Hard Times Have Rock Promoters Singing the Blues

After selling out arenas in more than two dozen cities earlier this year, the New Kids on the Block pop group was so confident their box office would continue to boom that they scheduled two concerts this month at 50,000-seat Dodger Stadium.

But after a four-month marketing effort that included promotional tie-ins with McDonald’s restaurants and local radio stations, promoter MCA Concerts canceled the second show for the group, which is one of the hottest in the nation.

Marc Bension, president of MCA Concerts, a subsidiary of the entertainment conglomerate MCA Inc., said New Kids didn’t want to do an extra show. Yet with only days to go before the Sept. 14 event, MCA was still advertising tickets for the single show.

Rock ‘n’ roll promoters are facing turbulent times as they get squeezed by higher costs, a dearth of music superstars with staying power and a fickle generation of teen-agers who--in the 1990s--have video games, MTV and other post-Woodstock diversions to compete with live concerts.

In the past decade, nearly half a dozen California promoters have gone out of business, including Pacific Concerts, which folded three years after being established in 1986, said Jacobs Moss, general manager of Avalon Productions, Southern California’s largest independent concert promoter.

Those still in business are having a tough time.

Slow ticket sales recently prompted Bill Graham, perhaps the nation’s best-known concert promoter, to move a show featuring the Ramones, Debbie Harry and two other groups from the 15,000-seat Arco Arena in Sacramento to the 2,250-seat Warfield Theater in San Francisco.

A Labor Day weekend concert that was to feature 50 acts--including Tanya Tucker and Tony! Toni! Tone!--in San Bernardino had sold just 20,000 of 90,000 tickets a day before the show, promoter Michael Scafuto said.

Meanwhile, ticket prices in the past 18 months--paced by the Rolling Stones’ then-record $30 tickets in 1989--have jumped 20% to an average of more than $20 as promoters have scrambled to cover higher costs of talent, insurance and facilities.

“The cost of going to shows has gotten so high, people can’t afford to go to concerts every month,” said Gary Bongiovanni, editor of the concert promotion trade magazine Pollstar.

“I am concerned about the concert industry in the long run,” added Peter Patton, assistant manager of the Richfield (Ohio) Coliseum. “I don’t know if we’ll ever get back to the days of having the number of concerts we used to. We are experiencing worse business in terms of ticket sales,” he said, citing a recent Linda Ronstadt concert.

Long considered a glamorous enterprise, albeit one in which reliable financial figures are hard to come by, concert promotion today is undergoing dramatic change as promoters and musical groups pay more attention to the bottom line to reduce the financial risk in a business that’s long been known for its cyclical nature.

Although Pollstar estimates that the top 100 moneymaking concerts generated $110 million in ticket sales in the first six months of this year, compared to $64 million in the first half of 1989, the midyear tally was boosted by a larger-than-normal number of tours from superstars who rarely go on the road, such as Paul McCartney, Madonna and Janet Jackson. Moneymaking concert tours have fallen off sharply this summer, and most experts say they expect fewer successful concerts the next few years.

“I think the business has been in a trend toward fewer concerts across the country,” said MCA’s Bension. “I think the MTV argument is a valid one. Bands get TV exposure, and they burn out more quickly.”

Already, touring has fallen off in secondary markets such as Richmond, Va., said Peter Luukko, a regional vice president for Spectacor Management Group, which operates 22 arenas around the country. Although major markets such as Los Angeles and New York still attract brisk business, promoters say they’re meeting resistance to high ticket prices, and they’re becoming reluctant to promote acts that aren’t superstars.

In the old days, promoters lavished time and money developing bands, starting them out in small clubs and moving them up. By doing so, bands developed a loyal following and were considered a long-term investment. Money flowed so freely that few promoters balked at artists’ demands for expensive accommodations or paying expenses for “groupies” and other concert hangers-on.

But today, promoters and facility operators are streamlining their business to cut out middlemen, protect their margins and control more links in the concert chain.

