04/06/2018

Netflix Inc is attempting its largest acquisition, offering more than $300 million to acquire a company that owns billboards across Los Angeles, including West Hollywood’s famed Sunset Strip, according to people familiar with the matter.

The move illustrates how one of the most successful streaming media companies values physical advertising assets as it steps up its marketing efforts. Billboards are holding their own compared to other forms of traditional advertising, such as ads in newspapers or TV that are easy to skip.

Netflix is just one of the bidders for the Los Angeles-based company, called Regency Outdoor Advertising, and there is no certainty that its offer will prevail, the sources said this week, asking not to be identified because the matter is confidential.

Netflix declined to comment. Regency Outdoor did not respond to a request for comment.

Regency Outdoor is owned by two brothers, Drake and Brian Kennedy. Some of its billboards are on the Sunset Strip, a portion of Sunset Boulevard in Los Angeles known for its live music and night clubs. The area is filled with splashy billboards often promoting upcoming TV shows and movies.

Regency Outdoor also owns billboards at Los Angeles International Airport, on major freeways, near the UCLA campus, and close to the Los Angeles Angels baseball stadium, according to its website.

Netflix has already advertised several of its series on Regency billboards including “Stranger Things” and “The Crown.”

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Netflix is increasing its spending on marketing for its original shows and movies to $2 billion this year as it competes for subscribers with technology companies such as Amazon.com Inc, Hulu and Facebook Inc and traditional media companies such as Walt Disney Co.

Netflix said in a letter to shareholders earlier this year that its marketing spending was growing “a little faster” than its revenue.

As a result of the bigger marketing expenditure, Netflix’s expenses per subscriber will jump around 25 percent to $16 per subscriber, up from $13 per subscriber, according to a recent MoffettNathanson report. The company reported it had 117.6 million worldwide streaming subscribers at the end of 2017.

“As the marketplace for original content becomes more crowded, Netflix is turning up the volume to promote the increasing number of Netflix originals,” Michael Nathanson, a MoffettNathanson analyst, wrote in the research note.

Netflix’s first known acquisition was last year’s purchase of comic book publisher Millarworld for an undisclosed sum.

Reuters (Reporting By Liana B. Baker and Jessica Toonkel in New York; Additional reporting by Lisa Richwine in Los Angeles)