Back in 2006 (two years before the recession struck in the UK and elsewhere) CBS outdoor signed an eight and a half year deal with London Underground to instal digital screens in flagship Tube stations like Oxford Circus.
In return CBS guaranteed London Underground operating company Transport for London (TFL) about £70m a year from its ad takings meaning that it had to sell considerably more than this to pay for the installation of the expensive screens and earn a profit.
Unfortunately it has failed to do so and is threatening to end its contract early in March 2012, three months before the start of the London Olympics when it (and TFL) should be making oodles of money. TFL is fighting the proposal and the two parties are also rowing about who owns the installations, CBS says it does and TFL the opposite.
CBS is also accusing TFL of mucking up the contract by delaying the installation process through prioritising its own structural works and foisting its useless contractors on CBS. So the US-owned firm is adding to TFL’s woes by suing it for millions in compensation.
Media owners are forever coming unstuck by striking deals with landlords and other property owners that take far too optimistic a view of the likely proceeds. Landlords put these deals out for tender and some idiot always pays too much to get the deal.
It happens in outdoor the whole time, the once high-flying Maiden Outdoor came terminally unstuck when it did a deal for ads on railway stations with operator Network Rail. That deal eventually moved on to French poster giant JC Decaux which does know how to do these things, always guaranteeing its own profit first.
Cinema advertising firms Carlton Cinema Advertising (owned by ITV) and Pearl & Dean both came unstuck by bidding too high for the UK’s small number of cinema operators. At a time when cinema admissions were booming Carlton was losing £8m a year and P&D £4m (P&D was half as big).
CBS’s new hardball approach presumably has something to do with the recent departure of managing director Mike Moran and commercial director Mark Chippendale who were in charge of the deal for some of the time at least.