"Since news of Geiger’s plan came out, I’ve been getting a lot more calls about investing in live music -- Geiger’s confidence in indie music has lifted everyone," explains one indie promoter who has seen Geiger's proposal to create a network of indie venues.
Add in recent comments from Live Nation chief executive Michael Rapino that were bearish on the scalability of Geiger’s plan, and many investors are wondering if there is a different path forward, offering a more passive, non-controlling stake in clubs and indie venues while still buying in at a significant discount.
"If you own the Troubadour in Los Angeles, it's a legendary business and you’re having a tough year, you’re not selling to Marc Geiger or anyone else at a one or two times multiple," Rapino recently said on a call when asked about Geiger's impact on indie music during a Nov. 5 earnings call. Venues managers have "access to capital, PPE loans" and "lots of ways you can keep your business afloat while you get through the storm," Rapino said, expressing doubt that Geiger can achieve any real scale with his venue plan.
Rapino would know -- Live Nation is the largest venue owner in the world with 107 clubs and theaters in its U.S. portfolio that act as important feeders and development systems for future festival, arena and stadium headliners. The $75 million in investor funds Geiger plans to spend on indie clubs, according to an interview with The New York Times, won’t give him anywhere close to Live Nation’s size. While he did hint that he wanted to create a "network effect" that would allow him to achieve some level of scalability, $75 million is probably not enough money to create a competitive network of venues that give him any type of advantage in booking shows.
Geiger knows this -- he ran the music department at WME for more than a decade and has seen thousands of tour deals come across his desk. Clubs are a tough business. The margins are thin, the access to capital is limited and many club owners don’t have any formal business training. From a commercial real estate perspective, there’s more incentive for a landlord to lease a space to a Chipotle than a rock club — the business is more stable, the other tenants don’t complain and hardly anyone ever calls the cops on a burrito joint.
Searching for Scalability
If Geiger is buying venues at a discount, and then using his music experience and business ties to identify inefficiencies, there's a potential to score better deals with vendors and think more creatively. That could potentially increase a club’s earnings by double digits and net a high yield, allowing him to repay investors and build a nice long-term business.
Multiply that across 10 to 20 SaveLive venues and Geiger would accomplish a form of scale that would have a financial impact on venues within his network.
In order to make those types of operational and efficiency changes, Geiger needs a 51% controlling interest in the venues. That’s how Live Nation makes its venue purchase agreements too, but the acquisition is part of a larger play to vertically grow its presence in the markets where it operates. Put more simply, Live Nation’s model is to consolidate venues, while Geiger’s plan is to consolidate the operational control of venues.
What Geiger is proposing is more akin to how ticketing companies pay for ticketing rights or a promoter buys exclusive booking rights. By purchasing a 51% interest, Geiger has the power to make changes wherever a venue is located and potentially implement multi-venue marketing and sponsorship deals that can push the yield higher. He can also collectively bargain for better ticketing deals, lower performance rights fees and potentially sign lucrative agreements with streaming companies like Twitch and YouTube. (Geiger did not comment for this article.)
It’s a risky plan, betting "that these independent venues are so distressed that they’re going to throw someone the keys at a very cheap price," Rapino said. Asking venue owners to risk their businesses on an unproven idea might be too big of an ask, especially if they are getting an increase in phone calls from investors with competing offers.
Can Save Our Stages Be Saved?
There’s also increased hope from the National Independent Venue Association for passage of the Save Our Stages Act, which could potentially raise $10 billion in federal grants for indie venues during the lame duck session or after President-elect Joe Biden’s inauguration. So far NIVA has mostly stayed agnostic when it comes to commercial endeavors like SaveLive.
"NIVA is pro independent venues and promoters, not anti anything,” says executive director Rev. Moose. "Since we formed in April, our sole focus has been to get emergency financial relief for our members, with the much-needed Save Our Stages Act currently having 207 bipartisan cosponsors. Every one of our nearly 3,000 members makes their own decisions based on what’s best for their business, which was the case before the pandemic, now, and in the future. This is the very independence we're fighting to preserve."
In his earnings call comments, Rapino was also amplifying a point that many others have made about SaveLive — the premise sounds like vulture financing. Offering a struggling music club enough money to avoid closing in exchange for a controlling ownership stake feels like Hobson's Choice, a take-it-or-leave-it offer that is falsely conveyed as a choice.
But venues really don't have many options right now. While private offers are increasing, Geiger is the only music exec with substantial experience making a public pitch to the music community.
"There's no one else offering to help the venues financially and lend support the way Marc is doing," says Nadia Prescher, owner of the Madison House booking agency in Boulder, Colorado, and head of the National Independent Talent Organization. "He’s providing an option, if you don't want to take it, you don't have to."
Does SaveLive Pose a Threat to Live Nation?
Many in the music business, including some of Geiger’s former colleagues at WME, support his plan as a way to promote a diverse and healthy landscape of talent buyers for concert content. But what’s motivating Geiger’s investors who are willing to front an eight-figure buy-up? Investors typically want a return on their investment and while we don't know the details of Geiger’s plan, it’s easy to conclude that the most direct pathway to profit would be to eventually markup and sell all the assets.
Perhaps that’s what was actually driving Rapino’s comments -- the idea that he is one of a handful of eventual potential SaveLive buyers in the years to come. To get to that point, many things have to go right for Geiger and SaveLive, but it’s easy to imagine Rapino and Live Nation would have a duty to shareholders to examine a possible acquisition if the company was on the market. Of course, if Rapino had really wanted to buy these properties, he probably would have already.
Until then, it’s unlikely what Geiger is doing represents any real competitive threat to Live Nation, but it does have the potential to help people in dire straits otherwise.
"I'm looking forward to learning more about the details of SaveLive," says Stephen Sternschein, managing partner for Heard Presents which owns several venues in Austin, Texas. "The devil is in the details. His is the first bonafide, public venture that is placing a bet on the future of independent venues and the return of live music, and I applaud him for recognizing the value and untapped potential from a commercial perspective in the space."
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