Selling Metro station naming rights: examples and debates

Selling Metro station naming rights: examples and debates
Marion Hoyez
CODATU
Chargée de Coopération - Inde
CODATU News Monday 10 October 2016

From sports venues to public transport infrastructures and rolling stock…

In general, operational costs for high-capacity public transport systems are seldom covered by fare box revenues. Subsidy amounts awarded to public and private operators often fail to fully cover losses and, hence, operators and decision-makers turn to alternative strategies to alleviate increasing deficits and, in some few cases, turn daily operations profitable.

The list of strategies includes, but is not limited to: commercial space renting, general advertising in vehicles or at stations, selected land value captures schemes, merchandising and naming rights. The latter is an alternative used in other domains, namely sports venue naming, television and radio shows [1]. It is a strategy where the holder of a certain asset – in this case a public infrastructure – will sell or rent out for a pre-determined period the name of this asset to a private company. The private company will then be able to advertise and, in some instances, it will acquire an area to promote its brand.

Naming rights, not surprisingly, is a contentious measure. While it certainly provides substantial non-fare box revenues, opponents to naming rights consider that, by changing the name of a station, it effectively disconnects the station from its urban landmarks or address where the station is located. This lack of link is likely to create relative confusion in users who fail to quickly identify the station and, then, their location on the transport network. Furthermore, most radical criticism argue that station naming legitimates power of biggest companies, sometimes creating the image that most profitable private companies are above public powers [2]. Indeed, it is argued that the naming rights model means a privatisation of public equipment image and users don’t have anymore respite with invading advertisement. Irrespective of criticisms, cities have recently begun to use naming rights schemes with varying degrees of success.

A worldwide prospective trend?

Many cities in the world have started selling their stations’ names to private companies, as a source of non-fare box revenue. Dubai Metro was the first project in the world to sell station naming rights, but various cities have followed: Chicago, Houston, London, Montreal, Kuala Lumpur, Gurgaon, Mumbai, New York, Philadelphia, etc. have successfully increased their non-fare box revenues. Other cities have vetoed initial proposals (Rio de Janeiro), or have failed to implement the measure (Boston). This process has been quite controversial all over the world.

Naming rights revenues will vary from city to city even if similar private sector companies are often targeted as potential partners:

  • In Dubai: In 2008, the Roads and Transport Authority (RTA) launched the « Dubai Metro Naming Rights Project » to choose the name of 23 of the 47 stations of the two underground lines (excluding landmarks and historical sites). A deal was signed for 40 M dirham per station for a 10-year period (approximately 2,5 M€ per station, per annum), it included 13 metro stations and leasing spaces inside the metro network. It is estimated that authorities have earned more than 450 M € between 2010 and 2014. The contract per station and per year represents 0,04% of the overall project cost (Dh 28 billion, or 7 billion €).
  • In Wuhan (China): In 2012, the name of Jianghan Road Station became prefaced by “Zhou Hei Ya,” – Wuhan-based food outlets famous for spicy duck necks. The sponsorship cost 5 M Yuan (approximately 0,7 M €) and ended in 2015. The contract for that station (per annum) represents 0,03% of the construction cost of the Line 2 (2,6 billion €).
  • In New York: A deal between the Metropolitan Transport Authority (MTA) and Barclays Bank was signed for US$ 0,2 M per annum (approximately 180 000 € per annum), for a 20-year contract, 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 Chicago: The Chicago Transit Authority was the first system in the United States to offer full branding at 11 stops along the city’s elevated train system. The naming rights deal’s duration is 8 years and it allows for exclusive branding at the stop [3].
  • In Philadelphia: The Southeastern Pennsylvania Transportation Authority (SEPTA) renamed Market East Transit Hub to Jefferson station after signing a 5-year US$ 5 M deal, in the name of a University, and two years later, after a difficult process, Pattison station was renamed after the telecoms operator AT&T [3].
  • In Boston: Officials sought approximately US 1 M per annum over 5 years (or 0,9 M €) from private company willing to tender. In 2014, officials also attempted to sell high-capacity public transport lines, for values nearing US$ 1,2 per year. While JetBlue effectively submitted an offer to purchase naming rights for the BlueLine, the tendering process was ultimately unsuccessful [3].
  • In London: For the first time in the underground’s 152-year history, Transport for London (TfL) has sold the naming rights of a station to Nestlé. Canada Water has been rebranded for 24 hours as Buxton Water on Sunday 26 April 2015, date of the annual London Marathon. The station’s roundel signs featured the name of the Nestlé-owned mineral water and there was branded artwork throughout. The main sign at the entrance and tube maps remained unchanged [4].
  • In Madrid: A deal for two major public transport nodes worth 3 M € over 3 years was signed with Vodafone covering the 2013-2016 period. The 3-year naming contract represents 0,15% of the overall cost of the Metrosur line (2 billion €). This deal might not be renewed in 2016.
  • In Delhi (India): The Delhi Metro has also started giving out station names, but only outside Delhi (Faridabad, Noida, Guragon), due to existing restrictions in Delhi and absence of restrictions in Uttar Pradesh and Haryana (neighbouring states). The scheme is referred to as “semi-naming rights”, as the licensee will only suffix the brand name with the name of the station. Naming rights for the stations come with exclusive marketing rights of media space for 10 years, with a lock-in period of 2 years [5].
  • In Mumbai (India): Depending on the size and location of the station, private companies will pay between 2 to 6 Crores (approximately 0,3 M € to 0,9 M €) per annum, for a 5-year contract (which can be renewed for 5 more years), which represents around 0,01% of the cost of the metro project (4,7 billion €). The deal covers 12 stations. The name of the successful bidder will prefix the name of the station and the company will have rights to 13 elements, such as areas in the station, distribution of pamphlets and brochures, space on Mumbai Metro website, and during announcements.
  • In Gurgaon (India): Depending on the size and location of the station, the companies will pay between 2.5 Crores to 7 Crores (approximately 0,35 M € to 1 M €) per annum, for a 5-year contract, representing 0.7% of the rapid metro project (144 M€). The sponsors are free to renew the interiors and part of the exteriors in the brand’s colour. So far, the following companies have given their name to stations: Vodafone, Micromax, Airtel, IndusInd Bank.
  • In Kuala Lumpur (Malaysia): the naming rights can cost up to RM 3 M for a 3-year period (approximately 0,7 M €), depending on how much change is required to the station. The naming contract represents 0.2% of the overall Monorail Project cost (335 M €). Thus far, AirAsia Berhad has already unveiled its first station of the kind, the AirAsia-Bukit Bintang station – formerly known as the Bukit Bintang monorail station.

