We'll go ahead and get started here. Good morning, everyone. My name is Daniel Osley. For those who don't know me, I'm an analyst here at Wells Fargo, and I have the pleasure of welcoming Clear Channel CEO Scott Wells for our next fireside. Thank you, Scott, for joining us.
Thanks for having me, Daniel. Whoa, I'm loud. There we go.
Get that worked out. So really just wanted to start with the national ad market. You've experienced some volatility in national ads throughout this year, you know, throughout the last two years, really, which is consistent with what some of the other traditional ad media have seen. So while we recognize some of the category-specific factors behind that, you know, do you view any of the recent weakness or recent volatility as structural versus cyclical?
You know, it's a great question. And you know, with national for us, it is the largest agencies. You know, when I look across our business, airports has actually had an outstanding year in national. And so, I don't wanna paint our whole business with the same brush. You know, when the dust settles on 2024, they will be, you know, a double-digit grower in national. And the roadside business, you know, will be low single digits. And I think that's more what you're referring to. But I look at national as, it's definitely 2024 has been a better year than 2023. And as I look out into 2025, I'm optimistic that we're gonna see it continuing to move in the right direction. It is a more complicated space.
I've said on a couple of our earnings calls that I think out-of-home needs to continue to raise its game in terms of being relevant to the national advertisers. I think we've accomplished that with what we're doing in airports. I think we need to work to achieve the same kind of level of relevance in the roadside business. The money's there. I think we just have to do a better job of getting after it. And I think we're making progress as a company and as an industry, but it is definitely an area of focus for us.
Maybe going back to that divergence you've seen in airports national versus, you know, roadside national, you know, what, what do you think is driving that? And, you know, maybe can you help unpack or describe the difference between the advertiser bases and, you know, maybe what, what those national advertisers on airports are looking for versus roadside?
So, they are quite different businesses in the sense that, you know, while we're presenting ads, you know, for a period of time, airports is more digital than out-of-home. I wanna say we're in the kinda mid-50s% on digital for airports and in the mid-30s% for out-of-home. So it is a kind of moment in time. You can do a little more flexible things inside an airport with full-motion video. You can do activations where you actually have people on the ground, selling things. I think fundamentally the difference between them is that airports has a very premium audience, both consumer and business, and that the advertisers really wanna reach that audience.
And that's what's been our effectiveness at tapping into advertiser demand for that audience and packaging it in ways that they find compelling has been a big part of why we've done that, along with continuing to ride, you know, the travel wave. And certainly, 2024 was not as big of a growth in passenger traffic as 2022 and 2023 were. But it was a healthy year for travel. So you have kind of a number of structural things that are different between the businesses.
Got it. And then broadly speaking, you know, how would you characterize your interactions with those larger agencies and advertisers, you know, maybe the level of engagement benchmarking against what you saw pre-pandemic?
Wow. That's going back a ways at this point, Daniel. That it's 2019, you know, full five years ago. I think that, you know, the large agency space has changed a lot in that time frame. There's been a lot of account churn in terms of what advertisers are with what agencies, and there's been a lot of change in how the agencies actually do business, with the rise of principal buying and some of the other platform things that they've done, and you've also had, you know, that same time period would correspond with the explosion of TikTok and the difficulties in linear TV, so it has been a tumultuous five years that we've had in that period. What I'd say to you is we have gotten a lot better at being in front of the advertisers themselves.
This is something you'll hear me say a lot, which is your agency conversation goes a lot better if you have an advertiser pounding the table that they want, you know, outdoor advertising in the mix than if you just wait for the agency to decide that they're gonna put it in there. So I think that, you know, us as an industry continuing to invest in getting in front of those big advertisers directly is gonna be one of the linchpin ways that we turn national into a strength as opposed to a, you know, area of volatility.
Got it. And then, you know, previously you mentioned out-of-home needing to raise its game, you know, when it comes to national, whether it's on the agency side or the large advertiser side. You know, so what are some examples of things that, you know, need to happen for those conversations to, you know, maybe go a little more in your favor?
