sr-061411-3dCity Council Meeting: June 14, 2011
Agendaltem:J-°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 atwo-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 market's 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 Bus' current advertising sales program can be used as a
platform to sell Culver CityBus advertising space alongside Big Blue Bus' advertising
space. This is a natural extension to .the Big Blue Bus' program and increases the reach
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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 fora 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 amouht 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.
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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 will be deposited into account 41642.404210.
Prepared by: Dan Dawson, Customer Relations Manager
Approved:
Forwarded to Council:
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St`eph' nie Negriff
Direct r of Transit Services
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Rod Gould
City Manager
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Reference Contract No.
9380 (CCS)