October 18, 2003

The third quarter was fairly good to the three publicly traded companies that are big players in outdoor advertising, with hopes pinned to even greater heights in 2004.

Clear Channel Outdoor, a unit of San Antonio-based Clear Channel Communications, was clearly the strongest performer. Its revenues rose 13 percent to $540 million, compared to $478.1 million a year ago. Viacom Outdoor, a unit of multi-media conglomerate Viacom, saw a 1 percent rise in revenues to $434.6 million in the third quarter, although year to date revenues are up 6 percent to $1.27 billion. And Lamar Advertising, the only publicly-traded pure-play outdoor firm, posted net revenues of $211.7 million, up 4.9 percent from the same period a year ago.

Clear Channel is benefiting from what its chief operating officer, Mark Mays, calls a renaissance of interest in outdoor advertising, with clients disaffected by the high price of network TV moving to national outdoor. "I can't say enough good things about the outdoor position," Mays said during a conference call with Wall Street analysts last week. Strong categories include automotive, business-to-business and computer.

Paul Meyer, chief executive officer of Clear Channel Outdoor, told the MediaDailyNews that the unit had worked hard over the past two years to expand its local sales force and improve the efficiency in executing multi- market national buys with a real-time inventory management system that brought the internal turnaround time from days to only a couple of hours.

At Clear Channel Outdoor, some of its largest markets -- like New York, Los Angeles, San Francisco and Miami -- have had the most significant growth, although some of the smaller markets are also performing well. Unlike both the local radio and TV business elsewhere in the company, out-of-home pricing is increasing with demand.

"Generally, we've been experiencing price increases, and that's obviously a product of the increased demand that we've been experiencing this year, certainly not dramatic, but I think we'll continue to drive price in the fourth quarter," Meyer said. Transit and bulletin rates were up and its average shelter and poster rates were down slightly. Occupancy was up in transit, bulletin and shelter inventory but slightly down in posters. At Lamar, there are signs of a turnaround but what executives acknowledge as a long way to go.

Bulletins, computer-painted vinyl signs that are put in high-density traffic locations and generally for longer terms than other out-of-home placements, are up slightly to 77 percent of Lamar's inventory in the third quarter. That compares to an occupancy rate of 75 percent a year ago and 74 percent in the third quarter of 2001. The average rate for a bulletin is $1,006 in the third quarter compared to $987 a year ago. Posters, which are sold for the shorter term, were essentially flat. Rates have hovered between $415 and $418 over the past three years of third quarters. Poster occupancy in the third quarter of 2003 was 67 percent, compared to 66 percent in 2002 and 63 percent in 2001.

Lamar's revenues come primarily from 85 percent local accounts, and Chief Executive Officer Kevin P. Reilly Jr. said the local advertising spend hasn't come back as robustly as was hoped. That's affecting its fourth-quarter guidance, with predictions that revenues would only grow about 1 percent.

"If local was truly making its cyclical turn, I think our guidance would have been a little more aggressive. Local hasn't happened yet, but I do feel better about the prospect of it happening sooner rather than later," said Sean Reilly, vice president of mergers and acquisitions.

Internally, Lamar sales executives have become more optimistic for 2004. "The level of interest and the level of activity has definitely picked up, and they are feeling better about their prospects about hitting their internal budgets," said Reilly. "They're feeling better than they have been ... given that it's been two, three pretty lean years."

Sean Reilly said long-term buys for 2004 are running deeper this year than last year among Lamar's largest customers.

"We are getting rate increases in the low single digits from large purchasers," he said. "They're buying deeper across a greater number of markets and they're also telling us to expect some scatter buys throughout the year."

Stephen Freitas, chief marketing officer at the Outdoor Advertising Association of America, said the industry was guardedly optimistic that 2003 will end up being a good year. He said that after a slump, the longer-term bulletins come back faster and then are followed by short-flight posters.

By Paul J. Gough
Courtesy of http://www.MediaPost.com

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