- The Washington Times - Wednesday, December 27, 2000

Rising ticket prices. More advertisements. Parking fees.

These are a few of the changes Washington-area music fans have encountered in the past five years when plunking down their dollars to see their favorite artists.

Still other changes have occurred in the music business, and some can be traced to a source concert-goers rarely see SFX Entertainment Inc. The New York-based sports and entertainment management company gobbled up concert promoters and amphitheaters before it was swallowed by radio station-owner Clear Channel Communications Inc. in August.

Insiders say SFX has changed the concert industry by focusing on revenue, buying entire tour packages instead of booking artists city by city. Its detractors accuse SFX of creating a monopoly on outdoor venues and say it has driven up ticket prices.

The company controls 70 percent to 80 percent of concerts larger than the nightclub level nationwide, estimated Ray Waddell, touring reporter for Billboard magazine.

"They're viewed with a mixture of fear, respect and disdain, depending on who you talk to," he said.

"Everybody who started in this business 30 to 35 years ago believed in the power of music to unify people, and now it's been subverted as a vehicle to generate cash," said Alex Kochan, an agent with Artists and Audience in New York. But he noted that attitude has become common among promoters, not just SFX.

David Goch, a lobbyist with Webster Chamberlain Bean in the District of Columbia and "a religious concert-goer," said he understands that the music industry wants to make as much money as possible.

"[But] when taking advantage turns into gouging … you're injuring the people that you should be fostering and caring for," he said.

He went to about 20 concerts this year, including Pearl Jam and Jimmy Buffett. He's lucky enough to be able to afford it, he said.

He did opt out of the Crosby, Stills, Nash & Young show, where tickets close to the stage went for $200 and higher.

If Mr. Goch attended an area show this summer, chances are it was promoted by SFX. The company owns Nissan Pavilion at Stone Ridge in Manassas, Va., and runs Merriweather Post Pavilion in Columbia, Md., as well as promoting shows at venues such as the MCI Center and RFK Stadium. The company also manages athletes and promotes musicals and plays.

Its recent concerts range from the "Anger Management Tour" with Limp Bizkit at the MCI Center Dec. 10 to a performance of the Trans-Siberian Orchestra at DAR Constitution Hall Dec. 22.

SFX's parent company, Clear Channel, owns 11 radio stations in Washington and Baltimore, including country music standby WMZQ-FM and the recently reformatted WJMO-FM, which plays what it calls "jammin' oldies."

Clear Channel's stock, traded on the New York Stock Exchange, rose to a six-month high of $83.81 in mid-August before falling to $48.44 yesterday. Some of SFX's critics, most of whom are competing promoters, have pressured the Justice Department to look into the company's practices, saying it has a monopoly on the concert industry, particularly for outdoor venues.

When Clear Channel bought another network of radio stations, AMFM Inc., the department forced it to sell off certain holdings. As for SFX, Justice conducted an inquiry several years ago that turned up no violations, a spokesman said.

One industry veteran who declined to be named said SFX's capabilities could become even more threatening with the Clear Channel merger: Stations could use air time as leverage to convince acts to use SFX as their promoter.

Mom-and-pop to big Daddy

"The concert business has evolved over the last four years or so from a mom-and-pop business to one that's dominated by an enormous corporation," said Gary Bongiovanni, editor of the industry trade magazine Pollstar.
But he said SFX does not have a monopoly because it competes with promoters such as House of Blues, Metropolitan Entertainment Group and Jam Productions.
Jack Boyle, chairman of SFX's music division, pooh-poohs the idea that the company has a monopoly, pointing out that Wolf Trap, which is run by the National Park Service, competes with Nissan and Merriweather locally.
Mr. Boyle, a longtime Washington-area promoter, sold his company, Cellar Door, to SFX in August 1998.
He said the concert business is unforgiving, with tight profit margins. And he painted himself and his company as promoters out to make an honest buck in a tough industry.
"On a risk-reward basis, this is one of the worst businesses in the world," he said.
He said SFX guarantees artists a set amount of money with the company getting any leftover profits. Mr. Boyle also noted that 20 percent of SFX-promoted shows are held in venues it doesn't own, so it doesn't get extra income from those locations' concessions.
Before SFX grew, the business was controlled by regional promoters who had solid relationships with bands, said Billboard's Mr. Waddell. In the early 1980s, promoters began to buy venues.
Then in the mid-1990s, SFX bought one competitor after another. By 1999, the company was the nation's leading promoter, with nearly seven times the revenue of No. 2 House of Blues.
The company could buy entire tour packages, booking acts at SFX venues or affiliated arenas. Even if an artist decides not to sell a whole tour to the company, the musician often plays at SFX venues.

