Monday, June 05, 2006
This article from Melodicrock.com and the Wall Street Journal...
What do you think of concert ticket prices these days? Please comment...
POP GOES THE CONCERT PRICE - BUT NOT FOR ALL:
Industry Spotlight / This from the Wall Street Journal - Summer Concerts Pop Goes the Ticket Price With U2 and the Stones on the sidelines this summer, promoters are putting big premiums on smaller names. Why seeing Shakira will cost you $90
By Ethan Smith June 3, 2006.
When Kelly Clarkson toured the U.S. last year on the heels of her smash hit single Since U Been Gone, the top ticket price for most shows was about $40. When the former American Idol hits the road this summer, her top ticket price will leap to $75.
It's going to be another expensive summer for music lovers intent on seeing their favorites in person. Facing heavy criticism about high ticket prices, the live-music industry last year made a concerted effort to hold the line on budget-busting price increases. In the first half of 2005, ticket prices actually declined 6%, according to trade magazine Pollstar. And concert promoters made an effort to court frustrated fans with other amenities like package deals that included food and beverage discounts.
Now ticket prices appear to be creeping -- sometimes skyrocketing -- upward. Madonna is charging up to $385 a head beginning this week. There's also a Shakira tour charging up to $90, and Faith Hill and Tim McGraw are charging as much as $125.
Behind the rising tide is the cyclical nature of the concert business itself. The handful of truly big-name acts who can command top dollar generally don't tour every year, going out either when they have an album to promote, or have simply kept fans waiting long enough to build demand for tickets. Last year's bumper crop of huge names -- Paul McCartney, the Rolling Stones, U2, Neil Diamond and other top earners were out for the first time in years -- all but ensured a quieter 2006 season. This has promoters battling over the limited supply of marquee names that can keep their venues busy all summer. For the entertainment industry, these are high-stakes bets. Promoters -- who must pay for the cost of the arena, the production and the artists' fee -- typically get just 5% to 15% of ticket revenue, with the rest going to the artists. These razor-thin margins make for a risky, difficult business for promoters, especially during the critical summer months.
Each year concert promoters appear caught off guard by the public's appetite for bands widely viewed as has-beens. Last year Mötley Crüe's reunion tour filled that role. This summer a dual bill by Def Leppard and Journey is generating much stronger-than-expected early sales, even though both bands' commercial peak was at least 20 years ago. But this one-two punch of early '80s pop rock and power balladry doesn't come cheap -- the best seats in some markets run as much as $98.75 each.
The full picture won't be known until the end of the season, which is just getting under way. And despite plenty of examples of pricey individual shows, people in the concert industry disagree about how ticket prices in total will compare with last year's. But most concur that the upward creep got started in the last half of 2005, when The Rolling Stones and Paul McCartney moved prices upward with tickets that sometimes exceeded $400 each. The explosive growth of Web sites like StubHub.com that resell concert tickets, often at hugely inflated prices, has encouraged artists and promoters to drive face values higher and higher.
This year, outings by Madonna, the Red Hot Chili Peppers and Tim McGraw and Faith Hill are likely to be big draws. But to get those shows, promoters must pay top dollar to edge out competitors. In that overheated context, it is easy for promoters to find they have paid too much for any given act, particularly because setting prices and predicting consumer demand remains something of a dark art. Less-than-stellar ticket sales can mean big financial losses for concert promoters. Peter Grosslight, world-wide head of music at the William Morris Agency, says pricing is "not a very exact science."
When an artist decides to tour, his or her agent solicits bids from concert promoters, who offer a minimum guaranteed payment for each show. (In the case of the biggest performers, a promoter with a nationwide presence, like Live Nation or AEG Live, may make an offer not just for specific concerts, but for the entire tour.) After the concert, the artist is then paid either the "guarantee," as the fee is known in the industry, or about 85% to 95% of the box office revenue -- whichever is greater.
Some promoters rely on the May-to-September window for up to 70% of their business for the year. The run-up to the summer concert season always entails tough negotiations as concert promoters wrangle with performers' agents over fees.
In a routine that has become almost a ritualized dance, the two sides of the negotiations inevitably blame their counterparts for ever-escalating prices. Promoters say agents hold them up for every penny they can -- including revenue they estimate the promoters make on things like parking, food and beverages. Agents counter that they are simply looking out for their clients.
"You need to do the best job for the artist," says Mitch Rose, head of Creative Artists Agency's music department.
