Last week, Live Nation reported a first-quarter loss of $84.4 million, 20% larger than the $70.3 million loss it incurred during Q1 2008. Concert attendance was down 22% in North America, suggesting that people had finally become reluctant to part with an average of $60 of their increasingly precious discretionary income during the recession.
But Live Nation claims their first quarter is typically their slowest period and that they usually experience higher revenue during their second and third quarters. In fact, the company’s deferred revenue, including money from tickets purchased for upcoming shows, is currently nearly $700 million, up 24% from last year. A strong April put ticket sales in-line with 2008, CEO Michael Rapino said during the company’s earnings call.
Even if attendance slips or ends up flat from 2008, Live Nation has other plans to boost revenue, including increasing on-site purchases of beer and souvenirs. In fact, on the company’s earnings call, Rapino described it as one of their “core strategies” this year:
With the reduced attendance expected throughout the year in North America we knew driving more dollars from each fan was a key strategy. We believe we’ll achieve this in two ways; first through higher margins on food and beverage that will be an outcome of our new concession deal with SMG Airmark which will increase profits by 10%.
The second way we expect to drive per head is through a host of new onsite initiatives including reducing the items sold and focusing on the most popular, profitable increasing points of sale, portable hawking to sell food and beverages directly to the patrons in their seats, and finally increasing products and adding new products like souvenirs photos, early access passes and bundling to create incremental revenue. [Emphasis ours]
Is this really the best way to boost revenue during a recession? Trying to get people to spend more money on beer and souvenirs?
Concert tickets are expensive enough and anyone who’s ever bought a drink, even water, at a show knows the prices are already astronomical. We can’t believe that in the current economic climate people would spend more money on refreshments and souvenirs. (Apparently they already are because onsite revenue increased by an average of $3.06 per person this quarter, but we believe that works out to one non-alcoholic drink per person.)
We doubt higher prices will lead to more onsite spending. And you can only charge so much without incurring the wrath of concertgoers—just ask the organisers of Woodstock ’99.
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