Back to the Drawing Board for Bids to Run Greek Theatre

When the Los Angeles Recreation and Parks board next meets to pick a promoter to run the city-owned Greek Theatre, it might not like the choices any more than the ones it rejected this week.

In fact, there might be no new bids to even consider.

Blame consolidation in the concert industry.

Only two bidders came forward to compete for the potentially lucrative contract to host shows at the 70-year-old amphitheater. And Wednesday, after deadlocking, the commission voted 3 to 1 to throw out both proposals and start over.

One bidder was House of Blues, the nation’s No. 2 promoter that last year reported a cumulative deficit of $124 million and withdrew its plan for an initial public offering.

The other is the Nederlander Organization, a family-run firm that has been widely criticized for neglecting the Greek during its 25-year administration of the facility and for bidding in partnership with a debt-laden conglomerate.

“I was hoping there would be [more],” said City Councilman Joel Wachs. “I’m a believer in competition. I think it forces people to do their best.”

With Wednesday’s vote, the city faces the prospect that it won’t have an operator for the venue when the Nederlanders’ current contract expires Oct. 31. And House of Blues might walk away from the bidding process altogether.

“Do not assume we will be back,” said House of Blues Senior Vice President Adam Friedman.

More companies aren’t fighting over the Greek, promoters say, because the city waited years too long to put it out for competitive bidding.

The renovation costs a new promoter would need to pay are rising, and that limits the field of competition to those with the deepest pockets. And while the politically connected Nederlander family kept a tight grip on the facility in recent years, the region’s other major firms, such as Bill Graham Presents, were gobbled up by industry consolidator SFX Entertainment.

“There just aren’t that many big players now,” said Gary Bongiovanni, editor of Pollstar, the concert trade publication.

Local promoters Wolf & Rissmiller went into decline after the 1977 death of one of the firm’s partners and eventually dissolved. Nationwide, many small promoters have been sputtering since the early 1990s because of the recession, rising artist fees and other operating costs, and an ongoing consolidation. Others, such as local promoter Avalon Attractions, were scooped up by SFX.

SFX became the world’s biggest concert promoter in just three years beginning in 1997 after spending more than $2 billion to buy up promotion companies and venues around the world. But that’s left it burdened with debt.

Aside from House of Blues and SFX, most of the nation’s promoters today are regional firms. Only about 10 of them have the finances to pay for the required renovations at the Greek, and most are leery of venturing outside their home turf.

“It’s still about having the right media relationships, the right radio relationships, knowing when to put it on sale and how to put it on sale,” said veteran promoter John Scher, who runs New York’s Metropolitan Entertainment Group. “Not having the local expertise that I think House of Blues has, and that I think SFX has, it just didn’t make sense for us.”

SFX-owned Avalon Attractions initially planned to bid on the Greek contract, but the parent company instead decided to join Nederlander, promising to provide 50% of the money needed for improvements.

Concerts West, a new firm backed by Denver billionaire Philip Anschutz, also has the resources to commit to the Greek, but its business plan is to book indoor arenas, not amphitheaters.

Under its proposal, House of Blues is offering the city 8% of the gross revenue generated by the facility with a minimum of $1.2 million per year for 10 years; and $11.1 million in renovations, including improvements to the stage, sound system and food concessions. House of Blues also offered to pay penalties if it didn’t make its attendance projections or increase the number of shows.

Nederlander is offering the city 8% of ticket revenue; 6% of all other revenue sources, such as merchandise with a minimum of $1.25 million a year for the first half of the term; and pledged $5.5 million for improvements, with SFX picking up half the bill. (SFX isn’t an official bidder but would assist Nederlander in booking acts into the amphitheater.)

Even if the operators pay only the minimum rent, it’s a step up from the old contract, under which the city received 4% to 5% of ticket sales and had to pay for renovation work out of its share. Revenue made under the new deal is expected to go to other parks and recreation programs.

The promoters are making projections far in excess of the minimum guarantees.

Each side says that if they are awarded the contract, the Greek will generate more than $21 million in its first year. Such a sum would mean a 42% jump in revenue over this year, an increase competitors say is outrageously unrealistic given that attendance industry-wide appears to be slipping. Average concert attendance dropped an estimated 7% last year, industry sources say.

Each of the promoters says it would make the leap by booking more shows at the Greek, increasing attendance with the renovations and--to the dismay of music fans--raise ticket prices at least 3% a year.

And while they make similar projections about the venue’s performance, the two promoters each say the opponent’s plan is rife with problems.

Nederlander attorney Adam Burke said House of Blues, which owns the 6,000-seat Universal Amphitheatre, would divert the hottest shows there, away from the Greek, to avoid sharing proceeds with the city.

Friedman said that rather than divert money from the amphitheater, the company’s control of Universal would allow it to book more shows at the Greek by attracting acts who in the past had been bumped in the competition to keep dates open for bigger stars. He said Nederlander is on the defensive after losing the vote of a special panel selected to review the competing plans.

For its part, Nederlander’s bid offered less rent money and fewer improvements. Critics suggest that the privately held company, which sold six of its concert venues to SFX in the last several years, is on the verge of leaving the concert industry, a charge it denies.

Critics also say the Nederlanders have remained in control of the Greek solely because their longtime lobbyist, Neil Papiano, is a close friend of City Council President John Ferraro. Nederlander officials note that House of Blues has hired high-powered lobbyists of its own.