Decisions being made at the moment could have a huge impact on both the long-term and immediate future of the industry.
Transport for London (TfL) is preparing to announce the winner of the London bus shelter OOH contract, and has just kicked off the pitch process for one of the world’s biggest OOH contracts, London Underground.
Each of these contracts will last for a number of years, meaning the winners will control the future of two of the most high value networks of OOH inventory in the UK.
Essentially, TfL’s position as a landlord with an enormous amount of media space inventory means that it is very influential in terms of the direction of the industry.
Unique dynamic for OOH
OOH is the only media industry whose existence is predicated almost entirely on third party landlord contracts. In addition to massive contracts like those held by TfL for both the London Bus Shelter network and the Underground network, there are approximately 7,000 individual contracts in the UK.
These include a broad range of local authorities, public bodies and individuals that happen to have a billboard on the side of their home.
While client media and advertising pitches are familiar and well-understood processes in the communications industry, what’s not so apparent is how important the dynamic of the third party contract is for the OOH sector.
An enormous amount of work goes into each tender, as media owners demonstrate to landlords the sort of future-thinking that keeps them at the forefront of their industry. This means that each tender can be a huge driver of change in what the medium looks like today and how it will look a few years from now.
Bright future for OOH
Encouragingly, even if the exact shape of the long-term future is somewhat unclear, its prospects are not. OOH is on the rise here in the UK. While other traditional media’s audiences are steadily declining, OOH audiences continue to grow.
Outdoor Media Centre reported in February this year that the industry had enjoyed its strongest quarter ever, with revenues close to £300m for the first time ever. In addition, the sector grew by 6.1 per cent in the fourth quarter of 2014 to reach annual revenue in excess of £1 billion, with overall annual growth at three per cent. The medium has also seen higher growth than any other, apart from online, over the past 10 years.
Now, the challenge for TfL’s numerous bidders is in how this industry success can be maintained and superseded for its extensive network of inventory. Both the London Bus Shelter and Underground contracts combined make up approximately 15 per cent to 20 per cent of the total market, collectively worth in excess of £1bn over the duration of the contracts.
However, the challenge will be in extracting as much value as possible from TfL’s existing inventory.
Innovation is key for success
As a public body, TfL has a responsibility to the taxpayer, and currently has a goal to generate £3.4bn in non-fare revenue, so the more OOH contract bidders can help TfL meet this goal the more likely their pitch will be successful. However, this comes with its own difficulties.
TfL’s inventory is mostly fixed – the number of buses, bus shelters, tube trains and stations is unlikely to drastically fluctuate over the next few years, meaning the amount of available advertising space probably won’t change all that much either.
Bidders will need to focus on the one factor that can change, and drive real additional value – innovation. Delivering new, exciting, high value, easily accessible, dynamic advertising propositions that resonate with the public will be the battleground.
Innovation in the medium enables all involved to deliver the best campaigns possible. It's a unique dynamic in the media industry where OOH businesses will live or die by the purity of media innovation alone, which can only be good news for advertisers.
Glen Wilson is MD at Posterscope