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  • 1. Sizzling Summer at the Movies 2009 on Track to be the Largest Box Office in Two Decades “ Box office-wise, the sky's Springing Into Summer ” the limit for ‘Up.’ - • X-Men Origins: Wolverine clawed its way “ to number one with $87 million Christian Bale brings some • Star Trek opened with $72.5 million, up serious star power to the role ” 17% over the same weekend in 2008 of the legendary John Connor. Receive 25% Off a Contract of 13 Weeks or More if Signed By 5/29/09 Terminator Night at the UP Land of the Lost Year One Transformers: Salvation Museum 2 May 29 June 5 June 19 Revenge of May 21 May 22 the Fallen June 24 1
  • 2. Where Are Advertisers? At the Movies Those on-screen ads before the movie bring in big bucks for National CineMedia and other movie-ad sellers By Jon Fine, May 14, 2009 This year has been characterized by advertisers slamming the brakes on spending across virtually all online and offline media. Yet even within this scarred landscape, there are thriving patches of grass. I guarantee, though, that you cannot guess what's built a strong case for being a media business darling of 2009 thus far. National CineMedia (NCMI) is the biggest U.S. movie theater advertising company. That is, it produces programming for theaters that shoehorn ads into the space between the time you take your seat and the start of the coming attractions. quot;Across most media, '09 is going to be a down year,quot; says CineMedia Chairman and CEO Kurt Hall. quot;We are in one of the fortunate areas that is new and growing.“ These ads appeal to many other constituencies for the same reasons that make movieheads grit their teeth: Viewers are alone in the dark with a massive and all-but-unignorable ad message spread out on a sailboat-sized screen. quot;The mindset of people watching movies is much different than the mindset of people watching TV,quot; says Tim Chaney, director of advertising at Kia Motors America, which just concluded a cinema advertising campaign for its new Soul subcompact. quot;TV becomes a lot of background noise.quot; At the movies, quot;you've got people in a more relaxed frame of mind, coming to be entertained.quot; And audience resistance to movie ads has steadily declined, he says. NO FAST-FORWARD, NO MUTE There's also a brute fact about this business. quot;Cinema is one of the only places where the consumer can't make [an ad] go away,quot; says Hall. And, says analyst James Marsh of investment banker Piper Jaffray, movies also attract a younger audience quot;that TV has had difficulty reaching.quot; (One of National CineMedia's top ad categories is the U.S. military, which obviously is only concerned with reaching young men and women.) And a healthier-than-expected year for movies, with box office attendance and revenue both up in the double digits, means that in many cases cinema ad firms are quot;overdeliveringquot;—more people are seeing the ads than the advertisers paid for, says Marsh. (This is not a claim many TV networks can make.) If TV networks continue to command premiums for shrinking audiences because of a scarcity of inventory—there are only so many spots available on American Idol, after all—it's a game cinemas can play, too. Movie houses still keep ads to a (relative) minimum, which, analysts say, also works in their favor. And one simple reality doesn't hurt either: If you believe, as I do, that one reason marketers stick with television is because they love to imagine their product starring on TV—well, then, isn't it even better if their products become movie stars? 2
  • 3. Blockbuster sales drop 20% in first quarter The DVD rental chain says more people are watching movies at theaters, pulling traffic from Blockbuster stores. Profit plummets 39%. By Ben Fritz May 15, 2009 As if crushing debt, the recession, Netflix and Redbox weren't enough, Blockbuster Inc. has a new foe: the booming box office. That's according to Jim Keyes, chief executive of the struggling but still massive DVD rental chain, who on Thursday blamed much of his company's weak performance last quarter on the growing number of people watching movies in theaters and not their living rooms. quot;We estimate nearly 3 million more people are going to the movies each week in 2009 [than 2008],quot; he said on a conference call with analysts. quot;This has been pulling traffic from Blockbuster stores.quot; The 14% rise in movie ticket sales this year hasn't hurt Netflix, which gained nearly 1 million subscribers last quarter and saw revenue grow 21% from the previous year. It's tough to ignore Blockbuster's own problems, most notably the cash shortage and looming debt repayments that forced it to cut its inventory of new DVDs by 20% during the first quarter to preserve cash. Revenue fell nearly 20% to $1.12 billion from the same period last year, while net income was down nearly 40% to $27.7 million. Both figures were significantly below investor expectations, which sent Blockbuster stock plummeting 23% in after-hours trading to 88 cents. quot;The main issue is that same-store sales were worse than expected and there's a concern about how long it will take them to get back on track,quot; said Arvind Bhatia, an analyst at Stern, Agee & Leach. Keyes promised that Blockbuster's stores would be fully stocked and aggressively marketing the value of rentals since the company eased its liquidity concerns last month by renegotiating a revolving line of credit that