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Movie theater ads spark big-screen debate: Appeal of captive audience and demographics push advertising sales to record levels, prompting backlash

February 7, 2005

Ron Keedy can be found taking tickets, popping popcorn and sweeping floors at Key Cinemas on Indianapolis' south side.

There's little Keedy won't do to build customer loyalty at the two-screen cinema he owns.

What he won't do is sell advertisements to go along with the first-run, often offbeat films he shows. Keedy thinks movies are art, and there's no place for commercial ads in the art his patrons pay to see.

"Maybe I'm a purist," Keedy said. "I feel very strongly against advertising. I don't think people come down here to watch advertising. That's what they're trying to escape."

Keedy said his operation has survived by listening to patrons and providing good customer service.

"We hear from people all the time," he said. "People are tired of being bombarded with ads, and they don't want it here."

About 30 miles north, officials at the spiffy, new Great Escape Movie Theatre in Noblesville accept advertising with open arms. The theater's parent company, New Albany-based Aliance Entertainment, started accepting advertising on its screens in 2000, a year after the company was founded.

"There are a lot of financial pressures on movie theaters these days," said Steve Menschell, Aliance Entertainment vice president of operations. "Theaters with stadium seating and the other amenities we provide cost 30 [percent] to 40 percent more to build than old movie theaters. With costs going up, we have to look at every ancillary form of revenue we can. There's a lot of pressure."

Keedy feels the pressure, too. He knows he could command monthly fees of $200 to $300 for a simple static-slide ad shown on his screens and several thousand dollars for digital video. That would come in handy when he's cutting a check to the filmmakers that supply the movies Key runs.

For first-run movies, about 90 percent of the ticket take from the first week goes back to the source of the film, whether it's a small, independent operation or a movie-making giant like 20th Century Fox. The scale slides down in weeks following, but across any given movie's entire run, approximately 70 percent of ticket revenue goes to production houses in Hollywood and New York, theater operators said.

"People often want to know if advertising helps keep ticket prices down, but much of [the ticket price] is controlled by the movie studios," said Pam Blase, vice president of corporate communication for Atlanta-based AMC Theatres, which has more than 3,500 screens nationwide, including 29 in the Indianapolis area. "This is ancillary revenue for the theaters. And it's entertainment for the audience."

Companies that control megaplexes can and do command much higher advertising rates than Keedy could at his twoscreen moviehouse. Companies like AMC and Knoxville, Tenn.-based Regal Entertainment Group, which controls Regal and United Artist theaters, sell five- and six-figure advertising packages to national advertisers seeking to reach the young, educated, upwardly mobile movie-going audience, industry sources said. Regional and local advertisers are sprinkled in at rates ranging from a few hundred dollars to a few thousand to advertise across all of a company's screens in a particular market.

Bill Perkins, a veteran media buyer and president of locally based Perkins Nichols Media, said cinema advertising is gaining traction in a fractured media market.

"It's an alternative to traditional media, and traditional media isn't delivering like it used to because of cable TV, DVDs and other competing media and entertainment formats," Perkins said. "Advertisers are looking for ways to fill the gaps, and increasingly cinema advertising is looking more attractive."

The onslaught of multiscreen megaplexes is adding to the allure. Not only does the new digital technology make advertising easier and big-screen ads more high-tech and entertaining, research suggests it's also changing movie-going habits.

A study by Nielsen Media Research showed 73 percent of patrons arrive earlier at a megaplex than to a smaller, traditional theater and 60 percent or more said they go more often to a megaplex and drive farther to get there compared with smaller theaters.

A National Cinema Network survey found 47 percent of moviegoers have income greater than $60,000, with 20 percent more than $100,000.

"All these numbers are driving advertisers to take a more serious look at this medium," Perkins said.

In the last decade, theaters that previously depended on concession sales to drive about three-fourths of profit began relying almost as heavily on advertising revenue, industry sources said.

Locally, companies like F.C. Tucker and Re/Max real estate agents, along with Purdue University and Shelter Insurance, have shown up on the big screen alongside national advertisers such as Circuit City, GlaxoSmithKline, Target and Toyota Motor Sales.

"For a local or regional marketing effort, we've found advertising at movie theaters is very effective," said Joseph Bennett, Purdue's vice president of university relations. "It's difficult to zero in on a local market with TV the way you can with cinema advertising. The cinema also reaches a good demographic for us."

"There's growing evidence that this is an extremely effective form of advertising," said Cheryl Magiros, senior vice president of sales for New York-based Screenvision Direct, a company that brokers advertising for theaters representing 14,500 screens across the country. "Recall is five to six times higher with cinema advertising than traditional media," Magiros said. "And movie ticket sales have gone up 27 percent nationally in the last decade. Those are strong numbers."

Screenvision and other sellers of theater advertising know a thing or two about rising numbers. Screenvision, which controls 56 percent of the market, has seen revenue grow more than 40 percent in the last two years. Regal/United Artists saw its ad revenue climb 48 percent in 2004 alone.

But there's another set of numbers, Key Cinema's Keedy pointed out.

A recent survey conducted by Insight Express, a Stamford, Conn.-based market research firm, showed 53 percent of moviegoers want theaters to stop showing ads, and 27 percent said they were likely to attend fewer movies as a result of such ads.

"I understand with the mortgages on these megaplexes, they're trying to make money any way they can," Keedy said. "We're going to stand on personal service. That's how we've survived. I don't think the paying audience is buying that these ads are part of the entertainment."
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