Velib Case Study
FINANCE
Vélib is privately operated by SOMUPI, a joint venture owned by JC Decaux, an outdoor advertising and street-furniture multinational, and Publicis, a large advertising and communications corporation. Most profits are derived from Billboard advertising.
SOMUPI is responsible for covering the entire cost of implementing and managing Vélib, as well as any additional fees. In return, it receives exclusive rights to provide and operate the bus shelters, public announcement boards and other street furniture, which then serve as the physical support for 1,628 lucrative advertising boards. The revenue directly generated by Vélib subscription and rental fees, expected to be in excess of 30 million Euros a year, goes to the city. If SOMUPI meets all contractual standards of good operation of the system, it is entitled to revenue sharing of 12 percent of Vélib revenues plus payment by the city of an amount equal to 12 percent of advertisement sales, i.e. about 10 million Euros. Since 1976, SOMUPI had held the street furniture and billboards contract with the city. The contract was not supposed to expire until 2010. However, in January 2006, Mayor Delanoë decided to break it and tender a new one designed to emulate the success of Velo’v, Lyon's bike share program, also run by JC Decaux. Delanoë wanted at least 3,000 bikes by the summer of 2007, and 6,000 by the end of the year. He also demanded a 20 percent reduction in the 2,000 existing billboards.
The top two bidding companies were SOMUPI and Group for Paris, a joint venture led by Clear Channel, the Texas based global media conglomerate and number one outdoor advertising company worldwide, and including major French companies. Initially, Group for Paris made the winning bid in November 2006 with a proposal for 14,000 bikes; SOMUPI’s proposal was for just
Vélib is privately operated by SOMUPI, a joint venture owned by JC Decaux, an outdoor advertising and street-furniture multinational, and Publicis, a large advertising and communications corporation. Most profits are derived from Billboard advertising.
SOMUPI is responsible for covering the entire cost of implementing and managing Vélib, as well as any additional fees. In return, it receives exclusive rights to provide and operate the bus shelters, public announcement boards and other street furniture, which then serve as the physical support for 1,628 lucrative advertising boards. The revenue directly generated by Vélib subscription and rental fees, expected to be in excess of 30 million Euros a year, goes to the city. If SOMUPI meets all contractual standards of good operation of the system, it is entitled to revenue sharing of 12 percent of Vélib revenues plus payment by the city of an amount equal to 12 percent of advertisement sales, i.e. about 10 million Euros. Since 1976, SOMUPI had held the street furniture and billboards contract with the city. The contract was not supposed to expire until 2010. However, in January 2006, Mayor Delanoë decided to break it and tender a new one designed to emulate the success of Velo’v, Lyon's bike share program, also run by JC Decaux. Delanoë wanted at least 3,000 bikes by the summer of 2007, and 6,000 by the end of the year. He also demanded a 20 percent reduction in the 2,000 existing billboards.
The top two bidding companies were SOMUPI and Group for Paris, a joint venture led by Clear Channel, the Texas based global media conglomerate and number one outdoor advertising company worldwide, and including major French companies. Initially, Group for Paris made the winning bid in November 2006 with a proposal for 14,000 bikes; SOMUPI’s proposal was for just