While Clear Channel Switzerland generally welcomes the proposals, APG has so far refrained from making a clear statement. At Affichage’s earnings press conference on February 29, *Werbewoche* sought further details from APG’s head of marketing, Markus Ehrle.
Mr. Ehrle, the Price Commissioner is calling for more competition in billboard advertising on public property. What are your thoughts on this?
Markus Ehrle: We take note of the Price Supervisor’s suggestions with interest, but are generally convinced that competition has worked very well so far in public tenders in Swiss cities and municipalities: The processes and criteria were clear, and even companies from abroad were able to participate. We were awarded the concessions in each case because we had submitted the most compelling bids to the cities as part of these tenders.
Among other things, the Price Commissioner is calling for concessions in larger cities to be divided into lots and put out to bid individually. What is the APG's position on this?
It is unclear what the Price Supervisor means by “lot”; this is not evident from the document at hand. In principle, however, it makes no sense for either the cities or the advertising market to divide up a homogeneous supply of billboard space. This not only leads to lost revenue for the municipalities but also makes it extremely difficult for advertisers to create cohesive campaigns.
The Price Commissioner also wants concession fees that are fixed and not calculated as a percentage of revenue.
This is already the case in practice: Some cities simply award their concessions to the highest bidder, which has both advantages and disadvantages for them. On the one hand, they can count on a fixed revenue stream when budgeting; on the other hand, they cannot share in the profits when the economy and business are doing well. We ourselves believe it is generally more beneficial for both sides if a portion of the fee is variable.
The Price Supervisor would also like to see shorter award intervals, for example, every three years.
A bidding process is generally very complex, and the effort required on the part of municipalities and providers is considerable. In addition, the services provided by the provider—such as cultural poster campaigns—are very labor-intensive. Shorter contract periods would therefore result in lower fees for municipalities and, conversely, higher prices for advertisers, since investments would have to be recouped within a very short time.
The Price Ombudsman further proposes that the infrastructure should be transferred to the municipality upon expiration of the concession.
We have been vehemently opposing this for years. We believe that in a functioning market economy, it is not the role of the local government to maintain or develop advertising media. Today, providers invest heavily in the design of urban furniture and in environmentally optimized products, as well as in the construction and maintenance of the advertising structures. This commitment to quality is, after all, very much in the cities’ best interest. However, all of this would be lost if the advertising structures were owned by the cities.
If a municipality does award its license to only one provider, the Price Commissioner requires that the lowest retail price offered be taken into account as a criterion in the award process.
This is one of the most sensitive issues, because what is the retail price? Here, too, the Price Ombudsman’s proposal offers no answer. There are already many forms of price differentiation today: gross, net, volume discounts, discounts for political campaigns, sales promotions, and so on. Furthermore, the end-customer price depends on inter- and intra-media competition: it matters significantly in which markets one is competing with which other media for advertising revenue. Setting a fixed pricing model would also amount to a distortion of intermedia competition, since no other media (not even those funded by license fees) are subject to such restrictions. For all these reasons, we consider this a problematic demand, especially since we are convinced that competition is very much alive and that it is not the state’s role to regulate prices in a competitive market.
In Geneva, however, APG raised its prices in 2011, shortly after securing the new exclusive contract. That’s proof that competition isn’t really working.
No. Under the new contract, the City of Geneva significantly reduced the available advertising space—by 10 to 30 percent, depending on the category and format. We have optimized our advertising offerings accordingly. It’s only natural to adjust our pricing to reflect these changes. In addition, we now offer a 10 percent early-booking discount. It’s also important to note that we haven’t adjusted our prices anywhere in Switzerland since 2008—despite population growth and a proven increase in service volume.
Either way—all things considered—the Price Supervisor’s requirements correspond quite closely to the procedure that the City of Zurich carried out in 2006, in which APG also successfully participated: At that time, APG won twelve city of Zurich lots, while four went to Clear Channel Switzerland (CCS). So were the last five years in Zurich really that bad?
Zurich has its own history, particularly when it comes to lottery tickets. Moreover, the Zurich model has not caught on in Switzerland. What matters most, however, is that the rules of the game both comply with competition law and meet market needs. Both conditions are met in Switzerland today, so no new rules are necessary. On the other hand, developments in Germany give us cause for concern: There, Berlin Brandenburg Airport issued a call for bids—and all outdoor advertising companies declined to participate due to economically unviable terms; the operator now has nothing at all.
However, if the Price Supervisor model were applied across the board, it would also benefit APG: for example, at Zurich Airport, which has been repeatedly awarding its billboard concession to CCS behind the scenes for years—something APG has already criticized.
If a call for proposals were to be issued there, we would of course be happy to participate. We are also convinced that we could contribute significantly to positive development.
Interview: Markus Knöpfli