iHeartMedia 2011 Annual Report Download - page 33

Outdoor Advertising
Our outdoor advertising revenue is derived from selling advertising space on the displays we own or operate in key
markets worldwide, consisting primarily of billboards, street furniture and transit displays. Part of our long-term strategy for our
outdoor advertising businesses is to pursue the technology of digital displays, including flat screens, LCDs and LEDs, as alternatives
to traditional methods of displaying our clients’ advertisements. We are currently installing these technologies in certain markets,
both domestically and internationally.
Management typically monitors our business by reviewing the average rates, average revenue per display, or yield,
occupancy, and inventory levels of each of our display types by market.
We own the majority of our advertising displays, which typically are located on sites that we either lease or own or for
which we have acquired permanent easements. Our advertising contracts with clients typically outline the number of displays
reserved, the duration of the advertising campaign and the unit price per display.
The significant expenses associated with our operations include (i) direct production, maintenance and installation
expenses, (ii) site lease expenses for land under our displays and (iii) revenue-sharing or minimum guaranteed amounts payable under
our billboard, street furniture and transit display contracts. Our direct production, maintenance and installation expenses include costs
for printing, transporting and changing the advertising copy on our displays, the related labor costs, the vinyl and paper costs,
electricity costs and the costs for cleaning and maintaining our displays. Vinyl and paper costs vary according to the complexity of the
advertising copy and the quantity of displays. Our site lease expenses include lease payments for use of the land under our displays, as
well as any revenue-sharing arrangements or minimum guaranteed amounts payable that we may have with the landlords. The terms
of our site leases and revenue-sharing or minimum guaranteed contracts generally range from one to 20 years.
A
mericas Outdoor Advertising
Our advertising rates are based on a number of different factors including location, competition, size of display,
illumination, market and gross ratings points. Gross ratings points are the total number of impressions delivered by a display or group
of displays, expressed as a percentage of a market population. The number of impressions delivered by a display is measured by the
number of people passing the site during a defined period of time. For all of our billboards in the United States, we use independent,
third-party auditing companies to verify the number of impressions delivered by a display.
Client contract terms typically range from four weeks to one year for the majority of our display inventory in the United
States. Generally, we own the street furniture structures and are responsible for their construction and maintenance. Contracts for the
right to place our street furniture and transit displays and sell advertising space on them are awarded by municipal and transit
authorities in competitive bidding processes governed by local law or are negotiated with private transit operators. Generally, these
contracts have terms ranging from 10 to 20 years.
I
nternational Outdoor Advertising
Similar to our Americas outdoor business, advertising rates generally are based on the gross ratings points of a display or
group of displays. The number of impressions delivered by a display, in some countries, is weighted to account for such factors as
illumination, proximity to other displays and the speed and viewing angle of approaching traffic. In addition, because our
International outdoor advertising operations are conducted in foreign markets, primarily Europe and Asia, management reviews the
operating results from our foreign operations on a constant dollar basis. A constant dollar basis allows for comparison of operations
independent of foreign exchange movements.
Our International display inventory is typically sold to clients through network packages, with client contract terms
typically ranging from one to two weeks with terms of up to one year available as well. Internationally, contracts with municipal and
transit authorities for the right to place our street furniture and transit displays typically provide for terms ranging from three to 15
years. The major difference between our International and Americas street furniture businesses is in the nature of the municipal
contracts. In our International outdoor business, these contracts typically require us to provide the municipality with a broader range
of metropolitan amenities in exchange for which we are authorized to sell advertising space on certain sections of the structures we
erect in the public domain. A different regulatory environment for billboards and competitive bidding for street furniture and transit
display contracts, which constitute a larger portion of our business internationally, may result in higher site lease costs in our
International business. As a result, our margins are typically lower in our International business than in the Americas.
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