It is a sector that has looked ripe for consolidation for years because two of the top three, Clear Channel and Exterion, are owned by private equity, as is one of the smaller players, Primesight. Add to this the biggest of the top three, JCDecaux, which scents opportunity and doesn’t have to think in the short term because of its family shareholder, and there is scope for a shake-out.
The catalyst might just be Transport for London’s outdoor contract for the Tube – one of the most valuable pieces of ad real estate in Europe. It is estimated to be worth as much as £150 million a year, or close to 15 per cent of the UK’s £1 billion-a-year outdoor market.
TfL will decide the winner next month. It looks to be a shoot-out between Exterion, the incumbent, and JCDecaux, after Clear Channel dropped out. Whatever the outcome, there is likely to be change.
Exterion is seen by many as the frontrunner, and a win would strengthen the position of its owner, Platinum Equity, if it wants to sell or acquire after buying the business at a good price in 2013.
A JCDecaux victory could potentially be more dramatic. The French company has already snatched the contract for TfL’s bus shelters from Clear Channel. Combining that with the Tube would give JCDecaux close to 50 per cent of the market, including an unrivalled share of London’s outdoor transport media.
That could prompt Exterion to merge with Clear Channel – although both have international, not just UK, interests.
A win for JCDecaux might not just make rivals nervous. We are in the realm of speculation but observers wonder what might happen if JCDecaux were truly radical and used its heft to try to change the way outdoor is traded in the UK. Could the role of specialist outdoor agencies, which keep media agencies away from the buying process, and the scale of rebates, which media owners pay to agencies, be up for discussion?
There is no evidence that JCDecaux is thinking of doing any such thing. But the fact that industry players are analysing the possible outcomes of the Tube deal shows how pivotal it could be.
Outdoor has got a fresh lease of life as it has shifted from an analogue to a digital medium. Wi-Fi is becoming ubiquitous in Tube stations and half of all UK outdoor revenues will soon come from digital, opening up mobile and programmatic opportunities.
But in a business where traditional practices such as the fortnightly buying of posters still persist, more change is coming.