Editco.net

People may be flooding into multiplexes to see James Cameron's Avatar, endless computer-generated cartoons and anything with Angelina Jolie or Russell Crowe in it (there's no accounting for taste) but the cinema advertising market is beached after an ocean of losses.

If you look into the small print of this report in the Guardian of STV's figures (STV is the ITV equivalent in Scotland) you'll see that Pearl and Dean, the venerable cinema advertising firm it bought for about £20m a decade ago, managed to lose £13m last year.

That's it, 13 million quid in what should be a buoyant market.

So what happened?

Well cinema advertising used to carved up between Rank Screen Advertising (J.Arthur and all that) and P&D, founded by the late-lamented Ernie Pearl (and possibly someone called Dean).

Then P&D, which also ran the hugely profitable Cannes Advertising Film Festival, was sold to the dimwits at STV (Scottish Television as was) while Rank was sold to Michael Green's Carlton Television. It subsequently ended up in the hands of ITV when that company was formed from a merger of Carlton and Granada.

Seasoned executives such as Peter Howard-Williams, who at various times ran both companies, were ditched by the new owners in favour of refugees from the newspaper and poster businesses. Who promptly set about promising the cinema owners ludicrous revenue guarantees that they failed to deliver.

End result? Monstrous losses through ridiculous long-term contracts even while cinema admissions, and therefore the market for the ads, were going through the roof.

ITV gave back its cinema advertising business, Carlton Screen Advertising, the bigger of the two, to the cinema owners about 18 months ago after racking up stupendous losses.

STV appears to be soldiering on.

But a business that turns over about £140m a year can't afford to keep losing £13m on what is, after all, a niche business as far as it's concerned.

This is a rare instance of a two-horse race, where both of them lose.