that sits between the playback unit and the digital device.”

In closing, we asked where cinema sits with advertisers in these economically challenged times. “Our industry grew through the advertising recession,” Reid attests. “We had record revenues for our company this past year, which was still during a relatively tough advertising market. Screenvision has seen additional advertisers migrating to onscreen as they became more focused on how they were going to spend smaller budgets more effectively.” Going forward, he expects to see that trend stick. “What we’ve seen historically is, not only do we have a high advertiser renewal rate, but the aggregate spend typically grows from year one to year two. Our anticipation is that the market will continue to grow and Screenvision with it.”