What's a Cemusa? New outdoor giant

By Published on .

Despite New York's bigger-is-better reputation, a little guy walked away with the billion dollar prize last week, when the city awarded its mammoth 20-year street furniture contract to Cemusa, a relatively unknown offspring of a Madrid-based construction company.

The contract was one of the city's largest-significant enough for JC Decaux's stock to drop 5% the day after the news broke and for Leslie Moonves, Viacom co-chief operating officer, to sit in on the incumbent's pitch. So how did the plucky foreigner swoop in and steal the rights?

Cemusa's only other U.S. operations are in Miami, San Antonio and Boston, yet it beat out finalists JCDecaux and Van Wagner-companies aggressively expanding their reach in the city-as well as outdoor giants Viacom and Clear Channel, both of which were dropped earlier in the process.

While the other bidders are pure-play outdoor media companies, Cemusa is part of FCC, an $8 billion Madrid-based company that specializes in construction and municipal services-everything from garbage collection to transportation.

"We're not just an advertising company, but also a services company," said Toulla Constantino, CEO of Cemusa North America. "We focus on creating beautiful streetscapes and that's good for the advertisers and it's great for the city because they have a clean beautiful amenity... it goes to our core competency."

Cemusa also offered the city a sweet deal: It will pay $1 billion dollars for the rights to sell advertising as well as design, install and maintain 3,300 new bus stop shelters, 330 new newsstands and 20 public toilets. The city will receive a share of the ad revenue-as it does under its current street furniture contract with Viacom-as well as 20% of the ad space for its own agencies and to bundle into corporate partnership deals. (Under its Viacom contract, the city gets 15%.)

Revised estimates

"We started out thinking maybe we could make $400 million and now we're making $1 billion," said Kay Sarlin, press secretary, New York City's Department of Transportation. Cemusa will give the city 20% of gross ad revenue.

Additionally, Cemusa will pony up out-of-home inventory in European and Latin American markets, helping to lay the foundation for a New York global marketing campaign, expected to launch next spring.

"Given the growing importance of outdoor advertising and the density and diversity and volume of the New York City media market, we were able to ask for and subsequently receive an unprecedented number of benefits," said Joseph Perello, the city's chief marketing officer.

One executive close to the pitches called the size of Cemusa's outlay "almost absurd" and how much the company will be able to recoup is unclear. When the contract's request for proposals was issued, estimates suggested revenue generated over the deal's lifetime could reach $1 billion. But out-of-home advertising is in vogue. And a more sophisticated measurement system, such as ones proposed by the Traffic Audit Bureau and Nielsen Outdoor, could potentially double out-of-home's share of ad dollars.

The rights to the Big Apple's street furniture are a major coup. "New York is so important as an advertising market that you can overpay for it because of what you can create after it," said one ad industry executive.

Many of the companies in the running counted on their local heritage to help woo the decision makers, who included representatives from several city agencies, including the departments of Transportation, City Planning, Consumer Affairs, Parks and Recreation and Design and Construction and the New York City Economic Development Corporation.

Van Wagner, for example, has a rich New York presence. It built up much of the advertising in Times Square before cashing out in the late 1990s and currently maintains and sells ads on the city's 3,000 payphone kiosks. Viacom Outdoor, meanwhile, leveraged its status as one of Manhattan's largest employers. Even JCDecaux, the French company widely credited with popularizing street furniture advertising, aligned with NBC Universal in a revenue-sharing plan that would have given the broadcast network 30% of the proceeds. Cemusa, which has a small national sales staff in New York, will beef up with 100 new hires.

And while the city has kept specifics under wraps, buyers are excited for the new outdoor products.

Most Popular
In this article: