Life has been better for the so called ‘emerging markets’. Faced with unrealistic artist fees, amateur promoters and inadequate infrastructure, how can Central Europe tip the scale back in its favour

With every frenzied summer, the prosperous live industry in Western Europe edges closer to an inevitable saturation point. That is one reason why it has become common practice, among bullish promoters and agents, to nod in the direction of the ‘emerging markets’ of Central Europe and refer to their massive growth potential.

Life has been better for the so called ‘emerging markets’. Faced with unrealistic artist fees, amateur promoters and inadequate infrastructure, how can Central Europe tip the scale back in its favour

With every frenzied summer, the prosperous live industry in Western Europe edges closer to an inevitable saturation point. That is one reason why it has become common practice, among bullish promoters and agents, to nod in the direction of the ‘emerging markets’ of Central Europe and refer to their massive growth potential.

The revitalised Vince Power recently declared his interest in the area, referring to the ‘huge room’ that exists in eastern parts of Europe for tours and festivals; Live Nation added a Hungarian presence alongside its existing Polish and Czech offices in April, with the acquisition of long-standing local promoter Multimedia.

Acts the calibre of Iron Maiden, the Red Hot Chili Peppers, Eric Clapton and Depeche Mode have all made triumphant stops in the stadiums and arenas of the region in the past year; and rather than simply focusing on the well-explored trinity of Poland, Hungary and the Czech Republic, major artists are routinely penetrating as far as Bulgaria, Slovenia and Serbia.

The broader European festival spirit has cross-pollinated Central Europe too, yielding new events such as INmusic Festival and Radar, both in Zagreb, Croatia and B’estival in Bucharest, Romania, which come on the heels of large, variously well-established events such as Sziget in Hungary, Exit in Serbia, Poland’s Heineken Open’er and Slovakia’s Pohoda.

All in all, the arrival in the European Union of Poland, Hungary, the Czech Republic, Slovakia and Slovenia (all 2004 entrants), followed by Romania and Bulgaria earlier this year, appears to have had the effect of shifting the perceived western boundary of chilly Eastern Europe right up to the former Soviet border and bringing these nations to the west of it closer to the European mainstream.

Indeed, as all this entrepreneurial and political activity would suggest, the region is, in many respects, utterly primed for growth. With a combined population of more than 110m, ever-improving transport links and far less bureaucracy, corruption and border difficulties than westerners might imagine, Central Europe seems to have all the makings of a boom market.

The Other Side

If all this exposition gives a mounting sense of a big ‘but’ on the horizon, it is unfortunately with good reason. Because in practise, critical financial disparities between Central Europe and the wider international circuit are threatening to derail even the larger markets before they have truly achieved lift-off.

Unrealistic artist fees, combined with an unfortunate rash of opportunistic amateur promoters across the region, mean that no territory in the region is exempt from cancelled dates, un-refunded punters and bankrupt promoters, and in some, such a state of affairs is virtually the rule, rather than the exception.

Multimedia founder Tim Dowdall, who now heads up Live Nation’s Hungarian presence, working right across Central and Eastern Europe, says the shape of the live business gives great cause for concern.

“Frankly, the market is not developing as solidly as we would have hoped a few years ago,” he says. “There are too many shows happening and the vast majority of those shows are not profitable in a traditional commercial sense – which is not to say that nobody is making a profit out of them, but the man on the ground very often is not.”

Nowhere in the region is the popular demand for music in question - on the contrary, demand is reliably high at the right prices. But, by overwhelmingly common consent, the main stumbling block comes from over-optimistic agents and managers demanding artist fees on a western scale, and in developing economies such as these, the results are predictable.

The Price of Fame

“We are working very much in a sellers’ market,” says Dowdall. “The balance of power is tipped almost entirely in favour of the artists and those who represent them, which means they can demand any prices they want and get away with it. Every promoter who purchases an artist for one of these markets is faced with the fact that he is probably not purchasing them at actual market value, so he is taking a big gamble.”

For almost every show, the cost of talent poses an apparently immovable barrier to genuine commercial success, leaving government subsidies, sponsorship deals and shadowy private funding as the most common means of making both ends meet.

With ticket prices in most territories still routinely too high for the bulk of the population to afford on anything more than an occasional basis, many shows either collapse before they are staged or go ahead at a significant loss.

“In many, many, many cases, it is a case of the guy on the ground losing a lot of money and then begging, borrowing, running away or bankrupting to get around it,” says Dowdall.

In Bulgaria last summer, just four out of around 40 international shows are said to have made a profit through a combination of market revenue and sponsorship funding, while the remainder broke even or, more commonly, registered a loss.

“There is a boom in the concert market in our country, but that has its negative side,” says Ivan Nestorov of Sofia Music Enterprises, Bulgaria’s leading promoter. “Last summer, there were more than 70 concerts announced, of which one third didn’t happen at all because of cancellation or other reasons – meaning they were organised by unreliable promoters. Some, including ours, were showing a loss because the ticket sales weren’t good.”

