Will Cannes be Canned?
My only occasion of going to the Cannes Lions festival was in 2019. That was a good year for the show: the weather was glorious, the conference had none of the worries about Covid that were soon to engulf the world and, more to the point, Cannes Lion generated double digit organic revenue growth, bouncing back after what had been a slightly rocky period. However, things have changed since then and the cancellation of the physical event (if not digital) for two years running raises questions over its future direction. My view is that there is a high possibility / probability that the Cannes Lion physical event does not return or, if it does, it may permanently be changed in nature. This is a view I hope is not right but it is worth exploring.
The Canary in the Coalmine
Last month, Reed Midem announced that it had permanently mothballed its Midem physical event in Cannes, which was due to take place in June 2022 (which, coincidentally, is around the times for Cannes Lion). This came as somewhat of a surprise as Midem had said prior to the announcement that the physical event would take place. Now it appears that only a digital event will happen. Reed Midem is also in talks with Cannes for the latter to take over the Midem brand.
There are a number of reasons for seeing Midem’s demise as more driven by specific factors. The show has been declining for years in terms of attendees and, given the changes in the music market it has been seen as less of a go-to event, especially given frustrations that the event has not kept up with the changing environment.
However, laying aside the similarities with Cannes Lion in terms of location and time of year, it is noticeable that an event which has a number of other similarities with the Lions, such as essentially being a place for industry executives to meet and discuss trends and which has been seen as having a rather more social aspect to it than a traditional trade show, has decided to close. The question is whether this is a pre-cursor to a similar thing happening with Cannes Lion.
Ascential’s sale of MediaLink may give a hint of what will happen with Cannes Lion
One indication that Cannes may not be coming back in its pre-pandemic form are the action of Ascential itself. Just because Christmas, it sold its MediaLink consulting business for $125m revenues, or c. x12 2020 adjusted EBITDA pre-central costs but probably more like high single digits on a normalised, pre-pandemic level.
MediaLink is a business which relied heavily on Cannes, a point made both in Ascential’s 2020 (“the absence of the Cannes Lions festival, a major platform for the industry, reduced the opportunity to drive new business.”) and 2019 results statements (“The higher profile presence of MediaLink at the Cannes Lions festival also illustrated the benefit of collaboration and cross-selling initiatives that are an area of increased focus across Ascential.”). More to the point, while it saw strong revenue growth in at least 1H21, face to face interaction at Cannes is an important driver of business.
Given Ascential does not need the cash, and that MediaLink delivered 35% revenue growth in 1H21, there is an obvious question of why Ascential decided to sell now. However, one explanation may be that it decided to sell now before it is at least concerned that Cannes Lion is unlikely to return to its traditional format which, if that does happen, would likely have impacted the proceeds Ascential would have been expected to receive.
The more fundamental reasons why Cannes Lion may never go back to its traditional format
However, there are more fundamental reasons why the traditional Cannes Lion format may not return and the problem is that there are not just one but three forces working against it. That is a major problem because, while one issue is usually easy to shrug off especially when it is “temporary” such as Covid, when more structural issues come into play, that makes it more difficult for the physical show to return. The three key issues here are:
- Covid;
- Budgetary decisions; and
- ESG.
1. COVID
The first is COVID. Globally, we are now in the midst of the spread of the new Omicrom variant and while, mercifully, it appears the new variant is milder, the fact that the world was caught off-guard so quickly by the spread of the new variant means that many traditional attendees may be wary of attending an event which, rightly or wrongly, might be interpreted as a potential super-spreader event, given the number of attendees flying from all corners of the world. That is especially the case given the potential for new variants and the increasing view that COVID will be around for years to come.
In addition, there are likely to be other barriers which are likely to reduce attendance, amongst them: the refusal of some firms to allow their employees to travel; the logistical nightmare of organising mass testing of delegates both for the conference and, in many cases, to meet travel requirements when they leave; the potential cost of insurance for the event, both for attendees and the organisers and quite a few parties. All these increase the headache (and cost) of attending.
2. Budget
The second issue is the issue of budget. Advertisers and Agencies have had two years of when allocating spend for Cannes has not been on their books. That spending will, in many cases, have been allocated elsewhere and there will be a question of whether Advertisers and Agencies will want to shift it back, especially as some of it (for Advertisers) has gone into advertising to help push more pressing needs such as brand support to push through price increases.
The overall amount may not be much – Informa said at its recent Capital Markets Day that it estimated exhibition spend made up 5% of advertisers’ overall marketing budgets – but for some companies, especially in the Agency world, that spend is likely to have been considerable. At its 1H results, Ascential stated that its 1H 2019 Cannes Lion revenues i.e. when the event took place were £67.8m and it is likely some of the major Agency groups were paying double-digit costs per year to attend.
3. ESG
The third issue is an ESG (Environmental, Sustainability and Governance) issue. A lot of people used to fly into Cannes from all over the world to attend Cannes. That means a lot of airflights. For firms that are increasingly under pressure to highlight the “greenness” of their brand and who are under increasing shareholder and regulatory pressure to disclose their environmental performance (especially in Europe under new European Commission directives), at least some may decide that it is too controversial to justify sending multitudes of executives only for what is perceived as a social gathering of the advertising industry. Moreover, given points one and two, environmental issues may be a more brand-friendly way of justifying postponement or cancellation.
Will Cannes be the same again? Unlikely but…
That does not mean that the Cannes Lion event is gone for good. In fact, it has continued to run – virtually – for the past two years and that is likely to continue.
In 1H21, this virtual event generated £34.4m of revenues, so half of 1H19 but with considerably lower costs. There is no reason why the annual Cannes Lion awards – which continue to have significant prestige – should not continue to be attractive for entrants nor why sponsorship nor other revenue streams dry up. In addition, it is clear that events companies globally are now looking to expand their revenue streams, through the optimisation of data and services, and prepare for a digital future for some of their events.
Another option is that Cannes could re-emerge as a more European-based events, with non-European attendees attending virtually. One of the points made by Informa recently was that regional events have generally rebounded more strongly than international, global ones and it may be that, given relatively easy travel within the EU at least, Cannes becomes a more localised gathering. For international attendees, a virtual event would eliminate most of the issues highlighted above.
However, what does feel increasingly likely is that Cannes will not go return to its pre-pandemic glory. The sale of MediaLink would seem to indicate that Ascential is at least making preparations for the show to move away from the physical format. That does not necessarily mean that Ascential has decided it does not want to be the owner of the asset – it may decide that the brand remains strong and that a digital event remains an attractive proposition. However, that may be of little comfort yearning for the return of the yachts and the days of old.