Lamar Could End Up Making More Money Despite Losing 1,800 Billboards

(MoneyWatch)  Lamar Advertising has lost 1,800 billboards from its network over the recession, according to the Atlanta Journal-Constitution:

Likewise, Baton Rouge-based Lamar Advertising, the nation's third-largest billboard operator, said it has closed 1,800 billboards and other types of smaller signs as a cost-saving measure.

Lamar may not have to worry about lost revenues from those ads if its shift into digital billboards is successful. On a conference call a year ago, COO Sean Reilly was asked about the revenue differences between new digital billboards and old outdoor sites. Here's what he said:

The multiple depends on first off what you are taking down and what you are putting up. So, on a bulletin and again this is not market specific, it's kind of for modeling purposes across the platform. Typically, you are taking down something that does about $2500 to $3,000 a month, and you are going to get something between $15,000 and $18,000 a month. And again that is sort of a modeling number, it depends on what market you are in and what the economic climate is. For posters, you are taking down something that averages about 450 to 500 bucks a month and you are getting something when you convert to digital you are getting 5,000 to 6,000 a month.

Reilly also told investors that Lamar aims to have about 450 new digital billboards on air by the end of the year. Lamar puts up about 125 new digital units per quarter.

Now let's do the back-of-the-envelope math: Taking the conservative numbers, if Lamar has lost 1,800 billboards that pay $2,500 a month, it is losing $4.5 million per month in revenues. But if it adds 450 digital units paying $15,000 a month, it will gain $6.7 million per month.

Which is how Lamar may end up making more money in 2010 despite delivering a smaller network with (presumably) a smaller audience.

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