SR-10-13-2015-3P
City Council
Report
City Council Regular Meeting: October 13, 2015
Agenda Item: 3.P
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To: Mayor and City Council
From: David Martin, Director, Planning and Community Development, Strategic
Planning (PCD)
Subject: Contract with Hulu, LLC, to establish Hulu as the Presenting Sponsor for the
Breeze Bike Share system
Recommended Action
Staff recommends that City Council:
1. Authorize the City Manager to execute an agreement with Hulu, LLC for the
sponsorship of the Breeze Bike Share system for five years at the level of
$675,000 annually.
2. Authorize budget changes as outlined in the Financial Impacts & Budget Action
section of the staff report.
Executive Summary
Following Council’s direction on November 11, 2014, staff undertook a process to obtain
a sponsor for the City’s Breeze Bike Share system, which has culminated in the
proposed five-year Presenting Sponsorship agreement with Hulu, LLC, to sponsor
Breeze for $675,000 annually. The Hulu agreement was the result of the marketing
efforts of the Superlative Group, Inc., with which the City contracted following a
competitive selection process advertised through an RFP that was issued in December
2014. The proposed contract exceeds the sponsorship parameters set by Council,
which aspired to find a minimum sponsorship level of $250,000/year for three years.
Once approved, the City Manager will e xecute the contract and staff will work with Hulu
on the system launch, scheduled for next month.
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Background
Council authorized staff to seek a bikeshare system sponsor as one of a series of steps
to implement and fund a citywide bikeshare program. Through an AQMD grant for
system development, the City contracted with Global Green USA, which reached out to
explore the market and determine general level of interest and feasibility. The
conclusion was that Santa Monica is a strong and attractive market fo r sponsors, with
sufficient potential even if advertisement is limited to bicycles only, avoiding stationary
fixtures in compliance with the Municipal Code. On November 11, 2014, Council
directed the City Manager to pursue corporate sponsorship funding fo r its new
bikeshare program, either directly or through an agency, that would provide a minimum
of $250,000 per year and to return to Council with a sponsorship proposal. (See
Attachment A).
Based on Global Green’s research and information provided to t he City, staff initially
pursued some leads to secure a sponsor directly prior to selection of an agency through
the RFP process. However, no sponsorship developed based on this effort.
Sponsorship Selection Process
On December 3, 2014, the City issued a Request for Proposals seeking a third-party
broker to secure bikeshare system sponsors at the highest support levels to supplement
user fees and underwrite operational expenses. Three proposals were received and
evaluated by a staff team with representatives from Planning & Community
Development and the City Manager’s Office based on the criteria in SMMC Section
2.24.072, including price, previous experience, capacity and skill, ability to deliver and
provide future service, and compliance with the RFP -defined scope of work. The
Superlative Group was selected based on these criteria, their superior valuation
methodology, and their strong track record with public agency programs. As bike share
is a new system in Los Angeles, their market evaluation to determine the right level for
sponsorship afforded by placement of the company name and logo on the bicycles was
particularly important. The negotiated commission -based agreement required
Superlative to obtain a minimum of $250,000 annually for the City with a bonus if the
contract exceeded a three year goal of $1,500,000 ($500,000 for three years) after
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commission. Superlative does not receive other reimbursements or direct payments
from the City. All artwork and materials are to be provided by the sponsor and placed
on the bicycles by the system operator.
Discussion
In late August, Superlative informed staff of a potential offer from Hulu, and over the
months of August and September, City staff and Hulu negotiated agreement details for
Hulu’s five-year sponsorship of Breeze (Attachment B). The agreement provides
$675,000 annually ($3,375,000 total), which includes a commission to Superlative and
well exceeds the $1,500,000 total amount targeted by the City to subsidize bike share
operations. Santa Monica-based Hulu is an on-line, ad-supported streaming service,
which has grown substantially and recently expanded its office space in Colorado
Center. With more than 500 employees in the Santa Monica workforce, Hulu
represents the innovative companies that have earned Santa Monica its “Silicon Beach”
moniker. As such, Hulu’s profile allies with the City’s 21st century objectives for the
City’s bike share enterprise, which will introduce technologically superior “smart bikes”
into the Los Angeles region.
The Hulu logo, which is the same green color as the Breeze bikes, would be placed on
the baskets and skirt guards of the Breeze bicycles, the locations that were approved by
Council. As required by the City’s Municipal Code, no advertisement, including logo
placement, may be placed on the bike share stations racks or signs. Hulu staff has
preliminarily begun coordination with City staff and other partners in the planning of
launch events, now tentatively scheduled to take place in early-mid November.
Hulu’s sponsorship of Breeze bike share is the first time that a corporation has
sponsored a specific, ongoing program in the City of Santa Monica, and the proposed
contract exceeds the support levels established by the Council. Hulu is a Santa
Monica-based, expanding internet streaming company, which also produces some
original content and employs more than 500 employees in the city. The sponsorship
ensures that the City’s bike share system, under operational contract with CycleHop,
LLC and featuring Social Bicycles’ “smart bikes,” will be self-supporting between
sponsorship income and anticipated user fee revenue.
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Financial Impacts and Budget Actions
Award of the agreement with Hulu, LLC for the sponsorship of the Breeze Bike Share
system will generate an estimated net annual revenue amount of $540,000 and requires
the following budget changes to the FY 2015-16 Adopted Budget and FY 2016-17
Budget Plan:
1. Establish revenue budget at account 01267.409330 in the amount of $675,000.
2. Appropriate $135,000 to reflect the payment of commission fees at account
01267.522580.
Prepared By: Liz Bar-El, Senior Planner
Approved
Forwarded to Council
Attachments:
A. November 11, 2014 Staff Report (web link)
B. Hulu Agreement Terms
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ATTACHMENT A: Hulu Contract Terms
Term detail
Five-year term beginning from launch date. Hulu may terminate agreement after third
contract year with 6 month notice
Exclusive presenting sponsor; City may procure secondary sponsorships from any local or
national commercial interest(s) as long as such interest(s) do not qualify as an online
company or ad-supported streaming service. Such sponsorships may be recognized in
materials and digital media (not on bikes).
Agreement contains terms within which both sides may promote the sponsorship
SIGNAGE & ANCILLARY SPONSORSHIP BENEFITS
Signage Exposure
• Five prominent Sponsor ID’s (sponsor logo only) on 500 Breeze bicycles introduced into
circulation as part of the launch of Bike Share and all additional bicycles added to the initial
inventory of Breeze bicycles during the Term, up to 1,000 total bicycles.
- Rear fender cover – 2 sides
- Front basket signage – 3 sides
Designation/Exclusivity
• Presenting sponsor of the Breeze Bike Share program
• Sole and Exclusive commercial sponsor signage on all bicycles
• All signage and placement subject to agreement with City of Santa Monica, not to be
unreasonably withheld
Online Exposure
• Logo/link on Bike Share website
• Logo/link on Bike Share mobile app
• Logo/link on Bike Share interactive maps and collateral materials
• Logo/link on Bike Share social media
• Logo/link on City of Santa Monica website
Additional Exposure
• Recognition as Presenting Sponsor at kickoff event and related materials
• Recognition as Presenting Sponsor on all bike share collateral materials
• City will give strong consideration to place select Bike Share stations at feasible location(s)
of Sponsor’s choice
• Exposure on additional bikes if program grows over the term, up to 1,000 bikes total
• City will make best efforts to include Sponsor exposure through additional partnerships for
launch including Global Green USA blog and other social media outlets, and bicycle
coalitions.
Reference:
Agreement No. 10202
(CCS)