Netflix’s Bid for a Billboard Company Makes No Economic Sense

“Eleven, this is what wasting money looks like.” Courtesy Netflix

Netflix is taking a page from Frances McDormand.

The streaming giant has reportedly offered more than $300 million in a bid to acquire Regency Outdoor Advertising, which owns billboards across Los Angeles.

According to its website, Regency owns premium advertising space throughout the City of Angels, at locations like Los Angeles International Airport, UCLA and the Sunset Strip.

The privately held company was founded in 1973. It’s owned by brothers Drake and Brian Kennedy.

If the billboard bid is successful, this would be Netflix’s second acquisition: last year the company bought Millarworld, the comic book publishing firm behind Kick-Ass and Kingsman.

Billboards may seem pretty quaint in the age of social media, but Netflix has already shown it knows how to use them for maximum effect.

Last year, plain white billboards featuring black text that read “Netflix Is a Joke” appeared in New York and Los Angeles.

It turned out the company had purchased the ads itself to promote upcoming stand-up specials from Chris Rock, Jerry Seinfeld and Dave Chappelle.

Netflix’s other eye-catching campaigns include a glowing neon Stranger Things ad at New York Comic-Con and an Altered Carbon billboard that featured a life-size “pod person.”

These lavish ad campaigns are part of Netflix’s increased marketing budget. The company is spending $2 billion on advertising this year, or about $16 per subscrier.

Netflix is worth about $140 billion, more than McDonald’s, GE, Ford and IBM. But according to a shareholder letter, its marketing budget is actually growing faster than its revenue.

Apparently that’s giving some stockholders pause—Netflix shares were down slightly this morning after the billboard news.

That’s not a huge surprise, because even for Los Angeles the $300 million price tag is pretty excessive.

According to audience location measurement service Geopath, a billboard on a freeway in a major city like Los Angeles gets about 400,000 impressions per month. Billboards typically cost $5.21 per thousand impressions, so that’s roughly $2,000 a month.

The average large billboard in highly trafficked areas of Los Angeles costs between $1,500 and $5,000 a month, so the math works out—up to this point.

But in order to justify the $300 million investment, Netflix would have to buy 5,000 to 16,000 billboards for a year.

Los Angeles has about 5,800 billboards in total, so unless Netflix utilized every single one of them, it wouldn’t turn a profit from the Regency investment

Netflix isn’t the only bidder for the boards, and there is no guarantee that its offer will prevail. But if it does, prepare for a shopping spree on the roofs of Los Angeles.

Netflix and Regency have not responded to Observer requests for comment.

Netflix’s Bid for a Billboard Company Makes No Economic Sense