My company makes loans and investments in the following sectors: outdoor advertising, radio, tower and catv. The outdoor advertising business is my favorite lending and investing sector. Here’s why.
First, there are barriers to entry in the form of restrictive building codes which keep competitiors out.
Second, the outdoor advertising business is less cyclical than other forms of media. US billboard revenues declined 18% during the 2008-2009 recession versus a 30% decline in radio revenue and a 44% decline in daily newspaper revenue during the same period. Billboard revenues are location based (McDonalds next exit) rather than brand based (e.g. Nike). Brand advertising gets cut severely during recessions.
Third, the business has low technology risk. Radio stations face competition from the internet and ipods. Newspapers face internet competition. Signs aren’t impacted by the internet. People still drive to work.
Fourth, the business is simple. You need someone to pay bills and someone to sell. Radio stations need on-air personnel and talented technical personnel. Newpapers need printers and writers.
