Clear Channel and the recent NYC MTA billboard contract win can be summed up in in the following way —A hope and a prayer
by Rob Macmillan, Operating partner | Founder | Former CEO Trailhead Media | Advisor
I had a couple questions when I read the news that I wanted to answer before I passed judgement on if this was a good deal for Clear Channel. I started by looking at Outfront Media and Clear Channel market performance and the NYC market in totality across billboards and transit.
For the longest time, OutFront has owned both MTA contracts, transit and billboards. This is where I will start.
This analysis is taken from the Outfront Media 10k filings between 2014 and 2023 and represent OutFront Media’s performance in NYC across transit and billboards.
OutFront Media – NYC
Prior to COVID there is a definite cap on total market revenue that OutFront Media was able to achieve from their NYC billboard and transit assets. Growing revenue consistently across the NYC portfolio has historically been a challenge.
COVID had two very distinct effects on NY as a market:
1. The decline in transit revenue as ridership dropped
2. Growth in billboard revenue since COVID. Billboard revenue is up by the same amount since 2020 by which NY Transit revenue is down – $37m which has left total market spend unchanged. This is no coincidence
OutFront Media NYC Billboards
Performance between 2014-2019 was extremely poor as illustrated below.
• NYC consistently struggled as a billboard market for OutFront
o Revenue per billboard shrunk by -2% CAGR 2015 through 2023
o Market revenue grew a paltry 0.3% CAGR 2015 through 2023
o The shift in spend from transit to billboards distorts performance over the last two years
• What is concerning is as OutFront added 184 assets 2017/2018 year revenue from billboards should have increased significantly, it did not
• Until COVID there was an established trend of stagnating market revenue and decreasing per unit revenues in the face of an increasing asset count
This should be extremely worrisome for Clear Channel as they take over the MTA billboard assets.
Key take aways from the Outfront Media data:
1. Simply adding more billboard ad faces into the NYC DMA does not = revenue growth for existing assets in your portfolio
2. Driving per unit revenue consistently seems to be a hard lift in the NYC market
3. There appears to be an established total NYC DMA OOH Ad spend ceiling i.e. the are a finite numbers of companies looking to utilize OOH media in the NYC DMA and growing the total pie appears not to have happened in the last 10 years
4. 100% correlation between ad spend moving from transit to billboards during and after COVID
Clear Channel Outdoor current billboard performance:
It’s only in the last two years that Clear Channel has begun to provide basic market level data.
In the last two years, Clear Channel has driven per unit economics and total revenue from their NYC portfolio.
It’s important to consider:
1. CCO won the Port Authority contract for the NYC area airports in 2020. Airport revenue is not distinguished from billboards in their 10k filing. Airport revenue has been the fastest growing or the only growing piece over the last 3 years within Clear Channel so this
is likely having an impact on the unit revenue growth seen above
2. Similar growth in billboard revenue was achieved by Outfront Media on the backend of COVID but there was little to no growth between 2014 and 2020
3. There is no public data which would shine a light on Clear Channel’s longer term historical market performance
Key takeaways:
1. CCO has underperformed on their NYC billboard portfolio compared to OutFront Media
a. During 2022 and 2023 Clear Channel drove significantly less revenue per display than OutFront Media
2. Airport revenue not being separately disclosed – likely distorts billboard performance
Why this background on OutFront, Clear Channel and the NYC OOH media market matters in the context of this contract award:
1. Despite a larger NYC billboard portfolio Clear Channel has meaningfully underperformed Outfront Media in average per unit economics
2. History matters – Outfront Media was unable to drive yield, meaningfully or consistently, in NYC over the last 10 years
3. When Outfront added billboards to the market this did not result in a yield increase across the portfolio. The opposite happened
4. Market revenue meaningfully shifted from transit to billboards due to covid – As ridership returns, Outfront Media digitization of the MTA takes effect and brands become familiar with the new opportunities I expect this revenue to migrate back to the transit network.
5. This shift back to historical norms will put pressure on NYC billboards in the coming years – I expect yield to decline
Based on the information available, I expect this billboard contract will become a drag on Clear Channel margins and cash flow. It is rumored that the revenue share is 80% with a stiff MAG payment that is not significantly less than their current per billboard revenue.
I do not believe this is prudent decision making by Clear Channel management. I see zero evidence that they understand the NYC market dynamics and market history and have bet a small part of the house that they will be able to increase yield on their existing billboard portfolio by virtue of the expanded footprint. They will not be successful if history is a predictor of the future as OutFront Media failed in this endeavor both on billboards and transit.
Cyclicality of national ad spend, the high dependance of this market on national ad spend and the shift of these dollars toward digital and programmatic is going to hamper performance. The premise that one can drive revenue on existing billboards by adding more, which history does not support, will likely fail in this market. Clear Channel US history of subpar revenue growth and execution since 2010, in which the company has consistently underperformed the market and GDP, does not help confidence levels.
These public/private partnerships have become so one sided with little to no benefit to the media owner partner other than market coverage.
When will OOH companies start to act rationally and base decisions on margin not revenues and start to reject these public sector tenders at these ridiculous levels?
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