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Councils need to adopt a tougher approach to negotiating over the value of the advertising sites in their areas, says Joe Lee. Local government faces major challenges as the credit crunch bites, forcing councils to make unpopular decisions, including a reduction of staff and increasing council tax. With planning receipts and other revenue streams also in decline, councils need to find other sources of income. So what can they do? A central tenet of PM Gordon Brown's strategy to reduce the effects of recession is to stimulate consumer spending – so retailers and producers need to advertise their wares, if they are to reach consumers, and maintain profits and market share, If they stop spending on advertising, then their share of sales in a shrinking market may fall, as customers move to rival, better advertised brands. While some may reduce their advertising budgets and drive harder bargains over the cost of advertising, the market will not dry up. The money will simply shift to the bestperforming and most cost-effective advertising options. So, what has this to do with local government? Well, outdoor advertising, sponsorship, and poster media, in particular, have proved to be among the most reliable ways to reach and impact consumers – as opposed to the massive expense of television or print advertising, for example. These types of media require a physical location, and as local authorities are generally one of the larger land and property owners in their geographic area, they could find they have more advertising media in place to benefit financially from any concentration of advertising spend in this particular market. Unfortunately, if you examine a cross-section of councils across the UK, as we have in our advertising audit work with local government since 2006, this is generally not yet the case. We have reviewed a wide variety of advertising contracts. Ideally, one would expect the council to receive a fair share of all revenue from advertising media on their land, sensible performance-management indicators enshrined in the contract, regular reviews of the revenue splits, and the types of new media available. This is almost exclusively not the case, in our experience. Over the last 15 years, the advertising market blindsided councils with a variety of ‘emperor's new clothes' offers, including free council advertising opportunities on billboards, or the implementation of automated toilets, in return for the exclusive right to place and sell advertising hoardings on council land. Many councils jumped at this opportunity without sufficient understanding of what they were really committing themselves to – contracts where the supplier is making seven-figure incomes over the contract period, and yet the council receives little or no revenue or, in some cases, actually loses money. Contracts of up to 20 years which have no performance criteria, one-sided contractual clauses in favour of the supplier, nearimpossible termination conditions, no review mechanisms or uplift in revenue shares, are all commonplace. Not even an adjustment for inflation. The result is that most councils have, so far, missed out on the lucrative opportunity to generate significant year-on-year revenue for themselves from the UK advertising spend. This is all the more critical in the current financial climate and because of the countdown to the 2012 Olympic and Paraplegic Games, which will provide a strong rise in advertising spend prior to and over the Olympic period. Of course, no-one is suggesting that councils want to see their streets festooned with adverts like a scene from Blade Runner. But there are still plenty of opportunities available to councils to sensitively increase the amount of advertising taking place on their land, and to start receiving more realistic levels of annual revenue. This requires strong internal leadership and vision, decisive decision-making, and hard negotiations with the supplier base. Councils need to understand the true potential and value of media sites on their land, and the ruses which suppliers use in negotiation to ensure they are not taken advantage of. Although 2009 may be a tough year for the advertising market as a whole, mid-2010 should see a bounce back in revenues. This makes 2009 the ideal year for local government to prepare a new approach to the advertising marketplace. Be bold. Negotiate hard. There is new revenue out there just waiting for you, if you are prepared to challenge the market and insist on your fair share. Jo Lee is director of Pax Consultancy

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Getting a better deal

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