How Fans Might Win if Amphitheaters End Rock Wars

It came as a shock, if not as a big surprise, to hear that operators of Pacific Amphitheatre in Costa Mesa are bidding for a piece of their archrival in the Southern California concert business, Irvine Meadows Amphitheatre.

Since the Pacific opened in 1983 and started giving the marginally older Irvine facility direct competition, the two have been locked in battle over the biggest touring rock, pop, jazz and country music performers who play the facilities. And rumors have been circulating for years that the Nederlander Organization, which built and operates the 18,765-capacity Pacific, would like to snap up 15,000-capacity Irvine and put an end to the bidding wars.

Operators of both outdoor bowls have complained separately that heated competition over bookings has made it well-nigh impossible to make any money, despite the fact that they sell millions of dollars worth of tickets each concert season.

The reason? To persuade a Phil Collins or a Tina Turner to choose one amphitheater over the other, the facilities’ booking agents wind up offering these acts far more money than they would get if they were dealing with a single promoter. One Southland promoter estimated that Orange County’s two largest pop concert facilities generally pay five to six times the going rate for talent.

So it’s not entirely unexpected that sooner or later, enlightened self-interest would prompt a stop-the-madness move by one faction.

Now, as to whether these two giants of the Southland concert industry can associate in any way without violating federal antitrust laws . . . that question will be answered by the U.S. Justice Department’s antitrust division, which is conducting an investigation into the possible “elimination of competition” between the two.

Officials at both facilities say they aren’t worried; that the Nederlander offer, if accepted, would increase competition, not decrease it, by making the amphitheater available to more than one promoter. And, in turn, Nederlander may open up the Pacific to other concert promoters.

There are skeptics who fear that Nederlander, once in control of Irvine as well as the Pacific, would simply shut out all other concert promoters. But realistically, Nederlander will have to persuade the Justice Department that that won’t be the case if it hopes to get the green flag on the deal.

(For the uninitiated, Nederlander is teaming with Ogden Corp., a major national concessionaire, to acquire 75% interest in Irvine Meadows for about $8 million, according to Irvine’s managing partner, Robert Geddes. In addition, Nederlander has also offered to give 25% interest in the operation of the Pacific to the consortium of private investors who own Irvine, said Geddes, who also owns 50% of Avalon Attractions, the independent promoter that has the exclusive contract to book Irvine Meadows.

Because of his interest in Avalon, Geddes is the most resistant to the deal and has teamed with entertainment industry bigwig Irving Azoff to counter the Nederlander offer in an attempt to buy out his three partners and keep Irvine Meadows for himself and Azoff.)

In the meantime, this attempt of the lion to lie down with the tiger provides a fascinating lesson about the way that raging free-market capitalism can wind up penalizing the one group that is supposed to benefit the most from competition: the ticket buyer.

It’s hard not to wince at the irony in the fact that average ticket prices in Orange County are substantially higher than in other markets where competition is far less active. In fact, most observers think tickets would probably cost less than they do now if there was just one amphitheater in the county.

Consumers better off with a monopoly? How did such a fundamental economic principal get so turned around?

It’s not really. The amphitheaters do adhere to basic tenets of supply and demand. You just have to sort out what is being supplied and who is demanding it.

In this case, the performers are supplying what the concert promoters demand. That’s why the intense competition has driven ticket prices up, not down: the amphitheaters are not selling to consumers so much as they are buying from performers, who have reaped considerable rewards from Orange County’s rock wars. Lowly music fans, because they have shown they will pretty much pay whatever facilities charge, barely weigh into this equation.

“The only ones getting rich right now are the acts,” says one former Southland concert promoter.

Will that change if Nederlander gets its foot in the door at Irvine? And will it help or hurt the local rock fan?

In reality, a promoter who also controls a theater--and with it the ancillary revenue from food concessions, parking fees, T-shirt sales and other merchandising--will be in a far better position to land any act it truly wants.

So whoever owns Irvine Meadows would be better able to counter any outside promoter’s offer. They could tell Michael Jackson’s manager, “Sure, we can pay you an extra $100,000 if you play here,” because the facility owner has substantial other income to draw from that wouldn’t be available to a promoter who simply rents the building for the night. And as industry sources acknowledge, that “etc.-income” side of the business can generate as much money as ticket sales.

Additionally, if the proposed $94-million, Ogden-financed, Nederlander-operated Anaheim Arena becomes a reality, Ogden-Nederlander eventually will be able to offer a given touring act any of three choice facilities in Orange County: one indoor, operating year-round; the other two outdoor, working the spring, summer and fall seasons.

That’s a lot of muscle.

But consider: A partnership between Nederlander and Irvine could cut down on money spent for talent because Nederlander no longer would be fighting Avalon so desperately to get a given act at “their” facility. They would still compete with other promoters for the deal, be it at the Pacific or Irvine, but if bidding escalated to the point where they had to start siphoning off money from other sources, like concessions, Nederlander might be more inclined to let another promoter book the act and just sit back and collect the rent, etc.--a known quantity.

No gambling, no losses.

Nederlander would also gain the beneficial side effect of having Irvine’s more remote location for the hard-rock and heavy metal acts that have been the focus of noise complaints by the Pacific’s Costa Mesa neighbors almost since Day One. If, at the same time, Nederlander could put the lid on the ongoing litigation over noise, that could save a lot of people a lot of hot-dog money, not to mention the public relations value.

At this point, it would seem that the people who are sitting prettiest in the picture are Geddes’ partners in Irvine Meadows: developer Donald M. Koll, Newport Beach attorney Paul Hegness and Irvine business consultant Larry Hoffman.

After years of getting lower returns on their investment than they expected because of the high-stakes bidding wars, they now have not one, but two, parties clamoring to throw them millions of dollars in exchange for their allegiance.

Who’s going to make out from this competition?

Stop me if you’ve heard this one before.