Two Largest Onscreen Movie Theater Ad Companies Call Off Merger

AP Photo/Reed Saxon

National Cinemedia and Screenvision agreed to cancel their deal after the U.S. Department of Justice sued to stop it.

A $375 million acquisition that would have brought together the two leading companies providing onscreen advertising in movie theaters has been called off in the face of government opposition.

On Monday, National Cinemedia said it terminated an agreement with Screenvision that was signed May 5, 2014, with SV Holdco and Screenvision for the acquisition.

The U.S. Department of Justice had filed a lawsuit last November seeking to block the merger. In a press release at the time the suit was filed, the Justice Department Antitrust Division said: “The department said that the acquisition would combine the only two significant cinema advertising networks in the United States, eliminating competition that has substantially benefitted movie theaters, advertisers and, ultimately, movie goers.”

“The proposed combination of NCM and Screenvision,” said assistant attorney general Bill Baer of the Justice Department’s Antitrust Division, “is a bad deal for movie theaters, advertisers and consumers. This merger to monopoly is exactly the type of transaction the antitrust laws were designed to prohibit.”

“NCM and Screenvision,” said an announcement Monday, “together determined that the ongoing cost and distraction of the suit to their employees, advertisers and exhibitor partners could no longer be justified and that both companies would be better served pursuing their independent businesses as standalone companies.”

“While I am disappointed,” said NCM chairman/CEO Kurt Hall, “that our shareholders and our advertising clients and exhibitor partners will not realize the benefits of a merger with Screenvision, I remain confident in our ability to continue to innovate and build our business.”

NCM alone places its First Look in-theater network in 20,100 screens in about 1,600 theaters in 183 markets. It does business in 49 of the top 50 markets.

Together the two companies would have dominated screen advertising in American movie theaters, but that remains only a small part of the overall advertising on all media.

Screenvision is estimated to be on more than 15,000 screens in over 2,400 theaters. It operates a high-definition digital network that can change the advertising on demand.

For the first time, last year NCM put on an “upfront" for advertisers much as TV networks do each May. It was part of an effort to expand the number and type of advertisers that take advantage of the captive audience in theaters during the period between movies.

NCM said it has commitments for 77 percent of its 2015 advertising compared with 51 percent at the same time last year.

The termination triggers a $26.8 million termination payment to be made in the next 10 days. NCM and its owners, a number of theater circuits, will share the cost. For NCM alone the cost of the fee and lawyers will be about $11 million.

The owners include Regal Entertainment Group, Cinemark Holdings and AMC Entertainment.

NCM predicted it will have revenue for the first quarter of 2015 of about $75 million to $78 million, up 7 percent to 11 percent over the prior year. For the year, NCM expected total revenue of about $432 million, up at least 7 percent over the prior year.