Tuesday, May 1, 2012

How Much is a Billboard Worth?

Apparently $189,000.

Indianapolis Business Journal reported yesterday on a deal that took place in Speedway.  Apparently, the City needed a quarter-acre of land to install a new roundabout.  The land owner had already sold the land to Speedway.

Clear Channel, though, had a lease on the property for a billboard they had on it.  When the City offered Clear Channel $165,000 for the board, Clear Channel refused.  After taking the company to court, the City and Clear Channel were ordered to accept a $189,000 transaction.

From the IBJ article:

"It's much less than what they had reuested in their counteroffer," said Scott Harris, executive director of the (Speedway redevelopment) commission, who declined to divulge the exact amount of Clear Channel's offer."

I guess maybe I just don't understand the economics of the advertising industry.  I know they can deal in big money.  Money beyond my comprehension.  Almost $200,000 for a lone billboard, though, just seems horribly steep.

Think about what you can buy for that kind of money.   I own a decent little 3-bedroom home in Indianapolis on about .7 acres. Two car garage.  Shed.  Central air.  I spent half that.  And, in today's housing environment, I would pay less, I'm sure.

I could take $100,000 around this town and probably have my choice of a half-dozen or more decent little bars for sale.  Make it $150,000 and I might have a serious choice to make from a ton of options.

So what in the world makes a billboard in Speedway worth $189,000?  Not the land, I remind you, just the board itself.  Are they really that kind of revenue generating machines?

I'm obviously in the wrong business.


  1. Lamar's website calls for Indy billboards to be rated from $3,400 to $112,200 for four weeks. Obviously all based off of location. I'm sure details of the lease period played a large part in it also.

  2. I guess another question I should have posed is: How much is a roundabout worth?

    I'm sure that this billboard, with it's proximity to IMS, ranks towards the top of those price lists. Especially near race times. Can't ask for a much more captive audience than that.

    But that also means that the City of Speedway is so committed to having a roundabout there that they are willing to spend at least a quarter of a million dollars, if not more, just to get the land to put the roundabout on.

    Is it just for aesthetic reasons, or is it really going to solve enough problems to spend the money?

    1. Haven't educated myself to the subject. This is for a roundabout? Why not just leave the billboard and drive around it? Ba-dum-chh!

    2. Estimating the present value of this billboard would involve calculating the estimated cash flow it generates in sales over a seemingly infinite period of time. The billboard could remain there for say 100 years. In that time period, it would probably generate more than the $189,000 payment.

      What I don't like is the government gobbling up land for their own nefarious purposes. In this case they have taken a prime advertising location and shuttered it. Big government has put another engine of the economy out of commission.

      This also brings to mind that particularly loathsome creature, Jim Brainard, who lurks to the north. He's very boisterous about all of the roundabouts that have been placed in the Carmel area during his terms in office. I'm just glad that in the case of Speedway the city didn't seize the property by eminent domain.

      I just heard Brainard on the news saying that he didn't want property values in Carmel to plummet because of the perceived spread of "blight" along the Michigan Road business corridor. I say let the consumers decide what they want there. There's just too much government intrusion out there.

  3. Alternatively, advertisers could find another billboard in the area. However, unless a new one is erected somewhere, we will be short one and the economy will pay for this type of activity. Also, the taxpayers get to foot the bill of $189,000. This kind of tick tack behavior is how we end up with massive debt. Governments are good at creating new expenditures and pet projects which supposedly put people back to work. In reality governments end up harming the economy in a number of ways.