Under pressure from labels and with deals tighter than ever, is the traditional role of the promoter under threat? Gordon Masson investigates…

Just like any large-scale industry, when a particular sector starts to enjoy sustained growth and increasing revenues, the eagle-eyed moneymen try to take advantage of the upswing.

Several years of healthy financial results have made the live music industry a particular favourite for investors to plough their money into, but as the margins begin to tighten and with the prospect of a global recession on the horizon, the real risk takers at the centre of the business – the promoters – could be in for a rollercoaster ride.

The threat of agents establishing in-house ticketing could leave promoters unable to sell tickets to their own shows, and record companies scrambling to get in on the action are just another potential dilemma circling the once impenetrable castle of the  promoter’s role.

Each of the world’s major music companies – Universal, Sony BMG, Warner and EMI – are dipping into the live sector in a desperate bid to prop up their dwindling CD sales. Nearly all new recording deals that are being offered to artists are stipulating that a share of the live revenues goes back to the label, and while such measures are understandable, they could fundamentally change the way in which the music business operates.

But such developments could present more opportunities than problems, and

Solo Agency supremo John Giddings is positive about the polarization of the industry. “The way the business is evolving will make promoters stronger,” he says.

“In the future, I can see that artists will be signing deals where all their rights will be handled by one entity. Therefore, there could be two types of company: a record company that also handles touring; or a touring company that also deals with the recording side of an act’s career.”

And Giddings is in no doubt about which operation would be more beneficial for an act. “The record companies are really struggling. CD sales are plummeting and artists now know that they can make a lot more money from touring than they can from selling records. So it’s the touring companies that are in the prime position.”

“I couldn’t agree more,” concurs Neil Warnock, owner of The Agency Group, one of the truly global independent booking agencies.

“The record companies are muscling in because they are panicked about their role in the music business. As a result they’re looking at which income streams are profitable and are stretching out to buy up those rights that give them access into those profitable lines.”

Rob Hallett, senior vice president of AEG Live, is equally bullish. “It’s not the promoters who should be questioning themselves,” Hallett says, “it’s every other area in the music industry that should be asking what their role is! The live business is really buoyant and that's why everyone is trying to get a piece of it.

“Promoters are not in any danger from that. They're the most entrepreneurial people in the business. Unlike others, who try to own the artist's rights in perpetuity, we only rent their catalogue for three hours a night and then we move on.”

Changing Lanes

As much as the live industry is wary (and perhaps rightly so) of their heavyweight major-label cousins, it’s not just the record business that is experimenting with the 360-degree model.

“The power is in the promoters hands now,” Giddings says. “Live Nation have signed Madonna and the last time I checked, she was one of the biggest stars in the world.”

Live Nation’s October 2007 announcement of its $120million [€81m], 360-degree Madonna deal surprised much of the industry, and was the latest example of the blurring boundaries between the live and recorded sectors.

As the world’s largest promoter continues to reposition itself as an all-encompassing music company (with ticketing, venues, merchandising, web services and fan sites) such change highlights how the role of the promoter and the concert experience is now central to the musical mix.

Warnock observes: “It’s inevitable that [Live Nation] will look to sign other artists, especially with someone as intelligent as Bob Ezrin running their label.”

Similarly, German promoter Deutsche Entertainment AG (DEAG) has recently hired André Selleneit – the former MD of BMG Berlin – to head its record label, DEAG Music.

“The record companies have woken up three or four years too late,” states DEAG chairman Peter Schwenkow. “Five years ago, they controlled the main revenue stream for artists and back then they could easily have persuaded their acts to assign other rights to them.

“But now most artists can expect to earn about 75% of their annual income from live work, so it’s promoters who have become the important people in artists’ lives.”

Indeed, when it comes to classical artists – with whom DEAG have a particularly strong relationship – Schwenkow highlights exactly the kind of influence a promoter has on their career.

“For just one night’s performance I’m paying Alan Netrebko more than he can earn from his record company in a whole year, which illustrates the problem that the record companies have,” he says.

“The promoter business is too complicated for record companies to build expertise in quickly, so they are being forced into buying promoters,” Schwenkow continues. “The difficulty is that promoters need to have an entrepreneurial touch and that maybe doesn’t fit in with corporate record companies.”

