Building Managers Turn Talent Buyers In Competitive Live Market

More and more frequently, if venues want a show, they have to ensure that it will be successful in the most convincing way possible, putting the venue's own resources on the line.

Though they are great marketers, venues are not, in the traditional sense, promoters (Live Nation amphitheaters and AEG-owned and/or -operated arenas and theaters being the exceptions).

Frequently, public money is at stake with publicly owned buildings, and a $100,000 loss of taxpayer dollars is tough to explain come audit time. At the least, every risk situation comes under close scrutiny, whether ownership is private, a casino, a sports team, a university, a municipality or some combination of those.

Most venues would prefer to host shows rather than take on the added responsibility of serving as the promoter; running a building is enough to worry about.

"Most of the venues that are buying shows and promoting in-house would consider themselves 'promoters of last resort,'" says Apregan Group president Jeff Apregan, president of the Venue Coalition, a consortium of 54 arenas in midsize and major markets across North America. "What I mean by that is that their preference would be to work with promoters and, in a perfect world, just act as the landlord."

But the world isn't perfect and sometimes if it has too many dark nights, an arena's management has to take measures to bring in content. That situation is particularly true outside the major markets or in cities with more than one similarly sized venue.

"Venues in secondary markets or highly competitive markets must be aggressive in the current paradigm, or they will not have product," says Brock Jones, VP of booking for Philadelphia-based venue management firm Global Spectrum. "Today's economies of scale within the industry dictate that major promoters and primary tours must focus on the top 15-20 markets with venues seating over 12,000 to be economically feasible. This places smaller venues and smaller markets in a position demanding they provide for themselves."

Many factors come into play when venues step into the high-risk talent-buying game, and the first to be weighed is why the building is considering buying talent in the place. But the biggest question going in is the same as throughout the talent buyer/seller dynamic: "Is the risk reasonable?" asks Jim McCue, senior VP at SMG, another Philadelphia-based venue management firm. "Will the show have a good chance to make money?"

McCue says SMG looks at promoting or co-promoting an event as "an opportunity to make money and create an event for our client." Money -- lost or earned -- knows no genre. "In the past year, we have promoted concerts in our arenas as diverse as Van Halen, Barry Manilow, Alan Jackson and Usher; family shows such as How to Train Your Dragon and Batman; and Heart and Trace Adkins in theaters," McCue says. "In some cases, SMG has developed an event fund or marketing fund to generate new events."

Some buildings need to open the cash box more than others. "If they have solid relationships with promoters who are bringing them shows, then it may not be as important for them to promote shows in-house," Apregan says. "If, on the other hand, they really need shows and events, they may need to give in-house promoting a closer look."

It is important to note that money isn't the only consideration in play. One is a responsibility, particularly for public buildings, to justify their very existence by bringing arts and entertainment to the community.

"Venues are obligated to program their buildings with a wide variety of content," Apregan says. "Their owners, their local governments, communities, students-if applicable-suite-holders and sponsors all have expectations that need to be met."

In fact, McCue notes, the big picture for most venues is serving the community and providing value for stakeholders, including season ticket holders and sponsors. And if the building shows interest in an event, sometimes that "encourages a promoter to step in," he adds. "In some cases, SMG corporate will co-promote to share the risk and make a show happen that otherwise would skip the market, and in some cases we will offer marketing dollars to supplement the ad campaign."

There are ways a venue can cover its assets before making an offer everyone regrets later. Ed Rubinstein, CEO of Arena Network, a consortium of 42 North American arenas, says that questions to consider early in the process are, "What is the artist history of selling tickets in the market? When was the last time the artist played the market, even if it was in a competitive venue? Are there competing events in the market that cater to a similar demographic? [Though that's] not as much of a problem in larger markets, [it's] definitely a concern in smaller ones."

A common refrain in the live business is there are no bad shows, just bad deals. That applies no matter who the promoter is.

"Deals need to make sense," Apregan says. No one wants someone else counting their money, but the act's representatives know the venue has ancillary revenue streams beyond ticket sales, like parking and concessions, and it certainly wouldn't be beyond the acts' reps to consider those building revenue streams, overtly or not, when setting their clients' fees. "Just like promoters, venues need to evaluate the risk before submitting offers. Just because they retain ancillary revenue streams doesn't necessarily mean they should be overpaying for the act."

Research can mitigate costly errors, and venues should use the data and history at hand when judging potential of box-office performance. They can also to a significant agree control their own destiny in making an event successful.

"There are a lot of very savvy venue operators today," Apregan says. "In addition to structuring compelling deals, they have lots of knowledge about the market and plenty of marketing resources. The considerations they face are the same as those a promoter would have to evaluate: How should it be scaled in my market? Are the prices right? Are the expense estimates accurate? Where do I break even, and is this the right choice for my venue and my community?"

