Why TIME Magazine Got the Bixi Story Wrong

Major media have a habit of blowing bike-share problems out of proportion. Witness the 2009 BBC story that cast theft and vandalism as an existential threat to Velib in Paris. Five years later, Velib is still going strong. The most recent entry in the genre is Christopher Matthews’ misguided story on the Bixi bankruptcy in TIME. Headline: “Why America’s Grand Bike-Sharing Experiment Is Failing.”

There’s a reason that Divvy was fed up with Bixi’s software, but TIME didn’t explain why. Photo: John Greenfield

The main mistake Matthews makes is to conflate Bixi’s troubles with the fate of American bike-share overall:

The question now is whether this is the beginning of the end for the bike-sharing experiments that have spread quickly across the U.S. So far, officials from various bike-sharing programs are saying no.

This is a poor way to frame the issue, for a few reasons. While Bixi is the dominant supplier in the American bike-share market, it is far from the only one. Medium-sized systems in Denver, Miami Beach, and Austin use equipment from other companies, so the Bixi bankruptcy doesn’t affect all U.S. bike-share systems.

The American bike-share operators that do use Bixi equipment will probably have serious logistical challenges on their hands, but there are reasons Matthews couldn’t find a single source to back up his doomsday scenario. Bixi itself relies on subcontractors to make most of its equipment and software. In a worst-case scenario where Bixi is broken up, those firms could be tapped to supply bike-share systems with components that integrate with existing equipment.

Matthews doesn’t mention any of these contingencies. He just keeps making the same unsupported claim:

Bixi hasn’t been able to operate profitably and is now owned by the City of Montreal — which only two years ago approved a whopping $108-million bailout package to keep the company afloat. That may call into question the long-term viability of these programs.

Again, other bike-share manufacturers like B-Cycle and Deco Bike aren’t filing for bankruptcy. What Bixi’s financial distress calls into question is Bixi’s management. Two and a half years ago, Montreal’s auditor general lambasted Bixi for having “an illegal organizational structure, inadequate planning and an absence of oversight and accountability.” The company’s most notorious business decision was to part ways with 8D Technologies and its software platform, which had powered an initial run of success in cities like Washington and London. Bixi’s product hasn’t been the same since.

Matthews fails to clearly distinguish between Bixi’s profitability and the financial viability of bike-share operators:

Most new services take many years to achieve profitability. The New York system, for instance, has caught on quickly with New Yorkers, but is still in the red, despite $30 million in revenues since its launch and millions in sponsorship funding from Citibank and Mastercard.

The issue of operating profitability is only tangentially related to Bixi, which supplies several American bike-share systems but doesn’t run any of them. Most cities are willing to subsidize their bike-share systems to some extent, so profit is not a precondition for success. (Only New York has stipulated that it won’t subsidize bike-share, but even there, new Mayor Bill de Blasio could decide to override that Bloomberg-era rule.) The subsidies tend to be quite small. Within about a year and a half of opening, for example, DC’s Capital Bikeshare was recovering nearly all of its operational expenses with revenue from users.

Of course, bike-share systems need good suppliers to keep subsidies low or achieve profitability. But here’s the big angle that Matthews missed: Bike-share operators in New York and Chicago were fed up with Bixi because its replacement for the 8D software system was dragging down performance. It’s too early to say exactly how the bankruptcy will play out, but one consequence is that there’s a path to bring 8D and its more highly-regarded software back into the fold, which would help these systems become more cost-effective.

Bixi’s bankruptcy is a big deal for American bike-share systems, but the implications don’t match up with what TIME told its readers.

  • Jeff

    Beyond the troubles with Bixi, this article seemed to imply that a lack of profitability made a given bikeshare system a failure. I can’t imagine what the writer must think about the Interstate highway system…

  • Robert Wright

    I rather prefer this version of the story, from the Financial Times (registration required): http://www.ft.com/intl/cms/s/0/c68b4080-82b7-11e3-8119-00144feab7de.html?siteedition=intl But then I wrote it myself.

  • Actually a Bixi Fan

    Major media may get the story wrong, but maybe the friendly media is a bit too friendly.

    It this was variable toll technology associated with HOT lanes or routing software for an airport’s control tower you’d be ripping it apart. If transit sole-sourced such a major system operation tool and it floundered, you’d decry their lack of forethought and admonish even the hint of passing any increased cost to riders.

