Article

Gannett spins off Captivate Network

The digital place-based ad firm has been spun off by the media giant and new investors Generation Partners.

September 27, 2013 by Christopher Hall — writer, self

Media giant Gannett announced yesterday that it is partnering with private equity firm Generation Partners to fund and spin off digital out-of-home advertising company Captivate Network.

The move is intended, Gannett said, to fund the continued growth and expansion of the Captivate Network digital signage advertising company, which will be spun off into a separate company co-owned by Gannett and Generation. Founded in 1997, Captivate operates an IP-enabled, digital place-based media network with more than 10,000 screens across more than 1,000 commercial office buildings in the U.S. and Canada.

The news generated generally positive responses from around the digital signage and digital out-of-home sector.

"Private equity investment in digital place-based media is a strong sign that investors see value and upside in our industry," Garry McGuire, CEO at RMG Networks, said in an email. "Captivate has done a great job of showing the high value of the office building audience, and that's obviously attractive to Generation. If they commit to scaling the business, that's a good sign for everyone in digital out-of-home."

Keith Kelsen, a longstanding member of the digital signage industry, said Captivate has long been a leader in the sector.

"They have taken the arrows on the frontier, to what is now a small industry," Kelsen wrote in an email. "The next phase as I see it is to cut costs, and grow the ad base, expand by acquisition, and then go public or sell. With the growth rates at 14.9 percent it makes this a viable private equity play."

Kelsen said Captivate founder and president Mike Difranza "has accomplished what few DOOH networks have been able to do and that is reach a significant inflection point of 10K screens. Growth beyond that requires capital and sometimes different thinking ... If they do what RMG has done, we should see them go public within two years."

According to the announcement, the partnership will give Captivate the needed capital and strategic focus to drive future growth. "As Gannett expands and invests in higher growth core and new businesses, this move will further focus investment on its media and marketing services transformation strategy," the company said.

"Overall this is a win for the industry as we have seen a number of large networks especially in health care go the same route with private equity funds," Kelsen said. "I look forward to seeing the results from [new CEO] Marc Kidd."

Captivate also announced that Marc Kidd has been named as the company's CEO. Gannet called Kidd "a seasoned marketing, media and entertainment executive who has been on the forefront developing communications platforms to connect branded content with clients wanting to engage their consumers." Kidd started his career at Host Communications in the early 1980s before joining Winnercomm, which provided third-party produced content to ESPN, in 2004. Kidd was named COO of Winnercomm in 2006 and became its president in 2007. Outdoor Channel Holdings acquired Winnercomm in 2009, at which point Kidd became president of media sales for Outdoor Channel Holdings.

Also in the announcement, Mark Shapiro has been named Captivate's Chairman and is an investor alongside Generation. Shapiro has extensive experience and contacts in the advertising, television, sports and entertainment industries, and also has a strong track record in the digital place-based media industry, according to the announcement. Shapiro was most recently the CEO of Dick Clark Productions, an entertainment and production company that produced the Golden Globes and the American Music Awards. Prior to Dick Clark Productions, Shapiro was the CEO of Six Flags after a career at ESPN, where he was executive vice president of programming and production responsible for the development, acquisition and scheduling of all programming.

Digital signage consultant and industry observer Lyle Bunn said that Captivate has earned "an enviable reputation" as a DOOH network, which was shown the previous investment by Gannet, which publishes USA Today and owns newspapers and television stations across the country.

"This announcement of new investment and executive talent positions Captivate for the next plateau of growth, while signaling that investors are indeed better understanding the revenue potential of DOOH," Bunn wrote in an email. "Sales cycles can be long as brands and their media planning agencies grow to appreciate the unique value that networks like Captivate can deliver in audience and engagement. This investment provides resilience and the resourcing useful to extend the reach of Captivate across and more deeply into the advertising community. All DOOH networks will benefit, as has been the case through past leadership shown by Captivate."

Bunn said estimates indicate there are about 100 investment companies that are "closely" eyeing the digital place-based media industry, "of which fewer than 25 are currently active, significant investors."

"The profile of every transaction, including this Captivate investment, causes other investors to adjust their lenses," he said. "The sustaining growth of DOOH is attractive."

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