U.S. Files Suit To Stop $375M Merger of Companies Responsible For Ads Shown At Movie Theaters

Companies of all shapes and sizes hoping to complete million-dollar mergers often face some tough questions from U.S. regulators. The process is no different for the less-talked about industries, like movie theater ad companies (you know, the companies responsible for making you sit through commercials before a seeing a movie?). And so, the U.S. Justice Department filed a lawsuit to stop the $375 million merger of the industry’s two biggest players, National CineMedia Inc and Screenvision LLC.

Reuters reports that the Justice Department filed the suit to block CineMedia’s acquisition of smaller rival Screenvision, that would create a combined company serving 88% of all U.S. move theater screens.

CineMedia and Screenvision are currently the two largest advertising companies that book commercials to be shown in movie theaters.

The companies are responsible for creating a 20-minute mix of ads and entertainment segments that are shown before movie trailers.

The companies split revenues from sold ads with the theaters they service.

According to the Justice Department complaint, advertising in theaters is different from other forms of advertising because it is shown on a large screen and because moviegoers cannot skip through the ads. Additionally, consumers who watch very little television but frequent the movie theater can be reached through these ads.

The Justice Department claims that the acquisition came about after CineMedia became upset with Screenvision’s aggressive deals to sign up more movie theaters at lower costs, resulting in the loss of business for the larger company.

The two companies tell Reuters that they plan to defend their merger, saying that if the merger was allowed, they would be able to offer lower costs for advertisers.

National CineMedia, which shows ads on about 20,000 movie screens, is partly owned by three movie theater chains: Regal Entertainment Group, AMC Entertainment Inc, and Cinemark Holdings Inc. Screenvision, which sells about 14,300 screens in the U.S., is partly owned by Carmike Cinemas Inc.

UPDATE 2-U.S. files lawsuit to stop merger of large movie ad companies [Reuters]