The Justice Department is suing to block the $375 million merger of National CineMedia and Screenvision, saying it would combine the only two "significant" cinema ad networks in the U.S., reducing competition and likely raising prices.
The suit was filed in U.S. District Court for the Southern District of New York.
The companies, which are owned by the three largest movie chains, Regal, AMC and Cinemark produce those pre-show programs that promote new TV shows, movies and other fare. The ad networks and the theaters share the revenues.
According to DOJ, NCM and Screenvision, “The proposed combination of NCM and Screenvision 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,” said Assistant Attorney General Bill Baer in a statement. "If this deal is allowed to proceed, the benefits of competition will be lost, depriving theaters and advertisers of options for cinema advertising network services and risking higher prices to movie goers.”
Look for media consolidation activists to use the suit as ammunition against other proposed mergers.
The companies still sounded hopeful that the deal could be done, though they will now have to make their case in court.
"I am obviously very disappointed that the DOJ did not see the benefits of the new combined company to our advertising clients and their agencies and our exhibitor partners," asid NCM chairman Kurt Hall. "We look forward to demonstrating those benefits. Combining NCM and Screenvision will enable us to offer advertisers a better product with the broader reach, ubiquitous geographic coverage, more advertising impressions, enhanced targeting capability, and lower costs that advertising clients and their agencies seek. With a better product we will generate more advertising revenue for our theatre circuit partners. Advertisers, exhibitors and shareholders all will benefit from this combination which will better enable NCM 2.0 to compete in the increasingly competitive video advertising marketplace."
"The merger preserves all the desirable attributes of cinema advertising while allowing the combined company to compete more effectively on dimensions important to advertisers," said Screenvision CEO Travis Reid noted, "Together, NCM and Screenvision will be more competitive in the expanding video advertising marketplace and provide long term incremental advertising revenue to our theater partners."