Clear Channel’s decade long journey in India

A progress report on Clear Channel, the out of home media major which set up shop in India

With the boom in the outdoor advertising industry in India over the past few years, the country saw a rise in the number of international out of home (OOH) companies that made a beeline to enter here. Some of these have been present in the country for just about two years while others, for almost a decade now.

afaqs! took a closer look at one of these international outdoor giants that set up shop in India. In an exclusive interview, Robin Carruthers, chief executive officer, Clear Channel, shares the company’s plans and goals when it entered the Indian market and how these plans materialised over the years. Also, with the global recession setting in and hitting the Indian outdoor industry, the company’s strategy and how it is reacting to the current situation, and of course, a look at its ambitious future plans.

For the uninitiated, Clear Channel Outdoor is one of the world’s largest outdoor advertising companies, with nearly one million displays in 49 countries across five continents. It reported revenues of US $ 3.29 billion for the year ended December 31, 2008.

The US based company, with interests in radio and outdoor, entered the outdoor scenario in India in 1998 by natural law of progression when it acquired More Group Plc, an OOH media owner that was present in 25 countries, including India. The first sites that Clear Channel Outdoor acquired in August 1999 were illuminated boards installed at a prime location on Babulnath Road, Mumbai.

However, the company has become more active only in the past four and a half years. In this period, it has set up bus shelters in Bengaluru and billboards in Delhi. One of the other first contracts Clear Channel got in India was the Delhi Metro Rail Project, which it is running successfully.

International company, Indian way

Discussing the company’s goals when it entered India and the challenges faced, Carruthers says, “We’ve managed to achieve most of our objectives in terms of actually putting properties into place. However, in terms of building them to the quality that Clear Channel wants, we haven’t been able to do so and that is not necessarily because of the capability of the people, but because of the surrounding environment.”

He explains that in India, a body that awards a contract and the company that gets it invest in the Capex but then there are fights between the agencies that one has to deal with. It becomes a problem because that’s not something one foresees when quoting a tender. Internationally too, there are problems – but these are brought to the table and sorted out. Here, it seems to take forever.

So how do international companies tackle such issues? He feels that one just has to speak to the authorities but there’s always the case of running letters from one department to another. The only thing that happens is that it delays the project. For example, if one has a five year contract and this gets delayed by eight months, that’s a huge revenue loss for the company, which is something like what happened to Clear Channel.

There are many issues that need to be sorted out between media owners and local authorities but Carruthers says that at least now there is a feeling of like-mindedness and the situation has changed for good.

The slowdown effect

While the outdoor market was absolutely fine till June 2008, the monies going into it have narrowed from a large gush to a trickle. How has this affected the scenario?

Carruthers puts this slowdown in outdoor into perspective: He says that there was a large boom over the second half of 2006; 2007 was great, too, and the first half of 2008 was also very good. The booms made a lot of people from other businesses look at outdoor and invest in this business. Thus, companies were flush with funds. There were venture capitalists investing money and mergers and acquisitions were happening.

Companies had evaluations and put in place growth patterns for the next three and five years. People went into a buying spree of sites, not only in Mumbai but on an all-India basis. What it actually did was to create an even bigger bubble.

“Clients started spending a lot on outdoors but that was not commensurate with the money being pumped into outdoors. To my mind, what happened was the quality didn’t improve. So company A bought 10 hoardings from company B and a client ended up paying more than he would usually have done. So – this was the actual growth. If you look at the organic growth as an industry per se, there wasn’t any,” he adds.

Unfortunately, there was a recession that set in across the globe in the second half of 2008 and India felt the shocks as well. Everywhere that this bubble in outdoor was being created for the past few years, it just burst.

Thus, now there are companies that have bought out a lot of sites and are just waiting. They cannot sell it for good prices in the market yet to gain back revenues. In a way, it has taken the industry two years back in time.

“While I won’t say the revenues have fallen but the growth of it has definitely been marginalised. So I wouldn’t term this as a recession affecting the outdoor industry but more of a correction. The percentage growth year-on-year was pretty average, but people are comparing it to an abnormal time of growth. This has led to a panic situation,” explains Carruthers.

What next?

Clear Channel has taken a conscious decision to go in for longer tenders. For now, the company is present in the main metros such as Mumbai, Delhi, Bengaluru, Hyderabad and Kolkata and plans to look at Tier II markets such as Pune, Ahmedabad and Chandigarh. It is not present in Chennai since the market there is still in a state of flux. The company plans to wait for the government’s rule to gain some clarity and will then decide how to proceed.

“But for now, the metros are where we are and in Kolkata we have a marginal presence. We are looking at developing this further but it all depends on the tenure and nature of the contract, and the investments that will be needed. We’ll do what the city needs. That will pretty much be our focus for the next three years,” says Carruthers.

Interestingly, the company has won a 20 year tender for Zone 1 in the Mumbai Urban Infrastructure Project. Besides Clear Channel, six other companies have also won the contract for six other zones in the city.

This project, which has been divided into different area zones, was awarded to seven different OOH companies towards the end of January, including JCDecaux, Clear Channel, Stroeer Media, Big Street, Zenith Outdoors and others. The project consists of planning, construction, beautification and maintenance of street furniture, pavements, road direction signages, public utilities, bus shelters, roads, parks and gardens.

The scope of business in this project will not be completely known until a detailed survey is conducted. Based on the survey, proposals will be made for certain non-monetisable street furniture assets – to be balanced out by some advertising assets. Therefore, to what extent the advertising assets will be accepted by the municipal committee, architects and others will determine the actual scope of business for the media owner.

Currently, all parties are looking at this as an investment opportunity that will be worked upon and proposals made in the next few months, with work starting on the project in about four to six months.

This project is being compared to international projects in developed outdoor markets such as Europe, where one doesn’t find any hoardings in the cities but ad displays on street furniture and pavement railings that are not obtrusive to people. They pass the message across and are a part of the cityscape.

“In India, outdoor has mainly comprised of hoardings and recently, bus shelters. It’s always been ‘larger the display – the better’. So it’s going to take a little time for the client to understand this change. Hence, with this project, there’s an education process for the client and also for the industry,” says Carruthers. He also thinks that once Mumbai kick starts, other city municipalities may want to do things along similar lines.

Clear Channel says it is keen to partner with municipalities on such long term projects since it gives enough time to leverage and win back revenues against the serious investment that’s going to be made, while building good quality media properties and street furniture for the city.

Also, for now, Clear Channel is following an international policy and has decided to wait out the tough times and not invest in too many projects at one go.

So, while Clear Channel is looking at long term tenders and street furniture projects seriously, it is taking it slow in India, with just a few projects in hand. It is in no hurry, with ‘caution’ being the name of the game, which, judging by the way things are going, seems to be the appropriate approach.