Despite being on-track to reach its lowered fiscal projections this year, Live Nation, the world's largest concert promotion and ticketing company, is looking to lower costs for 2011, primarily by paying the artists it promotes less money.
During a Bank of America Merrill Lynch Media, Communications and Entertainment Conference last week, Live Nation president and CEO Michael Rapino told investors that the decrease in concert ticket sales in 2009 should have been a wakeup call to artists and their managers and agents that the big, up-front paydays of the past are gone.
He said, due, in part, to the company making a profit in 2009 despite the recessionary environment, in 2010, "we didn't expect the consumer pull back that happened [in concert ticket sales]. We all thought that the theory that concerts are recession proof is true."
While Rapino would not disclose which artists would be offered less money, or the amounts being negotiated, he admitted the number one topic of discussion by industry insiders is how prices can be lowered in order "to fill the house."
"Have we started [negotiations] by saying we're not going to pay you that much because we don't feel we can sell enough tickets at that amount? And, is that leading to us getting some push back [from artists]? Yes. But, are we getting closer to the deals we want? Yes," he said, explaining that the company will concentrate on more "high margin" arena and amphitheatre shows with major acts, which could mean mid-range acts could get dropped.
This is sure to have an effect on the Middle East concert market, where a permanent arena doesn’t exist. Due to the need to build temporary structures for major arena-type shows, costs are even tighter.
It’s not surprising that artists are likely to be unhappy with Live Nation’s stance - since most music acts generate the lion share of their revenues through touring – but fans and Live Nation investors are sure to applaud the move, because it could lead to lower ticket prices and improved profits.
"2011 will be less about growing market share and more about profitability," Rapino said. He added that the company is looking to acquire more international artist management firms through its Front Line Management division to help grow Live Nation's international business, particularly in Spain, France, Brazil and Latin America.