So I think you have to meet the advertisers where they are. And where they are is analytical. And as an industry, we are not particularly effective. Even at a rudimentary thing like reach and frequency, it is not. I say it's rudimentary. It's actually quite hard. So I'm not being fair to the statisticians out there. But it is a rudimentary concept within advertising. And out-of-home data as available right now from our various associations doesn't enable easy, you know, factoring that in. It and that lacking makes it hard for us to participate in media mix modeling that almost every large advertiser does, and to a degree, bless you, to a degree, it makes more complicated multi-touch attribution modeling. So that's the industry part of it.
As a company, what we have been trying to do, if you think about advertiser analytics, there's a concept of count, which is, you know, what you use when you calculate CPMs in terms of how many impressions that you got. That is something that we very much believe needs to be provided by a third party and needs to be, you know, sort of standards-driven. Then there's the behavioral element, which is looking at all of the nuances of that audience. That's something that we as a company have been providing. That's why we developed the RADAR platform. What I think has happened in out-of-home, a lot of work has been done on that behavioral side. You know, certainly the programmatic platforms all provide versions of that. Most of our competitors provide versions of that.
What we haven't done is we haven't gotten the industry statistics where they ultimately need to be. So I think we are doing the things and things like our partnership with Circana, the work that we're doing in pharmaceuticals, the work that we're doing with IRI, the work that we're doing with LiveRamp, all of the things that you can do with the behavioral data is increasing our relevance and increasing our ability to win those large advertisers. But we really need to get the industry to come along on the core count, if you will.
That makes sense. And maybe getting into some vertical specifics, you know, over the last few weeks, we saw some really strong film releases, you know, and we've heard here at this conference that the film outlook for 2025 and, you know, even into 2026 is shaping up pretty positively. So, you know, would you expect to see traction in your media and entertainment vertical kinda in Q4 and into next year as a result?
I think the film release schedule is encouraging, what we're looking at. And Glicked has been quite the phenomenon, especially the Wicked part of it. It seems to be everywhere you turn, including on out-of-home. So we appreciate that. I think, you know, media and entertainment has a lot going on within it, right? I mean, you've got the film part, which I think the release schedule is encouraging. You've got what's going on in television, which is, you know, challenging, I think, as things play out. You've got CTV. You've got streaming. And as we see those, there are opportunities arising in some of the areas they're growing. There are things going away.
You know, for our book, movies and streaming have always been the principal parts that we have. And so I think, you know, we're positioned well into 2025. Media entertainment in 2024 has been better. When the books close, it will have been better than it was in 2023. But it's still not to where I think its full potential is. And so I think we've got room to move in 2025.
And then maybe outside of media and entertainment, you know, can you remind us of the other national verticals that have been a little more challenged this year? And then, you know, maybe following up on that, you know, what your outlook is for the potential recovery of those verticals moving forward?
So when you look at the full year, there haven't been a lot of national ones that are down per se. So the ones that have been flattish or growing less would be things in the financial services area, things in, and we don't actually for our internal reporting, let alone we don't really report externally. We don't differentiate national and local. So there are some verticals like financial services. There's a big local part of that too. But I'm aware of some large campaigns that didn't come in this year that, you know, were here last year. But financial services would have been one of the ones that wasn't what it could be. You know, auto insurance continues to be, although auto insurance will have done more in 2024 than it did in 2023.
It's still nowhere near where we'd like to see it. Alcoholic beverages actually had a very strong 2023, and they're flattish in 2024. So those are the ones that have been less positive. You know, for things that have been positive, you know, amusements has been good. You know, we talk a lot about pharmaceuticals, but it will be, you know, for the year, not as up as we'd like it. The thing that's encouraging in pharmaceuticals is that we were talking about kind of a couple of advertisers last year. Looking forward, you know, the dialogues are with four, five, six, you know, big pharmaceutical companies. So that trend is that they're slow in decision-making.
And there was quite a lot of late year-end money last year that I don't think is gonna replicate. I think it might slip into 2025. So, some puts and takes as it goes. You know, CPG has been good this year. You know, particularly the food part of CPG has been strong. I'm trying to think. You know, business services continues to be that's not a national one principally. That's more of a local one. But actually, some of it ends up being almost national because we have a number of business services companies that are buying across multiple markets. So that's kind of the rundown. But it's been a pretty solid year overall. There hasn't been a big hole that has developed.
