Its been a significant few weeks in out-of-home with no less than three watershed events all occurring within the space of a few days. Here, Kevin Shute of outdoor services firm Rainmaker, explainsǽƒ_ª¶Ý
1. OFTǽƒ_ªƒ_½s outdoor market study ǽƒ_ªƒ__ any surprises there?
The publication on 3rd February by the Office of Fair Trading of its long-awaited outdoor market study.
When announced in May 2010, the study set out to examine the ǽƒ_ª_structure and competition within the sectorǽƒ_ª¶ and to consider ǽƒ_ª_any distortions of competition or barriers to entry at different levels within the sectorǽƒ_ª¶. It would investigate ǽƒ_ª_the payment of commissions (to media buyers) and how these affect the incentives ofǽƒ_ª¶Ý buyers.ǽƒ_ª¶
After an eight-month study period the OFT came back withǽƒ_ª¶Ý well, not very much at all. It found the sector ǽƒ_ª_broadly competitive amongst both specialist buyers and media agenciesǽƒ_ª¶, and said that the ǽƒ_ª_majority of rebates (paid by seller to buyer) pass through to advertisersǽƒ_ª¶. the OFT did however claim it ǽƒ_ª_found some potential for rebates to distort how campaigns are booked and increase the price the advertisers payǽƒ_ª¶.
Anybody surprised at that?
The remedy is a clarion call to every would-be outdoor media auditor: a recommendation that advertisers wise up by getting their campaigns audited and ǽƒ_ª_provide appropriate contractual incentivesǽƒ_ª¶ to ensure their media agencies and specialists act in their best interest, recognising that typically neither owes a fiduciary duty to the advertiser under current arrangements.
Al of which rather begs the question, if not the advertiser then in whose best interests have they been acting all this time?
Some concerns were expressed that ǽƒ_ª_certain agreements between media owners & local authorities may be limiting competitionǽƒ_ª¶ but nothing overall to warrant an investigation by the Competition Commission and, judging by recent comment from them, nothing to unduly concern the big two street furniture providers, Clear Channel & JC Decaux.
Basically itǽƒ_ªƒ_½s business as usual under the prevailing rules and may the best man win.
2. Focus on JCǽƒ_ªƒ_½s Titan deal
The second landmark event came a day later when JC Decaux released its topline 2010 revenue performance figures. At first glance the UK appeared decidedly lacklustre with organic growth at 6.2 percent hardly ripping up the trees when compared to overall market growth of 12.5 percent as recorded by The Outdoor Media Centre.
But factor in the impact of ǽƒ_ª_foreign exchange, acquisitions and divestituresǽƒ_ª¶ and reported growth leapt by a much more impressive 47.9 percent. Unless Iǽƒ_ªƒ_½m mistaken, the only acquisition of note in 2010 was the purchase of the coveted Titan Outdoor rail and retail assets from its administrators on 18 January. Iǽƒ_ªƒ_½m unaware of significant asset sales so the additional ǽƒ__¶ª76 million (or Ç_¶œ63 million) or so revenues generated can only be attributable to acquisitions and foreign exchange rate fluctuations.
Whatever the balance this is an impressive contribution and a remarkable return on the Titan purchase price of Ç_¶œ7.5 million ǽƒ_ªƒ__ more so when you consider sales performance could only be affected in the final three quarters of the trading year due to forward sales & outdoor lead times. No wonder that chief executive Jean-Charles Decaux, identified further acquisitions as part of its future growth strategy at Davos on January 28.
If Malcolm Gladwell were commenting heǽƒ_ªƒ_½d no doubt identify this deft purchase as the ǽƒ_ª_tipping pointǽƒ_ª¶ for the UK outdoor industry, such is its potential impact on the sector.
Titan were arguably a better strategic fit for CBS or Clear Channel ǽƒ_ªƒ__ both of whom were already prominent in rail and retail. But neither bid seriously for Titan, perhaps understandable given the managerial and ownership musical chairs affecting both companies at the time. Primesight, then the fifth UK player, would have boosted its market offering immeasurably with Titanǽƒ_ªƒ_½s rail assets but instead chose to purchase their roadside billboard inventory earlier in August 2009 for a reported Ç_¶œ6 million. If only theyǽƒ_ªƒ_½d known and waited to compete for the bigger prize.
By virtue of the clearest strategy implemented by strong and stable management Decaux has now reached a position of unassailable dominance in the UK. The first year numbers certainly signpost that position. Their products are now so prominent, they have become ubiquitous. If so minded, Decaux would be capable of changing the rules of engagement more than even the most stringent OFT enquiry could achieve.
3. The relaunch of the Outdoor Media Centre
On 26 January, we saw the long overdue re-branding of the industryǽƒ_ªƒ_½s trade association as The Outdoor Media Centre and its strategic relaunch as a resource centre for advertisers and agencies. The new website does exactly what it says on the tin: ǽƒ_ª_Providing media planners with data, argument, audiovisual support and proof that the outdoor medium is effective.ǽƒ_ª¶
And by focussing on marketing it has elevated outdoor above its often-criticised ghetto mentality and internecine feuding and better equipped it to confront the inter-media challenges ahead. The new site and new emphasis resonates confidence with a wealth of case histories and related user-friendly information. Long overdue in my book
Kevin Shute is the founder of Rainmaker, the integrated outdoor services company providing expert insight, advice and management across the out-of-home sector.
