Western Railways opens bid with high expectations

Western Railways has called OOH players to bid for a steep seven year contract for rights to advertise on the suburban section of Mumbai railway stations from Churchgate to Dahanu Road. The company with the winning bid will have inventory options at 36 different stations on this stretch.

The minimum bid price for the contract is Rs 40.5 crore per year, taking the total minimum bid amount for seven years to Rs 283.5 crore. According to the new contract, the winner will have to up the licence fee from the second year onwards by 10 per cent, 15 per cent, 20 per cent, and so on. This will be on an annual basis from the previous year’s licence fees. The licensee will be allowed to pay the licence fee on a quarterly basis and put up media at their own expense, apart from using the media options already available at the stations.

Virender Raina, senior general manager and national business coordinator, Serve and Volley, says he thinks that the minimum bid price is on the higher side. “Due to the economic slowdown, many big players of the industry are withdrawing from long term contracts. There is no surety of timely returns in the OOH business at the moment,” he says.

Some OOH companies already have media rights at some of the stations on the stretch from Churchgate to Dahanu. These will retain their rights as per the contract. Ajaz Memon, director, Network Media Solutions, explains, “We have put up 360 digital clocks at various stations and have advertisement displays below them. This has been done as part of the contract we signed with Western Railways in October 2007. Once our contract expires in 2009, the property will be handed over to the winner of the tender bid.”

Memon also says that it will be difficult for Western Railways to get the high licence fee it is demanding. But at the same time, he says that he believes that the section from Churchgate to Dahanu will boost the portfolio of any outdoor player.

Indrajit Sen, OOH veteran and newly appointed president at Laqshya Media, says he would like to explore the possibility of bidding for this contract, though he points out that Western Railways is running the property in an unorganised way, and there are certain loopholes in the contract.

“The Churchgate station is cluttered with advertisements. Western Railways wants to earn more money by compromising on the quality of the media. It is not possible to extract all the advantages in one go, and eventually, this clutter will impact the revenues of Western Railways,” he says.

He adds, “All 36 stations will not be hot media selling properties and 50 per cent of the licence revenue will come from Churchgate station. Also, the licence fee will increase with every year and that is enough to break the back of any media seller.”