The state of the concert and live sporting events industries

June 10, 2010

At their core, concert and live sports events still are based on one of the oldest business models in human history: Some talented folks come to your town to perform some amazing feats, and a lot of people pay their money to see them, sitting in the same room, in real time, with no Internet service provider needed. (See also: the Roman gladiators or the traveling troubadours of the Middle Ages.)

But corporate consolidation and technological innovations are changing just about everything else about the live entertainment experience. Very little of this news has been good for consumers -- at least not for those of modest means. But promoters and venue owners? Well, it's been a different story for them.

Though it ranks a distant third to the annual conferences sponsored by the concert industry trades Pollstar and Billboard, the annual Event and Arena Marketing Conference is now in its 30th year, and it has drawn several hundred industry insiders -- most from the marketing end of mid-sized venues and arenas across the country -- to Chicago this week. The confab kicked off Wednesday with a panel entitled "The State of the Industry," and I was asked to moderate and get the conversation rolling by posing some questions for the panelists:

  • Alex Hodges, chief operating officer for Los Angeles-based Nederlander Concerts, one of a dwindling handful of indie promoters left standing in the U.S. after the ascent of the giant, monopolistic mega-corporation Ticketmaster/Live Nation, and overseer of some of the finest venues in California, including the Greek Theatre, the Santa Barbara Bowl, and the Grove of Anaheim.
  • Joe O'Neil, senior director of ticket operations for the Chicago Bulls, and as such a key player behind the scenes at the United Center.
  • And Rich Krezwick, president of the New Jersey Devils, operator of the Prudential Center in Newark, New Jersey, and a last-minute replacement on the dais for John McDonough of the Chicago Blackhawks, who apparently had better things to do on Wednesday.

Earlier this year, in a decision that was vehemently opposed by consumer advocates, many artists, and federal legislators on both the left and the right, the Justice Department approved the controversial merger of Live Nation and Ticketmaster, creating the proverbial 800,000-pound gorilla in the room at any gathering of venue operators and concert promoters. I started by asking the panelists what the merger has meant to them so far, and they had some illuminating responses to this and other questions, with the sports/venue guys, O'Neil and Krezwick, largely making the standard market arguments (people will pay what people will pay, and big business ain't necessarily bad business), and Nederlander's Hodges echoing many of the wary comments the country heard when fellow indie promoters Seth Hurwitz of Washington, D.C.'s 9:30 Club and Maryland's It's My Party concert promoters and Jerry Mickelson of Chicago's Jam Productions testified before the Senate in 2009.

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Q. What impact has the Ticketmaster/Live Nation merger had, from your perspective?


Rich Krezwick

Krezwick (New Jersey Devils): "I think I've always been a Ticketmaster venue in my career. [Since the merger,] I think we've all been waiting for something really eventful to happen, and nothing eventful really happened."¦ I think the big advantage now is that there is another major ticket company about to blossom in AEG [the Anschutz Entertainment Group, the second largest national ticketing entity, though much smaller than Ticketmaster], which is good for all of us with building contracts, [so] that we can now go to two major companies. The biggest thing to me is the plan to offer the back end at a flat price.

"What's going to happen in the next couple of years is that [the venue will] pay a flat fee--$2 or $2.50 or whatever [to the ticket broker for their services] -- and then we'll keep everything above that [from the service fee; in other words, on a $10 per ticket service or convenience charge, $8 or $7.50 will go to the venue and the rest to Ticketmaster or AEG]. I don't see the buildings giving that up too easily"¦ The only way you make money is off the ancillaries."

Hodges (Nederlander): "Fortunately for us, we have some must-play venues for the artists out there, the Greek Theatre being one and the Santa Barbara Bowl being another. We have a unique history with artists and managers, but the impact of the merger where a large competitor -- Live Nation, which is just huge -- is a part of Ticketmaster and a part of a company that owns management firms with a lot of artists"¦ Well, this year, we have a number of shows and artists that are represented by that management firm, but we know it's a struggle, and we have to really sell our venues and our ability. It's sort of a wait and see if there's going to be a greater impact. But it's tough"¦ it's tough on independent promoters. We do what we do, but we live in the shadow of these big competitors."


