'Barbie', 'Oppenheimer' brought 'life back in the business this summer': National CineMedia CEO

Barbie and Oppenheimer are two of the biggest movies of the summer, drawing in over $1 billion and $600 million globally, respectively.

National CineMedia (NCMI) CEO Tom Lesinski joins Yahoo Finance Live to talk about the return of cinema and its impact on the advertising space.

"July was one of the best months in the history of the movie business, in fact, the biggest July since 2016," Lesinski says, underlining a return to cinema advertising alongside moviegoers' return to theaters.

Lesinski explains the impact of cinema advertising compared to other platforms: "Brands keep searching and searching for young people, they can’t find them on TV anymore. They often are unreliably found in digital platforms." He notes the impact advertising and messaging will have on younger audiences "in front of a 50-foot screen," enabling the industry to re-target demographics further across other media channels and platforms.

Video Transcript

[AUDIO LOGO]

- The box office has been booming since the release of Barbie and Oppenheimer or Barbenheimer mid-July, breathing new life into moviegoers. But how does that impact advertising? Well, National CineMedia is taking a new approach, opting to shift to a programmatic selling structure for movie screen inventory. Tom Lesinski, National CineMedia CEO joins us now. So Tom, talk about the shift here and how we'd actually see it play out in real time when you think of customer data and how it would be then sort of transferred to or sold to third parties and then how moviegoers would actually see this experience.

THOMAS F. LESINSKI: Well, for the consumer itself, it would be fairly transparent. What we've been building is a very large database and probably the largest cinema movie database available. And ultimately, what every brand wants. Is they want to know exactly who's in their theater and whether they're targeting the people that they're looking for. We're known for reaching 18 to 34-year-olds. There's probably no better delivery system in the world for reaching young people in movie theaters today compared to television, or even in digital.

So what we wanted to do was marry that great young demo to a really cinematic experience 50-foot screen and then have the data and the ability to do all the attribution studies that our clients want. We've been very fortunate. July was one of the best months in the history of the movie business. In fact, the biggest July since 2016.

And during that period of time, 125 million people actually were in movie theaters. And National CineMedia being the leader in this space, we've delivered, you know, 70% of those. You know, the schedule you have up right now shows a really interesting intention study that we did. Literally, 97% of people watched cinema ads, and that compares very favorably to linear television sports, even YouTube, TikTok, Facebook, where we outperform most of those plumbers by at least 2 to 1.

So it's a really interesting comeback story. Just as the movie theaters have come back, cinema advertising is coming back as well. So we're excited about the future of this business. The movie business has been, obviously, under a lot of duress during COVID. And we finally see the life back in the business this summer with Barbenheimer, which seems to have been quite the story for everyone.

- Yeah. I mean, look, it got me dressed up to go to the theaters, Tom. So that was a success as well as just being able to see the movie and kind of participate in that. But then you think about what beyond Barbenheimer as well and the fanfare, the amount of foot traffic that's going into the theaters. How do you continue to sell to potential advertisers and marketers that the CPMs should still be that valuable moving out of a major wave of moviegoers like we've seen over the summer?

THOMAS F. LESINSKI: Well, as we sell advertising, we lay a slate out for our brands and advertisers. You know, every month, every week, there's some movie and some demographic that's interesting to an advertiser. And what was interesting to Barbie might have been interesting different to someone who was searching the Oppenheimer demographic.

So as we lay out our schedule and right in the middle of the upfronts right now, which are looking actually pretty good, there's always a movie in any given flight. And typically our brands by the week. And they can often buy all the movies in the theater. So they aren't just buying just Barbie and Oppenheimer, they're buying every screen in a multiplex.

So we've never had an issue, honestly, attracting advertisers around the year. Obviously, there's peaks in the summer and there's peaks in the fall-- November, December period. But generally speaking, this is a business where we can always drive young people into the theater. And I think as brands keep searching and searching for young people, they can't find them on TV anymore. They often are unreliably found in digital platforms.

But we know when they're in front of a 50-foot screen, that they're going to see our ad, and it's going to have a lot of impact. And most importantly, we have the ability to re-target them after they leave the theater, whether it's on their mobile phone or through a digital device so we can really deliver end-to-end before, during, and after the moviegoer that is often so desirable by advertisers.

- And Tom, as you guys exit bankruptcy amidst this restructuring, do you expect to sort of follow the wave of the return to the theater? In other words, did the restructuring have to do with the pandemic and people not being in theaters and now as you also, pivot to programmatic and also bet on, you know, sustainable return to theater, that's the sort of prospect here.

THOMAS F. LESINSKI: Let me sort of cover all those questions at once. So--

- Sorry.

THOMAS F. LESINSKI: There is a high correlation between admissions and box office and the way we deliver advertising. You see those results in advertising often later on, because most advertising is bought in the upfront market and bought often a year ahead of time. So what's being sold in the marketplace today is often the futures market of advertising, which is anywhere from 9 to 12 months from now.

And then there's also, of course, of a scatter market, which is a relatively weak sort of lately. So we look at our recovery story as being similar to what's happening on the exhibition side-- whether it's at AMC or Cinemark or Regal or some of the big public traded companies. But we tend to have a much better story in that our margin structure is significantly better than that. And the advertising business tends to be less volatile than the exhibition business.

And, you know, we're combining this with our digital platforms. We announced programmatic as being a new initiative for us to reach a whole other type of advertiser. So we look at us as a recovery stock that many people haven't discovered yet. We officially emerged on Monday. We're one of the few, if any, companies on the NASDAQ with truly no debt. So we have the ability to reinvest in our company.

And this is a very high margin business that delivers, you know, 80% of its free cash flow into EBITDA. Historically has been a high performing stock. Obviously, the capital structure was a problem for almost three years during COVID. And now that that's behind us, we sort of at this as another opportunity to take a really good ad product, high margin, interesting product for consumers and investors and then reinvigorate it, potentially, with additional capital.

- With that additional capital, do you think that you'll need to tap even more kind of resources to increase the liquidity for the company and continue investing?

THOMAS F. LESINSKI: I think the thing for us to do is, you know, we have to stabilize, obviously, our core business, which will require investing in our current infrastructure and current people set up. But we are going to look to additionally invest in data and analytics, which we've invested a lot in over the last several years. And we may start looking at other adjacent opportunities to reach cinemagoers.

It's a very unusual captive audience to have somebody in a movie theater running an ad. And that young demographic is, obviously, very appealing. If we can find related businesses or additional opportunities to sell to those same types of consumers, we would certainly do that. We're in a really unique position to, obviously, reward investors based on our capital structure, our margins, and the potential to grow the business.

- Tom, we got to go. What is the most compelling non-theater or non-cinema opportunity right now?

THOMAS F. LESINSKI: I think probably digital out-of-home is-- we are out and about all the time going to movie theaters. Often, those are in malls and places where we can deliver additional advertising to people coming and going. So I see that as a really an important adjacency. So I appreciate all the time and effort, but I just want to leave everybody with, get a chance to go to the movies this summer, if you haven't gone. It's a great experience, and it was proven out in July with Barbie and Oppenheimer.

- I have gone. I have gone, and I got dressed up for the occasion, Tom. It was fun. It was really--

THOMAS F. LESINSKI: It was fun. You know, you forget how much fun it is, because for two years in COVID, we never got to go. And it's great to be back in theaters.

- Absolutely. Well, Tom. Thanks for taking the time here with us today. Tom Lesinski, who was the National CineMedia CEO. We appreciate you joining on Yahoo Finance here with us this morning.

THOMAS F. LESINSKI: Thank you for having me. Appreciate it.

- Certainly.