And as I think about where we're gonna be going next, we've been talking about verticals. You know, we're gonna continue to be pushing on pharma. We're gonna continue to be pushing on CPG. Beer is an area that we're going deeper. Automotive is an area that we're going deeper. And we wanna leverage those relationships we've historically had in auto insurance, you know, to try to drive that vertical back. That remains a big opportunity as sort of the choppiness in that sector, you know, works its way through.
And then, you know, on CPG and pharma, those are verticals where you've made some real inroads and, you know, it seems like you're leading versus some of your peers here. So, you know, maybe can you help to describe what it is that you're doing differently and how that's resonating with advertisers in those specific verticals?
Yeah. I mean, that goes back to my description of the behavioral analytics. You know, we are able to. The pharma category has some of the most sophisticated ROI modeling of any vertical. And we are able to match the methodology they do. We don't actually do it for them. We just provide them data inputs, in terms of the audience that's being delivered by our campaigns. But with those data inputs, they're able to analyze us using the exact same methodology they use with other media. And what we found is that we're outperforming other media pretty meaningfully. And I think particularly in a world where there's gonna be a lot of scrutiny on, you know, pharma advertising on television, there could be a real opportunity here.
Now, you could talk about there's gonna be scrutiny of pharma advertising overall, and that's certainly a fair statement with where we sit today. But, you know, $10 billion advertising categories don't go to zero overnight. And I think that, what, what we will see is some emphasis on diversifying the base. And I think we have a fantastic, credible solution. So I'm, I'm optimistic that that's gonna help us, in the next kinda 24 months. On CPG, it's, it's the same basic story of we've, we've gone in, we've understood the ROI modeling. It does vary kind of company and category to, to category. But that's where things like our partnership with Circana give us an ability to, speak the language of the advertiser and, you know, actually deliver, you know, good, credible numbers that, that demonstrate the impact our campaigns are having. And, and that's helping.
I think the other thing there that's kind of our. It's a benefit we have from our international platform is CPG companies advertise a lot more as a percent of their budgets in other geographies than they do here. And some of that's just legacy. Some of that's because of the type of assets. They like street furniture because it's close to point of sale. But through some of those relationships, we've been able to reach in and tell the U.S. story. And it's one of those ones where the U.S. is like the growth opportunity as opposed to the mature ad market. So I think those are the kinda things we're doing.
That's helpful. You know, on a potential pharma advertising ban, you know, in your conversations, you know, how? What do you view the likelihood of something like that actually coming to fruition? And then, you know, how would you expect it to impact your business if it were to take place?
So, I mean, I look, I think people have serious questions that are being raised. You know, we have to go through the change of power process. We have to go through the confirmation process. And then we have to go through the actual ruling of whatever it is that comes down. So I don't think anything's gonna happen, you know, overnight. I do think on the margin, because we are not a content medium, you know, we don't have an editorial voice. We should actually be a pretty attractive sector when I think about the objections as they're being framed, and the fact that we have the analytics in place to demonstrate that we have the impact.
Now, if you get to a mode of you say, "Just it's all gone," then obviously that's gonna be bad. But that would be a relatively stunning short-term development. And so I think that we might go through a few stages here, the first of which obviously is getting, you know, confirmation done, before you get to that. And then there's the question of, you know, with what political capital there is, which priorities do you go after? So that's a complicated way of saying, "I don't know, Daniel." But I do think within the realm of how I'd think about a transition happening, we are actually a solution as opposed to, you know, part of the target, if you will.
That's helpful. And, you know, maybe a broader question, but, you know, we've seen the reach of legacy advertising media continue to shrink with cord cutting and the transition to digital. But, you know, against that, do you believe you've picked up share against some of these local ad media, or has most of that money just gone to digital?
