Advertising firm threatens to terminate �1bn train and tube station contract months before London 2012 games
Advertising firm CBS Outdoor is to launch a legal action against Transport for London over the costs of running the advertising network throughout the London Underground (LUL) and could terminate the �1bn contract that covers 33,000 poster sites in 275 stations and 88,000 panels in trains before the start of the Olympics.
The contract was expected to run until 2015, however, CBS Outdoor has found it extremely difficult to monetise the contract on the terms agreed when it won the pitch. One of the difficulties has been the huge investment costs required to upgrade the London Underground with digital screens.
CBS, which won the pitch to handle the contract in 2006 and is one of the largest advertising deals in the world, is threatening to terminate the contract in March next year unless terms are renegotiated by LUL.
It is not clear what impact the potential termination of the contract ? which covers 33,000 poster sites in 275 stations and 88,000 panels in trains ? will have just months before the London Olympics are set to start.
CBS Outdoor said on Thursday that it has given notice to LUL that it intends to terminate the contract on 31 March 2012 unless it returns to the negotiating table to hammer out a new deal.
CBS claims that LUL, and its parent company Transport for London have "refused to acknowledge" that changes implemented on the underground system have triggered an "adverse event" clause in the contract that have caused "massive cost over-runs" by the outdoor advertising company.
The company claims that "massively delayed" construction projects made it impossible for CBS Outdoor to "gain the access and approvals necessary to complete its upgrade work in a timely fashion and within budget".
CBS said it has been seeking to claim costs since 2007 and has now been forced to turn to high court action to seek to terminate the contract and receive an unspecified amount of compensation for damages.
"For several years CBS Outdoor has sought to engage London Underground in fruitful, bona fide discussions to address the extraordinary costs and delays attributable to them," said Richard Sauer, executive vice president and general counsel for CBS. "CBS Outdoor is seeking a fair and equitable resolution of this matter".
A spokeswoman for Tfl said that negotiations were ongoing and refuted that CBS Outdoor had the right to terminate the contract.
There is a six-month notice period for CBS to terminate the contract, which means that the outdoor company would have to officially cancel its agreement in October - making the threat now something of a bargaining manoeuvre.
"We do not accept that CBS is entitled to issue a termination notice and will be making it clear to CBS that it must honour its obligations under the contract LU will vigorously defend CBS's claims and will seek to recover any losses as a result of CBS's action," said Richard Parry, strategy director at Tfl.
He added: "CBS's claims that they want to terminate their contract due to delays to the LU upgrade programme are entirely spurious. TfL is engaged in discussions with CBS regarding the terms of the LU advertising concession".
? To contact the MediaGuardian news desk email editor@mediaguardian.co.uk or phone 020 3353 3857. For all other inquiries please call the main Guardian switchboard on 020 3353 2000. If you are writing a comment for publication, please mark clearly "for publication".
? To get the latest media news to your desktop or mobile, follow MediaGuardian on Twitter and Facebook.
Source: http://www.guardian.co.uk/media/2011/aug/25/olympics-advertising-london-underground
small business help types of advertising contextual advertising internet advertising
No comments:
Post a Comment