CBS Outdoor tube crisis is one more sign that site owners are taking media firms to the cleaners

CBS Outdoor, one of the big American firms that moved into the cosy UK outdoor market thinking it could sell posters like television, is struggling with payments to London Underground amounting to £71.5m a year with revenue just £71m a year.

That’s without paying staff, overheads, commission and a sub to the holding company back in the US.

And, just to make life better, the contract runs for eight years.

Why do media sales companies do this?

Once upon a time there was a highly successful quoted poster business in the UK called Maiden but then Maiden decided to bid high for sites on British Rail stations.

The upshot? Maiden went bust and the BR contract then moved on to US-owned firm Titan. Which despite its strict rules (no drinking at lunchtime) went bust last year.

French outdoor giant JC Decaux now has the contract.

Let’s move on to the cinema advertising market. Once upon a time this was split between Pearl & Dean (the original owners of the Cannes ad film awards) and Rank Screen Advertising.

Then P&D was bought by Scottish Media Group (owners of Scottish Television) and Rank was bought by Carlton TV, then the owner of the London TV franchise.

And what did they do? Bring in a load of execs who couldn’t really hack it in TV or press to run cinema (much the same happened with posters when the old guard were bought out).

And these dimwits created a situation in which the two cinema advertising firms lost £12m a year between them (Carlton £8m, P&D £4m) because they’d given the cinema owners ludicrous revenue guarantees.

Yet all this time cinema advertising was booming, with audiences rising and clients and agencies falling over themselves to air their expensive offerings to huge numbers of young people.

CBS will obviously need to try to re-negotiate its contract but that’s hardly going to be enticing to London Underground which is already facing up to UK chancellor George Osborne’s spending cuts.

CBS clearly isn’t going to go bust, unless CBS Outdoor is a cleverly and independently sited subsidiary of course.

But why on earth do these plonkers give away their money to site owners?

It’s enough to make a proper media man throw in the towel.

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About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.