It's a really hard question to answer in a data-driven way. I think at the national level, it has by and large gone to digital, in the U.S. That is not true as I look at some of our markets overseas, where I think more of the money has found its way to out-of-home. At the local level, though, there's no question that we've been winning some share from other legacy media. That has definitely been a core strategy of ours, and it's part of what explains the I think we're at 14 quarters of consistent local growth. Eileen, you know, give me a head shake if I'm off by a little bit. But we've had a terrific run, and part of that terrific run has been gaining share relative to other legacy media.
You know, Clear Channel and expansion of programmatic is part of that. You know, part of the upside with the expansion of programmatic capabilities is, you know, really the potential to reach a broader advertiser base. You know, can you walk us through the makeup of the demand you've seen on programmatic to date? You know, is it how much of it is new advertisers versus advertisers that, you know, were previously on out-of-home that, you know, maybe transitioned to automated buying versus traditional mediums or traditional ways of buying?
Sure. That's a tough one to answer too. You're giving me the easy ones this morning. What I'd tell you is, probably the first four or five years of programmatic, it was almost 100% new advertisers. That was when we were onboarding digital ad agencies, you know, that were sort of digital first. As The Trade Desk has become a big player, which they have in the last couple of years, we have started to see some overlap where you have large advertisers that, you know, used to buy 100% direct with us, shifting some of those budgets to programmatic. And in some cases, that's been a positive because it's been somebody who had maybe de-emphasized out-of-home because they couldn't get the programmatic experience. And so we're seeing growth, and in some cases, it's been a negative.
Probably this is since the beginning of 2022 that we've started seeing this 'cause that's when really The Trade Desk started getting traction. It's not just them, certainly some of the other players, but The Trade Desk in particular because of the relationships they have with agencies, because of the relationships they have with advertisers. You know, a part of the value proposition is omnichannel. People are thinking, "Okay, well, I just go through this platform and I you know get access to all the different types of media that I want and I'll get consistent reporting and etc., etc." It has started to be a situation where we're seeing advertisers come across.
But I think the core thing is, as we have gotten deeper in the programmatic story, we have found multiple different use cases have emerged. So when it first started, it was just the conventional, you know, SSP lists the inventory, DSP buys the inventory on behalf of the advertiser who places the ad. You know, now we have situations where we're going to the DSP and there's not an SSP involved. We've got situations where the SSP is going to the advertiser. We've got situations where we're going to the advertiser. And so this is part of, you know, programmatic is morphing into this broader automation discussion. And I think that is going to accelerate and that is going to, you're gonna see automation start to take on some of the things that we've done direct and some of the things that we've done programmatically.
So there's gonna be dollars shifting in terms of what the channel mix is. But there's no question that digital trading is gonna be a growth vehicle for this industry, you know, for the next bunch of years. It's not, we're nowhere near full potential on that one.
Got it. And, you know, on that, you know, how do your programmatic CPMs compare to your traditional inventory? And, you know, follow that or following that, you know, what would drive those CPMs higher? What would you need to see to drive those CPMs higher? You know, out-of-home is still relatively inexpensive compared to a lot of other media. So, you know, what helps to close that gap if you can on digital?
Yeah. It's a multi-part answer because I think the first part is most of our direct business doesn't get sold on CPM. So when you're calculating a CPM, you're doing it after the fact. You're not doing it. That's not the fundamental. Most of our business gets done because somebody really wants to be at that location. And then whether you're buying a slot on a digital board or the vinyl for a fixed board, it's because you really wanna be at that location. It's a contextual relevance of the location. When you back into it, though, programmatic CPMs are considerably higher than our non-programmatic. And it's because it's a premium product. And, you know, if you think about I mean, it's kind of amazing.
And I'm gonna get these numbers wrong because I didn't live through this in the industries. But if you think about the CPMs digital platforms were making in the late teens, the mid to late teens versus what they're making today, they're probably three times higher than what they were, at least. Maybe it's more. Some analysts in the listening crowd can correct me on that. And I think it's gotten that way because they've continued to add value in terms of the analytics that they're providing. But they've also added a lot of complexity. There are, you know, you look at LUMAscape and you see all the people who are dipping their fingers.
