Government Enquiry Set to Boost Outdoor

The OFT yesterday launched a market study into outdoor advertising. It will focus on both the structure of and competition within the sector. The initial phase of this project is expected to last three months, during which time the OFT will gather and assess evidence from interested parties.

I would like to share my personal view on this.

Whatever the outcome, this enquiry can only be good for the Outdoor industry and advertising in general.

Should the OFT decide there are no grounds for a full enquiry, this should finally stifle the almost constant background babble of disgruntled, and often anonymous, persons painting Outdoor as wholly corrupt. A world inhabited by shady Arthur Daley characters passing brown envelopes between themselves in dingy pubs. Envelopes soiled with the blood of those plucky individuals and companies currently excluded from getting their snouts into the top-table’s trough.

Should the OFT decide the market is anti-competitive, it will clearly layout remedies the industry needs to take. Smaller players will prosper and their offerings will finally be judged on merit, effect and price, rather than whether the established Outdoor elite choose to deal with you. This will then allow these currently aggrieved parties to grow their businesses, on the newly-laid, level playing field.

Both potential outcomes deserve some additional comment.

Those who have been most vociferous against the consolidated market of two major buyers of outdoor media, mainly focus their criticism on the commissions paid by media owners linked to volume commitments, guarantees of how much cash will be spent by the specialist’s advertiser clients. These critics might want to consider how much of this “income” is actually retained by the agency. Perhaps the enquiry will provide the catalyst bring to an end the antiquated accounting process of receiving a percentage of advertising spends as income. More sensible models of fees to cover agency costs, with acceptable profit margins, prevail within other media sectors. It is common, and rightly so, for agencies to receive additional bonuses for delivering the best mix of price and quality, or other performance related criteria.

Those smaller players who have been attempting to sell their media with little success will need to consider carefully the quality and attractiveness of their offerings to advertisers. It may become apparent this is what actually depresses their sales revenues, rather than the restrictive practices of the market.

This enquiry holds back Outdoor in the short-term, due to the inevitable diversion of energies and resources from selling the media to responding to OFT demands. However, once the outcome is known, perhaps Outdoor can get on with selling its communication strengths, rather than its introverted view of the Outdoor media silo.

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    Squeaky bum time for a few people methinks?

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    So what you’re saying is, it’s not the outdoor specialist’s fault that there is a totally unjustifiable commission system in UK Outdoor which creates massive barriers to entry and stifles vibrancy, it’s their parent companies? That could get very messy for WPP and Aegis, even though the OFT investigation is restricted to Outdoor advertising. Posterscope and Kinetic are nothing more than trading manes of the OOH divisions of those agency networks.

    And on another point, and let’s be very clear about this, we’re not talking about bonuses being paid by clients to specialists for great performance; we are talking about a tax on media owners to be allowed in to the playground.. This still does not deliver great value for advertisers; it just artificially inflates the price that advertisers pay with the resultant trickle down effect of increased prices for consumers.

    As Steve Davis of snooker fame would say, this could get ‘quite interesting.’