In Ms. Clarkson's case, the singer doesn't have a new album out, so audiences won't be hearing much, if any, fresh material for their $75. The reason for the spike in ticket prices is a behind-the-scenes effort to bid up the price for her services. Last year the pop singer received a guaranteed fee of $250,000 to $350,000 per show, according to a person familiar with the matter. Such guarantees are the primary underlying factor when it comes to setting ticket prices.
For this summer's outing, by contrast, she is to be paid in excess of an estimated $500,000 a night, according to people familiar with the situation. Executives at Live Nation, the world's largest concert promoter which is staging the tour, declined to comment on fees they pay performers. But Chief Executive Michael Rapino predicted Ms. Clarkson's tour will make money for the company, calling it "an absolute home run."
Mr. Rapino says his company can often afford to pay more than competitors for some artists, because his company owns the 153 major venues it books, meaning it makes more money than others do on things like parking fees and food sales. "We're a venue company," he says. "Our job is to increase utilization of our venues."
Even so, Live Nation's profit margins remain tight The company reported net income of just $1.1 million for the first three months of this year; its revenue for the same period was $516 million.
And that was in a calendar quarter considered strong for the concert business overall. It has been a bumpy few years for the business 2004 was brutal, for example, with promoters losing money by overpaying for tours by artists like Christina Aguilera and Marc Anthony, both of whom pulled out of planned tours amid lackluster sales. By comparison, last year was comparatively smooth, thanks to A-list acts and promoters who managed to keep enough of a lid on costs, at least for the first half of the year.
This year the gloves are off. Alex Hodges, executive vice president of House of Blues Entertainment, says the current environment is a minefield for promoters, filled with thinly hidden hazards. "Two years ago, people were pointing at one or two tours they thought were question marks," says Mr. Hodges. This year "nobody's staring out and saying, 'here's the big one that's coming.' But no question about it, there'll be 15 tours this summer that lose at the door."
With numerous performers with only middling drawing power on the road, says Randy Phillips, president and chief executive of No. 2 promoter AEG Live, "too many acts are cannibalizing each other."
The firefight that broke out recently over Mariah Carey is indicative of how keen demand is among promoters to secure top acts. The last time Ms. Carey mounted a North American concert tour, in 2003, the pop singer averaged just $262,000 a night at the box office, according to data from Pollstar. This year, by contrast, promoters have already promised to guarantee her almost twice that much per show -- well above $450,000 for every performance, according to several people involved in the talks. The 29-city tour was only recently announced, and ticket prices haven't been disclosed yet; the tour will be staged by Live Nation.
Faisel Durrani, president of marketing at Live Nation, which is promoting a number of this summer's big-ticket tours, points out that the cheapest seats for Ms. Clarkson's tour cost $25. He cites a range of other initiatives taken by Live Nation to lower prices. For select concerts, for instance, customers can buy four tickets for the price of three. He also points to a strong-selling tour by alternative rockers Nine Inch Nails, which includes "lawn" tickets -- the vast grassy spaces behind the seats at many amphitheaters -- for $20, and another by onetime Van Halen lead singer Sammy Hagar, for which lawn tickets cost only $10.
Others are finding ways to add on even more costs. People who log on to Ticketmaster's Web site to buy tickets to the Red Hot Chili Peppers' tour, for example, are given the option of buying a digital download of the band's new double album, "Stadium Arcadium," for an additional $19.90.
With just a few superstar acts on the road this year, artists are able to call shots beyond financial terms. Details like the routing of tours, too, are theirs to dictate. With her "Confessions" tour, Madonna could become the top earner of the year. She is performing in just 13 North American cities, but playing more than one night in each. That makes fans come to the performer, rather than the other way around, saving her time and money. Despite that -- and tickets that top out at $385 -- sales have been strong, according to the performer's representatives.
At least one act is forgoing a big payday in favor of a more intimate experience with fans. British rockers Radiohead, who have in recent years been more successful on tour than selling albums, this year are playing much smaller venues than on their last tour. In Los Angeles, for instance, the quintet is playing two nights at the 6,000-seat Greek Theatre; in 2003 they did two nights at the 16,000-seat Hollywood Bowl.
Those in the concert industry bemoaning the state of the business this summer don't have to look far back to find a more troubled summer. When promotion executives want to describe their current woes, many call this "the worst year since 2004."
posted by Paul Dickinson at 9:21 AM | Email Us