Meeting_Body
EXECUTIVE MANAGEMENT COMMITTEE
JANUARY 21, 2016
Subject/Action
SUBJECT: UPDATE ON ADVERTISING CONTRACTS AND EXERCISING FINAL CONTRACT OPTION YEAR WITH OUTFRONT MEDIA
ACTION: EXERCISE OPTION
Heading
RECOMMENDATION
Title
AWARD the third, and final, one-year option for year 2017 with Outfront Media's revenue-generating bus and rail advertising contracts; a $24,000,000 fixed, guaranteed amount of revenue to be received from these agreements by Metro for calendar year 2017.
Issue
ISSUE
In January 2015, Metro's Board approved Director Antonovich's Substitute to Director Fasana's Motion 79.1 (Attachment A), directing the CEO to exercise the next one-year option (for Calendar Year 2016) with Outfront Media. And that the Metro Board direct the CEO to provide quarterly updates to the Board on the contract performance of Outfront Media, specifically regarding the contractor's timely implementation of new opportunities (e.g. bike rack advertising space) as described in its January 2015 presentation to the Metro Executive Management Committee.
Discussion
DISCUSSION
Outfront Media was awarded two related 5-year revenue contracts (PS12714022 License to sell and display advertising on Metro buses, and PS12714023 License to sell and display advertising on Metro Rail system), each inclusive of three 1-year options. The period of performance for the initial term started January 1, 2013, and ends December 31, 2014. In January 2015, Metro's Board approved to exercise the next one-year option, which extends the term of this contract to December 31, 2016.
Metro receives a fixed, guaranteed amount of revenue from these agreements ($22 million in calendar year 2015 and $23 million in calendar year 2016) rather than a percentage of actual sales. This method shields Metro's revenue from fluctuations in the advertising industry, and relieves the agency of having a financial stake in the acceptance or rejection of any particular ad. Ad...
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