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NASHVILLE (Billboard) - Even if recession-stung music fans continue to pay big bucks to see top touring acts, their free-spending ways won't necessarily continue once they get to the concert.
That could pose problems for concessions and merchandise sales, a key element of the touring business.
The risks are especially great for amphitheaters, where ticket grosses are typically lower than they are for arenas. To entice upper-echelon acts to play these venues, promoters have to shell out a larger guarantee or percentage of sales -- sometimes as much as 95% of gross, as opposed to the traditional 85%-15% split.
The resulting razor-thin margins on ticket sales means that the profitability of amphitheater shows relies heavily on ancillary revenue like concessions sales and parking fees. And a downturn in either concert attendance or per capita spending on concessions would cause big problems for promoters of such shows.
Concert venues have always counted on concessions sales as a reliable source of income. In recent times, merchandising has become one of the most important revenue streams and branding components of an artist's career. Merchandise is also an important component of Live Nation's multirights deals with such artists as Madonna and Shakira, under which the concert promotion giant partners with musicians on recording, touring and ancillary revenues.
Shrinking disposable income is bound to affect how much beer and popcorn fans consume as well as how many concert souvenirs they buy.
For the time being, merchandise sales are holding up "surprisingly well" for top touring acts, says Dell Furano, CEO of Signatures Network, the merchandising arm of Live Nation.
"Madonna sales on this tour are as strong as her previous tours," he says. "Same with Coldplay, Bruce Springsteen, Kiss, 'America Idol' and Billy Joel."
Perhaps fans willing to invest $50-$100 in a concert want something to show for it besides ringing ears. "Buying gear has become an integral part of going to a concert," Furano says. "If you are going to buy a tickets, you still need your shirt to show your friends that you attended the show."
Still, even Furano acknowledges that "we are concerned going into the fourth quarter." And other industry experts say they already see signs of slowing consumer spending.
"We're feeling the impact of the economy on merchandise sales," says Dan Cooper, VP of artist relations for BandMerch, the merchandising division of AEG Live. "I'd say overall sales are off as much as 15% on the artists that aren't AC/DC, the ones that do tour regularly."
Merch industry veteran Steve Gerstman, who recently started Cut Merch and has for years handled merchandising for such acts as the Stray Cats and Eric Clapton, warns that "we've been hearing that we have not seen the worst of it."