    For privately funded systems like NYC, them’s the breaks. For those that use public dollars, let this be a wake-up call that there needs to be a new generation of systems (I think we’re on the 4th?) that can allow for some redundancy should a vendor no longer be able to provide a key component. We hold other major transportation systems to this standard, so it would only be fair.

  • R

    I think the point is that if a supplier of variable toll technology in a handful of cities went bankrupt while other companies continued to operate successfully, it would be a stretch to headline an article, “America’s Grand Variable Toll Technology Experiment is Failing.”

    You can point that out while still being critical of the dominant player, which is what this analysis seems to do.

  • You can knock the cities that chose Bixi, but I don’t think your analogy holds up. It’s a fledgling industry, procurement options are extremely limited, and when you introduce something like bike-share you may have to make decisions on an electoral timetable. Waiting for the industry to mature doesn’t make sense in that situation.

  • Bixi fan

    I’m not fully knocking those cities – they chose based on available options – but some level of redundancy should be built into (or at least awarded bonus points) future RFP’s.

  • Bingo. What return on investment does road building have in our current funding structure for roads?

  • Eddie

    The problems with Bixi were apparent long ago, and still Alta kept winning contract after contract in the US and Canada. If B-Cycle is sound financially, why wasn’t it chosen over Alta/Bixi in all those cities? I suppose because of Alta’s strong political connections (e.g., Gabe Klein in Chicago).

  • Brian

    The Chicago bikeshare program was built on bribes and backroom deals by Scott Kubly and Gabe Klein, similar to the red light camera program. I’m sure the speed camera program is the same way. They both knew the feds were getting close, which is why they resigned. BOTH of them deserve to rot in jail for the rest of their lives.

    While I like Divvy (and actually may buy a membership), I would love to see it FAIL, since it would be a bad reflection on them, and a nice punch in the stomach to all of the people who think bikes should be prioritized over cars. Hopefully this bankruptcy is a sign of MAJOR problems to come.

  • qrt145

    I wonder if Mr. Matthews has asked whether air transport or automobile transport are viable modes every time an airline or car manufacturing company files for bankruptcy. It happens all the time.

  • Brian

    Exactly. Gabe violated eithics rules by selecting them. HE belongs in jail.

  • WestLooper

    This type of coverage is maddening journalistic malpractice. There is no indication the bankruptcy will disrupt access to the software (I do hope ALTA has a source code escrow) nor that ALTA couldn’t procure hardware from other suppliers (or indeed Bixi itself). Furthermore as others have noted, the ability of a bike share system to recover all of its costs is hardly a precondition to its success.

  • WestLooper

    Also would it hurt him to look up the actual definition of the word nonplussed before spending a quarter at the word store.

  • WestLooper

    Your first sentence seems wrong — Bixi doesn’t run the New York system. You get this right later in the article so it seems like an issue of wording.

  • WestLooper

    The question is whether Bixi is the only one that can make the hardware (seems doubtful, although I believe some design patents may exist) and whether ALTA is in a position to maintain the software.

  • If bike sharing is a failure because one company flopped, I guess the car industry is an even larger failure because dozens of companies have flopped, and the the ones that stayed in business required enormous bailouts.

  • Bane of Trout

    Yes, Fried astutely takes TIME to ask. But TIME has been irrelevant for years, and since its readers probably aren’t (usually) cyclists, its poor assessment of bike sharing programs isn’t all that surprising or damaging.

  • Tom Fuller

    It is a failure. Cars sales are down 38% worldwide. Even the Chines are merging their companies. There is car saturation and outright resistance. The world’s two largest makers, GM and Toyota, are in a world of hurt. Both were extensively bailed out by their governments. When they fail, which they will, the defecation will strike the oscillating ventilator.

  • Tom Fuller

    None, the interstates are a money pit. Time for some technology changes.

  • lxndr

    If anyone can show Alta’s company structure and financial performance, that would clear up a lot of questions all around.
    They never respond to questions when asked by almost anyone. There is nothing on their website about company structure, financial performance, etc. Are they privately held? LLC? Corp? Public-private partnership?
    All this hiding and lack of information, makes it look like a Madoff venture. Transparency would help a lot. Then all these spinoffs and separate ventures would know where they stand … not to mention the members.

