Report to: General Committee                                                       Report Date: March 3, 2009

 

SUBJECT:                          Expression of Interest 192-I-08 Advertising Sales, Design and Production of the Markham Recreation and Culture Guide

PREPARED BY:               Janet Carnegie, Ext 4723

                                            Alex Moore, Ext 4711

 

RECOMMENDATION:

1)                  THAT the report entitled “Expression of Interest 192-I-08 Advertising Sales, Design and Production of the Markham Recreation and Culture Guide” be received”;

 

2)                  And That staff be authorized to award the Design and Production of the Markham Recreation Guide in the annual amount of $310,400.00 and the associated commission of 18% for advertising sales to “Punch Communication Inc.”;

 

3)                  And That the contractual agreement be for two (2) years with an option to extend for an additional two (2) years, with an exit clause after four issues dependant on success of the program;

 

4)                  And That the Manager of Purchasing in consultation with the Director of Communication and Community Relations be authorized to continue the contract, if found successful as per financial returns on page 4 after the first four issues, and after two (2) years;

 

5)                  And That the Commissioner of Corporate Services be authorized to execute an agreement with the preferred proponent in a form satisfactory to the Town’s Solicitor;

 

And that Staff be authorized and directed to do all things necessary to give effect to this resolution.

 

PURPOSE:

The purpose of this report is to seek authorization for staff to negotiate a contract agreement with Punch Communication Inc. to produce a quarterly magazine under the Town’s direction, incorporating content currently in the quarterly Recreation and Culture Guide; and the annual Living in Markham; and to include editorial content of interest to all residents on Town of Markham actions and activities.  The Town of Markham will provide and approve all editorial and program content. Punch Communications Inc. will sell advertising space, design and print the publication.

 

The objective is to develop a publication that is virtually self-funded by providing a more flexible range of advertising opportunities for local, regional and national advertisers.  

 

BACKGROUND:

The Town released an Expression of     Interest (EOI) to the market place with the intent to solicit interest from companies to sell advertising space, design, and print the Town of Markham Recreation and Culture Guide with the objective of off-setting production costs through advertising revenue.

 This Expression of Interest request was divided into three (3) sections: A – Advertising Sales, B – Creative Services, and C – Printing. 

Based on responses received, The EOI stated that Markham would select a proponent(s) who submits responses meeting the requirements as listed in this EOI.  Depending on the responses received, the Town would consider two options.

 

Option 1 is to issue a request for proposal (RFP) to invite the preferred proponents to submit a proposal to the Town.  Evaluation will be based on pre-established criteria included in the RFP. 

 

Option 2 is to negotiate with one preferred proponent to establish a contract for this project. If such negotiations do not lead to an agreement, Markham may proceed with negotiations with another proponent or issue an RFP as per option 1. Contract shall mean an agreement between the successful bidder and the Town of Markham.

 

After reviewing all bids, the Town is pursuing option 2 of the EOI document and through this report is seeking authorization to commence a formal agreement outlining specific terms and conditions with the recommended proponent (Punch Communication Inc.).

 

Of the four (4) submissions received, Punch Communications Inc. was the only proponent which provided a detailed business plan and financial model to achieve a break-even position.   Two (2) of the proponents proposed a fee for service in excess of $130,000.00 without advertising revenue to offset costs.  One (1) other proponent proposed a break even result without a financial analysis to support their approach.  Further, this firm has no advertising sales experience.

 

OPTIONS/ DISCUSSION:

Punch Communications Inc. presented a detailed proposal to work with The Town of Markham towards a cost-neutral publication.  Punch proposed a quarterly publication of Recreation & Culture programs and activities segmented into sections appealing to the following age groups:

·        Pre-school

·        Children

·        Pre-teen

·        Teen

·        Adults

·        Senior Adults

This provides more targeted advertising opportunities, allowing us to maximize advertising revenue and offset production costs. 

 

Punch also recommended an approach more consistent with a magazine, including editorial content on subjects of interest to all residents.  This approach will allow us to expand the Recreation & Culture Guide into a regular, quarterly communication with all residents, keeping them up-to-date on a broad range of Town-related subjects such as progress on our Strategic Priorities and programs.  We also plan to incorporate content from Living in Markham. By doing this we will not only provide more current information, but also save the costs associated with this publication, currently published annually.

