Commercial radio player Global’s move to buy outdoor companies Outdoor Plus and Primesight may provide a catalyst for big media companies to run the rule over out-of-home.
Consistent speculation that the OOH market is "ripe for consolidation" has proved correct.
A characteristically impactful entry by Global through the simultaneous purchase of Primesight and Outdoor Plus surprised most observers, but the deal is incontrovertibly logical for a media owner that has no runway remaining as a result of a dominance in its chosen media.
Global Outdoor combines premium London digital coverage with a national network.
A sale was attractive to both OOH owners since they had been battling to keep income healthy in a market that is growing slowly – at perhaps 1.5% a year.
The immensely likeable Naren Patel has pitched Primesight inventory as a cheaper alternative to other media options that can help buyers keep costs down, enabling Primesight to regularly punch above its weight at the annual negotiation table.
Outdoor Plus made a logical shift into digital OOH but an oversupply of premium inventory in London risked putting the squeeze on the business, so the Global deal could be seen as a much-needed pivot.
As a side issue, it will be interesting to see how Global adjusts to the market reality of dealing with specialists rather than agencies. The radio group’s extremely talented sales operation will be no doubt be pragmatic in its approach.
What now for the rest?
All the major players, with the exception of market leader JCDecaux, are backed by outside finance and have been forced to be either acquirers or targets.
None seems able or content to stick to the status quo and this remains the case in a market that needs to meet three- to five-year target multiples for investors.
Digital is now the only game in town – despite the inevitable cannibalisation that sees continued media owner investment in a medium whose share of the advertising cake is essentially static.
The contradiction is that advertisers will increasingly accept that OOH is still a broadcast medium as long as it is able to target dynamically. This now means by the hour to people with a propensity to purchase, rather than just by the fortnight and by geographical reach.
Diversified media owners such as Sky (soon to be under new ownership) and Google are big spenders in OOH and could gobble up the remaining OOH players without the purchases placing a strain on their balance sheets.
They will look beyond 2018 profit multiples and towards the strategic value that a DOOH offering could add to their proposition in the 2020s.
Who will be next to go?
Most remaining players have legacy issues with long landlord contracts on excessive numbers of "paper and paste" sites, most of which are not cost-effective to digitise.
JCDecaux, fiercely proud of being family-controlled rather than private equity-owned, will continue to remain off the table. This is tenable while the existing generation retains the energy for the fight, but a succession plan isn’t immediately obvious.
Clear Channel remains mired in Chapter 11 issues in the US, but it should emerge from bankruptcy protection stronger in 2019 after those are resolved, and it is a prize asset that will already be in the sights of some who are biding their time.
Exterion Media is full of potential but, like a mid-table Premier League team with recent management turbulence, it has yet to realise it. Advertisers value Exterion’s prized Transport for London assets, but the London Underground contract was repitched so competitively two years ago that it looks hard to make it work commercially. Exterion may be tough to buy in these circumstances, so it is more likely to be an acquirer.
A fully funded and publicly quoted Ocean Outdoor could be a consolidator and has bought well regionally from the Midlands up to Scotland. But with two of the most obvious acquisition targets now in Global’s hands, Ocean is running out of things to buy.
8 Outdoor is a dark horse – exclusively digital with an estate away from the big conurbations where DOOH competition is toughest, it’s a tasty morsel that could get gobbled up.
A look ahead
So let’s gaze into the crystal ball and think what might happen by Christmas 2020.
We could well see Ocean partying under the watchful eye of Dame Carolyn McCall at ITV, Clear Channel could be carving the turkey with Google and Exterion might still be looking for the perfect partner.
Meanwhile, 8 Outdoor could have been snapped up by any one of its bigger rivals. As for JCDecaux, it’s easy to imagine the French owners rebuffing an approach from Sky, but having to defend its significant market leadership against competitors with more leverage than it has been used to.
The only certainty is that there will still be plenty of intrigue in OOH as it moves away from a stand-alone medium to one that enhances the bottom line of the media conglomerates.
Marc Mendoza is a former UK chief executive of Havas Media and former UK chairman of Posterscope. He was a shareholder in Outdoor Plus until 2016