Paris City Cuts The Size Of Outdoor Ads, Advertisers Brace

A decision by the Paris city council to cut the amount of outdoor advertising within the city is likely to dent the sales of outdoor billboard companies such as JCDecaux SA (DEC.FR), ClearChannel Outdoor Holding Inc (CCO) and CBS Outdoor, and could lead to similar restrictions across Europe.

At a meeting Tuesday, the Paris city council decided to restrict the largest authorized size of advertising panels to eight square meters down from 12 square meters, the council's press office said Wednesday. Outdoor panel operators will have to replace their current panels with new, smaller ones. The city council's decision also forces panel owners to leave a distance of at least 25 meters between them.

The move is a potential revenue blow to the billboard companies as fewer panels and smaller billboards are likely to prove less appealing to advertisers, analysts said.

The measures will reduce the ad space on display in Paris by about 30%, a spokeswoman for the Paris city council said. "We're not opposed to advertising but we want to prevent it from being too intrusive," she said. The city council will publish the official order enforcing the decision in early July, she said.

The restrictions will hurt all the players in the outdoor advertising space, but particularly JCDecaux, the world's largest outdoor advertising group by revenue and the biggest in Paris, said Cheuvreux analyst Richard Houbron. He estimates the move will lead to a 1% fall in sales, even if it manages to increase its prices, as Paris represents 4% to 5% of its total revenue.

Houbron said the decision could "motivate other cities across France to follow suit, and possibly other European capitals to review their openness to what is described by opponents as visual pollution."

"In countries such as Germany and Nordic countries where the green political power is particularly strong, we see risk of contagion over time," he said.

For the March quarter, JCDecaux's revenue rose 9.9% to EUR535.3 million compared with EUR487.2 million a year earlier. Organic revenue, which excludes acquisitions and the impact of foreign exchange variations, rose by 7.8%. Advertising revenue excluding sales related to the sale, rental and maintenance of street furniture products, rose by 7.7% on an organic basis.

The 2,300 outdoor panels in Paris are shared between JCDecaux, ClearChannel and CBS Outdoor, a unit of CBS Corp (CBS).

Both JCDecaux and ClearChannel declined to comment on the restrictions planned by the city of Paris, while no one at CBS Outdoor was immediately available to comment on the issue.

Shares in JCDecaux closed Wednesday flat at EUR21.45, while at 1638 GMT CBS was down 0.7% at $26.73 and Clear Channel Outdoor was down 0.5% at $13.37.

Stephane Dottelonde, head of the French outdoor advertising industry lobby Union de la Publicite Exterieure, downplayed the impact of the move, noting that customers rarely advertise in Paris only, and instead pay for access to a network of billboards across various French cities. Also, ads posted on street furniture such as bus stops aren't subject to the new rules, he said.

Still, outdoor advertising companies are bracing for more details of a government-led plan to cut the number of outdoor panels right across France, which is expected to be put forward in coming months, Dottelonde said.

-By Thomas Varela and Inti Landauro, Dow Jones Newswires; +33 1 4017 1740; thomas.varela@dowjones.com, inti.landauro@dowjones.com

(Geraldine Amiel in Paris contributed to this article.)

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