Media Forum: Is outdoor probe welcome?

The outdoor ad industry faces scrutiny from the OFT.

At last. For years, people outside of outdoor's charmed inner circle have been telling us that there is something less than ideal about the way the medium is structured and the manner in which it is traded.

When we've attempted to convey these concerns, in even the most circumspect manner, we've provoked the ire and - in some rare cases - the legal representations of this inner circle.

It's a rather small circle - two major specialist buying points (the WPP-owned Kinetic and Aegis-owned Posterscope) and three dominant contractors (JCDecaux, Clear Channel and CBS Outdoor) - and it has been unrelentingly militant in defending its interests.

Their argument is that outdoor needs to be traded as an hermetically sealed market, separated off from the rest of the media business, not just because of historical reasons - it was fiddly to buy outdoor up until the 90s - but because "apartheid" guarantees a thriving medium, and a thriving medium delivers best value for advertisers.

They also argue that the sceptics have axes to grind. Because, they say, those with a tendency to carp include the managers of fringe contractors and the proprietors of tiny buying operations. Or they're sales directors of newspaper groups or TV companies or the disillusioned former employees and managers of inner-circle outdoor companies.

Now, they've all been given the opportunity to put up or shut up - because the matter is going to arbitration. Last week, the Office of Fair Trading announced that it is launching a market study of the outdoor advertising sector.

It will consider concentrations of power in the sector and "look at the payment of commissions by outdoor media owners to the specialist buyers and how these affect the incentives of those buyers". The initial phase is expected to last three months, during which the OFT will gather and assess evidence, with publication of a ruling expected in December 2010.

Should the industry welcome this initiative? Contractors tend to emphasise that they only want what's best for the business and are ready to work with the OFT and abide by its decisions. Jeremy Male, JCDecaux's chief executive of UK and Northern Europe, states that the company is "neutral" about the whole business; while Mike Baker, the new chief executive of the Outdoor Advertising Association, is on record saying that he will co-operate fully with the OFT.

As always, advertisers will have a pre-eminent part to play in all of this. Bob Wootton, the director of media and advertising at ISBA, says: "We're aware there are those in the wider media industry of the opinion that this is just desserts - but we're also aware that the major protagonists in the outdoor market don't necessarily agree with that. What I will say is that ISBA has sympathy for anyone attempting to keep up with the job of responding to regulatory interventions in the present economic climate."

The OFT is believed to be looking in exhaustive detail at the circumstances surrounding the collapse, back in March, of Gen Outdoor Media Intelligence, a small outdoor buying company that claimed to trade in a new way, offering greater transparency.

Gen's managing partner, Michael Higgins, who is still working to wind up the company, argues that the Kinetic-Posterscope duopoly has too much power: "Small contractors are told that they will not appear on schedules if an alternative exists within a major media owner, even if their offering is better and cheaper; printing companies are being squeezed below cost because of the concentration of buying clout or because the duopoly owns its own highly profitable print divisions; local authorities and landlords are being forced to accept deals because of limited alternatives and innovative digital and large-format poster companies with superior offerings have unsold inventory because a competitor has its inferior, adjacent inventory underwritten by part of the duopoly."

Perhaps, Simon Mathews, a partner at Polestar Communications, agrees - when buying becomes too concentrated, there's clearly a danger of the distinction between an objective buyer and proxy media owner becoming blurred. But he also concedes that the drive to control operational costs tends to lead to consolidations. In the end, he feels advertisers might be better served by a more open market. He concludes: "We all need to adapt our business models to cope with the realities of the current business environment, and extreme market concentration must always be resisted for the sake of choice."

- Letters, p24.

MAYBE - Jeremy Male, CEO, UK and Northern Europe, JCDecaux

"We have a neutral view about this. It appears to be a broad-ranging inquiry and we will work in a progressive way with the OFT over the coming weeks."

MAYBE - Bob Wootton, media and advertising director, ISBA

"We will be participating in the inquiry. It is no secret that ISBA has been working to bring a greater level of accountability to the business of outdoor and we're happy with the programme - with the caveat that it has not yet been fully tested."

YES - Michael Higgins, managing partner, Gen Outdoor

"Those with gripes now have their chance to contact the OFT. Should any fail to do so when they have this opportunity, then they will have no cause for complaint once the review is finished. They really will end up with what they deserve."

YES - Simon Mathews, partner, Polestar

"This review must be welcomed by all marketing organisations. When we have buying concentrations reaching 50 per cent in any media market, don't the lines between objective buyer and proxy media owner become blurred?"

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