Industry opinion is divided as to whether the two largest out-of-home (OOH) companies should merge, and the impact it will have on the sector.
With just over a month before a decision is made by the Australia Competition and Consumer Commission (ACCC), some are questioning whether the merger of APN Outdoor and Ooh!Media should go ahead.
Supporters of the consolidation say it will stimulate healthy competition between outdoor and larger media channels in the market. Those against it argue it would completely monopolise the out of home industry. See here for Ooh!Media's dismissal of claims.
Other OOH companies in particular have reservations about the way the merger will distort the industry and have a negative impact on digital inventory.
Goa CEO Chris Tyquin says the merger would be unfair on other OOH companies, likening it to Coles and Woolworths amalgamating in the retail sector.
“If Woolworths and Coles were to merge, the two biggest players in the food industry, the company would have control of over 69.5% of retail. I don’t see how this is any different,” Tyquin says.
Tyquin notes the Ooh!-APN merger would completely saturate the regional market Goa operates in, with at least “65-75% of the inventory in Queensland”.
Tyquin also argues that in areas such as northern Queensland, the majority of large billboards are already owned by either APN Outdoor or Ooh!Media.
The union would mean a hugely dominant outdoor media empire worth $1.6 billion and controlling more than 55% of the OOH market.
The network will have more than 70,000 advertising panels, including 9,000 digital, across roadside billboards, the only format where there is crossover, retail, offices, rail, transport, airports and other venues.
At last count, APN has 87 large format digital screens and Ooh!Media has 190.
Some fear that concentration in regional areas would prevent smaller players from entering the market in the future.
Although most in the industry agree the merger would stymie competition, many media agencies are reluctant to publicly oppose the move. Privately there are concerns about limited competition and price inflation.
MEC director of investment and activation Aaron Hampson says the merger will create a strong Australian OOH media company and protect the market from international companies entering, he also doesn't agree it will create a monopoly.
"We don’t believe the market would bear monopolistic price increases as there are enough alternatives to constrain spend. Concerns are being voiced around Ooh! power during tender processes, but ACCC are working through all of that now," says Hampson.
Over the past year, both companies reported solid growth in revenue for FY16. APN posted 10% revenue growth to $330.9 million, while Ooh!Media reported a 20.1% rise to $336.11m in the same reporting period.
Posterscope managing director Bryan Magee says it could be a catalyst for change.
“Will it drive innovation? Hopefully. Maybe it could mean more money invested into OOH and more conversion to digital end – programmatic, for those areas it could be a big positive,” Magee says.
For Magee, the biggest hurdle the two companies face begins after it is approved.
“It's not easy when you merge two companies. You’ve got two cultures and a lot of cost cutting going on down the middle,” says Magee.
Medical Channel CEO Nazar Musa argues that the merger should be celebrated.
“If two companies come together and they’re both successful already then it means it's a really successful space... We're talking about a real business with real screens, real billboards, real costs, real profits – all of that is incredibly positive for the business environment,” says Musa.
The ACCC's decision is due on 4 May. If passed, the merger will be taken to shareholders.
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