Oct. 24, 2012
/PRNewswire/ -- VisionChina Media, Inc. ("VisionChina" or the "Company") (Nasdaq: VISN), one of China's largest out-of-home digital television advertising networks on mass transportation systems, today announced its consolidated affiliated company, Beijing Eastlong Advertising Co., Ltd. ("Eastlong Advertising"), has reached a consensus with Shanghai Metro Television Company Limited ("Shanghai Metro TV") regarding the termination of an exclusive agency agreement, which had a contract period of five years from
January 1, 2009
December 31, 2013
and granted the Company the exclusive right to operate its digital mobile television advertising network on all the existing subway lines in
. The exclusive agency agreement was acquired by way of the Company's acquisition of Digital Media Group Company Limited, ("Digital Media Group"). This acquisition was closed on
November 16, 2009
and took effect from
. The termination of this exclusive agency agreement went into effect on
September 1, 2012
, without any form of penalty or compensation.After a series of negotiations, Eastlong Advertising recently entered into a new contract with Shanghai Metro TV to continue to operate its digital mobile television advertising network on all the existing subway lines in
for a period up to
December 31, 2012
on a non-exclusive agency basis by purchasing advertising time slots with fixed per minute rates.
Mr. Limin Li, chairman and chief executive officer of VisionChina Media commented, "The restructure of our cooperation model with Shanghai Metro TV is an important step in our overarching plan to optimize media resources and control costs associated with our media platforms. The new contract, under which we pay media costs based on the advertising minutes purchased, will help improve our operating margin by releasing the Company from the unreasonably high fixed media costs and resulting operating loss in
. In addition, it allows us to continue to operate our digital mobile television advertising network on the
Mr. Stanley Wang, chief financial officer of VisionChina Media added, "The original exclusive agency agreement with Shanghai Metro TV was inherited through the Company's acquisition of Digital Media Group in
. As we maintained in a series of lawsuits against the former shareholders and management of Digital Media Group, we believe that VisionChina Media was misled by the false, deceptive and unlawful statements provided by the former shareholders and management of Digital Media Group concerning Digital Media Group's financial condition and performance. We therefore projected an incorrect expectation of the operating results on those acquired media assets, including the most significant concession agreement of
subway media assets. As a result, the Company has been facing enormous pressure from the related media costs since its acquisition of Digital Media Group. In 2011, the Company terminated several other unfavorable exclusive agency agreements resulting in significant losses, acquired through Digital Media Group, including those covering Hong Kong Airport Express Line, Kowloon-Canton Through Train, Shanghai Intelligent Transport Information Signboards and Shenzhen Subway Line 1 in-train media assets."
"Close evaluation of our other acquired media assets together with mutually-beneficial negotiations with the Company's local operating partners will help to assure us a more favorable cost structure that can provide a solid basis for the Company's long term growth," added Mr. Wang.