What the business learned from U2, the Stones and Madonna
If the low end is important, the high end is even more so, and leads the way in both dictating profits and pricing the majority of the manifest. "You need that separation in your pricing to be able to appeal to a broad spectrum of ticket buyers," Live Nation Global Touring chairman Arthur Fogel says. That was the approach taken with U2's 360° tour, which wrapped in 2011 as the most successful tour ever in terms of both gross and attendance.
U2's 360° was very much multitiered in its scaling, topping out at $250, with a general-admission field section at $55, at least 10,000 seats priced at $30 and a range of prices in the middle. "We felt we needed to address the different price points, but to the extreme," Fogel says. "And in today's world, you'd have to say that $30 for U2 is an extreme price on the bottom end."
Yet U2 didn't push the envelope on the high end, at least compared with elite acts like Madonna and the Rolling Stones, who topped out at nearly $1,000 for the best seats, with VIP several times that. The much-scrutinized top-end pricing is "an artist-specific decision," Fogel says, adding that the stratosphere secondary-market pricing sometimes must just be ignored. "It's pretty obvious that for the top acts in the business, if they're charging $200-$300, that those tickets are going for a lot more on the secondary market once they get into play, or if they get into play."
Longtime Stones producer Michael Cohl in some ways set the standard for "gold circle" seats, which Cohl defines as the "5%-10% where we try to get the high-priced-ticket people to pay for the tour." Cohl recognizes that the media often focuses on those highest prices, generally with a negative connotation.
"The mistake the media have made over the years in attacking that situation is that this 10% of the house allows the other 90% to be $99 or $60 in our case," Cohl said in a 2005 Billboard interview about the Stones' A Bigger Bang tour. "If you get rid of that golden circle and spread it over the house...then the punters everybody is trying to protect will end up paying 30%-50% more."
AEG Live CEO Randy Phillips begs to differ. "As much as I admire and respect Michael Cohl, this is like the government saying 1% of the tax base covers the costs of all the government programs for the other 99%," he says. "Generally, those lower-priced seats are so far back in the upper bowl of an arena and consist of a couple of rows, they are more window dressing than a real healthy distribution of price. Often, the higher-priced inventory sits in platinum-style or VIP programs with some type of value-add to minimize the impact of the sticker shock. Since every tour has different economics, there is no real formula that applies across the spectrum."
Marc Geiger, head of contemporary music at William Morris Endeavor, has no problem with premium pricing, to an extent. "I want to go way past that, frankly, and get much smarter," he says. "There has been a natural resistance to finding the top end of what is the right ticket price for the first two tiers. Everyone is concerned with the image, because they think the top price will define how they get looked at. People would like to optimize the deal, but there are sensitivities."