  • Bike Chicago Employee

    In case you want to know, “Brian” is code for Josh Squire who just can’t seem to get over the fact that he didn’t win the Chicago contract, the NY contract, or just about any other contract. Bike Chicago and BCycle have no bad press because that have no press at all! Alta is a 20 year old company built from the ground up. I worked for Josh at Bike Chicago and this is all he talked about. He is obsessed with Divvy and thought it was wired for him because his empire is based in Chicago. It’s unhealthy and trolling the internet is embarrassing at a certain point. Get over it Squire!

  • Are there any B-Cycle programs that operate with 500+ bicycles?

  • Which questions would knowing these things clear up? Assume for example it’s an LLC. What does that tell you?

  • “That means Montreal taxpayers could be stuck with a $38-million bill, though the city hopes a sale of the international part of the business will cut that amount.”

    http://www.montrealgazette.com/touch/business/Bixi+files+bankruptcy+protection/9408589/story.html

    I don’t see the concern over Bixi filing for bankruptcy. Montreal wants nothing to do with the “international arm” and likely will sell. With cities clamoring for bike share programs and small government people claiming wasteful spending, a business will buy that arm.

    Likely viewed as win-win since they will receive payment from the government. Bike share programs may prove to be the best public transit option when factoring cost, maintenance and actual use.

  • Dennis McClendon

    No need to take a gratuitous swipe at highways. Multilane arterials and highways—basically anything with a number—generate much, much more in fuel taxes than they require for construction and maintenance. Local neighborhood streets do currently fall short of that measure (mostly because lawmakers are afraid to raise gas taxes), but of course we had those long before we had automobiles.

  • Adam Herstein

    Why America’s Grand Bike-Sharing Experiment Is Failing

    Ugh, such sensationalist garbage.

  • Chicagio

    Just to fly the Stars and Stripes here for a second… Wouldn’t this be a good opportunity for an American based company to swoop in, collect all of bixi’s suppliers and then strike deals with bixi-using cities?

  • MBDElf

    Since when does anyone but a RWNJ take TIME magazine as anything but a glossy uptake on the National Enquirer? They have about as much legitimacy left as Rove and Romney. The bailout in Montreal calls into question the viability of THAT program, not the general TREND of them…morons.

    Just because they don’t use the inflammatory rhetoric that the anti-bike slugs do, DOESN’T mean they’re neutral. They’re as anti-bike as the rest, just less aggressive with it.

  • MBDElf

    No.

  • Please explain the general funds transfer to the highway trust if fuel taxes are generating much more than the roads require.

    http://www.governing.com/blogs/fedwatch/gov-what-depleted-highway-trust-fund-means-states.html

  • iSkyscraper

    Hmmn, last I checked pretty much every single manufacturer of rail, buses, ferries, etc. all went bankrupt at some point. So what?

  • andrelot

    Non-sense. Manufacturing of vehicles is not part of public transit. Nothing would personally make me fiercely oppose any transit project than having a government factory of rail, road or air vehicles.

  • Eddie

    http://www.montrealgazette.com/business/Bixi+bankruptcy+City+first+repaid/9413709/story.html

    “The city and Bixi say a priority will be selling off Bixi’s international
    arm. Two previous potential buyers were close to purchasing it over the past year but backed down after taking a closer look at the company’s books.”

  • iSkyscraper

    You misunderstand my point, although I agree my wording was poor and I have edited to avoid further confusion.

    I’m not advocating for government takeover of manufacturers — the province of Ontario tried that in the 70s and 80s with UTDC, was a complete disaster. I’m simply pointing out that Bixi is a manufacturer/system builder for Alta and their troubles are unrelated to the operations of bikeshare itself.

  • Dennis McClendon

    The states (and some counties and municipalities) collect fuel taxes, too. There’s so much transfer of funding and responsibility among levels of government that you can’t just look at the federal budget to answer this question.

    Most of us studying the question eventually settle on the aggregate figures collected every year in the Bureau of Transportation Statistics’ Table HF-10. This shows that revenue from users pays more than half the direct costs of all streets and roads in the country (down from 70% earlier in the decade because politicians are afraid to raise gas taxes). Superhighways are only 1.4 percent of all roads but carry 32% of all vehicle-miles traveled. It seems only proper to allocate (in an accounting sense) the revenue stream to the facility that generates it. So I think it’s fair to say that freeways and other very busy highways are paid for entirely by their users, while about 40% of the cost of local streets and country roads is currently paid for by motorists.

