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TinotopiaLog → Naming Rights, Private Enterprise, and Subsidies (27 Jul 2004)
Tuesday 27 July 2004

Naming Rights, Private Enterprise, and Subsidies

There is apparently a plan under discussion in New York over whether the MTA should sell naming rights to subway stations and the like. I wrote about a similar situation a couple of years ago when Bloomberg was publicly suggesting that the city should sell naming rights to things like Central Park.

The article in the New York Times says:

Indeed, the authority’s officials said they could easily imagine the Delta Times Square Shuttle or, say, I.B.M.’s adopting the Tarrytown station on Metro-North’s Hudson rail line.

It is not until the last paragraph of the article that the Times points out that Times Square itself, as well as its subway station, is already named for a corporate entity: The New York Times.

And they don’t mention at all that Grand Central Terminal — apparently one of the things under consideration for a new corporate name — is already named for the New York Central Railroad.

A lot of things are named after corporate entities without anyone minding, or even thinking much about it: Wrigley Field in Chicago is named for the chewing-gum company. The Sears Tower is named for a certain mail-order and department-store company. Ditto the Woolworth Building, the Chrysler Building, and Busch Stadium: they all carry corporate names that are ‘organic’ in that they were named by (and for) the companies that built them.

These companies were also fairly well-respected — they built these buildings and stadiums, after all — and all these names are names rather than brands. Even among today’s sponsored-name stadiums, a few stand out as not setting one’s teeth on edge: Ford Field, Miller Park, Coors Field, and Heinz Field. All are so-named because big companies wrote checks, of course, but they’re also in a way named for the car, beer, and ketchup magnates who helped build their cities into what they are today.

You can even make a guess as to where these things are, so strongly-associated with particular cities are Ford, Miller, Coors, and Heinz. On the other hand, things like ‘U.S. Cellular Field’, ‘Ameriquest Field’, ‘Minute Maid Park’, ‘Citizens Bank Park’ and ‘Petco Park’ could be anywhere, and they just sound idiotic. ‘Citizens Park’ in particular would sound just fine; but then the bank wants to make sure that the people of the city (who of course paid for the stadium) are not under the mistaken impression that the place is named for, you know, them.

What’s the difference, really, between a corporation writing a check to a city (these things are almost always municipal operations now) to name a stadium, and a tycoon personally running the operation and then naming the thing after himself? One of the big ones is that when the tycoon names the stadium after himself, he’s patting himself on the back, recognizing himself for improving the city this way. When a company buys the naming rights so that it can add a giant sign reading ‘Zovuvazz Meat Byproducts Inc. Coliseum’ to the skyline, it’s naked advertising and something of an insult to the taxpayers who build these things.

So back to the MTA. They appear to be making the mistake — pretty common now — of thinking that any kind of advertising is desirable and in demand. To begin with, there’d be a certain reputational cost to anyone who bought the naming rights to something like Grand Central Station. If it was suddenly known as Famous Original Ray’s Station, a lot of people would be so disgusted that they’d start getting their pizza from Original Famous Ray’s instead.

Second, companies buy naming rights for stadiums because nearly everything that happens in a stadium happens on TV. For a few million dollars, you get your corporate name repeated over and over on TV every time there’s a game. Very few subway stations are televised. Aside from a very few things — every one of which would present the backlash problem I mentioned above — most of this stuff is fairly anonymous. Nobody in their right mind would pay money for the name.

Here’s an idea, though. If the MTA really needs the money, they should sell off some of these anonymous stations. The sale would have a few conditions, like that you couldn’t close the station without the consent of the MTA, and, obviously, you had to allow people to use the station to get on the trains. The MTA would maintain the tracks, and you would be in charge of everything else. The MTA would take most of the fares that you collected (what percentage of the fare accounts for running the stations? 10%? Then give that to the station operator, assuming that about as many people leave the system at a given station as board), and you’d keep the rest. You’d have an incentive, as a subway station owner, to attract as many people as possible to your station, and with so many people a day passing through your premises, you could potentially clean up by renting out little shops in the warren of offices, passages, and storage rooms that NYC subway stations seem to be full of.

If you bought an under-used station, you’d have an incentive to get more people to use it, perhaps by financing attractions on the surface. You might refund part of passengers’ fares, cutting into your margin in order to increase volume.

None of this makes the slightest bit of sense, though, not least because the MTA is in a strange position. The MTA wants as many people as possible to use their services, because that is, after all, why the MTA exists. But because the MTA — like all transit systems — does not make a profit (or even attempt to), they’re not really in a position of wanting to do anything that encourages too much use. More use, above a certain level, means less money, not more, because the MTA can’t pay its costs out of the fare money. The only real solution is to sell off the entire system, and thus require it to operate at a profit (or at least to break even) or not operate at all.

But this won’t work! everyone says. The BMT and IRT went bankrupt and were taken over by the city! The subway needs to be subsidized!

Well, it’s true that the BMT and IRT went out of business, but then they charged the same fare — five cents — from 1904 until the city bought them out in 1940. The subway fare — fixed by the city — was an issue in mayoral campaigns and, as railroads don’t vote, successful candidates supported the nickel fare, saying that it was essential to the operation of the city. Unfortunately, enough money to actually pay the bills turned out to be essential to the operation of the subway, and eight years after taking over the system, the city doubled the fare that had remained fixed at five cents for the previous forty-four years. The fare has been increased fourteen more times since then.

The New York subway system would be a good one to privatize because it was originally built with the intention of turning a profit. Publicly-built transit systems were never intended to make money, and so they probably can’t.

It’s not going to happen, but it would be nice if it did, at least as an experiment. In the United States, most things are done by the private sector, and most things here are at least the equal of their counterparts everywhere in the world. Most things get cheaper (in real terms) with time, too.

But mass transit we leave almost entirely to the public sector to run, and then when there’s an enormous cock-up we do nothing but examine how the public sector might get more money to do the same things.

Posted by tino at 22:28 27.07.04
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Well the MTA is indeed still loosing money since their last fare hike from $1.50 to $2 per fare. This aspect of the MTA came to mind from news reported a week ago when they released some of their upcoming budget plans for the year ahead.


Recently increased fares coupled with the phasing out of the token system caused every rider to use the Metrocard system. This in turn forced customers to begin buying more than just a single fare. Now to obtain a Metrocard (you must use a vending machine, no more human transactions trading dollars for tokens— hence MTA can and DID cut back on station staff in those little bullet proof booths) you have you spend at least $4 for a Metrocard, which provides you with 2 rides. There are ‘incentives’ worked in to make you spend more too, pay $10 and get an extra fare included for instance. However, this isn’t how most commuters use the Metrocard system at all. Most opt to buy a monthly card for $70 and then have unlimited access. Most companies also have some form of transportation management reimbursement which allows you to set a pre-tax amount which you can later reimbursement yourself from. Since so many people are using the subway more frequently due to the unlimited access the Metrocard provides to them, riders are driving down the actual cost of the per-ride fare. The MTA already in a pinch, is again looking to increase the price of discounted MetroCards.

Was no one in planning for the MTA awake when they put this idea out for testing? Did they test the long term results and consequences? I guess not because someone probably saw that if they exposed this ‘failure’ to early they wouldn’t be able to capitalize on it later. I’d be willing to pay more if they were honest in the first place, if indeed they were not being honest to begin with as I suggest.


Posted by: chris at July 28, 2004 02:49 PM