National CineMedia Revenues Rise

by Erik Sass, Nov 2, 2012, 3:35 PM

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Cinema advertising continues to contribute to digital out-of-home’s overall growth, with positive third quarter results from National CineMedia, the larger of two dominant cinema advertising networks in the U.S. However, NCM also cautioned that fourth quarter results might not be as strong, reflecting continuing economic uncertainty.

Total revenues increased 5.7% from $136 million in the third quarter of 2011 to $143.7 million in the third quarter of 2012, NCM announced, due mostly to an 8.5% jump in ad revenue over the same period, from $127.2 million to $138 million. The increase in ad revenues offset a slump in events revenues, which fell 35.2% from $8.8 million to $5.7 million, reflecting NCM’s decision to wind down its Fathom Business Events operation.

The strong third quarter performance boosted NCM’s overall results for the year to date, with total revenue increasing 3.8% from $320.8 million in the first nine months of 2011 to $332.9 million. Over the same period, advertising revenue increased 7.3% from $284.9 million to $305.6 million.

Looking ahead, prospects for the fourth quarter are mixed, according to NCM chairman and CEO Kurt Hall, who noted that the scatter market is “shaping up to be a bit more challenging than we had originally anticipated,” with advertisers “cautiously monitoring inconsistent economic data and several uncertainties that could impact future economic activity.”

While Hall didn’t mention specific concerns, other advertising and brand execs have pointed to the possible effects of Hurricane Sandy, the outcome of the presidential election, and the approach of the so-called “fiscal cliff” as contributing to a broader climate of economic uncertainty.

As a result of economic headwinds, NCM expects total revenues in the fourth quarter to fall somewhere between 2%-6%, to a range between $112 million and $122 million.

Nonetheless industry analysts remained positive, citing cinema advertising’s unique position, which holds out prospects for future growth. Anthony J. DiClemente, an analysts with Barclay’s Equity Research, summed it up: “Bigger picture, cinema advertising remains one of the few mediums that offer advertisers an engaged viewer and high rates of recall. As broadcast TV ratings continue to slowly erode and DVR usages continues to increase, we think the gap between cinema and broadcast will continue to narrow.”

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