Bike-Share Report: The Lessons of the Bixi System
The Bixi bike-sharing system was hailed as one of the best inventions of the year by Time Magazine in 2008. The Bixi system was primed for success—the company designed a single dock for payment that made set-up easy, and removable modules that made system maintenance convenient.
Five years later, Bixi is filing for bankruptcy in Montreal. The Montreal based Public Bike System Company (PBSC) – that provides the Bixi system – is saddled with a debt of around $50 million and has filed for bankruptcy protection. Luckily, the Bixi system's failure was not due to a lack of interest in bike-share programs. Rather, its failure stemmed from a large number of companies wanting to compete in the bike-share space, and in this new arena, the business models will need to be as innovative as their products.
The long collapse
Although Bixi's failure was a surprise for many in the bicycle sharing community, PBSC (and hence Bixi bike-share) has been in slow decline for some time now. PBSC recorded a $6.9 million shortfall in its first year. In 2011, the City of Montréal stepped in to bail the company out when it was near collapse. The city lent PBSC $37 million to cover its deficit at the time and also made $71 million in loan guarantees for international expansion.
To make matters worse, PBSC, the city's provider of the Bixi system, had promised the city of Montreal sales of the Bixi system to other cities (such as London, New York City and Chicago), would finance Bixi's bike-share operations. Montréal's auditor recommended that the company sell its international operations, since the law technically prevents Québec municipalities from running for-profit businesses, and sales to other cities is the part of the business that is potentially profitable.
Legal disputes, software issues, and delays meant that several of these cities began to withhold payments. As well, the Bixi system's owners got into a legal dispute with their software supplier, 8D Technologies. Bixi was forced to take on another company to replace the software. This litigation delayed the installation of systems in New York City and Chicago. Alta Bicycle Share, the provider of the Bixi bike-share system in Portland, Oregon, asked Bixi for $11 million in damages for software delays.
Turning a new tire
Although Bixi has not had the best financial or legal luck, the system has not disappeared. The city of Montreal is in the process of restructuring Bixi and taking over its assets. Although the bike-share system closed this winter, the city of Montreal has assured its bike-share enthusiasts that the service will reopen in April 2014. As well, Alta Bicycle Share is forming an alliance with 8D Technologies to sell bicycle-sharing systems throughout the world. This will combine the software, electronics and docking stations capabilities of 8D Technologies with the operating experience of Alta to develop the next bicycle-sharing generation, which bicycle enthusiasts and transport planners hope will be more successful than Bixi's previous attempt. Creating a financially feasible bike-sharing company will be vital in making personal non-motorized transport a pivotal component of developing cities' sustainable transport policies. Already bike-sharing systems have made enormous leaps forward, going from 7 bike-sharing systems in 2002 to some 497 bike-sharing systems in 2012. Although companies might rise and fall, it looks like bike-sharing systems as a whole are here to stay.