Debts and a lawsuit are the closing act at W. Hollywood music festival
The Sunset Strip Music Festival brought in acts like Jane’s Addiction and Failure, but lost $577,431 in 2012 and $389,414 in 2013.
Over its seven years, the Sunset Strip Music Festival seemed to do a better job of angering people in West Hollywood than entertaining them.
With bands like Linkin Park, the Offspring, Marilyn Manson and Motley Crue rocking from the stage, residents complained about window- and wall-rattling “sound abuse.”
But with every passing year, the festival many West Hollywood residents loved to hate was quietly dying, losing more than $1 million last year, according to a recent city performance audit of its organizer, the nonprofit Sunset Strip Business Assn.
Meant to promote the iconic strip, the debt-riddled rock festival became a source of the financial blues, civic anger and a lawsuit.
It angered Sunset Boulevard nightclubs, restaurants, hotels and bars that had no choice but to pay thousands of dollars a year — as high as $35,000 — to the nonprofit group, which managed the Sunset Strip Business Improvement District under contract with the city. (Fees went toward services such as sidewalk cleaning, security and marketing.)
“The fees that we pay annually are exorbitant,” a group of business owners — including the owners of BOA Steakhouse, the Viper Room, Pink Taco, 1 Oak and the Mondrian LA Hotel — wrote to City Manager Paul Arevalo in April. “In the current economic climate, we simply do not have the ability to spend this amount towards something that does not benefit us and actually hurts us at times.”
Created by the Sunset Strip Business Assn., the festival started in 2008. The first year, it was held inside the Strip’s vaunted live music venues. But organizers decided to take it outside, closing off Sunset Boulevard. Many business owners said that drove away customers, making the weekend of the festival a money-loser.
“The idea of closing down a street on the Sunset Strip is unbelievably romantic,” said Maribel Louie, the city’s arts and economic development manager. “The practicality of that is it’s probably the most expensive way to put on a music festival.”
The festival came to rely on large loans, at one point taking a $250,000 personal loan from the president of the Sunset Strip Business Assn. board to keep it afloat, according to a financial analysis of the nonprofit by the Irvine-based accounting firm White Nelson Diehl Evans.
In July 2013, a month before that year’s festival began, organizers asked for $100,000 from the city to cover production costs such as stage setup and lighting, according to city documents. In a letter asking for the money, Sunset Strip Business Assn. Executive Director Todd Steadman blamed low ticket sales the prior year on hot weather and guaranteed a “huge draw” for Linkin Park.
They got the money — which was in addition to $95,000 the city had previously agreed to donate. Even with that support, the festival lost $389,414 in 2013 after losing $577,431 in 2012, city documents show. Then, last year, things got even worse.
Two consecutive years of big losses didn’t discourage festival organizers. Instead, they doubled the festival’s length and partnered with the Nederlander Organization, the concert promoter that runs the Greek Theatre.
Nederlander agreed as long as it would be liable for only $50,000 if the festival was to fail, according to court documents. Sunset Strip Music Festival LLC — a limited liability company entirely owned and managed by the business association to operate the festival — was to pay Nederlander back for any losses beyond that.
Days before the festival began last September, Sunset Strip Music Festival LLC and the business association asked Nederlander for an emergency $150,000 loan, agreeing to repay it by June 30 with the money it earned from Jack Daniels-sponsored street pole banners on Sunset Boulevard. The loan has not been repaid.
Sunset Strip Music Festival LLC and the Sunset Strip Business Assn. — both led by Steadman — now jointly owe Nederlander about $610,000, including half a million dollars spent on deposits for musical acts, court documents state.
Steadman did not respond to requests for comment. The address listed for the Sunset Strip Business Assn. office is now a construction pit where a Marriott Hotel is being built. An outdated voice mail message for the association and the “rocking Sunset Strip Music Festival” says the dates for the 2014 event will be announced soon.
Leslie Klinger, an attorney representing the Sunset Strip Business Assn., declined in an email to comment for this article.
In late August, Nederlander sued the Sunset Strip Business Assn. and Sunset Strip Music Festival LLC, alleging fraud and breach of contract in a lawsuit filed in Los Angeles County Superior Court. Nederlander alleged that when festival organizers reached out to potential co-promoters, they said they planned to hold a “fiscally viable” event but “failed to disclose that the festival had never turned a profit.”
“We were left, really, with no choice,” Nederlander Concerts Chief Executive Alex Hodges said of filing the lawsuit. “I’m always surprised when people don’t honor what they say.”
On June 16, Steadman told Nederlander that the nonprofit and Sunset Strip Music Festival LLC did “not currently have the funds necessary” to pay the $150,000 it had agreed to pay by the end of that month, according to the lawsuit. When Nederlander asked how much the business association had made from the Jack Daniels banners, the agreed-upon source of the repayment money, “Steadman did not answer the question (or make any reply),” court documents state.
In August, the City Council wrested control of the business improvement district from the Sunset Strip Business Assn. and placed it under city management for at least the next year. The city appointed a board of advisors that includes many of the business owners who complained to the city.
“We’re glad to have all the turmoil from the previous organization behind us so we can move forward,” said Brett Latteri, owner of the Den on Sunset and a member of the business improvement district’s new advisory board.
Although the music festival is now defunct, the Sunset Strip Business Assn. still exists with one full-time employee: Steadman. It can no longer collect fees from the businesses.
Twitter: @haileybranson
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