Original solutions to best suit the local context

Schemes based on the naming right have also emerged to best suit particular conditions or new commercial and advertising options. In Denver (Colorado, US) for instance, a recently built railway line linking the city with the airport sought to finance infrastructural and operational costs and proceeded to sell its naming rights to the University of Colorado [6]. Interestingly, the new line, now officially referred to as University of Colorado A-Line, does not link nor does it cross the university. An interesting fact is that the contract was signed between the Transport Authority and a public institution and not a private partner.

In Japan, the naming rights initiative sought to adopt whimsical names for public transport stations to attract tourists. The innovation initiative resulted in the Chiba Prefecture being named after a hair growth solution: Kaminoke-kurohae [7]. Taking it a step further, the company’s music tune is played to signal a train approaching the station. Furthermore, one-time only edible kelp (a type of seaweed) train tickets were issued to promote the naming changing process: these were sold in less than a week.

Modes other than high-capacity rail- and road-based modes are also being analysed to judge the feasibility of a naming right initiative. In Singapore, the Land Transport Authority (LTA) has started investigating the prospects of selling the name of a bike-sharing system [8]. This type of scheme has already been used in New York (Citi Bike is sponsored by Citibank) and in London (where Barclays Bank sponsored th city programme from 2010 to 2015 for £ 25 M and then Santander UK got the contract).

Conclusion

Available data is insufficient to construct robust conclusions on naming rights initiatives in public transport systems. The general picture can eventually be used to show a trend that as the number of contracted years increases, the amount per station per annum is likely to increase too (see image below). Yet, national and local socioeconomic contexts and typology of public transport infrastructures are potentially more impactful than any other variables.

NamingRightsPlot

First, pertaining to cases from the same country, contracted years and amounts for cities vary considerably. The cases of India and the United States depict very different scenarios. In India, variability is reduced, but in the United States much higher variability is evident. Focusing on the latter, New York receives approximately 0,2M€ per annum per station, while Philadelphia (theoretically a city with less comparable advertising potential) receives 0,9M€ per annum per station. The higher amount is more than 4-times higher than the lower one, thus not easily explained by the difference in the number of contracted years.

However, any conclusion is potentially biased as no categorization of types of stations is proposed here. Indeed, a Metro or subway station, albeit possibly one with high patronage, is not comparable to an intercity train station or to a station in the suburban regional network. The place and role of any station on the network will play a major role in determining its naming rights potential. The image of a train station is that of an entry to the city and the image of a Metro station is more that of an urban landmark amongst others; this difference is important in understanding the naming rights potential of different infrastructures. So is the number of passengers passing through these infrastructures.

Second, in relation to the comparison of cases from different countries, a timid distinction between higher income countries and comparatively lower income countries can be put forward. Unsurprisingly, North American, European and Arab Gulf countries appear to be able to expect higher amounts per annum per year than, for instance, India or Malaysia. However, outliers – in this case New York – also point to the variability obstacle in this type of analyses.

In the end, naming rights initiatives in public transport infrastructures is not only a contentious issue in terms of the revenues it generates, but it is also contentious on how it generates these revenues. Future developments in this regard will shed light on the obstacles local authorities face when implementing these initiatives and on what variables can authorities analyse when determining the prospects of selling naming rights.

References

[1] « You name it: Rights for more municipal sites go on sale », The Japan Times, http://www.japantimes.co.jp/news/2011/09/20/news/you-name-it-rights-for-more-municipal-sites-go-on-sale/#.V-PNSYRrhZo

[2] « The problem with naming transit stations », Citylab, http://www.citylab.com/commute/2012/01/problem-naming-transit-stations/851/

[3] « U.S cities haven’t given up on selling naming rights for Transit Stations », Citylab, http://www.citylab.com/commute/2014/01/us-cities-havent-given-selling-naming-rights-transit-stations/8007/

[4] « Canada Water station renamed Buxton Water for Marathon Day », Transport For London, https://tfl.gov.uk/info-for/media/press-releases/2015/april/canada-water-station-renamed-buxton-water-for-marathon-day

[5] « Metro stations get new names », The Hindu, http://www.thehindu.com/news/cities/Delhi/metro-stations-get-new-names/article9165418.ece

[6] « RTD Board approves naming rights contract with the University of Colorado », RTD, http://www.rtd-denver.com/documents/MediaCenter/RTD%20Naming%20Rights%20Agreement%20NR%202015.pdf

[7] « Struggling rail line sells station naming rights in bid to stay on track », The Japan Times – News, http://www.japantimes.co.jp/news/2016/01/08/national/struggling-rail-line-sells-station-naming-rights-bid-stay-track/#.V_eSZISSdZo

[8] « Big sponsor wanted for bike-sharing scheme », The Straits Times, http://www.straitstimes.com/singapore/transport/big-sponsor-wanted-for-bike-sharing-scheme