Bike sharing systems financing and implementation models Part 1

 

Since the introduction of the first bike sharing systems in the 60. the financing and implementations models have evolved.

The idea of first bike sharing systems in the 60. was that the city would buy bikes and leave them on the street for shared use of all the citizens. In Amsterdam, to encourage the council to implement this idea activists from the radical group Provo left a couple dozen white bikes on the streets and let everybody use them. Even though the initiative was a failure (bikes were either stolen or confiscated by the police) it is always mentioned as the first bike sharing initiative in the world. In the following years the bike sharing systems that were introduced were exclusively financed and maintained by cities. 

The breakthrough came when Clear Channel came up with the idea of introducing a bike sharing system in Rennes called Vélo à la Carte that would be financed with revenues from the street furniture contract. Thanks to this idea Clear Channel won the contract for street furniture in Rennes over JCDecaux.

This started the advertisement war between the companies. JCDecaux filed a lawsuit against Clear Channel about the public bikes. Clear Channel answered with suing JCDecaux for unfair competition.

The next battle of the war took place in 2007 in Paris during the tender for street furniture advertising. First the tender was won by Clear Channel with an offer of 14.000 bikes, but JCDecaux was able to have the contract broken for a legal flaw. In the end it was the French advertising giant who won the tender with an offer 20.000 bikes. And so the Velib’ was born. 

The street furniture business model looks as follows:

• the advertising company installs and maintains the bike sharing systems with no cost for the city
• in exchange the company receives the rights to rent advertising spaces around the city
• whole system in financed with revenue generated with the street furniture contract that is signed for a longer period, such as 10 years
• the city obtains all the revenue generated by the system (the advertising company may receive a part of it as an incentive to increase efficiency of the system)

The business model was implemented by Clear Channel, JCDecaux and other advertising company – Cemusa in various cities around the world. After the success of Velib’ many cities wanted to introduce a similar system.

The biggest advantage of the model is that bike sharing is introduced at zero cost for the city.

On the other hand if the city had signed separate contracts for street furniture it would probably  be able to finance the bike sharing system with the revenue generated. 

Other disadvantage of this model is that it increases the amount of advertising in the cities and some are reluctant to contaminate the public space with more advertising.

That is why some cities decided to introduce and finance public bikes in a different way.

Other financing models will be described in part 2 of this article.

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