One dissenting voice is AEG Live’s Hallett. “I'm not at all convinced about promoters setting up record companies,” he says, “it reminds me of that line by The Who: Meet the new boss, same as the old boss. We won't get fooled again.”

But Hallett concedes that the industry is changing rapidly and that experiments are necessary. “It's a whole new model for the entire music industry – we've all got to think outside the box,” he says. “For instance, The Sunday Mail deal giving away the Prince album was an AEG idea. It worked brilliantly for him, but it wouldn't work for everyone.”

Conflicting Ethos

AEG has benefited hugely from opening The O₂ in London and the state-of-the-art venue is already breaking global arena attendance records. AEG’s core business is its venues, and both AEG Live and the AEG-funded independent promoter outfits (such as the UK’s Marshall Arts and Stuart Galbraith’s new company Kilimanjaro) serve to secure content for its arenas.

It’s a strategy at odds with its main competitor and market leader Live Nation, whose international map of promoters work as part of a large multinational structure, and the conflicting business ethos is liable to see the promoter landscape continue to change radically in the next few years.

But both companies are proving that with size does indeed come power, while also benefiting from economies of scale. Last month, eight French promoters banded together to form L’Arrière Boutique (see page 4) in order to reap the same benefits, and in the last few years, the rise of the mid-level corporates has been further proof that to succeed, the offices which house today’s promoters must frequently stand taller than their competitor’s.

But is there an inherent friction between the entrepreneurial spirit of the historical promoter, and the corporate environment they’re increasingly working within? And having to answer to investors or shareholders, and working within the framework of a much larger company, will tomorrow’s promoter need to know more about office politics than posters?

Jon McIldowie works for Channelfly, the promoting division of MAMA Group (which now incorporates a chain of venues; management companies; magazines and marketing specialists; and an artist services division) and he believes that the promoter’s entrepreneurial bent is being used in different ways, especially to expand the framework of services around an event.

“We are already seeing artists demanding additional services from their promoter partners,” McIldowie says. “Rather than just putting on a gig and making sure that the tickets sell, a promoter now takes charge of organising local sponsorship deals, as well as establishing agreements with local media partners for when an act comes to town.”

And the natural progression of this relationship could lead to even more involvement by promoter partners. “I'm thinking of things such as data capture on [the artist’s] audiences and a provision of services and additional entertainment at the show,” McIldowie says, “such as setting up networks where content can be delivered to people's mobile phones, or where they can offer a unique memento of each show to ticket holders.

“The promoter will be integral to delivering those services and will therefore be more important than ever to touring acts.”

Like McIldowie, Juha Kyyrö at Fullsteam in Finland is among the young breed of professionals who believe that promoters now have a pivotal say in whether a band can conquer a market. At the age of 25, Kyyrö was ranked the eighth most influential music industry executive in Finland, with Fullsteam incorporating a series of venues, a record label and booking agency.

“Promoters have always had an important role in building careers, but it has not always been recognised. That's changing,” he says. “A festival promoter, for instance, can have a huge influence on boosting the profile of an act in a particular territory just by booking them for their festival. I think people still underestimate the impact of that.”

And it’s not just the promoters’ power of exposure that is repositioning them as a central force in artists’ careers. Now more than ever, their involvement stretches far beyond the choice of venue.

“Promoters are having to work harder at marketing than ever before,” Kyyrö says. “We're also bringing in the sponsors to make the shows work. A lot of acts now expect that of their promoters and with no label support for touring, it’s going to become standard…pretty much everywhere.”

Future Health

So it’s all looking good, right? Having added strings to their bows and possessing more clout than ever to break an act, the promoter’s place in the food chain is secure. But forecasting what may lie ahead, AEG Live’s Hallett believes that he and his peers must act to safeguard the future of the entire chain itself.

“My fear is whether there will be any acts left to promote,” Hallett says. “Things are great at the moment, with the likes of The O₂ [Arena in London] selling out night after night, but the majority of those acts are well over the age of 40. Just which acts are going to be selling out the arenas in 10 years time?”

Noting that the record companies are no longer developing the talent which provides the content for the world’s clubs, arenas and stadia, Hallett is aiming to fill in for the A&R departments that have been decimated over the past few years.

