Green light keeps Maiden on track

OUTDOOR ADVERTISERS - Talk of further consolidation in the ultra-competitive outdoor sector has slowed since Maiden staved off potential suitors with a key contract win. Mark Banham examines the implications

The sense of relief must have been palpable at Maiden Group’s Victoria offices in London, when the UK’s fourth-largest outdoor player secured the 10-year £450m contract for over 2,000 poster sites across 17 mainline stations managed by Network Rail.

Relief because, for some time, Maiden had been the most troubled of the “big-four” outdoor players – the other three being JCDecaux, Clear Channel and Viacom Outdoor.

Another bonus for the UKbased operator was the addition of a £27m, five-year contract to manage product sampling and exhibitions for advertisers on the same 17 stations’ concourses.

Maiden was facing an uncertain future, with a series of exhausted outdoor contracts mainly based in and around rail stations that, as the incumbent, it had no choice but to defend.

Now it has the green light to continue heading down the commuter outdoor contract route – and could even go for the giant, 10-year £1.2bn Transport for London Underground brief, which has just come into play.

The defence of the Network Rail deal was all the more pressured due to the encroachment of US company Viacom Outdoor on the commuter sector, but that particular conglomerate wasn’t the only poster giant trying to remove all sight of Maiden’s signage from its traditional heartland. Bids had also been considered from JCDecaux and Clear Channel.

Viacom, which now stands to lose the London Underground contract, had already taken over three mainline rail contracts to add to its existing London Underground business, including Central Trains, Chiltern Railways and GNER. Most recently – in February – the firm also seized control of the 67 overland and five underground stations contracted to Merseyrail – the Liverpool-based train operating company this year.

Furthermore, Viacom remains confident that it will take more business from Maiden.

Emily Hirshman, head of outdoor at MediaCom, says the Network Rail contract, and other pending rail contracts – should Maiden retain them – will give the company the opportunity to paint itself as more victor than victim. But this will take more emphasis on self-promotion and marketing.

“I think if Maiden had lost the contract, they’d have had a somewhat uncertain future,” she says. “I’ve been involved in the outdoor industry for 10 years and, during that time, there have always been rumours about Maiden being up for sale. If they’d failed in this bid, there would’ve been more chance that they would’ve had to, at least, merge with another media owner.

“Maiden now has the opportunity to take this contract and forge ahead.”

This single contract accounted for approximately 12% of group revenue over 2003, which stood at £88m. It was likely that failure to obtain the contract by Maiden would have increased merger or takeover speculation.

Andrew Oldham, joint managing director of Viacom Outdoor, concedes that the awarding of the business to Maiden was of immediate benefit to his rival: “Its stock value climbed about 10% on the news.”

However, he does question whether Maiden can turn a decent profit from the deal: “The bid we made would’ve allowed us to make a certain amount of money from the deal. If Maiden want to do this, they’ll need to ratchet up their sales offering.”

Ron Zeghibe, chief executive of Maiden, says that he is aware that there will be detractors who say that his company will find it difficult to achieve a return on the investment they made to assure the contract. But, as far as he’s concerned, it’s just another case of the out-of-home industry turning on the winners in the race.

Zeghibe states that, not only did the company win the contract because of its extensive knowledge of the Network Rail estate, but, instead of the fiveyear contract they could have been awarded, Maiden were, in fact, awarded the upper benchmark of 10 years.

“We’re big enough that we can invest with the best of them, considering the size of the market in the UK,” he argues. “Possibly, our competitors could have thrown money at this contract, but I would think that they’d want to turn a profit from it, as well.”

Zeghibe continues: “The other outdoor media owners can take all the pot-shots they like, but we’ve put in a credible bid. We’re focused on the UK, but we can expand on the core brands to make sure we deliver the right results.

“We’ve been extremely innovative in what we’ve introduced to the market. We were one of the first to deliver instore promotion and we obviously introduced Transvision – which delivers a viable, affordable and desirable audience when other firms, who shall remain nameless, tried to introduce their own digital networks and failed.”