In short, venues can use the tools that all promoters use.

"We build pro formas studying expenses, scaling and a range of outcomes," McCue says. "We work every day with our local media, as well as using tools [like] SoundScan, Nielsen, Mediabase, show history, et cetera. Is the market a fit for the act? Is the show a fit for the community? Beyond the track record of the act, what have similar artists sold?"

And the venue knows better than most, or should, what the market can support. "We can manage the traffic of events to our best ability to ensure shows are not on top of one another or other conflicting events in the market," McCue says.

Given that they're in their building and market year-round, venues should have a useful toolbox at their disposal.

"We use our relationships with local media, our ticketing providers, our teams, our in-house media, our social media, to market an event," McCue says. "In many cases, based on the volume of ads we buy, we have venue trade we apply to a show."

And, as with tours, sponsorship dollars can help cover costs.

"With sufficient lead time, we sell local sponsorship for the event," McCue says. "Right now, one of our local markets is finalizing a relationship with a beverage company and a family tour that will likely result in a state-wide promotion for the show."

Today, the number of first-class venues extends far beyond the major markets, so, depending on how much a given artist wants to work, agents have to make choices when routing tours. Those choices more often than not come down to which venues offer the best deal. Sometimes something as mundane as a great rate on hotel rooms can make a difference.

"Venues need to understand that their offers need to be competitive," Apregan says. "Artists are typically only going to do a specific number of shows, and they are going to look for the most competitive deals. Maybe it's the guarantee. Maybe it's a bigger back end. The real question to ask is, Does this venue have the resources and expertise to market and produce this particular show?"

In today's world, every stakeholder in the show becomes a marketer, and venues are expected to be among the most effective among them. "A venue needs a top-notch marketing staff, including specialists in media buying great in-market relationships with all media, publicity, group sales and social media," Rubinstein says.

Agents and promoters know effective marketing from the venue leads to bigger grosses. "Of course, it is also important to keep a watchful eye on expenses in all categories," Rubinstein adds. "A venue that controls its expenses is well-known and well-used by artists, managers and agents."

The building talent coordinator should remember that going directly to the agent and bypassing the local promoter might anger that promoter, which could cost the venues dates down the line.

"If a building has an established relationship with one or more promoters and an artist is touring that the venue really wants, I would encourage them to first discuss it with the promoters with whom they do the most business," Apregan says. "This can get tricky at times, because the building doesn't want to get a promoter involved only to see the show go to another venue. If a promoter isn't necessarily interested in doing an act in their building, It's totally appropriate to reach out to the agent. If later it turns out that a promoter wants in, we would welcome the opportunity to work with them."

At the arena level, every building needs to maintain strong relationships with the two big national promoters in AEG Live and Live Nation, but smaller promoters shouldn't be overlooked, and the venues can help in these promoters' development.

"Venues must focus on big-picture strategies and emphasize strong, fair deals with independent promoters," Global's Jones says. "These independents will drive traffic to markets/venues they can succeed in."

There are some red flags that a show is a potential stiff. "Venues know that, if an agent is coming to them for offers, most promoters have already passed on the show," Rubinstein says. "That would certainly be a red flag to the smart venue manager. While it is important for both agencies and venues to work with promoters on a regular basis, the information sharing about upcoming acts and tours is skewed toward the promoter. In the long run, I don't believe this works to the benefit of the agents or talent."

Sometimes venue economics and the ancillaries and relationships they entail are the best fit for a given show, even if another promoter wants in.

"Many acts have guarantees, which are onerous for the traditional co-promote model with a promoter and will only succeed in an in-house model, where all revenue streams are controlled by the buyer venue," Jones says.

But, for example, when an arena manager is working for a municipality, some education about the "win some, lose some" world of live entertainment may be necessary.

"The biggest challenge is having clients understand the nature of this business and the risk involved," Jones says. "You may make money on a couple shows, but you will also take a hit at some point. There must be an understanding on the client's part-be it a city or university-that this is the nature of the business."

An artist guarantee is just that: It guarantees the artist will leave town with a paycheck. Venues have no such guarantee.

"If a venue is taking a risk, it wants to maintain all the revenue streams to provide an insurance policy against possible financial loss from ticket sales," Rubinstein says. "A venue can engage proactively with the artist to maximize the artist's sponsor visibility in the market during the promotion period and on the night of the event. From an operational standpoint, the venue should do everything it can to make the artist and crew comfortable and stress-free on the day of the show. Artists remember those venues who eliminate stress and bullshit."