This year has been no better, with more than 20 big shows in Bulgaria during June and July, according to the calculations of Joker Media’s Martin Stoyanov, who believes that may be a record.

“This year has been a nightmare,” he says. “The market was flooded and everybody had poor ticket sales. A couple of newcomers arrived around the middle of last year and thank god, they were pushed out of the market, but they made a big mess: they cancelled shows, they announced shows which were never contracted…”

The Croatian Crash

One of the wider region’s most notorious incidents was the collapse of the Croatian live market three years ago, prompted by a rash of cancellations. In the thick of it was Marijan Crnarić’s Impresario company, which pulled gigs in the 25,000-capacity Zagreb Gradski Stadium by both Lenny Kravitz and Metallica, having sold just 2,000 and 6,000 tickets respectively.

The crash left many fans out of pocket and severely shook consumer faith in the market,

setting a high-water mark for Central European live industry disasters in the process. When a spate of gigs in the country were moved and downgraded in recent months, it rapidly led to speculation that another collapse was imminent. Local promoters are quick to argue that is not so.

“We have worked so hard for the last two-and-a-half years and the market is going very well, in my opinion,” says Vladimir Ivanković, managing director of Zagreb-based Lupa Promotion. “We haven’t had any major stadium shows this year; we are concentrating on smaller shows to establish a good relationship with the audience again.”

The biggest current problem in Croatia, says Ivanković, is foreign promoters staging gigs in the local market and inflating artist fees. “They sit there in Vienna, or wherever, and offer unreasonable money to these bands. My idea is not to be the biggest promoter here, because if I put on the Rolling Stones and lose €2million, what’s the point? My aim is to be the best promoter – to pay everyone on time, fulfil our commitments and work at a world-class level.”

Degrees of Separation

Needless to say, while the live market of every country across the region shares in many of the same difficulties, each territory suffers to very different degrees. The economy of Poland has come on strongly in recent years, giving its concert industry the impetus to make up ground on the Czech Republic.

The challenges the Central European territories now face make it easy to forget just how far the leading nations have come. It may still be unfeasible to organise a major concert without sponsorship in Poland, for example, but the contribution made by ticket prices now is significantly larger than when the free market took its first steps in the late 80s and early 90s.

“The beginnings of the market were quite tough, as the ticket prices could be nothing but symbolic – less than €20,” says Pawel Kwiatkowski, co-owner of STX Jamboree. “That meant concert budgets had to be 90% sponsor-based. With the economic development of our country, the ticket earnings have become ever closer to western prices since the turn of the century.”

Indeed, Monika Klonowska of Good News Productions reports that 90% of her shows are promoted without corporate involvement. “It’s a question of picking the right act, but it’s still a lot harder without a sponsor” she says. Good News recently sold out 2,800 and 2,500 tickets for Gotan Project and Macy Gray shows respectively, priced at between €20 and €50.
 

Blue Chip Boosts

The disproportionate importance of corporate sponsorship is a point made time and again by promoters in Central Europe, but it is also worth noting that the sums available from brands tend to reflect the relatively limited spending power of those who will attend the gigs. “If you get a sponsorship deal for more than €15,000, you are more than happy,” says Stoyanov.

STX Jamboree, founded in 1991, has brought James Brown, Grace Jones and Diana Krall to Poland over the years, and, with the support of Glamour magazine, Orange and Nokia, will present M People to an audience of 3,000 in Warsaw in September.

Kwiatkowksi notes the rise of the country’s private and corporate circuit. The late Ray Charles was persuaded to play on his 70th birthday – “to celebrate the 80th anniversary of Poland’s largest insurance company,” says Kwiatkowksi – while STX Jamboree also recently hired Jamie Cullum to play a private party.

Without doubt, certain difficulties on the ground do not seem to be dissuading artists from coming, or foreign companies from investing. German live infrastructure company EPS recently opened a dedicated Polish office, having for years co-ordinated all its work in the country from Munich.

Poles Raise Bar

“Eastern Europe is a huge rising market. Especially in Poland, there is a lot going on in the live entertainment sector,” says EPS marketing manager Yvonne Klöfkorn. “The level in Poland in this sector is already very high and the working processes absolutely professional.”

EPS has shrewdly sited its new office in Breslau, between the major cities of Katowice and Krakau and close to Poland’s largest music venue, Chorzow’s Communist-era Śląski Stadium, which hosted the Chili Peppers, Pearl Jam and Genesis for Live Nation in June and July. EPS delivered infrastructure for all three shows and for Viva Art’s Rolling Stones gig in Warsaw in July.