It’s a sentiment that Steve Parker, UK buying director at Starcom Motive, agrees with: “You have to look at the success Maiden has had with new formats – particularly Transvision – before you ask why Maiden has successfully retained this contract.

They’d have been able to use this format as a template to illustrate how they could take the business to the next level.”

Viacom’s Oldham says that the risk that Maiden would have lost the Network Rail business, in comparison to other out-of-home contracts which may present themselves over the next year, may not have been as great as people might have thought.

“If you look at contracts, then probably about eight out of 10 of incumbents retain the business,” he says. “There’s much more of a chance of the business remaining where it is than the business changing hands.”

Although unsubstantiated rumours may suggest that Maiden will not be able to keep their current rates when the contract starts, the win will go some way to halting the influx of foreign media owners interested in consolidating outdoor assets across the UK territory.

MediaCom’s Hirshman says it’s a good thing that Maiden managed to retain the Network Rail business, as it stops the other three players exerting their power within the UK outdoor marketplace – which would add to their pricing power.

“I’m really pleased that Maiden has won this contract because it creates more competition in the market and halts the ongoing consolidation, if only for a while, which can only be good for agencies – as there’s more choice,” she notes.

Starcom’s Parker likes the choice that the Maiden offering will give to his advertisers, but thinks that consolidation and the big three’s entry into the market doesn’t have to be a particularly bad thing, as it offers more investment in outdoor.

“When Clear Channel and JCDecaux entered the UK market, they started to invest in sites which offered a better product to the advertiser,” he says. “Maiden still has a good chance with contracts though, because of its unique offering. But then, all the outdoor firms offer something different.”

The three major players are already considered to be ahead of Maiden when it comes to the largest street furniture contract in the UK – the Transport for London tender – which is expected to be announced toward autumn.

In order to try to stay in the running, Maiden has already had to bolster its bid under the banner City Lights London by engaging a partner – the Spanish outdoor owner Cemusa – which already hold street furniture contracts in 68 cities across its home territory, as well as Genoa and Parma in Italy, Miami in the US and, embarrassingly for Clear Channel, the latter’s home town of San Antonio, Texas.

The problem that will haunt Maiden in the battle for the major rail-based, or indeed streetfurniture contracts will be the company’s size in comparison to the three major players, and its lack of a tangible international network.

Hirshman says that this has been a problem in the past when facing competition from the outdoor majors: “One of the problems with Maiden is that they don’t really have a vision, or a unique selling proposition. If you look at someone like JCDecaux, they have all the flashing lights. Maiden have always concentrated on research and proving the product works.

They’ve just not been that good at marketing themselves.”

Unlike in mainland Europe, where the three major players have established a virtual stranglehold, when wrestling advertiser budgets from agencies.

In the UK, Maiden still stands as the main outdoor player bracing itself under the strain of competition from conglomerates.

Many thought that it would not survive the onslaught and would slowly be bled dry. But, at least for now, although the Network Rail deal is only one in a string of contracts it needs to win, the UK’s fourth-largest outdoor owner can breathe easy.

Key contract wins in outdoor

With Network Rail secured, there are other contract out there: 

  • TfL’s Underground contract, worth £1.2bn over 10 years. Viacom holds the brief until 2006.
  • Southern, formerly South Central trains. Outdoor owners involved in the pitch include incumbent Maiden and Viacom Outdoor;
  • South West Trains, currently held by Maiden;
  • Two smaller contracts with the First Group, TransPennine Express and First Great Western Link, both of which are currently held by Maiden.

Apart from rail, the biggest outdoor battle away from the tracks will be for the TfL street furniture contract, said to be worth £100m.

It has been held by Clear Channel's Adshel for 25 years, and is being contested by the incumbent, JC Decaux, Viacom Outdoor and a joint bid from Maiden via Anglo-Spanish venture City Lights London.

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