The Billboard Insider Podcast
00:04:46 · Dave Westburg, Paul Wright
[00:04:46] S0: Wow. Talk about the m and a market. You thought there would continue to be a healthy and a growing m and a market for billboard companies. [00:04:53] S1: Right. And we've continued to see that. There's just a lot of optimism about the industry. We're seeing a lot of interest from new groups that are in kind of ancillary media, newspaper, radio, television, that are thinking, you know, outdoor, out of home is the place we wanna be. And so they're moving dollars there, making more investments. And so we've been really encouraged by that, and we think that will continue. [00:05:24] S0: What do you think, Paul, the private equity involvement? I admit it's kinda mixed for me. When a stable new entrant comes in with long term capital, I'm thrilled. If it's a private equity firm that just wants to gear up a company, I am a little concerned because that is what happened to Clear Channel Outdoor. You had a private equity firm come in, over leverage it, and it never quite recovered. So I view the private equity firm serve as a mixed blessing. [00:05:51] S1: I would agree. I think that there's a need for some education and some understanding when you make those kinds of investments. And a lot of times, the private equity groups are only looking at numbers and don't really understand the dynamics of the industry. So it's important to kind of have that balance and and have that advice. Mhmm. [00:06:12] S0: How about digital sign regulations? Are we seeing a continued loosening of digital sign regulations?
00:06:12 · Dave Westburg, Paul Wright
[00:06:12] S0: How about digital sign regulations? Are we seeing a continued loosening of digital sign regulations? [00:06:19] S1: Yeah. No question. In fact, we're seeing a lot of activity from developers and municipalities and other property owners that have, you know, things that were built in the last fifty or a hundred years, and trying to incorporate new digital applications into their properties. And obviously, you know, you're not going to go out and put digital displays on Notre Dame or some other historic building. But there are applications where you're trying to drive traffic, you're trying to make it more of an entertainment type destination. So we're seeing mixed use developers and municipalities try to incorporate digital and not just an advertising way, but in an aesthetic architectural kind of way to enhance their properties. And we're working on a large project right now in California that, again, we need to maintain confidentiality. A year from now, you'll hear about the project and it'll be really exciting to talk about. But there's a lot of a lot of optimism about digital.
00:07:29 · Dave Westburg, Paul Wright
[00:07:29] S0: There is a knee jerk response to digital that says, we don't want digital because we don't want our city to look like Las Vegas. Well, the flip side of that is, do you want smart car charging stations? If you do and you don't wanna have to pay for them, maybe you should put allow a digital screen on the smart car charging station where someone can charge advertising and use the ad revenue to support the service. Do you want kiosks available at your transit stops? Maybe if you do, you need to allow a digital screen so that the advertising can help support the information that you're driving through the digital kiosk. It seems like it's a way of of creating revenue that can help support smart city initiatives. [00:08:15] S1: Absolutely. And municipalities especially are understanding that if they want these kinds of added value services in their communities, somebody's gotta pay for it. And advertising dollars are an easy way to cover those costs and and to generate just additional tax revenue. And I think that there was an initial reservation about digital and the safety concerns and things like that. But now that there have been enough deployed, they understand that these aren't something that are dangerous, something that are garish. They're actually something that can be incorporated into a community and and enhance the community.
00:08:15 · Paul Wright, Dave Westburg
[00:08:15] S1: Absolutely. And municipalities especially are understanding that if they want these kinds of added value services in their communities, somebody's gotta pay for it. And advertising dollars are an easy way to cover those costs and and to generate just additional tax revenue. And I think that there was an initial reservation about digital and the safety concerns and things like that. But now that there have been enough deployed, they understand that these aren't something that are dangerous, something that are garish. They're actually something that can be incorporated into a community and and enhance the community. [00:08:57] S0: Let's stop here for a word from our sponsor. Adomni increases your billboard revenue by selling unsold ad space at top dollar. Whether you have Watchfire from Medco or Daktronics billboards that Adomni easily integrates. Get started selling in as little as one business day on the fastest growing network of over 60,000 digital screens. Visit adomni.com or call 844ADOMNI to speak with an Adomni billboard specialist. Mention this Billboard Insider Podcast to receive one free year of Adomni's white labeled booking engine on your website. Paul, let's talk about out of home values. Where's the market right now?
00:09:39 · Paul Wright
[00:09:39] S1: Well, the market is increasing in terms of values. We're seeing values rise, and it's primarily based on three things. There's really strong revenue growth. That's a little bit unusual that in the fourth quarter, had strong growth, and we're really watching this first quarter to see if that continues. Traditionally, the first quarter is pretty soft. It's winter, and people aren't out and about on vacations and things like that. So we're watching the first quarter really closely to see if the strong revenue growth continues. But I suspect that it is continuing. And it's likely because of the number two item, which is a shift in ad spend. We've always kind of suspected that advertisers were moving dollars from other media. But I think this is the first really clear sign that those dollars are coming from radio and television and newspaper pretty clearly coming from those other media types. And so we're really excited about what's going on and and we think it will continue. And this general enthusiasm will continue at least for this year and maybe into next year. There are a couple of things that are kind of lurking out there, and they're negatives that could impact values or slow down value growth. And one of those things is taxation issues that may start to creep up. There was a recent case in Pennsylvania that concluded that the value of billboard lease income to the landowner can be considered in assessing the value of that property owner's land.
00:11:27 · Dave Westburg, Paul Wright
[00:11:27] S0: Let's just hope, Paul, that that gets overturned on appeal at the next level because to the extent that suddenly a landlord's property tax is going up because of a billboard lease, gonna make that billboard lease more expensive to the billboard company. It's gonna make property owners more reluctant to engage in billboard leases. [00:11:47] S1: That's possible. And so landowners are watching that, sign owners are watching that, we're watching that obviously. I think that there's a tendency to overreact to that, and so we're not concerned too much. We think that it'll be a slow evolution and prices might rise marginally in terms of lease costs because of taxes, but we're watching that. And then the other thing is a recession looming. I think everyone knows that that's likely to happen in the next couple of years. There was a study just that came out of CEOs, and they all generally agreed that the fourth quarter of twenty twenty was probably the time when they would start to see a softening in the economy. So, you know, that's another year and a half out, and we don't think that's gonna be a really strong recession like we had last time. I think it'll be pretty mild. [00:12:46] S0: Let's talk a little bit about multiples and what they might do at a recession. It seems multiples are at, oh, 10 to 12 times cash flow or EBITDA? And what do multiples do in a recession?