The ANA is very focused on this and trying to sort out, because they would like to see those digital CPMs come down. I look at that obviously as an opportunity because our CPMs are considerably lower, for the portion of our inventory that gets bought on a CPM basis. I think there's an education element to it. I think there's a whole lot of things that we could do to bring those CPMs up over time. But the core to it is getting that relevance to the advertiser. You know, you're always gonna have in any market the advertiser who is fixated on, "I've gotta have the lowest price." And if they define price by CPM, you know, that's one thing.
If they define price by, you know, a certain sized location or something. Anyway, the way this plays through is we need to follow the breadcrumbs that our digital brethren have left for us and figure out how we participate in the expanding of it. And I think it goes back to what I was talking about before about really credible counts and really good behavioral data. If we're doing those two things, odds are good that our CPMs are gonna continue to come up over time.
Got it, and, you know, as it relates to the outlook for growth, you know, into 2025 and beyond, you know, I know you haven't given guidance and don't expect you to do that today, but, you know, maybe you can update us on how early renewal conversations have trended and, you know, maybe just unpack what the bigger puts and takes are with regards to growth next year.
Yeah, so far, so good. It has been a good start to the upfront dialogue, both local and national. You know, I think we are all very fortunate, those of us who participate in the ad market, that we had a clear election. I don't think you can underestimate what that uncertainty would have done. I think if we were sitting here and we still didn't know who was gonna be president next year, that I'd be saying things differently. So I'm grateful for that. I think that because of that clarity, that is enabling the dialogues about renewals to go very smoothly. I think in general, businesses are pretty positive about the economic outlook. People seem to have internalized that we've pulled off a soft landing.
And people want to be promoting their brands and they wanna be growing their businesses next year. I do think that has, you know, that because inflation was such a rough dynamic. There are verticals that, you know, are very sensitive on cost. And so, you know, it's not gonna be a free-for-all in raising rates and things like that. I think we're gonna have to fight for every increase. But I think the thing that I'm encouraged by generally is I think that the pie of active advertisers is continuing to grow, and that should bode well for our business.
Great. And, you know, maybe just a question on the New York MTA roadside contract that you recently won? You know, we know the contract has a high rev share and a minimum annual guarantee. So we're just wondering how you got comfortable with the growth versus margin impact of, you know, bringing that contract online.
Yeah. So, I think a couple things. First of all, I wanna make 100% sure because I got some feedback after our earnings call that people didn't understand what this was. These are billboards. This is on the property that the MTA controls. And it actually is a relatively recent contract. It was consolidated in the 2017, 2018 timeframe. And we actually, you know, contributed a meaningful chunk of inventory when it was consolidated at that time. So, you know, if you're an enthusiast looking back at our old numbers, you actually had some shrinkage in 2017 and 2018 because we lost a number of locations around New York.
You know, for us, we have really been focused if you just looked at our inventory on a map of New York pre the MTA, what you'd see is really outstanding coverage in New Jersey heading into New York, really outstanding coverage in Times Square, decent coverage at the main bridges and tunnels around the city, and then a big donut hole in the rest of New York, and so for us, this is a chance for us to be very relevant in core New York ad buys, which New York and LA are the two most important outdoor markets. So it's a strategically important location for us.
And then I think the other part of it, you know, as regards to the economics of it, I would think of it as similar to our airports business at some level. So as you think about trying to model it or to try to think about the dynamic, that's the margin profile that you're gonna see with it, for the New York MTA itself. But, you know, you can't eat percentages. We're in a world where margin dollars are what matter. And we have a great deal of confidence that this is going to be margin dollar accretive for us, and that it's gonna help us in our negotiations with big advertisers because now we don't just have relevance in LA.
We have relevance in LA and, you know, Manhattan, mainstream New York, you know, Westchester, all of the areas, you know, out to Long Island and up into Connecticut. So it's a good fit for our urban footprint. And, you know, I would not underestimate the role that the performance we've done in airports did. I understand that whoever doesn't have a contract like this is gonna talk about how grotesque the economics of it are for the winner. And God bless, you know, that characterization. I think I've probably said that about some things over the years myself. This is not going to be like a cataclysmic negative for us. It's not gonna be as high margined as a roadside asset in, you know, Ocala, Florida. Okay. Peace. I fully admit that.
