Naming rights
Secondary revenues can provide additional resources to fund both operational andcapital costs of a public transport services. Commonly used for funding sports stadiums, the sale of naming rights is developing gradually in the sector of urban public transport. The principle is simple: contracting with a public or private partner to rename certain stations or lines of the transport system in exchange for a predefined annual fee. The location and traffic of the stations are factors that go into setting the value of the naming rights for a given period.
In certain cases, naming rights can be sold or leased for a pre-determined length of time. This involves naming a transport interchange after a company that pays for this advertising.
High levels of passenger traffic in the station, or footfall, should be a major factor in determining the value of any given advertisement, leasing, sponsorship deal, etc. In itself, naming rights is not a new concept; the city of New York has already had it in place since 1977.
According to Comet Nova, tariff revenues cover an average of 75% of operating costs, which commercial streams are estimated to provide 15% (resulting in an estimated deficit of 10%). In a similar type of exercise, the World Bank estimates that when including capital expenditures, the deficit increased to 30% in Latin American Regions.
In certain cases, naming rights can be sold or leased for a pre-determined length of time. This involves naming a bus, underground or tramway stop after a company that pays for this advertising. Station domination advertisement packages are a much lighter version of corporate takeovers. It has led to increasing popularity of the concept of naming rights and has been applied for the streetcar system in Portland (USA).
Ultimately the main factor, crucial in the successful application of Naming Rights, will be that of public acceptability. A report drafted by London’s Assembly GLA Conservatives estimated that £136m could be easily raised through these deals. However TfL considers the branding and passenger experience could suffer from this type of change.
Models
Among the most used models for naming rights, we can observe:
- Name extension of space or system, this model is the most commonly used as seen in the previous case studies provided, where the name of the sponsor is either set at the beginning or at the end of the identified location/space (e.g. Vodafone Sol Metro Station and Vodafone Linea 2).
- New infrastructure renaming, for instance the newly constructed infrastructure, such Emirates Air Cable Car in London, worth £136m over 10 years, with an average of 30,187 journeys per week.
- Old infrastructure renaming, new approach undertaken by SEPTA (the public transport authority serving 3.9 million people in the Philadelphia metropolitan area), which is currently an ongoing discussion, but could delete the traditional name of the station/line and fully replace it with the sponsor’s name only (e.g. AT&T Station).
Under these models, generally, the names of the sponsorship will be read out loud over speakers whenever trains approach the station and promotional events would be allowed on site.
Restrictions on the type of businesses that may apply (adult content businesses, political parties and messages, gun companies, family names, religious groups or alcohol and tobacco brands). Operator companies must ensure that the company or chosen corporate partner will not be considered incompatible with the transport company’s brand.
| NODES strategic objective | Contribution |
|---|---|
| Enhance accessibility and integration | 0 |
| Enhance intermodality | 0 |
| Enhance liveability | 0 |
| Increase safety and security conditions | 0 |
| Increase economic viability and costs efficiency | ++ |
| Stimulate local economy | 0 |
| Increase environmental efficiency | 0 |
| Increase energy efficiency | 0 |
Good practice
In Madrid in 2013, Metro de Madrid signed a three-year agreement for €3 million with the telecoms operator Vodafone to rename the central Sol station (65,000 passengers a day) as well as Line 2 of the underground (122,000 passengers a day). This new approach enabled a 10% increase in advertisement revenues.
In Lisbon in 2011, Metro Lisbon signed a five-year agreement with Portugal Telecom, providing the exclusive rights of promoting their corporate image through brand name and association in written and figurative illustrations within the chosen station. This new approach enabled a 10% increase in advertisement revenues. Portugal Telecom is entitled to carry out brand activation initiatives at the metro station including the organisation of events and customised decorations of the station. In addition, the rebranded station offers a cultural and recreational agenda, along with free WiFi access in the station. The revenue is shared between the Lisbon Metro Company (30% after commissions and agencies reimbursement) and Publimetro/MOP (70%) while all investment costs involved in implementation are covered by Publimetro/MOP. This includes the actual physical alteration to the station maintenance, electricity costs and signage adaptation.
In New York in 2009, the Metropolitan Transportation Authority (MTA) signed an agreement for $0.2 million per year (€0.15 million per year) for 20 years with Barclays Bank to add its name to the Atlantic Avenue subway station, located in Brooklyn next to the Barclays Center (a multi-purpose indoor arena). In July 2013, MTA decided to authorise the extension of this arrangement to all of its stations, subject to certain criteria being met, i.e. a geographic or historic link between the station and its name.
In Philadelphia in 2010, the Southeastern Pennsylvania Transportation Authority (SEPTA) signed a five-year agreement for $3 million (€2.3 million) with the telecoms operator AT&T to rename the Pattison subway station, one of the busiest of the entire system. The five-year deal would include AT&T’s corporate name on maps and signs throughout the large rail and bus systems. Furthermore this sponsorship deal could lay the grounds for many others to provide additional funding streams. For this deal to materialise, changes in legislation were required providing a suitable framework for expressions of interests to be submitted and processed.
In Boston, the Massachusetts Bay Transportation Authority (MBTA) opened three BRT lines for a sponsorship deal (brand printed on station maps and system signage); the highest starting bid was 2 million USD. MBTA also opened nine stations for sponsorship deals with a contract lasting for five years; the bidding costs were 1 million USD, with the exception of Yawkey station, starting at 500,000 USD.
Potential interchange performance improvement
- Improved use of the public transport systems assets and know-how, in terms of diversification of revenues, can help offset possible funding gaps in operation expenses;
- New and independent revenue streams, depending of the sponsorship deal and amount perceived;
- Public acceptability if available revenues are linked to the assets; for instance enabling universal benefits if the revenues are used either to subsidise fares or are reinvested in the system (capital expenditures);
- Improved features added by the sponsors in the leased space (e.g. Lisbon WiFi availability).
Resources
As an independent revenue stream, this is an opportunity for operators or interchange owners to generate additional revenue. Proper estimation of the space value is required in terms of the value of the name with regard to the amount of space available, passenger traffic and revenues required by the operator.
The initial investment costs relate to the actual physical alteration to the station maintenance, electricity costs and signage adaptation.
It enables universal benefits if the revenues are used either to subsidise fares or are reinvested in the system (capital expenditures).
References
Untapped Resources: Bearing down on fares through sponsorship. http://glaconservatives.co.uk/campaigns/tfl-sponsorship/
Innovative ways of Financing Public Transportation: Best Practices from Different Cities. UITP Regional Public Transport Seminar, Skopje, 2011. slideshare.net/kaanyildizgoz/innovative-ways-of-financing-public-transportation-best-practices-from-different-cities