Staff Report #3
October 31, 2018
To All Commissioners
Re: Transit Advertising Contract
Recommendation
That the Commission APPROVE exercising the five year contract renewal option for bus advertising, taking effect January 1, 2019 with Lamar Advertising noting in exercising the option, the Commission will receive guaranteed revenue over the renewal period of $2,350,000.
Background
London Transit has enjoyed a 20 year history via contract awards and exercising of renewal options with Lamar Advertising (Lamar) for bus advertising. Over the period, these contracts have been subject to significant economic change reflecting changing market conditions.
Bus advertising is broken down between interior and exterior ads, with exterior being more popular and easier to sell given the higher exposure to the general public. Interior ad space is generally not fully utilized due to limited demand for interior advertising. Lamar also provides some space at a reduced rate for public non-profit agencies.
The contract also defines exclusions and expectations as to the advertising content, including:
- advertisements will not expressly or impliedly present demeaning or derogatory portrayals of individuals or groups;
- undermine the safe and welcoming character of London’s public transit system and/or of the London Transit Commission as an organization; and
- fail to comply with any applicable law or regulations pertaining to such matters from time to time including the Canadian Advertising Standards.
Given a recent ruling and upheld appeal of an advertisement being in non-compliance by the Canadian Advertising Standards Counsel, an advertisement, which had been placed on LTC buses, was removed subsequent to the ruling. Lamar has implemented an amended approach to advertising approval going forward in an effort to mitigate situations of this nature. Effective immediately, any advertisement that is deemed to potentially be in conflict with the above requirements will require a confirmation of compliance from the Canadian Advertising Standards prior to it being placed on LTC buses.
The current five year contract expires December 31, 2018. The contract provides a five year renewal option, subject to negotiations with respect to revenues payable to London Transit. The expiring five year contract provided guaranteed revenue over the period of $1.9 million (starting at $360,000 for 2014 and growing to $400,000 for 2019). In addition, the contract provided the opportunity for additional revenue sharing based upon 40% of the net revenues beyond the minimum guarantee and in-kind media advertising through contra deals brokered by Lamar (expiring contract included $78,000 per year of Corus Radio Advertising trade).
Other terms and conditions of the contract include:
- Interior space – LTC shall be provided with interior space for on-board posting of Commission information (minimum of two inside spaces per bus). London Transit has consistently utilized three or four spaces which have been accommodated by Lamar.
- LTC reserves the right to utilize three buses (full bus wraps) for corporate promotions (cost of preparing wrap at LTC expense)
For the renewal period, Lamar has proposed guaranteed revenue of $2,350,000 ($450,000 for 2019 growing to $490,000 for 2023) with payment of the annual guaranteed amounts to be made in January of each year. All other terms and conditions of the contract remain in force for the renewal period.
The business relationship with Lamar has been excellent with no contract performance issues.
Recommended by:
Katie Burns, Director of Planning
Mike Gregor, Director of Finance
Concurred in by:
Kelly S. Paleczny, General Manager