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Published on 27 March 2014

Video content-driven businesses who fail to maximize the use of their assets and reach new audiences are doomed to repeat the devastating mistakes of others and assure themselves a spot in what will likely someday be the Smithsonian Institute's technology museum.

With that looming possibility in mind, and before the failure of Blockbuster and the launch of Netflix, National CineMedia (NCM) set out a decade ago to help their three huge cinema network owners maximize their brick and mortar facilities by broadcasting non-movie content – and advertising – via satellite to thousands of theater screens nationwide.

Fathom Events was created to find secure and schedule the non-movie content, which includes live sports (boxing), opera, unique comedy shows and concerts, now available with encores at your local cinema, minus travel, airfare and lodging for these otherwise remote events – and minus the high ticket prices.

"NCM was founded in 2002 to help theaters to maximize their theater assets via advertising and alternative events to bring in new audiences, and over the years we have successfully grown to do exactly that," explained NCM Spokesperson Amy Jane Finnerty. One year later, the direct broadcast network was online and delivering programming and advertising – and ticket and concessions revenue above and beyond that realized from movie screenings.

Rather than throwing more movies or show times at the issue of declining attendance due to alluring alternative movie viewing options, NCM and partners chose instead to deliver non-movie content live from remote locations to reach new audiences with a very affordable slate of engaging events. The efforts began moving cinemas toward entertainment outlets before DVD rental chains, mail options and streaming services took hold.

Now Showing!

Scheduled events demonstrate the variety of non-movie content available via the satellite network, often remotely held events made local for a far larger audience. Elton John, live from Caesars's Palace in Las Vegas this week, La Boheme live from The Met in HD, Peter Gabriel – Back to Front, the one-man show Shatner's World, Mayweather vs. Maidana live, And the Oscar Goes to...(an insiders' look at the upcoming Oscars awards and Cosi fan tutte – Live from The Met in HD. The Broadway productions are also reprised in encore broadcasts.

Elton John: The Million Dollar Piano, costs $18 a seat at my local movieplex. La Boheme is sold out at the same venue but seats for the encore are $20. Shatner's World is $15 a seat. For some reason, the Mayweather fight is not available local to me, but I can see it for $26 if I drive a half hour or more to the nearest facility. It likely costs double or triple that amount on pay-per-view from my cable provider. Also underwhelming, I can't buy tickets to Peter Gabriel (not live) until roughly three weeks before its debut.

The Network

NCM has built and expanded its Digital Content Network toward national coverage. The satellite-based programming and advertising distribution network features a dedicated network operations center (NOC) in Centennial, Colo. The NOC proactively monitors and manages alarm points, files and hardware devices in thousands of movie theaters throughout the country on a 7x24 basis, according to the firm. Smallish satellite dishes on cinemas and related equipment complete the system.

The reach of the country's three largest cinema companies – AMC Entertainment Inc., Cinemark Holdings, Inc. and Regal Entertainment Group - represents approximately 1,250 theaters and 16,560 screens. In addition, NCM has network affiliate relationships with over 30 top regional theater circuits representing approximately 330 theaters and 3,320 screens. With the addition of these network affiliate renewals, NCM's national cinema network totals approximately 1,580 theaters and approximately 19,880 screens.

Ads You Can't Skip

The satellite network carries both programming and ads (that show before the event begins) to the screens in each location. Given that these venues boast giant screens, digital surround sound and display high-definition video and comprise over 3 million seats, the matchup with compelling content the masses can't see in person, or can't afford to see, seems like a direct connect.

Fathom also offers viewers unique extras and behind-the-scene looks associated with its event broadcasts. NCM's FirstLook is a digital entertainment and advertising pre-feature program showcasing content from ABC Networks, A&E Television Networks, CBS Entertainment, Hasbro, Microsoft, NBC, Sony Pictures Entertainment and Turner Broadcasting System, along with national, regional and local advertising. Recent top brands advertising in FirstLook include Geico, M&Ms, Jeep, Apple, Booking.com, Taco Bell and American Girl.

NCM sold about half a billion dollars of ads in 2013 alone. And ads that run ins FirstLook play to a "captive" audience. Even the silence-your-cellphone spots are sponsored by Geico.

Fathom, the event programming arm, is owned by an entity created thanks to a spinoff from NCM this past December that is called AC JV, LLC. That group has 32% ownership by each of the founding member movie theater groups and four percent ownership by NCM, LLC. It pays NCM a fee to distribute its content.

Evolution Starts & Fits

Leading with programming versus the empty venue goes down as a valuable and tough lesson learned as some cinemaplexes attempted to address the evolution of video viewing by pitching their theaters for company meetings, parties and other non-content-driven gathering uses.

The core premise has been front of mind to venue owners in sports, music and conference centers who want to fill as many seats for as many dates and times a year as is humanly possible regardless of the event type.

The strategic, decade-long undertaking may not overtake movie screenings in revenue but has already brought many cinema "not anymores" back to the facilities for entertainment events that help extend the life of an American icon working to avoid following drive-ins and brick-and mortar rental chains like Blockbuster.

