Today’s News: Live Nation wants to pay artists less

TicketNews reports that Live Nation, facing declining ticket sales, is seeking to cut costs by paying the artists it promotes less money.  At a Bank of America – Merrill Lynch Media, Communications and Entertainment Conference last week, Live Nation President and CEO Michael Rapino announced that the big, up-front paydays of the past to artists and their managers are over:

While artists might not be happy with the move – since most music acts generate the lion share of their revenues through touring – fans and Live Nation investors will likely cheer the plan because it could lead to lower ticket prices and improved profits. Earlier this month, influential media and entertainment analyst Ben Mogil with Stifel, Nicolas & Company lowered his rating of the company, in part because of concerns that Live Nation was spending too much on artist guarantees. The move led to an immediate sell off, and drop in price, of Live Nation’s stock, which trades under the symbol LYV.

“2011 will be less about growing market share and more about profitability,” Rapino said. He added that the company is looking to acquire more international artist management firms through its Front Line Management division to help grow Live Nation’s international business, particularly in Spain, France, Brazil and Latin America.

With artists relying more on live shows to offset lower sales of both CDs and digital downloads of their music, this move is certainly not going to be taken well.   It’s especially telling that Rapino announced this at an investors’ meeting, rather than through a normal press release or interview.  Live Nation uses a system of kickbacks and rebates to the venues and artists, taken out of the service fee, to “sweeten the pot” and convince them to sign long-term deals with the massive company.  By announcing that they want artists to take a smaller share (and really, only the biggest arena-packing groups, such as the Rolling Stones and U2, are getting these rebates), LiveNation is signaling that their current model needs to change in order to remain a viable business plan in an changed economy.

The Hidden Cost of Free Events

According to the folks over at Eventbrite, hosting free events is a bad move.  In a post on their blog, they say that making an event free signals that is has no value, and will actually discourage people from attending.

This is interesting food for thought.  Their argument is grounded in economics -  the elusive “Giffen Good” (a type of good that has never been proven to exist, and which defies the Law of Demand, but still…) – and the results of a simple experiment seem to support this theory.  They created two identical webinars on using social media to promote events.  One was free; the other cost $5 to tune in.  Only 38 percent of those who registered for the free event showed up, but the attendance rate for the $5 event was 69 percent.

A guest post on the blog from  Corwin Hiebert (“who specializes in strategic event design, marketing, and creative talent management”) says a lot of the same.  Some highlights:

I’m convinced that the most offensive word in the event business is “FREE”, specifically when it refers to free admission for an event. Unless you’re new to capitalism, I think you’d agree that the word “free,” more often than not, communicates a lack of value. Whether or not an event can handle a zero-dollar ticket is often beside the point. What is, in fact, being communicated when no monetary commitment is required for an event is that expectations should be low.

When someone registers or plans to attend an event that is free they automatically assign that activity the category of “maybe.” If they are not liable for not showing up then it’s no big deal in their eyes. But it’s a big deal for you, the event planner. Your event plan can be seriously impacted when attendance is such a variable.

He cites Facebook as an example, saying, “It’s a miracle if even 1% of the confirmed attendees show up.”  A lot of people have a tendency to click “attending” or “maybe attending” if a friend invites them to an event, even if they have no intention of actually going.  Event hosts do the same thing, inviting every single one of their Facebook friends when they set up the event. (“No, Guy I Haven’t Talked To Since High School, I don’t care that your garage band is playing in Wyoming this weekend.”)  Event sharing is great, but without a way to filter events down to the ones your friends are attending or those that match your interests, it quickly becomes just another kind of digital clutter to tune out.  There’s no way to separate the events you’re most likely to want to attend from the rest of the crowded online landscape.  At the end of the day, Eventbrite isn’t wrong, just mistaken.  Paid events show commitment and a sincerity of intention to attend, and as Hiebert says, allows you to avoid the pitfalls of having to discount remaining tickets at the last minute to fill seats.  Still, with an effective filtering and recommendation system, I think event hosts could achieve the same sort of relevance and level of commitment for their free events.

What do you think?  Is this theory just a way to sell more tickets to more events, or are they on to something here? When you see that something is free, what do you expect from the event?

Today’s News: Live Nation stock takes a hit on ticket sale challenges

At an investor and analysis meeting held on July 15, LiveNation reported a 12 percent decline in ticket sales for the first half of 2010, and forecast lower revenue figures for the rest of the year. TicketNews cites a report “available on Live Nation’s investor relations Web site” that predicts sales to fall another 15 percent in the second half. However, the report is no longer available on the site, with the link replaced by a message saying “To receive a copy of the written materials provided in connection with Live Nation Entertainment’s 2010 Investor and Analyst Day, please e-mail your request to traciphan@livenation.com.”

Guess they got scared after their stock price fell nearly $3, more than 25 percent of Thursday’s opening price, since then. Live Nation CEO Michael Rapino said the massive sell-off began even before his presentation ended, the AP reported. “We had a real buzz kill at about Slide 9 when I saw the e-mails go out,” he said.

The stock’s slide has stabilized for now (shares are trading around $8.90 today), but this spells trouble for the giant media conglomerate. With key artists such as Rihanna and the Eagles canceling shows, and U2 postponing its North American tour, the pressure is on for Live Nation.