TfL preps £1bn contract to make it less ‘risk-averse’ with its advertising media

Transport for London (TfL) is combining all its advertising estate across London in a single £1bn package that it plans to sell to a media owner able to make it less risk adverse to commercial opportunites.

It marks the first time the city’s transport network has been packaged into a single advertising contract, spanning London Underground, London Overground, Tramlink, Docklands Light Railway and Victoria Coach Station. Crossrail will also be folded into the plan once it is operational.

The plan's reveal fires the starting gun on the race for media rights to one of the city’s most expansive advertising contracts. It will last for eight and a half years from 2016 and cover an advertising space during over 30 million journeys every day through 270 tube stations as well as 45 DLR stations

Transport bosses expect traditional out of home players to vie for the rights though are keen to see whether the more integrated offering attracts digital specialists as well as alternative media companies.

The reason being that the TfL wants to elevate the value of inventory, which accounts for 20 per cent of the UK’s out of home advertising estate. Some of the organisation’s previous commercial attempts had not necessarily capitalised on the opportunities on offer, according to its director of commercial development Graeme Craig due to a lack of incentives in the contracts for both parties.

“We’re keen to move to a different approach now that’s more of a partnership”, he continued. It means turning TfL assets into sustainable sources of income rather than pushing hard on securing upfront capital.

In the past deals were geared to drive early investment but would not be sustained throughout the life of the contract. “We do want to run this in-house by ourselves," he added.

"We want to find a partner that can sit opposite the table to us as equals. We’ve been risk averse in the past where I think we were willing to sign up to a guarantee where we could tell our partners that it was their job to deliver the money.”

It means that whereas London Underground partner Exterion might have been responsible for putting up infrastructure in previous contracts, TfL would now do it due to its expertise on its own stations. The better balanced dynamic equates to a more efficient grouping of the organisation’s resources in its bid to generate £3.4bn in non-fare revenue over the next 10 years.

The target is a revision on the £2.4bn previously projected, reflective of the advertising opportunities travel chiefs hope to mine from a media pool that spans over 5,500 acres of property and 10,000 retail outlets.

To support the shift, the TfL has upscaled its commercial arm as well as tweaked its strategy to showcase that it is an advertising business. The change is already manifesting itself in a more dynamic brand presence on the London Underground. Canada Water tube station was renamed Buxton Water on the day of last month’s London Marathon and further brand takeovers are planned.

The winner of the integrated contract is expected to be agreed by next April and ready to roll out from October.