Advertising and Communications and Media & Marketing

Billboards enter digital era

November 12, 2007

Remote-controlled digital billboards are revolutionizing the outdoor advertising industry nationwide, but a city prohibition against the medium is preventing a rollout here.

"This is the biggest development in outdoor advertising in many years," said Richard Sprague, who launched Columbus-based JR Promotions in 1987 with his wife, Janeen. "[Digital] is like taking this industry from the typewriter to the computer era."

Digital billboards, which are like huge television screens, give advertisers more flexibility, open choice billboard spots to more advertisers, and give billboard companies greater earning potential. Ads can be changed from a remote location in minutes, and the level of brightness is automatically adjusted depending on the time of day.

There are more than 700 digital billboards nationwide--the vast majority erected since 2005. But there are only four in Indiana.

The closest one to Indianapolis is a billboard JR Promotions owns that began operating in October on the east side of Interstate 65 near the Edinburgh Outlet Mall. The company is erecting another one in the same vicinity on the west side of I-65.

The first billboard is booked solid, Sprague said. He expects similar demand for his second digital billboard, which will be operational within a month.

Regulators play catch-up

The Highway Beautification Act of 1965 governs the outdoor advertising industry. But state and local municipalities have imposed their own laws to address technological advances that couldn't have been foreseen four decades ago.

In 2003, Indianapolis' Department of Metropolitan Development adopted regulations outlawing digital billboards due to concern over visual clutter and roadway safety.

DMD officials said city officials came up with the regulations after meeting with billboard company officials, but sources within the industry said they were not consulted about an all-out ban of digital billboards.

JR Promotions' Sprague thinks cities that outlaw the new technology will hurt economic development.

"More people travel along busy roadways than live in many of our cities," Sprague said. "We need to get people off our highways to stop and spend money in our communities. It's time to get going with this technology--or get left behind."

But local regulations aren't the only worry.

The Federal Highway Administration has commissioned a safety study on the new devices and expects to submit its finding to Congress in 2009. Those findings could trigger tighter federal legislation against digital billboards.

In the meantime, a "guidance memorandum" issued by the FHA Sept. 25 essentially allows digital billboards anywhere there are traditional billboards, unless otherwise disallowed by state or local regulations.

"A lot of this is left up to local control," said FHA spokesman Doug Hecox. "We have no reason at this point not to allow digital billboards."

Kevin Fry, president of Scenic America, a Washington, D.C.-based advocacy group that seeks to limit roadside advertising, decried the FHA's recent decision.

Fry pointed out that the Highway Beautification Act states that once a billboard is legally constructed, a new law can't mandate that it be taken down without compensating the company that owns it for construction costs and lost revenue.

"This is a permanent decision," Fry said. "I would caution municipalities to think very long and hard before allowing these."

Scenic America had urged the FHA and other government officials to put a moratorium on digital billboards until impartial studies are completed.

Fry argued that digital billboards' brightness and rotating ads are more distracting than traditional billboards and lead to serious driver distractions.

The Outdoor Advertising Association of America points to studies that show that's not the case. Fry called those studies "bogus."

Sudden change

There have been few changes in the 80-plus-year history of the industry.

Until the 1990s, wooden boards were painted and installed on billboards in a laborious day-long process.

In the early 1990s, ads were printed on vinyl sheets, which could be taken down and sometimes reused.

In the mid-1990s, "tri-vision," or billboards with rotating slats that could accommodate three messages, hit the market. They were mostly placed at busy intersections where motorists stuck in traffic became a captive audience. But the trivision boards were clunky and cumbersome to change, industry experts said.

Now, billboard companies are flocking to the digital medium. The nation's largest players, including Clear Channel Outdoor and Lamar Outdoor Advertising, are launching numerous digital billboards. Lamar, with about 570 digital billboards, is the national leader. Both have a presence in Indiana, where regulations allow a billboard image to change every eight seconds.

The new technology means billboards can accommodate five to seven advertisers simultaneously. That means a large increase in revenue.

With monthly rent ranging from $500 to $4,500 depending on location, the switch to a digital billboard means annual revenue from a single sign in a choice location could rise from $54,000 to more than $320,000.

Lamar officials told investors the digital boards should generate five to eight times the revenue of a traditional billboard.

The revenue potential is such that even smaller billboard companies like JR Promotions are finding that the approximately $450,000 it costs to set up a digital billboard is worth the investment. That compares to $50,000 for a traditional billboard.

More inventory

Advertisers say they don't mind sharing a sign with others that get in on the rotation.

"There are lots of great billboard locations--in fact, most of the best locations--that have been locked down for a long time. With a digital billboard, suddenly those locations have availability," said Bruce Bryant, president of locally based Promotus Advertising, which places ads for several of its clients on billboards statewide.

Bryant has little doubt his clients would be willing to pay as much to share a digital billboard with four or five other advertisers as they would to be on a traditional billboard by themselves.

"You bet we'd pay as much," Bryant said. There's no medium like billboards for reaching statewide or broader geographic audiences, he said.

There's no lack of interest in his digital billboard, Sprague said, with inquiries coming from car dealers, hospitals, medical groups, hotels and restaurants, among others.

The rollout of digital billboards is all about advertiser demand and the potential for increased earnings, said Buster Kantrow, Lamar vice president of business development.

Lamar has two digital billboards in Evansville, but the number in Indiana could increase soon, Kantrow said.

"We think this is the future of the industry," he said, "but we're not moving ahead at the expense of driver safety."

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