Obie Media Corporation

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Obie Media Corporation

4211 West 11th Avenue
Eugene, Oregon 97402
U.S.A.
Telephone: (541) 686-8400
Toll Free: (800) 233-6243
Fax: (541) 345-4339
Web site: http://www.obie.com

Public Company
Incorporated: 1996
Employees: 295
Sales: $44.8 million (2002)
Stock Exchanges: NASDAQ
Ticker Symbol: OBIE
NAIC: 541613 Marketing Consulting; 541850 Display Advertising; 541890 Other Services Related to Advertising

Obie Media Corporation specializes in the sale, design, production, and installation of “out-of-home” advertising, including transit posters, transit murals, billboards, urban wallscapes, and bus shelter and bench displays. With sales offices throughout North America, Obie Media has agreements with more than 40 local government transit districts in the United States and Canada to sell advertising space on district-owned vehicles, transit shelters, bus benches, stations, and kiosks. The company also owns and operates advertising faces on structures located in Washington, Oregon, California, Wyoming, Montana, and Idaho and leases outdoor building walls in Portland, Seattle, and Spokane.

1940s to Mid-1990s: From Sign Painting to Outdoor Advertising

In 1939, Gordon Obie started a sign-painting business in Bozeman, Montana, painting outdoor advertising displays. Known for his attention to detail and artistry, Obie’s business thrived for two decades, and in 1959, having moved to Oregon, he began Obie Outdoor Advertising in Eugene. His son, Brian, joined him in the business in 1962. In 1968, Brian Obie became president of Obie Outdoor Advertising.

The father-son business took Gordon Obie’s sign-painting venture one step further. The family business expanded steadily throughout the 1970s under Brian Obie’s direction. Obie Outdoor Advertising moved from painting signs to marketing outdoor advertising space. In 1979, Brian Obie sold the assets of Obie Outdoor Advertising to 3M Media Corporation and signed a non-competition agreement with 3M.

Throughout the 1970s, too, Brian Obie became involved in Eugene politics; from 1973 to 1976, he served on the city planning commission; from 1977 to 1984, he was a Eugene city councilor. After serving as mayor of Eugene, Oregon, from 1984 to 1988, Brian Obie once again devoted his attention to business, this time Obie Media Corporation, a company he had cofounded in 1987 with a few billboards and a single transit advertising contract with Lane County Transit District.

Within several years, Obie Media had grown to cover 65 outdoor advertising markets along the West Coast, and the company undertook an aggressive sales program that targeted local small and medium-sized businesses, a client segment that traditionally had received little attention in the transit advertising business. Its revenue for 1995 was $8.3 million. By 1996, the company operated about 650 billboard display faces on 375 outdoor advertising structures in Washington, Oregon, Idaho, and California. It had 70 full-time employees and agreements with seven local government transit districts to sell advertising on nearly 1,200 vehicles. In 1996, Obie Industries Incorporated formed Obie Media Corporation as a subsidiary, which it subsequently spun off. Obie Media sold one million shares of common stock in an initial public offering in 1996, raising about $6 million, which it put toward paying down the company debt.

Mid-1990s to Late-1990s: Expanding Nationally As a Transit Advertiser

Throughout the mid-1990s, the company continued its strategy of focusing on transit advertising and of targeting small- to medium-sized businesses that could not finance other advertising methods, but had no problem paying Obie’s $600 a month for a removable, vinyl billboard on the side of a bus. The company’s chief financial officer in a 1998 Business Journal article attributed the company’s rapid growth to the fact that it delivered “top-of-the-mind awareness in a very cost effective manner.” “Traffic is increasing and more and more people are driving by billboards or waiting for … buses,” he explained. Additionally, Obie’s methods of advertising eliminated the need to strategize how to reach a particular segment of the population. “If you think about newspapers, there’s a whole generation of people who don’t read or subscribe to them. Because of the proliferation of broadcast signals, it’s hardest to pinpoint an audience when, instead of three channels, you get 53,” he said.

Transit advertising was a unique sort of business. Agreements with transit districts are typically awarded through a competitive proposal process. A transit agreement, typically three to five years in length, requires the transit advertising operator to guarantee the district the greater of a minimum percentage of the advertising revenues generated by the operator’s use of the district’s vehicles, benches, and shelters, with the operator often posting performance bonds or letters of credit.

In the late 1990s, Obie, feeling ready for a major push into the national advertising scene, began expanding outside the Northwest, establishing a hub and spoke system of regional sales offices. In 1997, the company landed contracts with several transit systems: Dallas Area Rapid Transit, Santa Cruz Metropolitan Transit System, Austin’s Capital Metropolitan Transportation Authority, and Sacramento’s Paratransit Incorporated. According to Obie’s chief financial officer in a January 1998 issue of the Register Guard, the company, with accounts in 11 communities, and in three of the top 25 U.S. markets—Portland, Dallas, and Sacramento—had “a lot more to talk to the national advertising agencies about…. We’re more attractive to national advertisers, and we’re getting demand from national advertisers for our space…. ” Revenue for 1997 was $13.3 million.

By 1998, the company’s media business was booming as advertisers sought alternatives to the increasingly fragmented and costly television, radio, and print media markets. The company expanded again, this time eastward with the purchase of P&C Media in Pennsylvania. P&C, one of the oldest transit advertising firms, had started in 1941 as Philbin & Coinè Inc.; it represented 16 markets in the eastern and midwestern United States at the time of acquisition. Obie also expanded into Canada through a seven-year contract with BC Transit in British Columbia to provide interior and exterior advertising displays for operations in Vancouver, Victoria, and 30 smaller municipal transit systems.