The volume of Recreation and Culture program content has increased with the result that the current Guide has reached a maximum number of pages using the current binding process.  As a result, the number of pages available for advertising has decreased meaning less revenue than the current 30% advertising content guideline permits.

 

In addition to selling advertising space in the quarterly Markham magazine, it is proposed that the Town of Markham negotiate with Punch Communications to sell rink board, backlit sign and other advertising in Town community and recreation centres. This will provide the opportunity to offer advertisers the opportunity to purchase advertising not only in the magazine, but also in Town facilities, creating a more effective overall advertising program for advertisers and generating additional revenue for the Town.

BID INFORMATION

Advertised

ETN

Bids closed on

August 29 ,2008

Number picking up EOI documents

8

Number responding EOI to bid

4

 

FINANCIAL CONSIDERATIONS AND TEMPLATE: (external link)

The Town’s current annual cost for the preparation, printing and distribution of the recreation guide is approximately $245,000 with offsetting advertising revenue of approximately $170,000 resulting in a net cost of $75,000. 

 

Through an E3 initiative, Staff identified an opportunity to achieve cost neutrality with respect to the recreation guide and through a contractual agreement with Punch for all services except for distribution.  By outsourcing advertising sales and the design of the Recreation & Culture Guide, Town staff currently doing this work can focus their efforts on other key priorities. 

 

Punch initially identified annual costs of $362,600 for the preparation and printing of the recreation guide.  This has been successfully negotiated down by Purchasing staff to $310,400 or a reduction of $52,200.  Punch is forecasting advertising revenue in the range of $500,000 with associated commission of 18% (negotiated down from 25%).  Based on the above figures it is anticipated that the Town will achieve annual revenue of $99,600 ($500,000 - $90,000 (commission) - $310,400 = $99,600) attributable to the outsourcing of the recreation guide with Punch.  The budget also includes $23,000 for distribution of the guide which is outside the scope of this contract, resulting in net annual revenue of $76,600.

 

The proposed quarterly magazine will offer a new range of advertising opportunities and an increased volume of advertising space (40-60% compared with 30% in the current Recreation Guide).  It should be noted that special interest publications generally contain up to 75% advertising content. 

 

The Guide, in its current form is limited to 144 pages.  In the new format, it is expected to increase to approximately 184 pages to incorporate increasing recreation and culture program content, new editorial content and additional advertising. 

Since the $500,000 of annual advertising revenue is not guaranteed the chart below identifies the required net revenue targets.

 

Target Net Revenue

Required Advertising Revenue

$75,000 Subsidy

$315,150

Breakeven

$406,600

$76,600 Surplus

$500,000

 

As a reasonability check, even assuming if advertising rates stay constant, the Recreation Guide will expect to generate approx $360,000 in revenue based on the increased opportunity of additional advertising space.  

 

Based on the timing of this award, Punch will be responsible for the Fall and Winter guides in 2009 and it is anticipated that the Town will achieve the 2009 E3 target savings of $50,000.  Based on the success of the initiative, the 2010 budget will be adjusted to incorporate the annualized impact.

 

The costs identified above reflect the additional costs associated with increased pages and the more costly perfect binding process required for anything larger than the current publication.   

 

Current advertisers are largely companies or organizations which we expect will continue to purchase space in the new magazine.  It is anticipated that, through the efforts of an external, professional advertising sales agent, the new publication will also attract the interest of a number of other, potentially national advertisers who will benefit from reaching key target markets in Markham.

 

HUMAN RESOURCES CONSIDERATIONS

By outsourcing advertising sales and the design of the Recreation & Culture Guide, Town staff currently doing this work can focus their efforts on other key priorities.

 

ALIGNMENT WITH STRATEGIC PRIORITIES:

The quarterly Markham publication will provide a regular opportunity to keep residents informed on progress related to all strategic priorities.  This approach is an E3 initiative that will result in significant cost savings and potential new revenue.

 

BUSINESS UNITS CONSULTED AND AFFECTED:

Recreation Department & Culture Department

 

RECOMMENDED

                            BY:    ______________________          ________________________

                                      Janet Carnegie                                 Andy Taylor

                                      Director, Communications                Commissioner,

                                      & Community Relations                   Corporate Services

ATTACHMENTS:

Markham Life draft Media Kit