Clear Channel's Concert Strategy Is Revamped Amid Tough Market

By ANNA WILDE MATHEWS and JENNIFER ORDONEZ
Staff Reporters of THE WALL STREET JOURNAL

When veteran rocker Peter Gabriel toured last fall, promoter Clear Channel Entertainment agreed to pay him as much as $600,000 per show. But with an average ticket price of $91, fans left a lot of seats empty in the big arenas he played.

So this year Clear Channel cut a much different deal for Mr. Gabriel's coming tour: It slashed his upfront fee nearly in half, say people familiar with the matter, and booked him primarily at outdoor amphitheaters Clear Channel owns, with average ticket prices to be about $43 -- changes the nation's No. 1 concert promoter hopes will fill more seats and boost profit.

The shift highlights a change of approach at Clear Channel Entertainment's concert division, which has struggled in recent years. The unit of Clear Channel Communications Inc. is revamping much about how it chooses acts, plans tours and sells tickets. Among the goals: paying smaller upfront fees, lowering ticket prices and selling out shows.

Clear Channel got into the concert business in 2000 when it acquired SFX Entertainment Inc., and its concert venues, from entrepreneur Robert F.X. Sillerman. Mr. Sillerman had consolidated many of the nation's strongest local concert promoters into one company. Clear Channel was convinced SFX would fit in naturally with its powerful radio operation: The divisions could work closely together to tout shows in radio ads and create buzz through "spontaneous" disc-jockey chatter.

In the process, Clear Channel tried to change how the concert industry worked. Previously, local concert promoters typically focused on their own markets. With its huge reach, Clear Channel bet it could lock up tours by the biggest artists, and slot shows into the 106 North American concert sites it owns or operates, including 40 U.S. amphitheaters. Clear Channel typically profits from concessions and parking at its venues as well. National advertisers would want to sign on as sponsors, the company reasoned, drawn in part by natural promotional tie-ins with Clear Channel stations.

But things didn't work out quite that way. Looking to secure national tours with big-name acts, the company paid high fees for many of the musicians and in many cases couldn't generate the ticket sales it needed to turn a profit.

Clear Channel Communications President Mark Mays says the entertainment division has "been dealt a pretty difficult environment," because of the Sept. 11, 2001, terrorist attacks on the U.S. and the economic downturn. Speaking of the division in general, he says: "If they get a slight economic wind at their back, we think they're going to do well." Brian Becker, chief executive of Clear Channel Entertainment, says the company realizes the "environment has changed radically" since Clear Channel acquired the concert business, and it is adjusting its concert operation to reflect that.

Last year, the company internally acknowledged its problems in a scathing report generated after the two heads of its concert division stepped down. The report warned that Clear Channel suffered from a "lack of competitive advantage" in the concert business. It was seen as a "behemoth," whose "corporate size is at odds with grassroots values of artists and music."

Clear Channel's economic model had serious flaws, the report said. The main one was relatively few acts were big enough to succeed in such national tours, and Clear Channel had to pay lavishly to secure them. The report warned of "aging artist talent and lack of staying power of new touring acts," resulting in "dependence on a select, key number" of performers. The result: The musicians' expectations for guaranteed payments were "at all-time highs" and it had become "difficult to pass on overpriced tours."

COOLING DOWN?

Average ticket prices for some high-grossing tours with most or all dates handled by Clear Channel:

Artist	Average ticket price 2002
Paul McCartney	$129.92
Rolling Stones	119.20
Cher	71.89

Artist	Average ticket price 2003
Elton John/Billy Joel	$109.26
Bruce Springsteen (and the E Street Band)	73.96
Bon Jovi	60.59

*2003 data represent a three-month average beginning Feb. 14
Sources: Pollstar; Clear Channel

The report also found problems with its amphitheaters, which aren't usable much of the year because of weather, and which some bands consider less desirable than newer, larger indoor arenas. The Dixie Chicks, for example, balked at appearing primarily in Clear Channel's amphitheaters after an e-mail poll of tens of thousands of fans showed they favored indoor shows. Clear Channel will promote most of the band's shows, but largely at indoor arenas. The report also noted Clear Channel made 2.6 times more profit at an average amphitheater show than it did from a typical arena performance, not including box and season seats and sponsorship sales.

Clear Channel says it is addressing many of the problems raised in the report. For one thing, the company says it has bowed out of the bidding for some big acts when the demands got too rich. "There are tours we are not doing this year," says Don Law, chairman and co-CEO of Clear Channel Entertainment's music division. Mr. Law declined to name any specific musicians, but said in an e-mail message that "if you look at the tours being done by the competition, and note which ones aren't hitting their numbers, you will have a good idea."

Several of the tours expected to be big this summer, including Fleetwood Mac and the Eagles, are being handled mainly by Clear Channel's fast-growing rival, closely held Anschutz Corp.'s Anschutz Entertainment Group. Randy Phillips, chief executive of AEG Live, its concert arm, says he didn't overpay for any of his company's major acts and expects them to be profitable. "We're not a not-for-profit organization," he says. Still, he agrees the concert industry faces a problem with rising ticket prices.

For its part, Clear Channel is giving more decision-making power to its local operators in each market. Local managers will have more authority to pay artists based on what they think their markets will bear. The company also may allow some of its promoters to operate under their original company names. "It is our emphasis to be less centralized ..." Mr. Law says.

The company also is rolling out new ticket-selling efforts designed to improve its relations with acts and provide fans with extras like early access to tickets.

Clear Channel says its new approach is working. For the first quarter, the entertainment unit showed lower revenue, but earnings rose. Do performers, such as Peter Gabriel, mind lower upfront fees? Mr. Law declines to comment on Clear Channel's deal with the musician except to say Mr. Gabriel is "very smart and understands the market is tougher."

Updated June 2, 2003