With the purchase of P&C, Obie became the second largest provider of transit ads in the United States. It had operations in 29 transit districts, including seven of the top 30 media markets. A major force in the outdoor media industry, Obie Media was firmly established in four distinct regions: Canada, the Northwest, the Southwest, and the eastern United States. Each region had its own sales, design, production, and administrative capabilities and drew in roughly $8 million in sales per year. The company’s stock price had doubled since its initial public offering while its revenues edged close to $15 million a year. Obie Media Limited, a newly created subsidiary, oversaw the company’s Canadian operations. In early 1999, Obie Media Limited opened an office in London, Ontario, to handle the company’s contract with the London Transit Commission.

The late 1990s into 2000 saw a trend toward regional consolidation and heavy competition in the outdoor media industry, which up until then had been fragmented and consisted mostly of smaller players. Improved technology was also helping the industry as a whole to grow. Digital reproductions and computer painting created the possibility of more vibrant colors and more durable displays, according to the industry’s Outdoor Advertising Association. Obie introduced its signature “Back Attack” product—an ad without a frame placed directly on the back of a bus. It also began to make use of “wraps,” large vinyl appliqués that are wrapped around the sides and backs of buses. The design for the wrap was programmed into a computer and then digitally painted on a vinyl strip that matched the measurement of the vehicle to be wrapped.

The late 1990s were a period of stellar growth for Obie. Its sales for 2000 reached more than $51 million. In 2001, the firm, which employed 69 people, bought its second high-speed computerized printer so that it could increase in-house production of vinyl ads from 40 to more than 80 percent by the end of the year. The printers expanded Obie’s digital production shop, which also employed about 20 artists in Eugene who hand painted ads.

In the past, Obie’s billboard business had generated up to 90 percent of sales; however, with revenues from billboards dropping off to about 25 percent in the late 1990s, Obie turned its attention to signing up new transit districts as clients. From 1998 to 2001, Obie and its Canadian subsidiary generated a host of new contracts, and the company’s revenues increased steadily. Throughout 1998 and 1999, Obie expanded in the midwestern and eastern United States and Canada. In the year 2000, Obie added to its East Coast clientele. In 2001, the Chicago Transit Authority signed on with Obie Media. Obie opened a major office in Chicago shortly after signing the contract with CTA, the second largest transit system in the United States.

In another aspect of its growth, the company also purchased the outdoor advertising assets of Sign Products and JOSCO Outdoor in Billings, Montana, and Empire Neon in Sheridan, Wyoming, in 1999. Despite record earnings of $2 million for the year on revenue of $22.7 million, Obie Media still required additional cash; thus, the company held its second public offering to pay down debt and increase its stability to borrow money to fund future acquisitions.

Company Perspectives:

Out-of-home advertising gives advertisers an opportunity to revolutionize how they communicate to their audience and maximize their advertising investment. Obie Media’s dedication to quality, integrity and service has created a new standard in the industry.

Overcoming Obstacles: 2000s

Early in 2000, Obie began to ramp up its local sales effort in many of its markets. By late 2000, it had 120 salespeople in the United States and Canada, 50 percent more than it had had the year before. Obie’s three national sales offices achieved a 25 percent increase in sales during the first nine months of 2000 as compared to sales totals for the first nine months of 1999. During the summer of 2000, the company ranked second on the Seattle Times’ “Northwest 100” list, commemorating its outstanding growth in sales, market value, and employees, plus best return on average equity during the previous two years.

By early 2001, though, the weakened national economy was hampering profits for Obie. Although sales doubled between 1998 and 2001, profits increased from $1.5 million for 1998 to only $1.6 million in 2001. Profits were suffering as a result of the company’s contracts with transit districts, 80 percent of which guaranteed that Obie would pay a minimum amount or share a healthy percentage of sales revenues with the transit district. To solve this problem, Obie began to try to get its transit agencies to accept reduced guarantees.

Another problem arose in 2001 when the CTA fired Obie. Obie approached the CTA to say that it was unable to give bond security for 2002, “unable to meet. minimum guaranteed revenues for 2001,” according to CTA authorities in a Chicago Sun-Times article. To cope with contract loss, the company laid off its 37 Chicago employees and 13 independent contractors who installed signs.

By 2002, however, Obie appeared to be bouncing back. The firm had trimmed costs, cutting about 4 percent of its employees. It was successful in renegotiating its share of revenue paid to transit agencies from 54 to 43 percent. In order to expand upon its national presence, Obie had developed a strategy based on developing regional operating centers; seeking new transit agreements; pursuing acquisitions; and expanding its national sales effort.

Principal Subsidiaries

Obie Media Limited (Canada); Obie Industries; OB Walls, Inc.

Principal Competitors

Clear Channel Communications Inc.; Gateway Outdoor Advertising; Infinity Broadcasting Corporation; Lamar Advertising Company; Mediacom; Omni: The Outdoor Company; Outdoor Systems Inc.; Pattison Outdoor; Urban Outdoor; Viacom Outdoor Group; Washington Transit Advertising.

Key Dates:

1939:: Gordon Obie starts painting signs in Bozeman, Montana.
1959:: Obie starts Obie Outdoor Advertising in Eugene, Oregon.
1962:: Brian Obie joins his father’s company.
1968:: Brian Obie becomes president of Obie Outdoor Advertising.
1979:: Brian Obie sells the assets of Obie Outdoor Advertising to 3M Media Corporation.
1980:: Brian Obie restarts Obie Outdoor Advertising company, which lands its first transit advertising contract with Lane Transit District.
1987:: Brian Obie founds Obie Media Corporation.
1996:: Obie Media Corporation separates from its parent company, Obie Industries Incorporated, and launches its initial public offering.
1998:: The company acquires P&C Media and creates its Canadian subsidiary, Obie Media Limited.