  • Katja

    Didn’t Chicago have a B-Cycle for like five minutes a few years ago?

  • Eddie

    Denver has about 700 bikes.

  • Eddie

    By the way, I have no connection to B-Cycle, but I think their system of an annual membership allowing one to use B-Cycle in any city is great. You can’t do that with Alta — e.g., if you’re a Citi Bike member, that doesn’t give you free access to Capital Bikeshare or Divvy.

    B-Cycle’s press release from yesterday:

    “While all of us at B-cycle regret the unfortunate news that PBSC has filed for bankruptcy we feel it is important to note that this occurrence is not an indication of the future of bike share. B-cycle has implemented successful bike share systems in 30 locations in both North and South America and continues to work with a growing number of cities looking for more sustainable transportation options, most recently installing systems in Santiago, Chile and Austin, Texas. Largely owned by Trek Bicycle, one of the world’s most successful bicycle companies, B-cycle is financially stable and operates under a fiscally responsible business model that delivers results for all of our systems. We believe the future of bike share is bright and look forward to bringing sustainable transportation to more of the world for years to come.”

  • Hdawson

    What are you talking about? B-cycle has plenty of press…and none of it is related to bankruptcy or a failed system.

  • Planner Pissed at Planetizen

    Brian,
    I love how you start the article talking about the press getting things wrong. Velib may be “going strong” but they sure did have issues with theft and vandalism. 9,000 bikes in one year is a huge operational issue. That’s 1.5x Citi Bike systems (or almost 3x if you recognize that Citi Bike never got more than 3,400 bikes on the street at any one time).

    Love the shoddy reporting by a writer ripping on bad reporting…

    http://www.france24.com/en/20130920-france-theft-vandalism-paris-bike-share-system-velib/

  • Planner Pissed at Planetizen

    Actually, I would wager they moved on in order to bring another major city into the Alta court the same way they did with the DC program. While “Brian” may be “Josh Squire” there is a clear correlation between Scott and Gabe becoming “senior advisors” to Alta and then becoming DOT in a city that soon after awards a bike share contract to Alta in a rather shady manner.

    Truly, Alta does a great job at playing the political pipes.

  • Planner Pissed at Planetizen

    It had a program funded by Bike and Roll Chicago. That’s often how B-cycle works. People actually pay to market them.

  • Planner Pissed at Planetizen

    B-cycle’s points are valid. Sadly, despite little customization for programs B-cycle also fails to deliver projects in a timely manner. At some point somebody in bike share needs to solve that problem rather than perpetuating it.

  • Planner Pissed at Planetizen

    Unfortunately as a result of our patent system’s own flaws it is difficult to tell what if any of the claims made in PBSC patents may have been awarded. In the end, most of their patents are for design and not utility. There is little there that is defensible.

  • Katja

    So why’d it fail so epically? I only vaguely remember the B-Cycle station near the Daley Center, and that was back when I was going there daily.

    B-Cycle operates bike share in Madison, WI, though, and it’s apparently pretty great. Maybe it’s just a scale thing?

  • Planner Pissed at Planetizen

    How do you propose autos get to those lovely multilane arterials and highways if not by local roads? They’re all part of the same system. Perhaps we should begin privatizing your local access road.

  • Planner Pissed at Planetizen

    Based on information leaks from current systems it appears such disruption has already begun.

  • Planner Pissed at Planetizen

    It didn’t “fail” per se. The team lost the bid and the city having awarded an exclusive contract to Alta booted the B-cycle stations out.

  • Katja

    Really? I feel like there was a pretty large time gap between the very brief tenure of B-Cycle and the initial rollout of Divvy. Like, at least three years’ worth of time gap.

  • So, you’re willing to “accept.” I honestly don’t really care if you’re studying it or not, user fees and taxes do not cover the cost of the roads you speak of entirely.

    If you’re going to say they do in the accepting manner that you presented, I think it’s best to say so from the beginning. I don’t know why our highways are not entirely tollways yet or that there are even some Interstates that operate through Chicago that are not.

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