was set to expire in August. The so-called revolver now won't end until September 2010, though Blockbuster had to reduce the available credit to $250 million from $350 million and accept a higher interest rate to get the extension. Keyes pointed to a number of initiatives that could improve performance later in the year, including a strong lineup of films such as quot;Star Trekquot; and quot;Fast & Furious.quot; Blockbuster is also looking to sell products like quot;movie-themed sunglassesquot; and Blu-ray players in stores, to grow its Netflix-like DVD- by-mail and digital download businesses, and to roll out more than 3,000 Redbox-like kiosks through a partnership with manufacturer NCR. The Dallas company is also looking to slash $250 million in costs through store closures and other initiatives. All that won't matter unless Blockbuster can improve the terms of its debts, which stand at $922.5 million. Keyes described the renegotiated line of credit as quot;a bridge to the future when the cost of capital is not as punitive.quot; Bhatia said it essentially gives the company a year of breathing room. quot;I think they can focus on operations for the next 12 to 15 months,quot; he explained. quot;But they will not have the same flexibility they did before unless the capital markets improve dramatically.” 3
  • 4. The Movies: America’s Favorite Entertainment Destination Attendance Movies: 1.4 Billion Sporting Events: 198 Million Shows: 12 Million Concerts: 51 Million Source: MPAA 2007 Entertainment Industry Market Statistics, Billboard Magazine November 2007, Crain’s New York Business January 2008 4
  • 5. Cinema Delivers Key Consumers Key findings from Aegis/Posterscope Out-of-Home Consumer Survey; August 2007 • They’re on the go: 18-30 year-olds spend less time with most traditional media and more time out-of-home than the average adult 18+ • They pay attention to movie advertising: among the vast majority who go to the movies, 84% notice movie theater advertising • And they’re spending time in places where your products and services are sold: movie enthusiasts are more likely than non-enthusiasts to visit: Coffee Shops Malls Airports Bars Casual Dining Restaurants Gyms Source: Aegis Media Americas’ Posterscope USA, Out-of-Home Consumer Survey, August 2007 5
  • 6. Cinema Advertising Breaks Through 6
  • 7. NEW MEXICO BIG SCREENS BIG ADVANTAGES THE AGES OF MOVIEGOERS IN ALBUQUERQUE • 34.1% - 18 - 34 • 11 Theaters • 40.3% - 35 - 54 • 120 Screens • 25.6% - 55+ • 5.8 Million in IN ALBUQUERQUE OUR PATRONS ARE EDUCATED Annual Attendance AND HAVE HIGH INCOME • Frequent moviegoers are 11% more likely have attended college 9% Growth Since 2006 • Frequent moviegoers are 16% more likely to have graduated college • Frequent moviegoers are 30% more likely to make $75,000 or more • Frequent moviegoers are 40% more likely to make $100,000 or more IN ALBUQUERQUE OUR PATRONS WORK IN A VARIETY OF PROFESSIONAL OCCUPATIONS • Frequent moviegoers are 7% more likely to work in sales/offices • Frequent moviegoers are 33% more likely to work in professional fields • Frequent moviegoers are 9% more likely to work in management/business/finance 7
  • 8. Cinema’s Recall Scores Can’t Be Beat *Source: Morgan Stanley Dean Witter, 2001; Cinema Recall (i.e. September 2007 NCM On-Screen IAG Report); LSU Manship School of Mass Communications, June 2003 for O-O-H 8
  • 9. Patrons Enjoy FirstLook Source: OTX FirstLook Survey, May 2006 9
  • 10. As Seen in Myers Report Cinema Advertising Ranks First Among 40 Media Categories For Advertising Attentiveness  Likelihood To Pay Attention To Advertising Messages Index  Movie Theaters  Pre-movie video entertainment 134  Movie Theaters  Pre-movie slide messages 122 • Pre-movie video advertising is the  Movie Theater lobbies (posters, video, kiosks, etc.) 118 highest indexing medium among  Home, Food & Family Interests Magazines 117 audiences who say they are quot;very  Entertainment Weeklies 116 likely/extremely likelyquot; to pay  Websites you visit for TV and movie related information 113  Primetime Drama Series 108 attention to advertising in 21  Women's Lifestyle and Special Interests Magazines 107 media categories.  News Magazines 102  Travel Publications 101 • Pre-movie video advertising  Situation Comedies 99 indexes 134 compared to the  Primetime Reality Series 99  Elevator TV Screens 93 average attentiveness of 100.  Primetime Variety / Competition Shows 87 (Pre-movie video advertising is  Video displays in public locations 87 34% higher than the index  Men's Lifestyle and Special Interests Magazines 87 average).  Gossip Tabloids 86  Video displays at Retailers 85  Dramadies and Primetime Soaps 84  Business Publications 84  Video in Grocery and Drug Stores 72 10
  • 11. Cinema is One of the Most Engaging Ad Environments of all Major Media Consumers pay attention to ads in cinema at a rate of 2.5 times greater than television* *Source: Jack Myers Media Business Report, quot;Jack Myers Emotional Connections Survey of 8,000 Americans on Audience Attentiveness to Advertisingquot; as cited in JackMyers.com quot;Daily Data,quot; as cited March 18, 2008, NCM Attitude and Recall Test, April 2008; 11
  • 12. Cinema Ads Drive Purchase Intent Cinema ads are TWICE as effective as television ads driving consumers to consider purchasing a product being advertised Source: Myers Publishing/OTX, October 2006, NCM Primary Studies May 2003 – June 2007 12
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