Pre-Covid levels: Will in-cinema advertising make the big comeback this year?

After two years of subdued growth due to Covid-19, the cinema business is now returning to normalcy. The bounce back of the film industry has also given hopes of in-cinema advertising putting up a good show. But will the sector reach the pre-Covid revenue levels this year is a question that remains to be answered.

The in-cinema advertising revenue, which stood at Rs 800 crore revenue in 2019, fell down to Rs 200 crore in 2020 and further down to Rs 100 crore in 2021, according to the FICCI EY 2022 report. However, with pandemic-related restrictions almost gone, viewers are now returning to theatres and things look positive for the sector.

Festivals & recovery 

Gautam Dutta, CEO, PVR, believes that cinema advertising will bounce back and hit pre-Covid levels by the end of Q3 as some big films are slated to release in the upcoming festive season. 

“For the first time in two years, cinema will be operating without operating restrictions during the festive season. The festive season accounts for a major share of sales for most consumer facing companies. This is the period when companies increase their marketing spends,” said Dutta.  

Anand Vishal, Chief Operating Officer, Inox Leisure, added that by November- December, we should be back to pre-Covid numbers. “During October, November, December, we should be able to do about 85% of our pre-Covid numbers and by the time January and February comes, we hope that we should be back to our 100% level.” 

According to Ajay Mehta, Founder, (iTV) Interactive Television, and MD, Kinetic India, in 2022, March/April saw record audiences on the back of big blockbusters like RRR, KGF 2, and Kashmir Files. “In-cinema advertising has come back strongly with the coming back of the audiences into the theaters and will emerge as the fastest growing medium in 2022 albeit on a small base.” He further adds that rapid growth of more than 500% is likely to happen this year as 2021 was a year deeply impacted by Covid. 

Prominence

Experts claim that cinema advertising is a crucial revenue stream for multiplexes and a useful tool for advertisers to target specific demographics.

According to Dutta, ad revenue contributes an average 12% of the overall sales turnover for PVR. “It’s pivotal to our business economics and its dependence has significantly increased. In the pre-Covid year of FY 2019-20, our advertising sales was Rs 376 crore. We have a market share of more than 33% in the in-cinema advertising segment for the multiplex industry in India,” Dutta shared. 

Dutta also explained that cinema advertising provides an unparalleled impact due to the best audio-visual experience. “Today brand managers are spending a lot of time wanting to evolve their campaign for cinema,” he mentioned.

Vishal stated that prior to Covid, cinema ad sales for Inox accounted for roughly 11–12% of the overall revenues. "For Inox, cinema advertising used to make nearly 50% of the EBITDA. We got off to a good start after Covid, I believe it will take the market another two to four months to catch up to where it was before Covid. About 70% of our pre-Covid numbers have been met,”  he remarked. 

Growth

According to Ajay Mehta, Founder, (iTV) Interactive Television, and MD, Kinetic India, pre-pandemic, cinema advertising was growing at an extremely rapid pace. In fact, for many years, it was the second fastest growing medium behind digital. 

“This was on the back of a couple of trends – the scaling up of multiplexes which brought a premium cinema-going experience to consumers not just in the metro but also in mini metros. The other trend was the digitization of single screens, which meant a new movie could release simultaneously across the length and breadth of the country as the distributors did not have any duplication costs of prints which was the case prior to digitization. Since movies were released on the same date across the country, piracy came under control which led to more audiences going to the theatres. This was noticed by clients and a number of categories, like apparel, auto, BFSI, media & entertainment, became regular investors in this medium,” he explained.

Cinema advertising has evolved from traditional slides to TVC to being innovative, said Deepak Kumar, Country Head, The Story Lab - dentsu India. “Cinema has seen some of the finest and memorable advertising innovations. The audience has no remote control and thus are 100% captive. You can be rest assured that every occupied seat would have seen the ad or innovation that you have created for the consumers. Multiplexes are more marketing friendly and open to explore engaging and non-intrusive ideas.”

Dutta shared that post-pandemic cinemas have been relentlessly working in the space of on-screen innovation to drive higher excitement for brands to break the inertia of inaction in the industry for about two years. 