While Poland is by far the largest country in Central Europe, the Czech Republic was by some distance Central Europe’s fastest starter, not least because its geographical position – bordering on both Germany and Austria – puts it closer to the route of traditional European tours than Poland, its northerly neighbour. Hungary, while some way behind, can nonetheless sell out a well-promoted arena show with the right artist.

“It all depends on the artists,” says Marton Brady, managing director of long established promoter ShowTime Budapest. “In the Hungarian market, you have to take care with very up-to-date artists. We still prefer to work with artists who have a long history – if they have a 30- or 40-year career, it is much easier to sell tickets.

“I thought Morrissey must sell 5,000 tickets, but he couldn’t and we lost a lot of money. But, for example, we did very successful shows with R.E.M. and Stomp; Michael Flatley was okay; Eric Clapton was fully sold out; Billy Idol was okay; Bryan Adams was fine.”

Unpredictable Trends

Overwhelmingly, and bewilderingly for local operators, there appears to be little predictable logic to the pattern of ticket sales. Besides Brady’s roll call of hits and misses, Linkin Park, Iron Maiden and, particularly the Chili Peppers all met with significant success in the region this year or last, while George Michael and numerous other acts disappointed.

“It is a very, very complex logarithm, and if it were easy to predict, I would know what to book next year,” says Dowdall, who says the risks have instilled great caution in his own operation.

“We are certainly not trying to put a blanket over the whole market anymore, like we did when there was not such a supply of artists available for this part of the world,” he says. “Nowadays, everybody seems to want to come out here. Because these markets are relatively new, a lot of people seem to think these are lands of opportunity. We know, from 26 years of operating here, that is not the case.”

In Hungary, sharp rises in VAT over the past decade – from 5% to 20% in three big steps – have severely impaired the ability of developing local businesses to turn a profit. “It is much more expensive to do business in Hungary than it used to be,” says Brady.

Hungary’s economy has not picked up as fast as expected, with predictable consequences for the average disposable income. “We have almost reached the ticket prices of Western Europe, and there is a very small pot of people who can spend that kind of money,” says Brady.

One technique with which ShowTime has experimented is to create further pricing tiers, offering limited numbers of premium VIP tickets for those who can afford them and gilding their experience with after-show parties, merchandise and the very best seats.

“We did VIP with Cher and also with Britney Spears, but it is very hard to do every time if the artist is not involved.”

Venue Boost

One problem which is definitely endemic right across Central Europe is an understandable lack of investment in infrastructure, which is why modern venues stand out particularly brightly. Budapest’s Sports Arena, the Sazka Arena in Prague and Serbia’s Belgrade Arena are all sharp, modern halls, while a handful of regional venues, such as those in Ostrava in the Czech Republic and Debrecen in Hungary are likewise welcome, relatively recent additions to the circuit.

Next year, a new 20,000-capacity venue will be unveiled in Zagreb for the European Handball Championship, much to the approval of Vlado Ivanković. “The youngest hall in Zagreb is 20 years old, and that is for basketball,” he says.

In Budapest, the 15,000-capacity Sports Arena has observed such heartening attendances from gigs for artists such as Shakira and Phil Collins that it plans to launch its own in-house live promotion operation.

“I do believe that if big stars come, they will sell out,” says Budapest Arena marketing manager Andrea Szepesi. “Maybe, if for three months there are no big names, and then two or three come within a month, sometimes people do have to make a choice. But people here in Hungary are really hungry for culture and music, so in the end it is not a problem.”

For those territories still working towards even Hungary’s stability and scale, there are ultimately even more fundamental concerns than the quality of the available venues.

“It’s things like the capacity of the roads,” says Stoyanov in Bulgaria. “It is a real ordeal to deal with a tour that has more than 30 trucks. Hopefully, being in the EU will help a lot in terms of infrastructure.”

But still the gigs go on – a tribute occasionally to wrong-headed commercial thinking, but just as often to the doggedness of the region’s dedicated promoters.

Joker Media’s three-day festival with Motörhead, Manowar and Heaven And Hell, the Kaliakra Rock Fest in the Bulgarian seaside resort of Kavarna, was the country’s first ever festival and brought in 25,000 fans.

“It was pretty tense to work it out, because our territory is not in the main touring circuit, but it did really well,” says Stoyanov. “We broke even. You know how it is in our world…”

No one can question the commitment of those who have toiled in the market since the collapse of Communism in the region, and their persistence and the success of particular gigs and festivals are the elements that bode well for this troubled market. Equally, there are those in a position to judge, who believe the Central European live industry as it stands is based on a flawed model, and only dramatic developments can turn it around.

“There is only one thing which is going to change it, and that is a general collapse of the market,” says Tim Dowdall. “When you get to a stage where people can’t honour their agreements and tours start to suffer, then [agents and managers] will have to wake up to the fact that actually, this doesn’t make sense anymore. I think, unfortunately, the bubble has to burst before there will be any serious change.”

Adam Woods