Concert Promotion Faces the Merger Music

Consolidation is a trend throughout the entertainment industry. Studios have gobbled up TV networks and independent film companies. There has been a feeding frenzy for radio stations. Several big theater chains have merged recently.

Now, live entertainment may be next. Concert promotion, to date a generally fragmented, localized business, is being targeted for consolidation.

New York-based SFX Broadcasting, which itself agreed to be bought last year by Dallas investment firm Hicks, Muse, Tate & Furst for $2.1 billion, has set its sights on owning and operating concert venues through its SFX Entertainment subsidiary. The company’s recent half-billion-dollar buying spree of promotion companies, including San Francisco-based Bill Graham Presents, have the live-entertainment industry buzzing about what SFX’s Robert F.X. Sillerman may do next.

“[Sillerman’s] goal is to own and consolidate the concert promotion business,” said Andrew Van Houten, a media analyst for BT Alex. Brown. “I think he will try to build and increase the value of his assets, then consider selling them to someone else . . . as he did with SFX.”

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SFX is the hot topic at the Concert Industry Consortium, sponsored by Pollstar magazine and various concert industry firms this week at the Century Plaza hotel. On Thursday, arena owners discussed the implications for them if SFX begins to draw concerts away to the 42 venues across the country that SFX owns or controls. Most of those venues are not in the top tier of well-known facilities; none is in Southern California.

This morning, a panel including Ticketmaster Chief Executive Fred Rosen and longtime manager and industry veteran Irving Azoff are expected to discuss SFX and the consolidation of the promotion business.

SFX poses a possible threat to both ticketing firms and personal managers. With enough national clout, it’s possible the firm could start doing its own ticketing and book tours into its own venues--bypassing managers and agents. Agents also fear SFX having the power to dictate terms and reduce their and their artists’ take.

Concert promoters have traditionally worked on thin margins, because they pay concert costs upfront and have to hope for a full house to recoup their money and profit from a cut of ticket sales. If they control their own venues--as most of the firms acquired by SFX do--promoters can make more money on things like concessions and parking. They can make still more if they control their own ticketing. Los Angeles-based Ticketmaster has had the strongest hold on that lucrative business in recent years.

SFX has already acquired a small ticketing company in St. Louis. To expand its ticketing business would inevitably mean locking horns with Ticketmaster. Rosen--who built Ticketmaster into the nation’s leading ticketer--said in an interview: “We welcome competition. But as a corporation, if we saw [Sillerman] getting extensively involved in ticketing, we’d have to look at getting involved in promoting.”

Sillerman, 49, founded SFX as a radio station group in 1992. He took the company public in 1993; by the time he agreed to sell to Hicks Muse in August, Sillerman had become the seventh-largest radio broadcaster in the U.S. through a series of acquisitions.

“[Sillerman] is a brilliant guy. He understood that the [Telecommunications Reform Act] would change everything; he built up an incredible group in a very short time,” said Jeff Pollack, head of Los Angeles-based consultancy Pollack Music Group.

Even before the Hicks Muse purchase, Sillerman had begun to buy concert promoters. After the deal, Sillerman became head of subsidiary SFX Entertainment. SFX Entertainment’s flurry of acquisitions in recent months have included Houston-based Pace Entertainment and New York-based Delsener-Slater in addition to Bill Graham Presents. Among other things, SFX Entertainment now lays claim to being the largest live-concert booker in the New York metropolitan area and the largest concert promoter in the state of Texas.

Throughout all this, Sillerman and SFX have kept a low profile. Several SFX executives are attending the conference at the Century Plaza, but none is taking part in the panels. Sillerman is a no-show; his assistant said he was taking part in a road show to potential investors and could not take part in a phone interview for this article.

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Sillerman’s first, albeit relatively minor, Los Angeles deal is an agreement struck with the Left Bank Organization for consumer and audience research. Industry insiders say Sillerman longs for a Los Angeles-based promoter, such as an Avalon or a Nederlander.

“I don’t know of anything specific [in terms of Los Angeles deals], but anything could happen,” said Gary Bongiovanni, editor of Pollstar. “If they could buy Delsener-Slater, they could buy anything.”