Cashing in on Concerts

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In recent weeks, both the New York Times and Bloomberg Businessweek ran stories on the booming music concert business.  

The Times piece, A Front-Row Seat, to Go? Rock Fans Pay for Perks relayed the success of VIP packages which give concert goers special perks like face time with the artists at thousands of dollars a head. 

Bonnaroo, the top-grossing music festival in North America for eight years, was the subject of the Businesweek article. I was struck by the business successes relayed in the pieces and the common threads which ran through both – there were definitely some takeaways for everyone.

First, a brief primer:

The Times piece described VIP perks currently popular among concert goers — ranging from a $350 package for Justin Bieber fans to attend a pre-show soundcheck to those offered by Bon Jovi, including  backstage tours, photo ops with Jon Bon Jovi’s maracas and mic stand, and black metal folding chairs with a gold and cherry-red Bon Jovi logo on the cushion – one fan spent $8,500 for 6 VIP packages.

Randy Phillips, the chief executive of AEG Live, promoter of the Bon Jovi tour, explained the business model fueling these packages saying, “On a hot act you can make as much money from 10 percent of the house as the other 90.

Bonaroo, the  music festival held each summer near Nashville, attracts 75,000 fans to a 4-day, 100-band jamboree — this year’s acts include Stevie Wonder, Jay-Z, and Dave Matthews Band. Businessweek reports, “Ticket prices range from $250 for a general-admission pass to $18,500 for a luxury package that includes an air-conditioned bus, on-stage VIP viewing platforms, and a chauffeured golf cart to shuttle between the two.

Last year the festival grossed around $30 million, approximately $18 million of which came from ticket sales. And since, Bonnaroo “funds itself on ticket sales” according to one of the partners of Superfly the concert promotion company behind the event, the other $12 million was profit.

Numbers like these are pretty impressive, particularly since we’re talking about luxury purchases in a post-recession economy. So what’s driving these successes? The articles outlined three points which seem relevant to all businesses:

1.    exclusivity for the masses – These concert experiences are remarkable opportunities for unremarkable people. Through them, regular Joes like you and me get access to something that once was the exclusive purview of the rich and famous.

Concert goers used to have to know the right people to get a backstage pass or to have the chance to meet the artists. Now a little piece of plastic known as a credit card is enough to give you access. And while the prices on some of the packages are still prohibitive for most of us, there are a lot of ~$200 offerings which make the splurge much more reasonable.

Plus VIP packages are offered more frequently now so their exclusivity is more accessible. The Times explains, “Once available only for top-dollar tours by the likes of U2 or the Rolling Stones, V.I.P. packages have trickled down to the rank-and-file of live music.” Now fans of emerging bands like Boys Like Girls can sign up for a meet-and-greet and a load of merchandise for $150.

Bonaroo offers a different kind of exclusivity. It’s an opportunity to see a mix of A-list stars from Radiohead to Pearl Jam to Metallica, as well as indie bands like The Black Keys, Morning Teleportation, and MGMT, in a single venue. And there’s always the chance you’ll end up bumping into celebs like Bruce Springsteen or Conan O’Brien as they roam the festival.

It’s an experience available only to those people who make the pilgrimage to a farm an hour outside of Nashville in mid-June. As appealing as it sounds, there are a lot of folks who just aren’t able to go – but 75,000 people can and so it is as accessible to the masses as it is exclusive.

2.    immersive experiences — These concerts are about so much more than listening to music.

Bonaroo is not your average concert or music festival. Amenities include a film tent, gourmet burrito and microbrew stands, TV banks for watching the NBA finals and the World Cup, and showers. The Businessweek article reports, “Daily programming runs from noon until 4 a.m., and an estimated 90% of concertgoers stay on-site—either in tents or in one of the fully outfitted RVs provided… ‘You don’t go home at night and turn on CNN or check your e-mail,’ [Superfly partner Rick] Farman says. ‘It’s an all-encompassing experience.’”

Similarly, getting the red-carpet treatment through a VIP package is a memorable experience which extends well beyond the artists’ performance. Gourmet food, logo-ed swag, photo ops, and on-stage seating are among the offerings described in the Times piece. At a time when the price of recorded music has hit at an all-time low, these packages leverage the perceived value of an in-person, multi-sensory experience.

3.    keen customer insights — It’s clear the people behind these experiences know their customers and what they want.

Superfly understands the careful line to walk on sponsorships in order to keep the vibe of the festival attractive to its audience.  “The marketing presence is muted compared with other festivals,” Businessweek says. “There’s Bud Light in the VIP tent and Ben & Jerry’s new Bonnaroo Buzz flavor in the freezers, but the promoters strive to keep signage to a minimum and have resisted selling naming rights for stages or the festival.

The organizers behind the Bon Jovi VIP packages know their fans are motivated by bragging rights – that’s why the top package includes the takeaway chair. One fan was reported to have five Bon Jovi chairs at home and expected to buy even more before the tour is through. I can only imagine the pride with which she shows them off to her friends and visitors.

But those for Rick Springfield (of General Hospital and “Jessie’s Girl” fame) take a different tack. His packages include ample “schmoozing time” before and after the shows, which helps develop strong relationships with fans. “Rick’s fans are incredibly loyal, which is the reason he’s still able to have a career,” his manager Rob Kos said. “He’s very cognizant of that.

These three approaches have prompted folks to spend big bucks at a time when most businesses struggle to get people to simply open their wallets. No doubt selling Bono is sexier than selling burgers, books, or business services, but leveraging exclusivity for the masses, immersive experiences, and keen customer insights seems to make sense for many businesses.

That’s because forming a profound connection with customers drives the success of most every company. Dan Berkowitz, the founder of CID Entertainment which organizes music festival VIP programs, describes a level of customer engagement every business aspires to:  “These aren’t just customers. They are fans who have an emotional attachment…

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