Nonhyeon Station on Line 7 was sold for 900 million won, the highest price ever, to a large ophthalmic clinic, after bidding for the rights to the station name was conducted by Seoul Metro. The selling of naming rights works to allow the names of nearby companies or institutions to be included with the existing station names. It was launched to overcome the management difficulties of the subways, which are around 1 trillion won in the red every year. Citizens are at odds over the project with opinions such as "there are many advantages, such as resolving the deficit," and "this project cannot fundamentally solve financial difficulties."
Provide a seat next to the name
Seoul Metro is striving to overcome financial difficulties by increasing the number of targets for the sale of naming rights to expand to imports. The Seoul Metro has implemented it since 2016. It was started to overcome management difficulties by answering the requests of institutions and companies to begin this project and creating new revenue sources. The sale of naming rights means adding the names of nearby companies or institutions to the existing names of individual subway stations and using them together. If a company or institution pays Seoul Metro for the right to use the station name, it will mark the sub-station name in parentheses at the bottom right of the name. The sub-station name can be marked in 10 ways, including route maps and the station name board at entrances and on platforms. To participate in the bidding for the naming rights, in the case of downtown Seoul, the company or institution that wants to bid must be located within 1km of the station. The successful bidder can mark the name of their institution next to the station for three years, and extend the contract once without re-bidding. If there are places that offer the same amount, the order will be determined as follows: public institutions, schools, hospitals, businesses, and multi-use facilities.
The project has been carried out by Seoul Metro for six years. The reason why the sales have become more active this year is because it is experiencing its worst deficit ever. The net loss for the year exceeds 1 trillion won and the cumulative deficit is about 17 trillion won. As of 2021, the Seoul subway costs 1,988 won per person on average, but the average fare for adults, students, and children is only 999 won, resulting in a deficit of 989 won per person. Compared to 10 years ago, when the deficit was 366 won, the burden on subways has increased 2.7 times. The financial difficulties seem to have worsened due to the increased burden of free transportation and the ticket price being frozen at 1,250 won for adults for seven years since 2015. Last year, Seoul Metro attempted to restructure the workforce, but it failed due to opposition from the labor union. As the increase of subway fares and the preservation of the national expenses for free transportation have stalled, Seoul Metro has begun to expand the business of the sale of naming rights. The accumulation of long-term deficits can also be directly related to citizens' safety, such as the difficulty in replacing old trains. According to 'The April issue of the Railway Safety Report' issued by the Korea Transportation Safety Corporation, 18,828 subway cars were 20 years old, which is 53 percent of all the cars in 2021. This shows that the financial difficulties of the subway are not just damage to the transportation corporation.
The reverse side of the sale of naming rights
From June 7 this year, Seoul Metro has been in the process of selling the naming rights of 50 stations in the Seoul subway. Gangnam Station, which ranks first in the number of people using the station every year, and major transit stations such as City Hall Station, Yeouido Station, Gongdeok Station, and Sindorim Station were newly added to the target stations. According to Seoul Metro held a bid for the project from June 27 to 29. As a result, four places, Euljiro Station on Line 2, Seolleung Station and Myeongdong Station on Line 4, and Nonhyeon Station on Line 7 have been sold to Hana Bank, Acuon Savings Bank, Woori Financial Group, and Gangnam Brand Ophthalmology respectively, with Nonhyeon Station being sold for a record 900 million won. In addition, Shin Yongsan (Amore Pacific), Hapjeong (Holt Children's Welfare Association), and Euljiro 4-ga (BC Card) stations are currently listed. Even overseas, the sale of naming rights is attracting attention as a new source of income for railway operators. It was first introduced in Japan by small local railways in the mid-2000s and expanded nationally in 2013 with the confluence of large trains like Keikyu. Subway stations in New York, London, and Delhi are also expanding their business in this way. For example, MTA, which operates the New York subway, received $200,000 (about 260 million won) a year and sold the 20 year naming rights of Atlantic Avenue to British financial firm Barclays.
The sale of naming rights provides public relations opportunities for institutions and companies, and it can provide additional information to station users through the sub-station name. A financial official said, "In the case of banks and credit card companies, reliability and brand recognition are important. In particular, if the station name is shared in areas with a large floating population of young people or financial centers, we can also take the symbolic image of the station, so we can expect to enhance the brand image."1) If the names are written side by side, passengers can hear the names repeatedly, so companies can promote their name. Also, it can give a positive image to customers and international buyers. Standard Chartered Bank Korea Limited, which added its name to Jonggak Station on Line 1, evaluated that brand recognition would improve by 3% at the end of 2019 compared to June 2017, when the first contract was made. An official from Seoul Metro emphasizes, "The sale of naming rights is a win-win project that can help ease financial difficulties, and companies and organizations can also promote themselves based on the symbolism of the station."2) Seoul Metro considered the effect to be that of killing two birds with one stone. It is also thought to be effective because the surrounding landmarks may be easy to find if they are incorporated into the station name and the transportation corporation can earn additional income.
However, Seoul Metro's decision to expand the sale of naming rights has raised concerns that public character could be damaged. This is because the Seoul Metropolitan Government is focusing only on the business to make money rather than trying to make up for the deficit. Yoo Junghoon, a professor of Department of Transportation Systems Engineering at Ajou University, said, "In other countries such as the U.S., private companies selectively write down their sub-station names only when they help build subway stations such as through donations. The name of the subway station, which is public property, should not be sold simply to make money."3) He insisted on a careful approach to sales of sub-station names, citing overseas systems as an example. There were also concerns that if a specific institution or company occupies a historical name with a strong characteristic of public good, an image unrelated to the region could be included. This is because even if the names of companies that do not function as landmarks, such as Lotte World, are added, commercial facilities are likely to give unnecessary information to users. However, Seoul Metro refuted that there is little concern that the public will be damaged because it goes through a deliberation committee. In 2020, private education company 'Eduwill' participated in a bid for the name of Noryangjin Station, but failed due to severe opposition, with 97% of local residents in Dongjak Gu opposed. It was also pointed out that the sale of naming rights could not be a fundamental solution to improve construction management.
