City Council Meeting: June 14, 2011

Agenda Item: 3-D

To:†††††††††††††† Mayor and City Council

From:†††††††††† Stephanie Negriff, Director of Transit Services

Subject:††††††† Agreement to Manage Culver CityBus Advertising Sales Program

 

 

Recommended Action

Staff recommends that the City Council authorize the City Manager to negotiate and execute a two-year agreement with three one-year options to renew with the City of Culver City to manage the bus advertising sales program for Culver CityBus.

 

Executive Summary

Staff proposes the Big Blue Bus to serve as exclusive advertising concessionaire for Culver CityBus. The advertising sales program will be overseen by the Big Blue Bus existing Advertising Sales program and will assume all administrative costs associated with supporting such a program. Big Blue Bus will benefit from generating an additional revenue stream, increasing the coverage, as well as increasing overall inventory to fulfill the marketís demand for additional premium ad space. Culver CityBus will benefit from a new revenue stream and the creation of an ad sales program with minimal start-up costs. The program is estimated to generate additional annual revenue of $105,000 in FY 2011-12, $112,500 in FY 2012-13, and $120,000 in FY 2013-14.

 

Background

Since 2001, the Big Blue Bus has been operating its own advertising sales program, selling advertising space on buses to a variety of clients which generates a revenue stream that financially supports transit services. The program has been highly effective, increasing from $464,000 in 2004 to $1,600,000 in Fiscal Year 2010.

 

Discussion

On February 16, 2011, Big Blue Bus staff presented a proposal to Culver City demonstrating how Big Blue Busí current advertising sales program can be used as a platform to sell advertising space on Culver CityBus. This is a natural extension to the Big Blue Busí program and increases the reach of the overall ad program for advertisers. Culver CityBus has asked the Big Blue Bus to act as their concessionaire to implement a Culver CityBus bus advertising sales program. Big Blue Bus will develop sales strategies to sell both ad spaces as a whole and/or separately depending on demand.

 

Under the proposed Memorandum of Understanding with the City of Culver City, existing Big Blue Bus staff would manage all aspects of an advertising program for Culver CityBus in exchange for a 30% commission on net advertising sales. Net advertising sales is defined as the sum of the gross advertising sales amount minus any advertising agency discount or commission that may be offered minus Big Blue Bus 30% commission. The actual cost of posting services is applied to the net advertising sales amount with the remaining balance identified as the net advertising revenue that will be paid to Culver CityBus. The calculation is illustrated as follows:

 

††††††††† Annual Gross Advertising Sales Amount†††††††††††††††††††††††††††††† $ 411,765

††††††††† Less: Advertising agency discount††††††††††††††††††††††††††††† ††††††††† ($61,765)

††††††††† Less: 30% Commission on Net Advertising Sales††††††† ††††††††† ($105,000)

††††††††† Annual Net Advertising Sales Amount†††††††††††††††††††††††††††††††††† $ 245,000

†††††††† Less: Annual Actual Cost of Posting Services†††††††††††††††††††††† ($50,000)

††††††††† Annual Net Advertising Revenue for Culver CityBus††††††††††††† $195,000

 

The Big Blue Bus would promote and advertise Culver CityBus ad space along with its own, negotiate contracts for ad placement, contract with and manage the installation of all ads, and handle the accounting and billing. Advertisements will be consistent in content with Big Blue Bus current policy standards. Each quarter a review of the number of ads sold and gross sales amount would be provided to Culver CityBus along with the calculation of their estimated net revenue. The MOU would extend for two years with three one-year extensions available.

 

Financial Impacts & Budget Actions

There are no budgetary cost increases associated with managing the Culver CityBus advertising program. Operation of the program would be done by existing Big Blue Bus marketing and administrative staff. The ad posting would be done by a posting company and related costs paid would be reimbursed by Culver CityBus.

 

Additional revenue from the Culver CityBus advertising program is estimated to generate $105,000 in FY 2011-12, $112,500 in FY 2012-13, and $120,000 in FY 2013-14. The revenue increase will be added to the adopted budget in account 41642.404210 for FY 2011-12.

 

 

Prepared by: Dan Dawson, Customer Relations Manager

 

 

Approved:

 

Forwarded to Council:

 

 

 

 

 

 

Stephanie Negriff

Director of Transit Services

 

Rod Gould

City Manager