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January 15, 2009 


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LEFSETZ LETTER


The Money
Posted: January 15, 2009
Itís coming from the promoter.

In Aspen, Jim Lewi and Diarmuid Quinn lamented that there was nowhere to get cash anymore. That the label couldnít afford to fund everything. Where was the money going to come from?

Two weeks later a promoter who was in attendance laughed. He told me the promoter was the new bank! Itís the promoter whoís guaranteeing the tour, but heís not seen as a partner, the agents and acts just want to extract as much cash as they can, they donít care about the health of the company that puts on the show.

This same person quoted Howard Kaufman. Irving once told me in a phone call that he had no problems with Rapino, he just had to say "You donít want me to have Howard call, do you?"

Michael Rapino wanted to change the structure. Wanted acts to share in the upside. But suddenly Howardís acts werenít going to play Live Nation sheds. They were going to take a year off, or play indoors. Howard controls the shed sellouts, everything from Jimmy Buffett to Def Leppard to Journey. Rapino caved.

Not that you can blame Howard. He canít help it if promoters are clambering over each other to pay more. Thatís what weíve got, a pay more world. Where Live Nation and AEG outbid each other. Live Nation needs the business and AEG has got more money than god. But is this helping the industry?

Sure, momentarily itís helping the acts. But, as a result, ticket prices go up and promoters end up stealing from acts. Who wouldnít? Itís almost impossible to make any money. And if youíve got a loss, itís significant. Used to be the agents/managers/acts would help the promoter out if he lost money, the talent needed the promoter to stay in business. But now that Live Nation is a publicly traded company and AEG is so rich, why?

So the promoter has to cough up a ton of bread. The promoter is the bank. But heís getting very little in return.

Why canít deals be restructured? Where costs are covered and everybody shares in the upside? Why canít labels use some of that 360 money, that live revenue, to develop new acts? Why does the promoter put up all the money and have such little power? Where else do you take all the risk and end up with so little reward?

Weíre fighting amongst ourselves and weíre the losers. Live gigs are a once a year event, something planned way in advance as opposed to a weekly or monthly occurrence like they used to be. Hell, tickets go on sale more than twelve months ahead in some cases! And unlike in sports, the teams/acts are constantly changing, so you donít have a legacy of good will bringing the customer inside the building.

But ultimately, youíve got to blame the promoter himself. The promoter has to learn how to say no. But he hasnít yet.

The Mailbag:

Subject: RE: The Money

Bob,

This is the Gospel according to Harvey.
I have been giving speeches on "Promoting and the art of saying NO" foryears. Finally it's all coming home to roost! Managers and their agents havegot to get real in this difficult climate. We are lucky.... in the pastrecession proof.... but not any more. Live shows are now the main earningsfor artists. If the promoters cannot turn a profit on the bigger acts thenthere will be nothing left to invest in the new acts. The record companiesstill don't know how to break acts, so its down to the promoters to build upa following. If great songs are produced they will still sell despite therecord cos. But we have to work together to invest in new talent. And thatmeans being able to generate enough money to reinvest. Howard and co. livein the dark ages. SAY NO to stay alive. There is always another act to workwith.

Harvey Goldsmith

Level 3

_____________________________________

Subject: Re: The Money

Hey Bob:

Try being a venue owned by a non-profit and book in-house in a small market.My only goal is to bring quality acts here without losing money. We did thatlast year with Joan Baez and Aimee Mann, but only through the grace of localsponsors.

Just had a call from an agency in New York wanting to sell me an antiqueMotown act (name withheld) at a "bargain" price (due to routing) to endtheir week. - $25K, plus $3,500 buyout of the backline, hire 10 localmusicians, pay for sound., lights, security, catering, provide 15-passengervan for them to drive around and sight-see, etc. And I didn't even finishreading the rider. And this is for a hall with a little over 1,000 seats.He suggested we price tickets at $40-$45 a seat. We'd still have to sellout to break even. I suggested he find an outside promoter. And who wantsto see old Motown acts? You're never even sure if you're getting any of theoriginal members.

