Advertisement
U.S. markets closed
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • Dow 30

    39,807.37
    +47.29 (+0.12%)
     
  • Nasdaq

    16,379.46
    -20.06 (-0.12%)
     
  • Russell 2000

    2,124.55
    +10.20 (+0.48%)
     
  • Crude Oil

    83.11
    -0.06 (-0.07%)
     
  • Gold

    2,254.80
    +16.40 (+0.73%)
     
  • Silver

    25.10
    +0.18 (+0.74%)
     
  • EUR/USD

    1.0787
    -0.0006 (-0.05%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • GBP/USD

    1.2619
    -0.0003 (-0.02%)
     
  • USD/JPY

    151.3370
    -0.0350 (-0.02%)
     
  • Bitcoin USD

    69,865.37
    -571.03 (-0.81%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • Nikkei 225

    40,369.44
    +201.37 (+0.50%)
     

Advertising crash leaves black hole in Transport for London's finances

Transport for London teamed up with Sony for the Playstation 5 launch
Transport for London teamed up with Sony for the Playstation 5 launch

Sony was taking it to the next level. To dial up the excitement surrounding the launch of its video game console the Playstation 5, the electronics giant teamed up with Transport for London (TfL) for a publicity stunt.

The red circular signs at the London Underground's Oxford Street Station were transformed into a triangle, square and a cross - symbols associated with the console's controller.

But while the November campaign may have attracted extra attention for Sony, for TfL it helped to buttress its parlous financial position.

TfL's advertising income from billboards plastered across the stations and walkways connecting London's underground network has been decimated by the pandemic.

Nationwide lockdowns have caused commuters and advertisers to flee in equal measure.

Advertising income across its underground, rail and bus network fell 93pc to £3m between April and June last year.

Since then, it has rebounded to £20m between September and December, but still remains £22m lower than levels seen in the third quarter of 2019/20.

A spokeswoman for TfL says the third quarter had seen an increase compared to the first and second quarters, but further lockdown restrictions have left a "high degree of uncertainty around future income. We will continue to work closely with our advertising partners to ensure that we are able to support the return of brands to our network and rebuild our revenue streams as soon as possible."

For Global - the radio and outdoor advertising company which holds the London Underground contract - the fallout has been just as painful.

The owner of LBC and Classic FM recorded a £179.8m pre-tax loss for the year to March 2020 after booking a £219m charge in response to the Covid hit to billboard advertising.

But as the vaccine roll-out motors ahead, the outdoor advertising industry is now peddling a message of hope.

The sector, spanning roadside hoardings to the adverts slapped across buses, is poised to capitalise on the re-opening of the economy as lockdown measures ease.

As people start flocking back to city centres to eat out or go to work, advertising executives are expecting more eyeballs on billboards.

After falling by 46pc last year, outdoor advertising sales are on track to grow by 37pc this year and 19pc in 2022, according to data from the Advertising Association and advertising research body WARC.

Yet such optimism runs counter to the prevailing view that the pandemic has cemented the shift towards working from a home.

If the trend persists, it not only threatens TfL's passenger numbers, but the raison d'etre of outdoor advertising in shopping hubs, airports, rail stations and along the roadside.

Dallas Wiles, co-chief executive of JC Decaux UK, an arm of the world's biggest outdoor advertising company, believes the threat is overplayed.

He says the industry has now gone from "looking down to looking up" as the vaccine roll-out brings the Covid crisis to heel.

A joint study between JC Decaux and rival Clear Channel Outdoor found that audience reach for roadside billboards is at 92pc of pre-pandemic levels, according to Wiles.

"By June 21, we predict roadside outdoor advertising audiences will be at 100pc, followed by [shopping centres] at 90pc and rail at 60pc of pre-pandemic levels, as people return to shopping, socialising and yes, working in city centres," he says.

He points to the 2021 chief executive pulse by KPMG, the accountancy, which showed only 17pc now planned to downsize their office space, compared 69pc in August last year.

However, the data is conflicting. A separate study of 600 medium-sized businesses by the professional services firm Grant Thornton found just 5pc believed full-time office working would be most effective post-pandemic.

KPMG, meanwhile, announced it was closing one of its Manchester offices last month as it shifted to a hybrid working model.

Despite the uncertainty, Tim Bleakley, the chief executive of Ocean Outdoor, the billboard advertising company behind the Piccadilly Lights, expects to see green shoots of recovery.

Revenue has tumbled 17pc to £86.2m for the year to December, as Covid caused it to swing from a £792,000 profit to a £173m loss.

But Bleakley is backing the company to have months this year where it trades in line with pre-pandemic performance.

Ocean Outdoor last month it broadcast an animated sunrise across the Piccadilly Lights by the artist David Hockney - TOBY MELVILLE/REUTERS
Ocean Outdoor last month it broadcast an animated sunrise across the Piccadilly Lights by the artist David Hockney - TOBY MELVILLE/REUTERS

"The first quarter of this year was the severest lockdown we have been in," he says. "But in the second quarter we are seeing increased buoyancy and business confidence, all of which bodes well for the advertising climate.

"We are a direct correlation between advertiser interest, the lifting of restrictions and how successful the vaccine programme has been.

"I would say we are in the early stages of quite a rapid recovery."

Bleakley says all the indicators point towards people spending more time outdoors once the lockdowns measures are reined in.

Ocean Outdoor's largest contract is with Westfield, the shopping centre giants behind malls in Stratford and Shepherd's Bush.

"There are liberated audiences, which are growing in volume, because they are spending more of their time outside to make up for lost time," Bleakley adds.

One part of the company's strategy to attract more eyes to digital billboards is through content.

Ocean Outdoor has secured rights from BT Sport to show UEFA Champions League highlights, while last month it broadcast an animated sunrise across the Piccadilly Lights by the artist David Hockney.

"One of the things we focused on during the pandemic is 'how do you remain relevant' when the government has switched off your medium," he adds. "We transformed our screens into a public service network."

"We have signed up rights to more sporting events because people are going to spend more time out of home, but less time at these events because they cannot have spectators back."

Sir Martin Sorrell, the WPP founder and chief executive of digital advertising business S4 Capital, says outdoor advertising can thrive but it must innovate.

Asked about the prospects of the sector, he replies: "In a nutshell, traditional outdoor no, but digital outdoor yes.

"Where you can alter the copy and screen to take into account different consumer habits, I think it could be quite effective.

"They have to change their models. It is a bit like the advertising holding companies, they have got the analogue operations around their neck and they have to get out of that."

Shaking off old habits will be crucial for TfL to shore up its finances post-pandemic. Transport bosses are beginning to realise that embracing the new may just be the only way to keep London moving.

Advertisement