But it's a great way to increase our footprint, increase our relevance with those big advertisers. And the execution that we've done on the New York airports should give our investors a lot of confidence that we're gonna be able to execute on these roadside assets as well. So I'm optimistic that a year from now, we're gonna be talking about how helpful this has been to our overall growth story.
Good context, and you know, on airports, you've performed really nicely over the last few years, and you've seen really strong growth, but you know, with that growth, do you expect any additional competitors or any additional attention to be attracted to some of these RFP processes that may come up in the next few years as you know, you've exhibited that you know, airports could be a solid business?
I mean, these are competitive bids whenever they come up. So do I think that there'll be new players? You know, I think that there are people who will lean in maybe a little bit more. Some of our competitors already are maybe leaning in a little bit more on airports. But I don't think that it's going to cause, you know, even in the markets where there's quote-unquote perfect competition and, you know, seven people bidding for a particular tender, you don't see the economics running crazily on those in general. There are point things. So I'm not concerned that it's gonna become. We have a very this is something I should have said about the New York MTA as well. Anytime we do a large bid, our board is involved in that dialogue.
And we do not have people who are shy about voicing opinions and voicing strong opinions on our board. And so if we see a situation where we think the cost of the competition is too high, you know, we won't do that. We've done that in Europe with some of the contracts that we've lost over the last couple of years where we've just drawn a line and we said, "This is as far as we'll go. If that's not good enough, then, you know, so be it," and we'll continue to have that discipline. So I don't foresee it, because it's still a tough business. And there's a lot of specialty knowledge that you get.
It's just like, you know, we, you're not gonna see us. I know they're in a challenged place right now, but there was a period of time where, like, subway was like the growth thing in the transit media. And I'm sure that day will be there again. We wouldn't go running to go do that because there's a lot about working underground and in tight quarters that you learn from operating those things. It's the same in an airport, that understanding if you look at an airport now versus what an airport looked like a decade ago, it's an entirely different proposition in terms of where there are ads, the fact that they're mostly digital now, the fact that there's a lot less clutter. The proposition in an airport now is a lot better than it was a decade ago.
So anyway, there's a lot of specialty knowledge that goes into it. I don't have any illusions that these bids won't be competitive, but I also think that they'll sort out at a level that you can make your money.
Maybe the last question to wrap us up, the obligatory Europe North sale question. You know, I understand that you typically can't say much about the ongoing process, but, you know, if we take a step back, how are you managing, you know, maybe trying to realize maximum value for the assets versus, you know, the potential of the benefits of just, you know, getting a sale done and becoming a pure-play U.S. company?
Yeah. So, I mean, look, if you take a step back on our process, Europe North in the perimeter that we have in the market right now went on the market about a year ago. So I know our Europe sale process has been going on quite a long time, but getting the Europe South pieces done took quite a bit of time. And, you know, we really only brought the perimeter that's now in the marketplace up about a year ago. We are not being cute. The driver of time on this is not because we're trying to get some crazy multiple for it.
The driver of timing of it is the complexity of the business and the fact that, you know, we're living through history again now where there's inflation and there's, you know, high interest rates relative to where interest rates were for the last, you know, decade prior to us launching this process. And that has, and we were going through a quite active renewal period where there were also some other key assets that were for sale or not for sale for bid in other parts of Europe. And so you had a lot of uncertainty around, okay, what's the perimeter gonna actually be when the dust settles? That now, you know, the kind of last piece of that was sorted out in October. I think we're in a window now where we can actually see us, you know, get to fruition.
The issue is not that we're holding out for, you know, it's gotta be X multiple. The issue is just there have been a lot of moving pieces, and these are pretty complicated businesses. You know, the world, there's just not a lot of people lining up to. I'm actually pleased with the activity we have because, I mean, if you, I think, if you go walk into a general investor and say, "Hey, you wanna sign up for a capital-intensive cyclical in Europe," you're not gonna be overwhelmed by people running over you. The fact that we've had as much interest as we have and that we are in a position where, you know, I feel good that we're gonna get something done, I think is positive.
Great. Well, we'll leave it there. Thanks so much, Scott.
Thank you, Daniel. Appreciate it.