When Branding Is Too Good: A
Cautionary Tale From New York’s
Citi Bike
WHY WOULD ANY OTHER COMPANY WANT TO JOIN CITI AS
A SPONSOR?
Shaunacy Ferro
New Yorkers have racked up more than 7 million trips on Citi
Bike, New York City’s bike-share system, since it launched
late last May. More than 100,000 people hold annual
memberships. Yet financially, Citi Bike needs help. According
to the New York Times, Citi Bike is seeking somewhere in
the range of $20 million to be able to maintain and expand
the program. As the city’s transportation commissioner, Polly
Trottenberg, has admitted, Citi Bike has faced “significant
financial and operational issues.”
The company’s financial turmoil may be due, in part, to the
structure of its main sponsorship with Citi Bank. The New
York City Department of Transportation provides oversight
for Citi Bike, but the program--which is the largest in the
country--receives no public money, differentiating it from bike
shares in other cities. The New York system is operated by
NYC Bike Share, a subsidiary of the Portland-based Alta Bike
Share, which also operates systems in Chicago, Boston, and
Washington, D.C., among others. In a deal brokered by the
Bloomberg administration, Citigroup is paying $41 million
over the bike share’s first five years to be the title sponsor.
Mastercard, the only other sponsor, paid $6.5 million.
The problem is that it can be hard to decipher where Citi
Bike ends and Citibank begins, making it difficult to entice
additional sponsors to join. When you allow one company to
brand your service so completely, there’s little benefit left to
offer other potential funding partners. According to the Wall
Street Journal:
Alta was always expected to seek sponsorship, in addition to
Citigroup Inc., which paid for the naming rights. Goldman
Sachs Group Inc. lent the money up front to pay for start-up
costs. Finding additional sponsors has proved challenging
because the program has become so closely associated with
its eponymous supporter, according to a person familiar with
the matter.
Citi made a smart investment by inextricably linking itself with
the popular bike share for a mere $41 million. Thousands of
New Yorkers are riding moving Citi billboards around the city
each day. For the bike share, the benefits of the partnership
are less clear. By not securing enough Citi money to keep
itself afloat from the outset without other sponsors, Citi Bike
may have hobbled itself.