“The groupies have been replaced by MBAs,” said Moss of Avalon. “The amounts of money that are on the line today demand that everybody be more businesslike and professional.”

Spectacor’s Luukko said settlement of the $9.3 million in ticket receipts from last year’s Rolling Stones concert at the Los Angeles Coliseum took just 20 minutes with the aid of the band accountant’s portable computer. Years ago, Luukko said, he often stayed up until 3 a.m. haggling over ticket receipts with band financial personnel who were often intoxicated or inept.

Concert promotion began changing about a decade ago, when the advent of cable television’s 24-hour rock music channel, MTV, enabled musicians to become stars without having to go on lengthy tours to meet fans face-to-face, according to promoter Graham.

Faced with the new video competition, promoters and facilities operators fought back, trying to make concerts more enjoyable.

They rushed to build open-air amphitheaters, which were not only cheaper to construct than enclosed arenas but offered concert-goers outdoor ambience with their music. And promoters made it easier to buy tickets by using agents, such as Los Angeles-based Ticketmaster, that market tickets nationwide with computers and an army of telephone sales people.

Artists changed too.

To compete with TV, they added special effects to increase the visual spectacle at live concerts. Lasers, smoke bombs and other gimmicks are now commonplace at shows.

But while promoters and artists worked on making concert-going easier and more entertaining, they were getting squeezed by rising costs, particularly for insurance, talent fees and facility rentals.

Since 1985, for example, liability insurance for concerts has more than tripled, according to Alicefay Prine, vice president of Marsh & McLennan Worldwide, a New York-based business insurance broker. Insurers now charge between 15 cents and 30 cents a person for $1 million of liability coverage.

Meanwhile, artists who once got a flat payment from promoters now often receive a guaranteed fee, a percentage of ticket sales and income from merchandising deals, said Richard Walters, a vice president at Famous Artists Agency, which represents over 150 artists, including New Kids on the Block.

Talent fees are negotiable and can vary dramatically according to artist, venue and even time of year. But artists who got $25,000 to $50,000 a decade ago to perform can now make 10 times that, promoters say.

Typically, a major artist now gets 50% to 70% of gross ticket receipts, experts say. Of that percentage, the artist’s agent and manager get 25%. The remaining 30% to 50% of receipts go to the promoter, who must pay insurance fees, facility rental, security and advertising.

Based on those rough figures, the Rolling Stones and their managers may have received as much as $60 million from the estimated $98 million in ticket sales generated in their 33-city concert tour last year. Neither representatives of the group, which was without an agent at the time, nor promoter BCL Entertainment of Toronto could be reached to comment on Pollstar’s financial estimates of the tour, which don’t include income from merchandising deals.

The national promotion deal that BCL brokered with the Stones, and the huge sums of money they paid for the group, are troubling signs of how the concert business may be changing, some observers say.

“When you are spending X millions of dollars for the Rolling Stones, what’s going to happen with the other (less well-known) artists?” Bension asked rhetorically. “This type of operation is not going to buy the Tracy Chapmans of the world. But (such artists) need exposure too.”

With promoters such as BCL offering huge sums of money to major acts for a national tour, less well-financed local promoters are being squeezed out.

They are being replaced by big outfits such as MCA Concerts, Bill Graham Presents and Ft. Lauderdale-based Cellar Door Co., as well as arena operators such as Ogden Allied Facility Services that are developing their own staffs to book and promote talent.

These promoters have stayed afloat financially by cutting costs.

MCA, Graham, Avalon and many other major promoters, for instance, have been buying more of the amphitheaters where they stage concerts.

Theoretically, said Bension of MCA Concerts, a promoter who owns his own facility could lose money on the concert but make a profit overall when arena rental, merchandising, parking and other fees are figured in.

Yet with costs continuing to rise, such vertical integration may not be enough.

“Everybody’s margins are getting squeezed today,” Spectacor’s Luukko said. “Promoters are paying more for talent; buildings are getting more favorable rental deals; tickets cost a lot more. About the only person coming out ahead is the act. . . . Maybe I should go on stage.”