If a booking agency has so much faith in an act, how about they put theirown money where their mouths are? I'd gladly let them have the hall forfree and I'll keep the bar revenue. They can pay show expenses if they'reso sure they'll sell out. Share the risk, indeed. I don't see howpromoters make any money when artists get 85% (and up) of backend afterexpenses and guarantees are met.

David Allgood
Manager, Bama Theatre
Tuscaloosa, Alabama

_____________________________________

Subject: Re: The Money

Bob,

Glad you are bring this up post-Aspen, as I believe this entire topic got abit buried in the din of all the other issues discussed at the conference.If you recall, when the discussion did come up as to future funding, Iproffered multiple solutions to the now age old question of Who is going topay for all this?

I had hoped to stoke a dialogue, but frankly in a room dominated bypromoters and agents, it was difficult to get beyond anything which did notdirectly affect the live side of the business. And I have a big mouth.

So here are some of the "investors", in no particular order, who can fund amarketing campaign without the so-called benefit of a record company--largeor small.

AGENCIES-- Who, beside the manager, has more of a vested interest in thewell- being of an act other than the agent? Usually they have been with theact FOREVER, have nice cash flow and understand that it is one thing to touran act who is not releasing current music and another to tour an act whois...it was understandable that Brent Smith from Wm. Morris chimed in withan strong understanding of how this can work positively for the agencies aswell as the artist...the agencies have no interest in being recordcompanies, but simply want the positive results of a well thought out andexecuted marketing plan in support of their artists who need this type ofsupport.

MANAGERS-- Don't laugh...although WRITING a check is anathema to mostmanagers, most of the recent funding for self-released records has come fromthe smart managers. If the act has any real income, it is quite simple toshow how you can effectively cash flow a project...believe me, it works aswe have had projects in the last year under this scenario. Rememberheritage acts are different than '90's acts who are different than babybands who are different from bands who no one gives a shit about. Therecord can be a loss leader or actually something that, under the rightcircumstances, can be profitable. It all depends on the reasons WHY an actis releasing an album and what the anticipated result is. All are factorsin determining how much to spend to support the release. Notwithstandingsome of the ridiculous claims at the conference that marketing isunnecessary, well that is simply stupid...especially in this day and age ofinsane clutter in the market.

PUBLISHERS-- Now more than ever. As you know, I've been on both sides, andthe publishers who GET IT always have, always will. Kenny MacPherson/RayLaMontagne/Chrysalis Publishing. Period.

These three entities have one thing in common--a deep need for the artist tobe successful and therefore a necessity to sort out the new disorder offinancing. The promoter aspect will work nationally once these newalliances are all sorted out. That could take a minute. Or two.

Then again, there is ALWAYS your rich neighbor dentist...the one who alwayswanted to invest in the music business. These days it is easier to sellthis dream than it is to explain derivatives. And still more fun.

Steve Backer

RENT-A-LABEL

_____________________________________

Subject: Re: The Money

Bob,

Just say no??......leave it to Harvey to state the most obvious and easy answer to what everyone wants to portray as a complex problem. The landscape is what it is because buyers have insisted on the "I'll pay more than them if I can just get the play" scenario. At least we're starting to see the "NO" scenario played out a bit more often, but not nearly enough. As a nonprofit presenter I certainly have many stories like David Allgood's ........too many. Just a few from recent memory: The BAD: I email an agent inquiring about the possibility of his artist (paid him 50K just over a year ago) performing at our Gala fundraiser to benefit scholarships to our music school for inner city children. I ask how much, he responds 500K. I ask for an explanation of the jump........he says "Gala Price". The GOOD: Agent calls wants to put his artist in my smaller theater (300 seats); I say I can't pay the asking price. Agent talks to management, management says they'll play with no guarantee; they set the ticket price and take 90% of the money after approved expenses. They set a ticket price more than double ever charged in that space, sell it out, artist makes fee, we get our money (including bar) and everyone happy. That artist will now play the main theater (1200 seats) in the upcoming season.........artist development with help from everyone? Yep. No disrespect intended, but the comments of Steve Backer really began to lose air after the words ďalbumĒ and ďrecord companyĒ were used.

Cheers,
Steve Bailey Executive Director/CEO
Grand Opera House
Wilmington, Delaware

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