Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
TRANSIT ADVERTISING SALES AGREEMENTS SUMMARY With few exceptions, transit agencies in the United States accept and display advertising on their property and vehicles. Although the primary purpose is raising revenues, transit adver- tising serves other purposes as well, such as promoting transit services and providing adver- tising space for nonprofit agencies. Advertising provides a relatively small amount of revenue to transit agencies. In the sample of transit agencies surveyed for this report, total revenues from advertising sales averaged 1.5% of total operating funds, with amounts ranging from 0.1% to 3.2%. Advertising revenues appear more significant if viewed in light of fare revenues; total advertising revenues for transit agencies surveyed were 4.4% of these agenciesâ total revenues from fares. In dollar terms, revenues can be quite significant, ranging from $3 million to $20 million in 2002 for a sample of large agencies in major cities, down to $50,000 annually for small agencies. Revenues averaged approximately 3.5 cents per passenger trip among large, multi-modal transit agencies and approximately $1,500 per bus t bus-only agencies. a Until the recent economic downturn, the revenue stream from advertising sales had been growing at a healthy rate for most agencies. One-half of the transit agencies surveyed ex- perienced increases of 20% or more from 1999 to 2002, with a few seeing gains of more than 60%. Revenues have been spurred by the increasing attractiveness of outdoor advertis- ing, a category that includes billboards, newsstands, and taxis, as well as transit. New tech- nologies have improved the production and display of advertisements and attracted national brand-name companies. Consolidation of outdoor advertising sales among a few large media firms brought increased resources to expand and promote outdoor advertising. Most transit agencies contract out the advertising sales function to private firms, whether large national media companies or local advertising sales contractors. Vigorous competition for transit contracts helped to increase agency revenues in the late 1990s. However, some transit agencies experienced large declines in revenue in 2002 and early 2003 because of the decline in the advertising market and the economic recession generally. Whether revenue will return to a healthy growth rate when the advertising market re- bounds remains to be seen. On the positive side, the advent of nontraditional forms of ad- vertising may generate new revenue streams. Competing media such as television and radio continue to fragment, city populations continue to grow, and new audience measurement technologies promise to put outdoor advertising on a level playing field with radio and tele- vision by producing detailed audience demographic data. These factors could increase tran- sit agency advertising revenues. Other factors suggest pessimism. There was less competition for transit agency sales con- tracts in 2001 and 2002 than in previous years. One major media company holds a dominant position in contracting with large transit agencies, raising the question of whether competi- tion will continue to spur increases in advertising sales revenues among this group. Compe- tition in small and mid-size markets has been uneven, with a large variation in transit agency revenues between cities, even accounting for bus fleet size. In mid to small media markets, 46% of transit agencies sold some or all of their advertis- ing space using in-house staff. Creative and aggressive transit staffs at some of these agencies
2 have demonstrated that just as much, or more, revenue can be obtained through in-house sales as through contracted sales. Transit agency staff responsible for the advertising program face a number of important decisions. Should they sell advertisements in-house or contract out the function? If con- tracted, what should be the contract terms and how should a request for proposals be struc- tured? What types of displays should they sell? Should they pursue nontraditional forms of advertising such as bus and train wraps, station dominance, in-vehicle and in-station video screens, and electronic signs and in-tunnel advertising? Should they accept noncommercial and public service advertising? How can the agency avoid becoming enmeshed in contro- versy over advertisements that address emotionally charged issues such as abortion and other sexual topics or that portray graphic violence? How should staff strike a balance be- tween maximizing revenues and using advertising space to promote the agency and help the community through public service advertisements? This report documents and summarizes transit agenciesâ experience with advertising sales and synthesizes current practices for advertising sales, contracting, and display. This infor- mation can help agency staff address these issues and implement effective advertising pro- grams.