Billboard Mastery Podcast: Episode 74

The Beauty Of Being Federally Regulated – And Hated

There have been very industries regulated by the U.S. government, and billboards are one of those few groups. But the hatred that many environmental groups have for billboards have actually created a huge amount of the value in the sign industry. In this Billboard Mastery podcast we’re going to discuss how being federally regulated – and hated – provides one of the best positions any industry could hope for.

Episode 74: The Beauty Of Being Federally Regulated – And Hated Transcript

There have been several industries in the past which the US government has chosen to regulate. Things like the airline industry, the trucking industry, the cable industry, and the billboard industry. This is Frank Rolfe, The Billboard Mastery Podcast. We're gonna talk about why it's great to be federally regulated, but also to be hated. Let's look at the airline industry, for example. Originally, the airline industry was federally regulated because people thought it was the only safe way to run it. And they also thought that no one would ever devote the investment needed to start an airline unless they had a monopoly situation. So back in the old days of TWA and Pan Am, those airlines operated under the safety and security of the federal government, fending off all competition. If you wanted to start an airline, well, you couldn't. You couldn't unless the government told you you could. And even then, they would regulate you so that you could not really compete and harm the other airlines.

And during that period, the airlines flourished. They loved it. They all had a monopoly, they were free of competition, it was enormously profitable. You may have flown in an airplane back in those days, and it was a luxury form of travel, because airlines were making tons and tons of money. What was the problem? The fares were very, very high. It cost a lot of money to fly in a plane back then. People dressed up, fancy, coat and tie, to fly in the planes, because they spent so much on the tickets, they saw it as an act of keeping up with the Joneses to be able to fly. But then what happened to the airline industry? Well, what happened was, government became concerned that the rates were too high and the fares needed to come down. And they were told that they no longer had to keep things regulated, it was time to allow freedom of competition. They deregulated the airline industry and the airline industry fortunes plummeted.

Then you have the trucking industry, very similar to the airline industry. The government felt that for safety reasons and to spur economic investment in the trucks, they would have to allow truckers to have all kinds of blocks to competition. See that they were basically guaranteed to make money if only they were a trucker. And what happened? The government was convinced that we needed to have more competition. It would drive the price of shipping down, therefore all consumer good prices would come down, and trucking was deregulated. What happened again? Well, trucking as far as profitability, plummeted, it could never make as much money deregulated as it ever made regulated. And then you have the case of the billboard. Billboards were not federally regulated in any form or function until the 1960s. Prior to that, you could build a billboard anywhere you wanted. There was no limitation. If you ever go down Route 66, which was built prior to the '60s, you'll see in some sections of the old Route 66, so many billboards, it's mind blowing.

You'll know you're on Route 66 because of the sheer density of signs. They're absolutely everywhere. They create almost a visual solid wall as you're going down old Route 66. And then what happened? Well, the government decided that that was creating a visual blight on America. And Lady Bird Johnson of all people took that as a champion the cause and convinced Congress to pass the Highway Beautification Act. Now some people suspect she only did that because she heard they were gonna start building billboards near her ranch, down near Austin. So she wanted to stop them from doing that, so she actually changed federal law to preserve her own property. Is it true? I don't know I read the accounts and I think it probably was true. Nevertheless, the government was convinced that federally regulating signs was essential. Once again, things would only be better if the government controlled it all and that's what they did.

And overnight, that created almost all of the value in billboards. Because when you stopped the supply, then it kept the values extremely high. Imagine how low billboards would be worth if you could just build one anytime you wanted. Build a new Holiday Inn, what do you do? Build your own sign. That's what people did back prior to the Highway Beautification Act in the '60s, hotels and people, they would just build their own signs wherever they want. You wanted to open up a Dairy Queen while you just put three or four billboards up in either direction. But the Beautification Act changed all that. The Dairy Queen owner could no longer do it, nor could Holiday Inn. They had to have a national billboard license or a state license. They had to meet certain spacings, certain zonings, certain maximum sizes and heights.

And suddenly the government controlled it. And everyone who had a billboard had one super valuable item. They had a permit. A permit that was precious and rare and it could not be replicated. And that is what created all the value. So just like airlines, just like trucks, regulation is what created the billboard industry, or at least all of its profitability. But we're unique compared to all of the other federally regulated industries, because we have one feature that none of them had. Everyone hates us. The government has many times in the past thrown out the idea of deregulating signs. And when they did, what happened was you had all these environmental groups and the general public march down to them and say, "Don't you dare do that. Oh my gosh, we'll have even more billboards. Billboards are the ugliest thing in the world."

Groups like Scenic America, very well funded big lobbies. They had many, many people lobby, government employees and say, "Look, you can't deregulate signs, visually, it'll be the death of America." So, we are one of the few industries ever to be regulated, if not the only one, but never deregulated. And the odds of it being deregulated going forward, I would put it absolutely 0%. Why is that? Because a hatred is still there. People don't like billboards. They find them offensive, they find them to be blight. They don't like the looks of them. And there's only no benefit of the government to deregulate. They could care less on whether it reduces down the average cost per McDonald's unit for billboards to have the billboard rates go down. Look to the largest billboard users America are. People like McDonald's and Verizon, the government could care less about those people.

It's not like airline tickets or trucking where it was in common good of all of millions of Americans, in this case, if you deregulated signs, what would you happen? You'd have actually what people would say would be damaged to the millions of Americans who have to look at them. And all you'd be benefiting with price competition are just a few key industries. So it's a pretty safe part that our deregulation will never occur, that we will probably go to the end of time as the only industry ever regulated by the federal government, but never deregulated. And that's fantastic news. This is Frank Rolfe, Billboard Mastery Podcast. Hope you enjoyed this, talk to you again soon.