Another round in L.A.’s billboard wars has begun as a small sign company is poised once again to challenge the city’s latest plan to allow lucrative digital billboards along its streets.

Summit Media, which sued the city a decade ago over its billboard rules and won a court ruling forcing nearly 100 digital billboards to be turned off, says a plan being considered by L.A. officials is little better.

That plan would require applicants seeking to put up digital billboards to take down up to 8 square feet of conventional billboard space for every square foot of digital space they want to put up. The idea was introduced as a bare-bones proposal at a public hearing last month and will be refined in coming weeks before going back to council committee.

The trouble, Summit argues, is the plan discriminates against smaller sign companies that have few or no billboards to take down.

“On the merits, whether the take-down requirement is 8-to-1, 6-to-1, or 4-to-1, small companies will not be able to participate,” Phil Recht, an attorney with Mayer Brown who represents Summit Media, said at that hearing.

As a result, Santa Monica-based Summit, which owns and operates 55 billboards in Los Angeles, could be largely shut out of the lucrative digital billboard marketplace. If takedown ratios become mandatory, dozens of companies in the city with only a handful of signs each could be shut out entirely, as would any newcomers.

Instead, Recht said, the three companies that own almost 85 percent of the 8,000-plus billboards in Los Angeles – ClearChannel Outdoor of San Antonio; Outfront Media of New York; and Lamar Advertising Co. of Baton Rouge, La. – would gain permanent monopoly status.

Millions at stake

Thanks to a 2002 agreement with the city, ClearChannel and Outfront raced to build 99 digital billboards in Los Angeles, mostly in more lucrative markets on the Westside. Summit challenged this duopoly in court, and three years ago a judge ordered all the digital billboards turned off. Those boards went dark and, in most cases, have since been covered up with conventional signs. The only digital billboards allowed in the city since have been in a select few sign districts, most notably in downtown.

ClearChannel, Outfront, and Lamar have been furiously lobbying the city to hammer out a plan so that the darkened digital billboards could be turned back on and new ones built.

At stake is tens of millions of dollars in revenue for the sign companies and the city. A single digital billboard with 10 changeable messages an hour at a well-placed intersection in Los Angeles can bring in eight to 10 times as much revenue as a conventional sign – as much as $1 million a year at top-trafficked intersections on the Westside.

Under the proposal now being hashed out at City Hall, the city stands to take a good chunk of that money through revenue-sharing agreements with the sign companies. As an inducement to get as many billboards taken down across the city as possible, the higher the takedown ratio, the lower the percentage of revenue sign companies would share with the city.

So, if a sign company agrees to take down 8 square feet of conventional billboard space for every square foot of digital sign space it puts up, it would pay very little in revenue to the city, while a company agreeing to a 4-to-1 takedown ratio would pay considerably more.

In the hearing, various figures of the city’s potential share emerged, from 5 percent to 50 percent of digital billboard revenue.

Big company support

The three major sign companies are all on board with this concept, according to Stacy Miller, director of the Los Angeles Advertising Coalition, which represents ClearChannel, Outfront, and Lamar.

“Our goal is to get a comprehensive sign ordinance in place that allows digital billboards outside of sign districts yet also has significant takedowns of older billboards,” Miller said. “What’s come out from the city so far is a very good road map with some really positive pieces.”

ClearChannel’s attorney, Cindy Starrett of Latham & Watkins, concurred during the hearing last month.

“We very much appreciate the balance that (the proposal) displays,” Starrett said. “This balanced ordinance encourages sign reduction for all communities and maximizes public benefits given the city’s drastic needs for improvements in many areas.”

Miller took issue with Recht’s characterization that the plan would perpetuate the stranglehold of the “big three” sign companies.

“We believe small companies should be allowed to participate in this process, either through lower ratios or other public benefit arrangements,” she said.

When questioned during the hearing, city officials said that allowing small or newcomer sign companies to buy existing billboards from the more established players might be an option. But that would hinge on whether the “big three” sign companies would be willing to sell their signs or whether they would want to keep those billboards for themselves as takedown targets.

Eyeing revenue

The ultimate decision on setting the ratios lies with the city’s 15 council members. One, Mitch Englander, said he favors the takedown ratio concept with revenue-sharing for the city.

“If we’re going to have digital billboards at all, there must be protections for the community and there must be a takedown ratio,” Englander said. “Whatever that (takedown) number is, we need to make sure that blight comes down in communities in exchange for this and that there’s also some kind of revenue to the city, which we greatly need.”

None of this sits well with billboard opponents, who want thousands of conventional billboards removed and few, if any, digital billboards.

“The city is doing everything backwards,” said Dennis Hathaway, president of the Ban Billboard Blight Coalition. “This scheme could result in a big proliferation of digital billboards without any public sense of how much revenue would be involved and where the billboards would be taken down. You will see digital billboards popping up on Ventura Boulevard, all over West Los Angeles, the western San Fernando Valley, and Mid-City.”

For reprint and licensing requests for this article, CLICK HERE.