Outfront CEO Jeremy Male was upbeat in remarks at last week’s Goldman Sachs Communicopia Conference. You can access his recording at the Outfront Website. Here are the highlights:
On the need to improve the out of home buying process
At the moment if you want to buy a billboard from us it’s pretty hard work…It’s probably going to involve a fax at some stage…Out of home in the future will be fueled by the same data and insights as other media and will be bought in much the same way that you buy an air ticket with the same algorithms that maximize yield.
On market conditions
When you look at the macro trends for out of home, they remain as strong as they ever were. We’re still a medium which is gaining eyeballs. Whether its urbanization or other tends such as eating out, the connected computer, the way that mobile devices interact with our locations..
On Outfront’s data platform
We’re talking about a tech stack…When you think of how our industry currently trades…we are so far behind. What we are trying to achieve is…a user interface with advertising agencies. So you can say I want to be in New York, this is my budget, this is the audience I am after, what boards index highest for that audience? are they available?…and if it’s a digital sign I want to be able to deliver a digital ad to that sign.
Is Outfront trying to go its own way as opposed to using Geopath’s system?
It’s the wrong way to think about it. What we will have in our DMP is all sorts of different pieces of data, one of which will be Geopath. We’re talking about layers of data. Layers of information. It’s highly unlikely that in the future that an ad agency will just use Geopath data for buying out of home. They’re going to use all sorts of other data…We’re talking about having a very robust data set that’s going to work for our business. And our business won’t necessarily going to look like every other business. Our business will incorporate 50,000 small screens on the MTA for example…
On data spending
We’re going to have certain costs in our business that won’t be going away. We put them in a bucket that we call strategic development expenses. It’s got a run rate of $3-4 million per quarter.
On the growth in digital revenue as a percent of Outfront’s total revenue.
In 2016 digital was 12% of revenues, in 2017 digital was 17% of revenues and I would suspect that next year we will be at 20% of revenues. 25% will be in 2-3 years max. There are two pieces to it. One is we are putting in new signs…We’re also seeing increasing digital yields on same board digitals…
Why Outfront likes transit
For the most part in transit systems the transit authority pays for the capital. So while it’s a 20-40% EBIDTA margin, return on capital is great because you’re not putting much in….When you think about it strategically…public transit infrastructure is only going to go one way…the millennials and Gen X are about living in cities, they are about urban environment, they are about public transit…and for us I think it’s an advantage that we have this amazing advertising opportunity…in Boston and New York and San Francisco and Washington and maybe because it’s going to come up to bid next year Chicago.
On Clear Channel Outdoor
There’s a couple things that could happen. One possibility is that they could try to continue the business as a public company…and maybe they would try to restructure the balance sheet by selling the international business which seems the most obvious business that you could parse out and has a value of $1.5 billion…Having done that unless there’s someone ready and willing and able to acquire the business as a whole I would suspect that they would try to run the business and create some value over the next couple of years…Other possibilities consist of some sort of breakup of the U.S. piece. Whether that maximizes value I’m not sure…There are still DOJ issues swirling around the industry on how much bigger some of us can get in certain markets. I wish that the DOJ would think of out of home in a broader media landscape. We’re 4.5% of media revenues. I firmly believe that we should allow consolidation…The DOJ’s got a bit of a way to move before 3 could become 2.
Insider’s take: Insider has heard rumors that Clear Channel Outdoor has tried to sell the international business for a while. $1.2 billion won’t reduce Clear Channel Outdoor’s $5 billion in debt to a sustainable level, but it would be a great start and give Clear Channel’s management renewed focus. Insider has been skeptical about the attractiveness of the transit business versus the regular billboard business due to short term contracts and lower margins. Male’s claim that transit takes less capital to operate so the return on capital is high is worth looking into.
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