SFX move rocks music biz

Industryites worry over survival of agents

With the entry of SFX Entertainment into the concert promotion business, the industry is being whittled down to a handful of key players. SFX’s recent acquisition of several top concert promoters and venue owners has the tight-knit community worried that death is imminent for the smaller agency and independent promoter — the latter the backbone of the industry.

Creative Artists Agency’s music division chief Tom Ross has gone on the offensive, hoping to stop what he believes could be an irreversible trend: the elimination of the music agent.

Last year, SFX paid $300 million for four influential concert promotion firms: Contemporary Group, Concert/Southern Promotions, Pace and the venerable Bill Graham Presents. It is looking at other companies as well.

Unprecedented control

Along with the assets it already owns — Delsener/Slater, Sunshine Promotions and a handful of related businesses — the new buys gave SFX unprecedented control over the national concert promotion business and a network of more than 42 venues.

At a recent concert promoters confab, Ross assailed SFX’s tactics and rallied agents, promoters, artists and their managers to resist the New York-based conglom’s overtures and keep the music agent in the loop.

The company has told Wall Street that it can get better talent rates by helping consolidate the $1.3 billion a year business into a handful of key players — and that it can create national tours by going directly to the artists and having them play only SFX-controlled venues.

The promoters who were bought by SFX will benefit from its deep pockets, which can be tapped for venue acquisition or new construction.

In exchange, SFX got the millions of dollars of the promoters’ cash flow and the solid industry reputations of the promoters.

Unmatched buying power

SFX’s $2 billion war chest — derived from the sale last July of its web of radio stations to Capstar — gives it unmatched buying power and the ability to offer huge sums to artists.

While paying top dollar and outbidding competitors for tours is a basic tenet of good business, one group will be most affected by SFX’s plan to go directly to the acts: agents, the front-line soldiers in the concert-industry booking wars.

SFX isn’t likely to work the farm circuit, the litany of clubs and small venues that developing acts play to gain national recognition. But agents book these venues with little or no commission money, with an eye on creating the next Madison Square Garden headliner.

‘Strip-mine the industry’

“SFX’s long-term interests have nothing to do with building careers or protecting artists,” Ross told Daily Variety. “They are going to strip-mine the industry, move on in three years to airplane parts, and maybe some us will still be around to put the industry back together again.”

Typically, agents weave a world tour by making a series of individual deals; they spend their day dealing with a promoter or venue in each city, trying to get the best payment structure for their clients. They also work with record labels and weigh whether an artist’s career is better served by playing a venue in Cleveland or Austin.

Agents have long been able to pit promoters against one another in an attempt to get their clients the best possible deal, but SFX’s clout could portend a further erosion of the influence that talent agents have held in the industry for decades.

Some promoters such as Universal or Bill Graham, which may control several venues, can offer a package deal for all of its houses. But none presently has the reach of the SFX-owned companies.

“SFX is about profitability over (artists’) careers,” says Ross. “It’s about convincing shareholders the company is making a profit.”

SFX’s strength comes from its ability to offer an act that would make $400,000 a night a packaged deal of $21 million to play its 42 venues — a $100,000-per-night increase over the act’s usual going rate. It can offer the increase by spreading the risk over its 42 venues and making the deal without an agent.

The “savings” of the agent’s 10% commission could be passed on to the act.

The precedent for major acts eliminating an agent to book a tour include the Rolling Stones and U2, both of whom used Michael Cohl to lead their mammoth $150 million-grossing roadshows. Led Zeppelin alums Robert Plant and Jimmy Page are booking their upcoming tour themselves.

Publicly, SFX execs say they are interested in building a better mousetrap and making the concertgoing experience a more pleasurable one. And keeping the agents involved.

‘Crucial alliance’

“We are committed to maintaining the agency system,” SFX prexy/CEO Michael Farrel told Daily Variety. “There is a level of concern out there, but that is the position of SFX. We believe it’s a crucial alliance.”

SFX, in a recent SEC filing, claims control of one-third of the tickets sold nationally (roughly 20 million) and tells its investors it can get more profitable deals by going directly to the talent.

But its notions are making people nervous. “Any time there are changes in an industry at this level, people are going to be very wary about what it means,” said Fred Rosen, prexy/CEO of Ticketmaster. “The full implication of this will probably not be felt for six to 12 months.”

One sign of the changing times was the unprecedented teaming last week of SFX, Universal Concerts and Cellar Door to promote the upcoming Spice Girls tour. Such a pact would have been unheard-of several years ago due to the highly competitive nature of the business.

“We want to build better buildings or improve existing ones to make the concertgoing experience for fans an enjoyable one,” says Farrel. “Not being capitally constrained, like some of the promoters we acquired once were, we can step up and make that kind of investment.”

Not surprisingly, execs at the SFX-aligned promoters say it’s about time someone noticed what a valuable business they were in, and they’re surprised it took someone so long to step up to the plate.

Farrel notes that the attraction of the business was its constant attendance figures and the potential for boosting audience levels “through affiliations with artists and successful tours.” Many inside the camp also suggest it’s a diversification rather than a consolidation.

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