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November 18, 2005

Comments

Greg

You know, I'm a bit curious about who takes the risk in event promotion / hosting and whether there's an opportunity to be had in shifting the risk / reward opportunity from parties who'd prefer more stable revenue to speculators. If you can convert from a spot to a forward you can build a market... we should talk more about this, it'd be a good intellectual exercise.

Peter Caputa

Greg. I'd love to run this through your analysis engine.

Here's some thoughts...

In nightclub and other local small events, the clubs/venues assume all of the risk. Opening a new club is a big risk. Planning a new club night (or event) isn't a big risk.

In larger events, the game changes. Enter the middle man: the concert promoter (show organizer). In concert promotion, the concert promoters assume all of the risk.

So, concerts are probably the best example given what I know and the huge upfront risk. One of the biggest line items for a concert is the talent. There are a handful of large concert promoters (AEG, Clear Channel, House of Blues + another 10 or so big players) that vie for the bigger talent. I've been told that something like 80% of concert tickets sold are for the top 30 acts. So, the acts don't have any risk. They know that the rights to their tours will get bought by concert promoters. The promoter assumes the risk that they will sell out the tour. The problem is that promoters bid so high to get the business, that they don't often make their money back. And it is public information that Clear Channel's entertainment division, the biggest concert promoter, loses (has lost) a lot of cash operating this way. Their modus operandi has been to get the top talent at whatever price. And it hasn't been working.

Another big problem is lack of data. The problem exacerbates (and opportunity increases) when you get into smaller shows (approx 1-10k). Very few acts can draw a crowd everywhere. And very few concert promoters know which acts draw what crowds - where. So, the market gets very fragmented - very quickly.

Ticketing companies (especially the big ones) generally horde customer data and use it as a direct marketing tool. But, concert promoters, who buy the talent and put all the money into advertising the event, don't have access to the data for mining purposes (business intelligence) or marketing purposes. But, the irony is that the ticketing companies do very little to make the event successful. And they assume very little risk. But, they keep a nice fat margin for themselves. Of course, they give kick backs to promoters when online sales are made. But, that does little to reduce risk for the concert promoter.

So, the reason concert promotion is a tough busines to make money in - is because of the huge upfront risks involved. And the lack of data to make intelligent decisions. And the inability of concert promoters to really drive ticket sales through data driven marketing/advertising.

We certainly aren't addressing the upfront risks. Nor are we going after big shows, as ticketing is controlled by a monopoly, propped up by a concert promotion oligopoly. But, we are hoping to hedge risks for small and medium sized events by improving business intelligence and by applying CPA advertising.

Ed Batista

Pete, this discussion gets me thinking about how concert-goers' attention gestures (listening to songs and buying music, researching dates, purchasing a ticket, etc.) could be integrated into their overall "attention cloud." which would go a long way toward providing sufficient data to make better decisions by promoters. I expect Greg and his colleagues at Root will have some ideas in the near future, if they don't already, but I hope you'll A) keep asking the folks working on attention to provide the data you need in the events biz, and B) think about potential attention services that entities like Root could be providing. Hope all's well.

Ed

Dick Costolo

Great post, which I only found because of your comment on seth's post! Since seth first started describing /root to me, i have found the whole thing absolutely fascinating. I need to spend some time in an overstuffed chair wrapping my head around his latest post and yours here. I hadn't thought about event promotion in this context at all, but of course it makes perfect sense.

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