Need new solutions
The corporation is using the sale of naming rights to make up for the deficit, but this is only a temporary expedient. The deficit is astronomically large, but the profits from the project are insufficient. The corporation pointed to the loss of free transportation, which it mentioned earlier, as the core cause of the chronic budget deficit. According to the '2021 Transportation Personnel Analysis' released by Seoul Metro in 2022, the loss of free transportation for one year reached 278.4 billion won as of 2021. Related organizations are demanding the preservation of national expenses for free subway transportation. The first clause of Article 32 of the Railway Industry Basic Act states that the cost incurred by providing public service to railway operators must be borne by the state or the person directly requesting the railway service, as prescribed by Presidential Decree. In other words, the government should bear the management losses caused by the services provided for the public interest even though the railway operator has taken measures to improve the management. Currently, however, the government only supports free transportation of KORAIL. A union official said, "Free transportation can be seen as a government welfare service, but it is a shift of responsibility that the corporation bears all the burden."4) Since free transportation is the government's policy, it is unfair for the management organization to bear all the costs of free transportation. However, the government avoided the burden, saying that local governments were responsible. If the government does not overhaul the system, it will be difficult to rise above its financial difficulties.
Some argue that free transportation should be abolished and partially subsidized. According to the '2020 Population and Housing Survey' released by the National Statistical Office, the elderly population aged 65 or older accounted for 16.4% of the Korean population in 2019. The Seoul Institute of Research said, "As we enter the super-aging society, the benefits of the free transportation system are expected to be greater. The free ride system should be a sustainable public service by seeking flexible operation, raising the standard age, and government support."5) As the population of the elderly increases and the concentration of the population in Seoul increases, the proportion of free transportation in Seoul may increase. Major foreign countries also have a transportation discount system for the elderly, but most countries operate it flexibly according to income level, age, and time of day. In the UK, people aged 60 and over are eligible for a free discount from 9:30 a.m. to 11:00 p.m. outside of peak hours. In the case of France, low-income people aged 65 or older and those aged 60 or older who cannot work are eligible for a discount. Korea is the only country that offers a 100 percent discount to all senior citizens aged 65 and over. The flexible operation of the transportation fare discount system can also be considered as a way to solve financial difficulties.
Another reason for the financial difficulties of Seoul Metro is the low subway fare structure. If the transportation cost is 1,000 won, citizens pay 576 won for the subway and 599 won for the bus. Overseas subway operators in places such as Beijing, Singapore, and London apply fare adjustment rates by linking subway fares to changes in prices such as electricity bills. Kim Sigon, a professor at SNU of Science and Technology's Graduate School of Railways, said, "The rate has not risen for seven years, so we should raise it to 1,500 won before ordering improvement from the corporation."6) Experts advise that the adjustment should not be postponed any longer as the rate adjustment has not been made for a long time even though the cause of the increase is sufficient. However, the government has announced through the Price Stabilization Task Force (TF) of the Ministry of Land, Infrastructure and Transport (MOLIT) that it will not raise transportation-related utility bills such as railway and road tolls for the time being. As utility bills such as electricity and gas continue to rise, the government intends to maintain at least the current state of railway and road tolls. Earlier this year, the MOLIT tried to promote research services to consider ways to increase railway fares, but the plan was completely suspended due to severe price increases. Amid growing difficulties in raising rail fares, local public corporations are urging the government to take measures related to legal lawsuits for free transportation. It explains that the government can cover the budget deficit by providing free transportation losses for people aged 65 or older, disabled, and those of national merit, which are guaranteed by the law.
To keep the subway running
Seoul Metro maintains a free ride system and operates the subway system at a loss of about 1 trillion won every year. The sale of naming rights is being used to overcome financial difficulties, but it seems difficult to solve the old construction problem fundamentally. The introduction of a transportation fare discount system and an increase in subway fares have emerged as ways to resolve the deficit. Also, the corporation has demanded that the government provide free transportation support. Some say it is difficult to conclude that the current problem is only for the corporations, so it is necessary to improve the government's related system.
1) Kang Jungmi, ""Is the Next Station to Get Off at Hana Bank Station?" Changes Caused by 800 Million", Chosun Ilbo, July 3, 2022
2) Jo Jimin, "Selling 'Name' at 50 Subway Stations in Seoul, Trying to Overcome Financial Difficulties", Financial News, June 13, 2022
3) Woo Taegyung, "Can They Sell the Name of the 'Public Goods' Subway Station without Trying to Improve the Deficit?", Hankook Ilbo, June 7, 2022
4) Huh Gowoon, "Selling Everything They Can Is Not Enough"… Seoul Metro's 1 Trillion Deficit?" News1, August 26, 2022
5) Ki Sunghoon and Kang Jooheon, "In Korea, the Elderly Take the Subway for Free … There Is No Such Thing as a Welfare Paradise", Moneytoday, August 13, 2022
6) Park Yongjoon, "Government Don't Squeeze the Subway and Give Them a Realistic Alternative."
Ju Kim Jiyeong / Reporter
Lee Gayun / Reporter