Interesting detail on deal structure for big DOOH transit deal

August 3, 2009 by Dave Haynes

A story last week in MediaPost provides some interesting detail about how digital out of home deals are being structured with big media companies and local authorities.

The story was about the deal between Titan Worldwide and the Long Island Railroad, which runs under the direction of the Metropolitan Transportation Authority. It’s a very small test, with one car on each line and four screens in each car, and the writer suggests there is no timetable for a further rollout.

It’s suggested this is a way for the transport authority to generate new revenues, and points to the NBC Universal PATHvision system that started this spring on New Jersey PATH commuter trains that run into NYC. 

So here’s the interesting stuff for anyone on the business planning side of a DOOH company … 

Under its “PATHVision” deal, NBCU is a subcontractor of JCDecaux. The out-of-home company obtained rights to an “infotainment” network on the PATH system in an agreement with the Port Authority.

NBCU could owe Decaux $4 million, or more, if the contract runs for 13 years. At least $1.5 million is guaranteed.

The agreement calls for NBCU to pay Decaux a guaranteed minimum amount each year, or a percentage of gross ad revenue — whichever figure is higher.

The first year has no minimum and Decaux will receive 10% of revenues. Then, in the second year, Decaux will receive a minimum payment of $100,000, or 10% of revenue.

If the contract runs for 13 years — which would include a renewal — it tops out with a $500,000 minimum payment to Decaux, or 25% of revenue.  

It’s interesting both that Decaux has the rights and pieced them off to NBC, and that some serious guarantees are in place. Now for NBC that may be walking around money, but for most network operators million dollar-plus guarantees would be more than a little unnerving.

Transit authorities and property owners aren’t typically signing deals just on the prospects of a revenue share percentage. They want a guarantee on what they’ll see. That sort of thing has killed or crippled smaller companies, though it can work.

Image from Hoboken411.com