“Today, consumers are indifferent to advertising and its traditional ways on the screen doesn’t excite the audience in the usual way as earlier. Therefore, exhibitors are continuously making the effort to move away from the conventional approach and find newer ways to engage with the audience. The introduction of experiential in-cinema advertising is one such effort towards that pursuit,” Dutta shared.

Vishal added, “Cinema brings a lot of flexibility in terms of choosing where brands want to advertise. Who do you want to address their communication to? Which market do they want to target, which is not there with any other medium be it print or electronic. With cinema, very targeted advertising can happen.”

Box office

Even while business at multiplexes is returning to normal, the sector is still dealing with some difficulties, such as a reduction in footfall that is directly tied to the poor box office results. Some of the recently released movies haven't been able to hold people's interest, and then there have been calls to boycott bollywood.

Kumar says that clients continue to show interest in cinema advertising. “But they have now become more selective. Blockbuster movies used to garner two/three weeks ad bookings. They are now down to a week’s plan and basis the box office collection it gets extended to week 2.”

Vishal shared that cinema advertising is a pre-sale. Advertising of a movie is sold before the film is released.  “You're selling advertising on the hype of the film, greater the hype, better the chances of the advertiser coming on board. Yes, it's a different story that the film may not do well. There have been some plans which have been shelved, but there have been newer clients who have emerged. We are back to 70% of our advertiser base of pre-Covid and that wouldn't have been the case if advertisers were not coming back to us. So advertisers are coming back. There are some sporadic cases where people are saying that we will wait and watch and that's a very small inconsequential number.”

Talking about the impact of poor show of some of the recently released fims, Karan Taurani, SVP, Elara Capital, opined, “We have seen a slow and gradual recovery. When the cinema opened last year during Diwali, recovery was closer to 40-50% and gradually moved towards the April- May quarter. But what we have seen right now is that the content has been really poor this quarter and apparently that slow and gradual recovery has stalled. In fact it's started moving backwards instead of being stable. In the last two months, the performance of these films was really below par. We were expecting this recovery to touch 80% towards Diwali, but I think we are now moving backwards. I don’t think boycott trends have anything to do with that, content is the reason why there is decline in footfall.” 

Pricing and inventory 

Kumar shared that if compared with the movies released during Covid and the advertising it generated, then technically there is no fall as such. “But if you compare the pre-Covid times with the Covid years, then of course there is a huge drop.

Doing a comparison, Dutta said, “Pricing was down to 70%; annual deals, which accounted for almost 40% of ad deals in the pre-Covid-19 period, shrank to less than 5% last year. However, today we have revived to above 70%. By quarter 3, we should be within the hitting range of the pre-covid numbers and we will exceed the pre-covid number by Q4 (FY23).”

He further added, “It has taken us a little time but given that cinema delivers an unparalleled impact, we are just almost close to a couple of months away from full recovery. Advertising is dependent on footfalls or eyeballs and this is the most important deciding factor for a client to advertise. With the dearth of film releases, and uncertainty in terms of film slate, in-cinema advertising continued to face pressures with cinema facing three waves of Covid. It is only expected to scale up when film slates are finalized with a certain degree of confidence. With audiences returning back to cinema in significant numbers, advertising will also fall in line in due course.”

Vishal claims that both existing and emerging businesses are showing interest in multiplexes. However, the ad rates continue to be close to pre-Covid times. “It will take some time. It will take us approximately six months to build on the rates. When your inventory is running at full capacity, you can raise your prices. If we had reached 100% pre-Covid level, we could have raised our prices. However, given that we are only at roughly 70% of pre-Covid at the moment, as I previously stated, it is economically prudent for us to keep up those pre-Covid rates. Once we reach 100%, it will be prudent for us to raise the rate and then have a higher yield for the advertisement.”

Taurani too feels that advertisers would like to wait and watch, they would not be in a hurry. “One big part is that close to 40% of the advertising revenue was pre-sold in nature in the form of annual contract but it's not happening all this time because of lockdown restrictions. Now films are coming back-to-back and they failed to grab audience attention. Until that confidence comes back, that percentage of annual contract will remain to be very low.”