MEDIA FORUM: Decaux’s outdoor spree seen as least of all evils - Did JC Decaux pay over the odds for the clutch of poster businesses, including Mills & Allen, it acquired from Havas last week? After all, pounds 650 million is an awful lot of

There were sighs of relief in many quarters last week when it emerged that Mills & Allen had been sold to an existing outdoor media owner. It’s a big deal, of course, and continues an almost scary wave of consolidation within the medium - but looked at another way, this is the status quo option.

There were sighs of relief in many quarters last week when it

emerged that Mills & Allen had been sold to an existing outdoor media

owner. It’s a big deal, of course, and continues an almost scary wave of

consolidation within the medium - but looked at another way, this is the

status quo option.



M&A is just one of a handful of poster companies (others include Sky

Sites, Avenir and AP Systemes) acquired last week by JC Decaux from

Havas for pounds 650 million. It makes Decaux - not so long ago a street

furniture specialist confined to the French market - the largest outdoor

media owner in the world. And many in the UK market are very pleased

about that.



They’re not happy for Decaux as such. It’s just that, in some eyes, this

is the least worst option. No-one wanted the M&A sale to raise

competition and monopoly issues - and that would have been the case if

other existing UK outdoor players had bought M&A. Decaux is big in the

UK bus shelter market but M&A’s inventory is mostly larger format

billboards. So Decaux is bigger now but no more dominant.



But monopoly worries were as nothing in some quarters compared with the

prospect of a TV or a radio company getting its hands on M&A. This was

widely forecast as a likely outcome - and with good reason. The

worldwide trend in outdoor is not just towards consolidation but

specifically towards consolidation of the major outdoor owners into

larger multimedia conglomerates.



TDI, for example, is part of the CBS family. More Group’s owner, Clear

Channel, is a big radio owner in the US. A lot of people in the business

don’t like the idea of cross-media selling. Many just don’t like the

idea of outdoor coming out of its cosy ghetto where it is bought by

poster specialists and different trading rules apply, not least in the

fact that commission rates are higher than in other media. Decaux won’t

rock any boats; and the medium is now in a happy balance. There are four

big players - TDI in transport advertising; More Group and Decaux, both

with broad portfolios; and Maiden in large formats - with fairly equal

market shares.



Of one thing there’s little doubt - Decaux will invest in its new

inventory.



Its chief executive, Jean-Francois Decaux, promises an immediate pounds

15 million investment programme at M&A. This will involve new products,

new designs and more backlighting on existing sites. He also foresees

increased investment in research - he insists that the industry’s new

trading currency, Postar, must evolve into a study that will allow the

efficiency of the outdoor medium to be measured against other media. He

comments: ’Mills & Allen and Sky Sites are complementary to our existing

business and will allow us to catch hundreds of millions of people,

whether it be in the street, the Tube, airports or shopping centres. I

believe in the increasing importance of outdoor advertising at a time

when the fragmentation of TV, coupled with the communication revolution

of the internet, is dramatically increasing the competition for the

home-based leisure time of the consumer.’



So, an even stronger champion of the medium emerges? Should the move be

acclaimed? Most in the UK market agree on the positives, but say there

are some potential downsides too. First, has Decaux paid too much? And

will it now seek to claw back that investment by raising rates? The

second worry is related - does Decaux have the sales culture to make

sense of the M&A business?



Steve Wilson, the managing director of the largest outdoor buying point,

Blade, comments: ’When TDI entered the UK market, it brought with it a

very strong sales culture and it paid great dividends. Decaux is clearly

different in that its culture is biased towards inventory development

and service. It will be interesting to see if it can change the M&A

sales culture that it will inherit.’



Wilson points out that this might not be an ideal time to confront such

issues. Blade’s recently published revenue analysis of the outdoor

market estimates that, although the medium as a whole was up overall in

the first quarter of this year, the larger formats are not performing at

all well.



Revenue in the 96-sheet market is down by 9 per cent (first quarter 1999

versus the same period last year) and 48-sheets are down by an even more

worrying 13 per cent.



Richard Beaven, the media director of Leo Burnett Media, Procter &

Gamble’s agency of record on poster buying, agrees that Decaux will have

to think carefully about its sales and marketing efforts: ’Decaux has no

experience of 48- and 96-sheet formats in the UK and it will probably

find it difficult to translate its pretty rigid six-sheet policy into

larger formats - where a far greater degree of flexibility is called

for. Generally, the market is still short term and many outdoor

contractors have had a pretty tough job in recent months to deliver

against sales expectations and reverse a trend of increasing voidage

(unsold panels).’



So it might prove difficult for Decaux to coerce advertisers into

helping to foot the astronomical cost of this acquisition. Roger Parry,

chief executive of Decaux’s closest rival, the More Group, certainly

believes that’s the case - but for slightly different reasons. However,

he does believe that the deal must be seen broadly as a welcome

development. He ventures: ’Industries in consolidation become better

industries. It brings more investment and better management. The quality

and the value of the product rises. Decaux has an excellent investment

track record and you have to assume that the quality of its newly

acquired plant across Europe will rise. That has to be very positive for

the medium.’



Parry, though, is in no doubt whatsoever that Decaux has paid

substantially over the odds for its new properties. He adds: ’Something

dramatic has to happen to justify the huge price they paid. But I don’t

think UK advertisers should worry that Decaux will attempt to recoup its

investment by raising prices. To a certain extent, they can dictate

prices in France but in the UK there are now four fairly well-matched

outdoor companies. That competitive situation will regulate prices.’



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