The current work-in-progress and top challenge still facing the cinema owners, united under the current name Fathom Events, is to expand their informational and promotional efforts for the non-movie screenings to those who have forsaken the movie-going experience, and the younger "cinema –nevers." They watch movies from their homes from a series of content outlets such as Xbox 360 Live and find them on the web as well. This group could be drawn to the cinema for non-movie events such as sports, comedy and concerts.

If Fathom Events overcomes a tough messaging and marketing challenge, it stands a better chance of thriving than entertainment companies that tried to expand their business model (Blockbuster's streaming service) far too late in the video industry consumption game.

With that in mind, NCM has expanded its efforts beyond the cinema.

Marketing Muscle

While FirstLook promotes Fathom Events on the biggest of screens minutes before the featured movie begins, they are also promoted to the non-movie-going masses via other channels, screens and apps.

NCM has established a comprehensive effort through which to promote Fathom Events by delivering FirstLook over the web and to wireless devices. Reaching approximately 47 million monthly uniques, NCM also says its Online and Mobile Networks expand FirstLook to digital video and second-screen mobile applications, which is describes as:

• FirstLook5 — A five-minute online and mobile video version of NCM's FirstLook pre-show, FirstLook5 features world-class entertainment content along with advertising for an "integrated original video platform."
• FirstLook Sync App — NCM says its FirstLook Sync app interacts with NCM's FirstLook pre-show through audio recognition technology, designed to give movie audiences direct response capability and automatically remind them to be courteous and turn off their cell phone when FirstLook ends and the movie trailers begin.
• Movie Night Out App — Moviegoers can always plan a night at the movies with Movie Night Out, including access to reviews, trailers, show times, theater locations, ticketing by Fandango and suggestions on fun things to do before and after the film, according to NCM.

Adding Social Media

Most recently, in February, NCM Media Networks announced a partnership with Twitter Amplify to develop a new branded entertainment series that will launch in mid-2014 and bring the most exciting movie conversations, Tweets and Vines to the big screen, according to the companies.

Twitter's Amplify program is the social broadcast network service's video promotion tool. The planned one-minute weekly show "will feature quick moving segments, taking a fun look at the top trending movie and entertainment content on Twitter and Vine," according to the news release.

"Going beyond the typical red carpet and gossip coverage, the series will be the first interactive on-screen program that invites moviegoers to join the conversation and help shape the content of the show," the release stated. "Through hashtags, fans will be able to share their thoughts on movies and may even see their own Tweets and Vines up on the silver screen alongside some of the biggest names in Hollywood."

The Business of Entertainment

NCM, which had owned Fathom Events, spun it off this past December.

"Fathom Events presents special events programming for audiences across a network of affiliated movie theaters. Fathom Events is a consumer business that works with its content providers to market its events directly to the public," explained NCM's Amy Jane Finnerty. "This is why the business was spun off to the movie theater circuits – it was felt that, as consumer-oriented companies, AMC/Regal/Cinemark was better positioned to take Fathom Events to the next level of growth."

NCM is the largest cinema advertising company in the U.S., she claimed. "We sell ad time across our network of affiliated movie theaters and network of movie/entertainment-related digital and mobile properties. NCM is a B-to-B business that works with brands/advertisers/ad agencies to help them reach movie audiences."

The Numbers

NCM, which released Q4 2913 results last month, demonstrated steady revenue growth as did the Fathom Events unit.

Total revenue for the fourth quarter of 2013 increased 5.9% to $122.7 million from $115.9 million for the comparable quarter last year, according to the earnings release. Advertising revenue for the fourth quarter of 2013 was $108.1 million, an increase of 4.0% compared to $103.9 million for the comparable quarter last year.

Fathom Events revenue increased 21.7% to $14.6 million for the fourth quarter of 2013 compared to $12.0 million for the comparable quarter last year, according to a press announcement this past February. Net income for the fourth quarter of 2013 was $19.0 million, compared to a net loss of $0.5 million, for the fourth quarter of 2012, the filing claimed. Net income for the fourth quarter of 2013 and net loss for the fourth quarter of 2012 both include non-cash and other items, including the gain on the sale of the Fathom business on December 26, 2013.
If these "unusual items" were excluded for both years, the release said net income "would have increased 47.7% to $12.7 million for the fourth quarter of 2013 compared to net income of $8.6 million for the fourth quarter of 2012."

The Bottom Line

The combination of unique, non-movie content available in existing facilities for affordable prices with advertising to captive audiences nationwide may not generate additional revenues to overtake movie ticket sales, but it likely guarantees that cinemaplexes won't be marginalized or made extinct.

By evolving their decades-long business model of ticket and concession sales by adding non-movie video content to the menu, cinemas have already outlived several movie undertakings that failed to evolve, or attempted to far too late. Those entities will be featured exhibits if the Smithsonian really does open a technology museum. Check the content wing.