MTA IDEAS MAY AD UP AGENCY HOPES COMMERCIALS CAN GENERATE FUNDS.

Byline: RACHEL URANGA Staff Writer

Hoping to replicate the success of transit agencies nationwide, the financially strapped MTA is looking for innovative ways to sell space on its buses, trains and stations to bring in more advertising revenue.

The Metropolitan Transportation Authority, desperate to avert a fare hike, has directed its staff to report back later this month with ways to increase advertising, with Mayor Antonio Villaraigosa telling fellow board members it's time to ``think outside the box.''

Other agencies around the country already have been doing that.

The Chicago Transit Authority, for instance, sells ad space in its subway tunnels, which look like silent commercials to passengers on the speeding trains.

In New York, which has tripled ad revenues over the last decade -- passengers boarding an airport shuttle are surrounded by murals depicting scenes from Italy or the Netherlands -- travel ads paid for by airlines.

On the BART system in San Francisco, passengers will soon be seeing ads on the back of their rail tickets and are being offered credit cards with transit rewards for spending.

But while ads touting everything from iPods to attorneys can rake in millions of dollars, it's only a small fraction of what the MTA and most other agencies need to fill funding gaps.

MTA officials estimate they could boost the $17 million in ad revenue they now bring in by anywhere from $1 million to $10 million. And while that sounds like a lot, it's hardly enough to sustain an agency that last month had to raid its reserve fund to cover a $110 million deficit for the fiscal year that begins July 1.

Some argue that the MTA and other agencies shouldn't be subjecting their passengers -- who are, in effect, captive audiences -- to commercial messages. And others argue the money generated isn't worth the visual pollution.

``At some point you have to ask what kind of message you are putting on the bus,'' said John Fasana, an MTA board member, who in 2000 backed the agency's ban on advertising in subway stations.

Critics also say that if the MTA is trying to lure motorists out of their cars, it needs to make the ride a pleasant one.

``Personally, I find it offensive when public agencies will take your fare money and treat you with no respect by overexposing you with an environment that is bombarded by ads,'' said Tom Radulovich, a board member of Bay Area Rapid Transit, which runs the subway system in Northern California.

Last year, BART began ``wrapping'' its subway cars with advertisements and also opened advertising spots along walls and floors of subway stations.

Despite the increased advertising opportunities, officials say, revenue has actually fallen because a downturn in the market forced BART to reduce rates.

But with the Los Angeles MTA scrounging to find ways to boost revenue, officials will be forced to consider what was once thought off-limits.

Current MTA policy bans advertising for tobacco, alcohol or political campaigns or candidates -- potentially lucrative sources of revenue.

The wrapping of subway cars in advertisements is also forbidden -- as it is in New York where officials say it poses a safety hazard.

And the MTA allows no more than 200 of its 2,668 buses to be covered -- or wrapped -- in advertisements. But that wrapping is considered one of the most lucrative forms of advertisements, bringing in nearly 20 percent of the $17 million generated each year.

On average, an MTA bus running during rush hours earns about $7,755, although officials said they could not provide a breakdown of how much each ad costs advertisers.

Officials with CBS Outdoor, which handles the MTA's advertising contract, did not return phone calls.

``The trade-off is you don't want mobile billboards running around everywhere but in reality it's an easy way to generate revenue,'' said Matt Raymond, an MTA spokesman.

Since last year, the agency has installed miniature television screens on 1,700 buses, where riders watch commercials interspersed with news, weather and puzzles. Since being introduced last year, the program has generated about $100,000.

But transit officials and marketing experts say opening up high-profile areas like subway stations could attract top-dollar advertisers.

Diane Badame, associate professor of marketing at the University of Southern California Marshall School of Business, said ads on buses and subways would attract companies trying to reach a younger audience that relies more heavily on word-of-mouth and the Internet in making its buying decisions.

``For Generation X and Generation Y, nontraditional forms of advertisements are the best way to go,'' Badame said. ``They don't want to have ads in their face. They want to learn in different ways about products. They would rather interact with ads.''

Kiosks at subway stations, clever ads along buses and other transit-oriented spaces allow for that interaction.

Yet adding more ad space may not equal the windfall officials hope for.

The MTA contracts its advertising with New York-based CBS Outdoor and for the past five years, the contract is based on a flat rate, so even if ads skyrocketed the MTA wouldn't gain any money.

Though the contract comes up for renewal this year, officials say that pursuing an ad-based contract could ultimately backfire.

``(Now), we are protected from the ups and downs in the advertising industry, changes in the economy,'' said Warren Morse, MTA marketing director. ``The downside of the flat rates is we don't get additional benefit of a strong ad market.''

rachel.uranga(at)dailynews.com

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CAPTION(S):

4 photos

Photo:

(1 -- color) A television ad plays on one of several monitors set up on an MTA Orange Line bus in Van Nuys.

Tom Mendoza/Staff Photographer

(2) An ad is displayed at one of the bus stops along Owensmouth Avenue in Woodland Hills.

(3) A bus-stop bench displays an ad along Ventura Boulevard in Tarzana. The MTA is trying to come up with more ways to generate ad revenues.

Evan Yee/Staff Photographer

(4 -- color) no caption (bus)