Generation cash gap

Critics say the new system has contributed to ticket costs that have priced some fans out of their favorite concerts.
That's borne out by attendance numbers, which dropped in 1999, while gross ticket sales hit a record $1.5 billion. The trend seemed to reverse in the first half of 2000, however, according to Pollstar.
The top 50 tours, including Bruce Springsteen and Tina Turner, sold 12.9 million tickets in the first half of this year, up 5 percent from 1999.
In all of 1999, fans bought 26.3 million tickets to the top 50 tours, down from 27.4 million in 1998 and 32.5 million in 1994, the record year for ticket grosses.
Pollstar estimates that 2000 will be a record-breaking year as prices continue to climb.
SFX's long-term strategy doesn't include plans to keep fans coming, Mr. Kochan said.
"SFX hasn't demonstrated that they have any plans to generate any new audience for music. They have no strategy in lowering the ticket prices or bringing people who have left the concert market back into the fold," he said.
He said the highest-priced acts, most of them targeted to baby boomers, will stop touring as they age.
That could cause a sharp drop-off in ticket revenue, since bands that play to younger audiences typically charge less.
Industry insiders say SFX has driven up ticket prices by guaranteeing groups' fees when it buys tours. The rise, they say, is caused by both the artists' demands for more money and SFX's offers of higher fees and other promoters have followed suit to compete.
Concert tickets averaged $44.80 in the first half of 2000, up from $43.63 in 1999 and an increase of more than $11 from 1998, when the average was $33.59, according to Pollstar.
The averages have climbed partly because of tiered pricing, a practice SFX has championed, Mr. Bongiovanni said. The biggest acts charge premiums for the best seats, raising the average price.
For example, tickets to Bruce Springsteen's tour earlier this year averaged $61.25, while pricey seats at Crosby, Stills, Nash & Young shows drove the band's ticket average up to $76.32.
Tickets for acts that target a younger crowd are frequently cheaper, such as Korn's average of $29.58 and Britney Spears tickets at $32.82.
Ten years ago, the average ticket price for the top 50 tours was $23, Pollstar reported.
Mr. Bongiovanni said the market has supported the higher prices, but John Scher, chief executive officer of Metropolitan Entertainment Group in New York, said high-priced tickets amount to emotional blackmail.
"The emotional connection between the average consumer and their favorite entertainer, rock band, performer, it's unique. It isn't something that necessarily a bunch of [antitrust] lawyers in Washington understand because it's as much, if not more, emotional as it is academic," he said.
"What they've effectively done is limited the amount of shows that people can now afford to go to," said Jerry Mickelson, a co-owner of Jam Productions in Chicago.

'Convenience' costs

SFX and other promoters are not relying just on ticket prices for revenue. They and agencies like Ticketmaster have tacked on rising surcharges as well, such as facilities and parking fees.
For example, concert-goers shelled out a base price of $29.50 for MTV's "Return to the Rock" concert at George Mason University's Patriot Center in late October.
But if they ordered from Ticketmaster, they had to pay more than $10 extra to see Stone Temple Pilots, Godsmack and Disturbed after a $3.25 handling fee per order, an $8 convenience fee and a $2.50 parking fee.
Ticketmaster gets part of the fees, with the rest going to SFX. An SFX spokeswoman said the company's take differs depending on the show, and she didn't have the breakdown for the concert.
"Rock" fans' total? $43.25.
Mr. Boyle of SFX points out that since parking fees are included in the price of a ticket, concert-goers do not have to pay as they park, which would slow traffic.
SFX also makes money through high concession prices at its venues, and the company has put more attention toward advertising at its venues as well.
"When [fans] walk into a venue, it's definitely a walking billboard," said Ken Fermaglich, an agent with the London-based Agency Group Ltd. who represents such rock acts as Creed and 3 Doors Down.

Cash for control

Mr. Fermaglich and other agents argue that the artists as well as consumers are losing out due SFX's practices.
The company is more concerned with filling seats, he said not building acts' audiences.
Mr. Mickelson said SFX attracts musicians by offering them huge monetary guarantees.
"They're already giving the bands more money than what they thought they would ever get," he said.
An act that used to be worth $125,000 per night might now get $250,000, but fees range widely, he said.
Mr. Kochan, who represents acts such as Paul McCartney through his agency, Artists and Audience, contends that musicians are making less percentage-wise than they did in the 1960s.
At that time, bands made 60 percent to 65 percent of concert grosses. Now they struggle to get 50 percent, he said.
He noted that SFX does not give artists a percentage of the gross because it does not include surcharges in its calculations. The band gets a percentage only of the actual ticket fee.
He said bands lose some control when they sell tours to SFX or other promoters. For example, they don't have as much input into tour stops or prices.
Mr. Fermaglich said the system also has hurt the agents' business. They used to be the link between promoters and artists, helping acts book cities by using relationships with local promoters.
But since SFX has formed a national force, the agents' role has changed.
Agents such as Mr. Fermaglich have had to learn more about elements like tour marketing and radio promotions, he said.
Mr. Kochan said SFX has enough leverage to sidestep agents.
"If you don't play ball with them, they'll just go directly to the manager," he said.

Sounds of silence

So why aren't more people complaining about SFX's practices?
Virtually every sector of the music industry must deal with the company, so musicians and co-promoters are reluctant to criticize SFX.
"Every artist that I know is [angry] about it" but they won't say so, Mr. Kochan said. And he said his comments about the company are not meant as a criticism.
At least one artist has spoken out about SFX and Clear Channel, albeit obliquely. Amy Ray, one-half of the group Indigo Girls, makes a reference to the Clear Channel-SFX merger on her record company's Web site:
"I hear a rumor that the biggest radio-station company just bought the biggest concert-promotion company… . [K]eep in mind that the promotion company just finished buying as many [independent] concert promoters as it could. What does it all mean? We thought radio had gone as far as it could down the drain, that is.
"But now that they actually control the concert circuit, I'm sure we'll be newly impressed with their ever-growing ability to turn a good thing bad."

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