In other words, Titan promised that revenues would increase by a set amount. Let's say it was $10 million. They also guaranteed a percentage of each advertising dollar. Let's say it was 72%. Titan would guarantee whichever was lower. Most advertisers that work with transit systems merely guarantee a piece of each advertising dollar earned. Because Titan guaranteed a minimum they swooped in and secured dozens of contracts with major transit systems all over the country. During the boom periods, this was no problem.
Yet, over the last two plus years, advertising of all sorts has dropped off tremendously. What happens when you guarantee $10 million in business but you only deliver on $2 million? So, what's happened to Titan? They've begun to default on many of these contracts.
The lawsuit alleges that Titan has failed to make mandated payments exceeding
$400,000, and has failed to provide PACE with an account of its billings, as it is required to pay PACE a certain percentage of its gross sales. It also states that Titan failed to provide PACE with the irrevocable letter of credit that the contract requires.
This is the contract between Titan and PACE [PDF] and Change Order #5 to the contract [PDF], which extended its life. The letter of credit requirement in Change Order #5 requires Titan to provide a LoC equal to 50% of the annual minimum payment for each year. In other words, Titan does not have the credit to get an LoC for a mere $2.35 Million. The Change Order also states that CBS Outdoor already paid the guaranteed minimum revenue for the period ending March 31, 2009. Titan was in default beginning in April 2009 when its guaranteed minimum payments began.
Meanwhile, many transit authorities have begun to dump Titan as a result.
The Metropolitan Transportation Authority has revoked its contract with troubled
advertising firm Titan Outdoor Holdings and awarded the right to run ads on the region's buses and commuter trains to CBS Outdoor.
The decision was a blow to Titan, which was founded in 2001 and quickly became a top player in transit advertising with contracts around the country and in Canada. The New York-based company's contract with the MTA started in January 2007.
So, Titans promises blew the company's fortunes up during the economic boom but now they're on the brink of defaulting with dozens of the same transit systems that made them such a player only ten years ago. Of course, the City of Chicago can still be counted on to give them a new deal.
Previously, CTA’s advertising contracts for print and digital advertising were under separate contracts. The approved contract has both types of advertising managed under the same agreement which is more advantageous for CTA and advertisers in coordinating opportunities for companies that want to advertise on the system, said the organization.
Both print and digital advertising have been impacted by the weak economy and the new agreement takes into account the current market conditions and expectations moving forward.
The contract also contains five one-year renewal options for both print and digital
advertising. For digital advertising, the additional five-year options would provide a minimum of $7.6 million. If, however, revenues from digital advertising exceed the minimum guarantee, CTA would receive 55 percent of all revenues for the duration of the contract.
Minimums still apply.