The Nederlander-run Greek Theatre in Los Angeles

Q. And what about the so-called "firewall" that the Justice Department has promised it will erect between the ticketing end of Ticketmaster/Live Nation's business and the concert promotion end, so that it doesn't have an unfair advantage by having inside information from it's competitors? Do you think that will work? Hodges: "That's yet to be seen." O'Neil (Chicago Bulls): "When the government plugs up the oil [leak in the Gulf], then they'll put the firewall up! "I think time is going to tell how [the merger] is going to affect the consumer and how is it going to affect pricing. The thing about competition keeping prices down in any industry, now, when you have one entity that owns the acts, and owns the venue, and owns the ticketing system, where is that going to go?"

Q. The United Center is one of the few remaining major venues that isn't owned by a Live Nation or an AEG, and where an indie promoter, Jam, is in fierce and regular competition with Live Nation to promote shows for this market. O'Neil: "I like that Jam is still alive, that Arny [Granat] and Jerry [Mickelson] are still on the map and fighting, and it scares me that there's not going to be competition. As long as I've dealt with Ticketmaster, and I have a wonderful relationship with Ticketmaster, they've essentially been the only game in town. And that's why convenience charges and service charges have escalated so much." Still, all of the panelists agreed, even though consumers consistently complain about Ticketmaster--sometimes in the harshest terms--their businesses have been pleased with its services. Hodges: "While Ticketmaster has been any easy target for certain issues, service charges and so forth, the consistency of delivering your seat has been good. There's a confidence level with consumers that we see there."

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Q. Let's talk about the secondary ticket market -- or, as I like to more accurately call this part of the business -- scalping. It seems as if the notion of people being able to re-sell tickets to other people for as much as they will pay is creating a two-tiered system that's like the crack John Lennon made when the Beatles performed for the Queen: Those of you in the cheap seats, clap your hands; the rest of you rattle your jewelry. I mean, scalpers suck, right?

Hodges: "I, as the Bulls ticket manager, am a scalper now, because through the Ticket Exchange program at Ticketmaster, we allow people to resell Bulls tickets at over face value, and we get a cut of the action. About three years ago, we had a disclaimer on Bulls tickets: It said the resale of Chicago Bulls tickets for over face value is expressly prohibited. Now, we have the same thing, but it says it's expressly encouraged, because we're making a few bucks on it!" [Laughs]

Hodges: "For us in the concert world, it's a double-edged sword. To counter it, years ago, we started the gold circle idea, to charge more for the first 1,000 tickets or the first five rows, to keep the scalpers from getting that money. But we started that and soon we had a two-priced house. Then it was that seats further back shouldn't cost as much, and so on, so you end up with six or seven prices [for the same concert], and you don't know how much to drop the next price, and it's all very confusing."

Q. Rich, in New Jersey, there was a tremendous controversy last year when Bruce Springsteen attacked the scalpers for reselling tickets to his concerts, and recently, across the river in New York, Governor Paterson and Attorney General Andrew Cuomo advocated the return to a decades-old law prohibiting scalpers from reselling a ticket for any more than $2 over its face value. It seems as if the New York/New Jersey area has declared war on scalping.

Krezwick: "It's over! Everybody's a scalper nowadays!

"Look, it is America"¦. If you gave me the choice today, I would pay a lot of money to see the Beatles. And you might not; that's your choice.

O'Neil: "Not defending scalpers, but the secondary market 20 years ago was more of an illegitimate market. The ticket broker was thought of as a shady operator, and in some ways, there still are a lot of shady operators, possibly and probably breaking laws and not paying taxes and that. But the one positive out of this is that you can go to Bulls.com and sometimes, on the day of the game, you can buy a seat at face value [from] somebody who's just trying to dump it, and you know it's legit. And StubHub is a company that is legit. And people that can't get the tickets at face value or who want to pay a little bit more to get the better seat, I think they're in better hands now then they were 20 or 25 years ago."


A depiction of an early "secondary ticket market" transaction shows the scalpers hard at work and the consumer appearing, um, a bit perturbed.

 

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