“There just isn't any content being developed, so that's something I plan to do more actively in 2008, simply because it needs to be done,” he says.

“I quite like my job and I'm still young enough to want to do it for another 15 or 20 years, but I won't be able to if there are no acts to promote. If the record companies aren't investing in new talent, then it's up to us in the live industry to do it.”

Easy Money

That approach will no doubt be welcomed by emerging acts and their representatives, who are starting to tap into new sources of finance for projects, including tour support.

Music Managers Forum council member Marc Marot, who ran Island Records throughout the 1990s, and who now heads up management company, Terra Firma Artists, is one of many managers turning to venture capitalists.

“Ingenious has around £20m [€26.6m] available, Icebreaker has £10-15m [€13.3-19.9m], Edge [Performance] has £22m [€29m] and Jazz Summers [of Big Life Management] is trying to raise £10m, so the amount of money on offer to savvy entrepreneurs is incredible,” says Marot, who foresees promoters treading a similar path.

“Between me and my business partner, John Arnison, we’re releasing nine venture capital backed albums this year. We’re not going anywhere near the labels with their 360-degree deals – why would we?

“The great thing about dealing with venture capitalist trusts is that you can use the money for whatever you want – recording costs, TV advertising, tour support – and unlike the label deals, it is non-recuperable. Also, rather than signing away 75% of your profits to the record company, the VCT takes only 50% and the rights revert to the artist, which would never happen with a record company.”

David Glick is the principal behind the Edge Performance VCTs, which is in the process of raising another £25m [€33m] to invest in the entertainment sector, and he reveals the requests for funding concerts and tours are coming in thick and fast.

“We’re getting approached by lots of people who are looking for money to fund live events. A lot of traditional live music promoters already have their own sources of money, so the people that are coming to us are often from other walks of life,” he says.

“Within the music business at the moment, a lot of skilled and creative individuals are suddenly finding themselves out of work. There are a lot of talented executives who are losing their jobs, but my view is that just because you’ve been trained at a record company doesn’t mean that’s all you can do. Indeed, people can bring different and compelling ideas to the table when they’ve worked elsewhere in the business, so it’s an intriguing time.”

With the venture capitalists making such vast sums available for investment in live music projects, promoters are reassessing how they fund touring.

“If investors think they should put their money into live music, I'm not going to complain; I'm fine with taking investors' money no matter where it comes from,” Schwenkow says.

Paper Trail

But, while it may be easier than ever to find the money to stage a show, one mooted development is threatening the core role of the promoters themselves. Led by Primary Talent in the UK, some booking agencies are toying with setting up in-house ticketing services for their artists. It’s a move designed to capture the booking fee rebates that ticket companies give to promoters, but it’s a plan with few admirers.

“If agents want to do ticketing, then they've got to be prepared to put up the money for the shows,” says Hallett. “Quite frankly, it's all bullshit. I can't see why agencies would want to take ticketing in-house.”

The concept is generating widespread threats of revolt, with promoters countering that if the agency deals weren’t so tough, there would be no need to source additional income in the first place. The timing and distribution of a show’s tickets is a central component of a promoter’s role, and removing such a choice would mark a fundamental shift.

And despite the continuing buoyancy of the live sector, to ensure that sufficient tickets will be sold at all Hallett warns that promoters are now going to have to dig deep. “The next two or three years are looking very positive, but after that it's very uncertain,” Hallett say. “So it's better for all of us if we spend some time growing our own food because there will be more acts to promote if we take an active hand in developing them.”

DEAG’s Schwenkow concludes: “Us promoters are still in the days of the gold rush, but this will end. We should not just be looking at those few tours whose tickets sell out in minutes, as 75% of the live music business is not selling out.

“In the long run, the business will come together because third parties are taking the business away – I'm thinking of Apple and iTunes, for example. There are new enemies on the horizon.”

With little to fear from the major label’s involvement, and more revenue sources and responsibilities, today’s promoter is increasingly fulfilling a far wider remit than ever. It just remains to be seen whether they are able to safeguard the future of the business – the artist’s career – while sufficiently entrenching their position to remain such a guiding force in the future.

Gordon Masson

Additional reporting by Greg Parmley