In the fall of 2008, it was a buyer’s market in automobiles. Wall Street had crashed and not only were manufacturers in trouble, dealers were scrambling too. After all, it may say Lexus on the dealership, but it’s owned by a third party, which is financing inventory and has to get rid of it or go bust. Prices for autos were at rock bottom. You could buy below wholesale. Dealers were desperate.
But once those autos were gone, the deep discounts disappeared. Possibly to never return again. Unless we’ve got another economic crisis.
Automotive sales are now back up. The business is much healthier. There was a lot of pain along the way, but in order to succeed manufacturers have to create products the consumer wants to buy and not produce vehicles in excess of demand. As a result of the continuing economic malaise, sales are not at pre-2008 levels, but they’re strong, because you can only drive the clunker for so long.
Live Nation has too much expensive inventory. They’re blowing it out at sale prices. Having already committed to payment, they want as many people at shows as possible, to pay for parking, food and merch. But in a matter of months, all these dates will be played off. Then what?
According to Live Nation, everything will be fine when the media stops complaining and superstars go back on the road. This is like GM saying its problems were not endemic, that there was a huge demand for Pontiacs. Or that Chrysler’s business model did not require a reduction in dealerships. Or that Ford didn’t have to kill Mercury. No one’s resting on their laurels in the car business, hell, Ed Whitacre keeps firing people at GM. If only non-producing/non-visionary people were fired at Live Nation! GM is fighting for its survival. If only Live Nation admitted it was in a similar bind, it too would make the painful decisions to insure its continuation.
In other words, Live Nation has to present shows people want to see. Not enough to fill a season at their amphitheatres or to satiate sponsors. This is like car companies manufacturing for rental companies. Who wants those pieces of shit in terrible colors when the rental company is through with them? Furthermore, the rental companies are hurting too. They’re buying fewer cars and holding on to them longer. Which is why you now have a hard time getting a car on the road and have to pay if you cancel. Business realities have forced discipline. I see no discipline at Live Nation. Only prayer.
Furthermore, one can ask whether Live Nation’s business model works at all. Does centralized buying of national tours deliver good results? Or do you need a local promoter, who knows the marketplace intimately, what competing shows are coming into town, what drains money from the marketplace. Only the grandest of the grand, and that seems limited to GaGa and Swift, can appear any night at any price. Everybody else is scrapping for dollars.
Yes, the economy is in the toilet. Retail sales are off. But nowhere close to the drop-off in concert attendance. But the real question is, when the economy recovers, will people once again pay exorbitant amounts to hear live music?
You can’t drive a beater forever. You want reliability. And you’re willing to trade unanticipated repair bills on your old model for monthly payments on a new ride. But do you need to see the classic rock acts again? At inflated prices?
And what is a fair price?
Now that concerts are ten bucks, now that Live Nation has taught consumers you’re better off waiting to buy tickets, that you’ll not only get cheaper ducats, but oftentimes better seats, will the pre-2010 mania of pre-sales at inflated prices and an inflated secondary market return?
It’s like music is a fad. And once it’s done, you can’t give away the merchandise. Manufacturers wholesale it out to a jobber, who blows it out for pennies on the dollar. Only today the jobber is Live Nation, which is devaluing its own inventory.
Price stability returned in autos by decreasing inventory with the knowledge that replacement is inevitable. There’s way too much inventory in the concert sphere and we’ve never been able to replace the Beatles and we don’t even seem capable of replacing Bon Jovi!
So we’ve got old product or crap new acts and both are overpriced. What exactly is going to make people shell out their dough to see live music? Especially when they know if they just wait, the promoter will beg them to come, almost let them in free.
Furthermore, when they get inside they won’t be at a recently-refurbished multiplex, they won’t be watching in 3-D, they’ll be ensconced in decades-old shitholes that don’t need to be refurbished, but torn down. Yes, the movie business is now tearing down the eighties and nineties multiplexes. If you don’t have stadium seating, you can’t sell a ticket. You want to see "Avatar" in IMAX 3-D. But you go see the act in an environment that’s positively last century. Give Chrysler credit, it’s coming up with new products, not only a new Grand Cherokee, but Fiats. And Ford revitalized the Mustang and Chevy came out with a new Camaro. Niche products that enhance the brand. We’ve got niche product in the music business, but we don’t let it seep into the mainstream, we’d rather jam the purveyor of the radio hit of the moment down people’s throats. And it turns out no one wants to see these evanescent stars, certainly not in quantity, and not for long.
In other words, to survive Live Nation has to be developing acts, that flourish based on their music, not their media notoriety. But that’s too slow! But at what time do you retool for the future? A future where fewer people want to go and everybody wants a deal!
You can’t get a deal on an Apple product. Prices are sky high and people are lining up to buy them, just check yesterday’s earnings report. There’s heat. If you’re in the commodity business, like Dell, you’re in trouble, there’s just not enough of a profit margin. And now I’ve switched metaphors, from cars to computers, but it’s all product. But in music, we always sold something more, something elusive, we didn’t want to debase the concoction by calling it product, but that’s what it’s become.