LA WATCHDOG-The politically appointed Board of Recreation and Parks Commissioners must determine how to manage the 5,900 seat Greek Theatre now that the City Council has rejected the Board’s recommendation to award a ten year Concession Agreement (with two five year options) to Live Nation.
Underlying the City Council’s decision to reject the Live Nation deal was the outpouring of support by the local community and numerous Neighborhood Councils for the proposal offered by the Nederlander family and its partner, Anschutz Entertainment Group. Importantly, over the last 40 years, Nederlander has successfully managed the Greek Theatre while at the same time, building a strong relationship of trust with the venue’s neighbors. This was evident as Nederlander and AEG obtained over 30,000 signatures for their online petition supporting their proposal.
Nederlander has also built an excellent reputation in our City by reviving the Pantages Theatre in Hollywood while AEG’s sizable investments in LA Live, Staples, and the Nokia Theatre were one of the major catalysts in the rejuvenation of downtown Los Angeles.
Live Nation, despite being the world’s largest live entertainment company with almost $7 billion in annual revenues, is a relative unknown in our City other that it is the owner of Ticketmaster, one of the most despised companies in the live entertainment industry because its monopolistic service fees are ripping off ticket buyers who have no other alternative.
The Nederlander/AEG revenue sharing arrangement (10% of revenues) is also more generous than that of Live Nation (8% of revenues), producing $17.5 million more revenue to the City over the twenty year life of the Concession Agreement, a differential of almost 30%.
Furthermore, the ticket prices and related charges proposed by Nederlander/AEG are projected to be 10% to 15% lower than those offered by Live Nation, representing a savings of over $50 million to theatre patrons.
The Board of Commissioners appears to be considering two alternatives.
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The first is to issue a new Request for Proposals for the Operation and Maintenance of the Greek Theatre Concession (the “RFP”). This process would need to be expedited since the existing Concession Agreement is set to expire on October 31, 2015. Furthermore, the evaluation of the RFP’s would need to be open and transparent with active participation by the local Los Feliz community.
The other alternative would be to operate the Greek Theatre as an “Open Venue” where Rec & Parks would “maintain control of the programming calendar while providing open access to all promoters on a non-exclusive basis.”
The Open Venue arrangement is an attempt to eliminate the promoter and capture a larger share of the revenue and profits. But the success of this arrangement is contingent upon Rec & Parks having the necessary management to operate the Greek Theatre efficiently and provide excellent service to its patrons.
Unfortunately, the Department does not have the management talent to operate a customer centric operation such as the Greek Theatre. As it is, the City’s 420 parks are poorly managed and maintained because its appropriations, management ranks, and staffing has been decimated as the City devoted its cash to fund massive increase in salaries, pensions, and benefits.
The City also does not have the financial resources to upgrade the venue. Both Live Nation and Nederlander/AEG proposed to invest $25 million and $19 million, respectively, while the City is facing a cumulative deficit of $700 million over the next four years.
Rec & Parks would also be responsible for maintaining the facility. But preventive maintenance is not the Department’s strong suit as witnessed by the sorry condition of our parks and their bathrooms.
The Department would also propose to capture more of the revenues associated with the food concessions and parking operations. But knowing the City and its procurement and hiring policies, this is easier said than done.
While the Department will point to Denver’s success in operating the 10,000 seat Red Rocks Amphitheatre, they fail to recognize that this outdoor venue has been operating for almost 75 years.
Last year, the Greek Theatre, located in Griffith Park less than a mile north of the intersection of Los Feliz Boulevard and Vermont Avenue, had a record year, generating over $27 million in revenue and paying the City almost $2 million in revenue sharing payments.
However, the minimum revenue share payment by Live Nation and Nederlander/AEG would increase to $3 million and $3.5 million, respectively, both healthy increases.
Rather than bearing the risk of operating an Open Venue without the necessary management talent and financial resources, the Department should remain as a landlord and enjoy the substantial increase in rent. As such, Rec & Parks should issue an updated RFP that would be evaluated in an open and transparent process with substantial community input.
As they say on Wall Street, bulls make money in up markets, bears make money in down markets, and pigs always get slaughtered.
(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee, The Ratepayer Advocate for the Greater Wilshire Neighborhood Council, and a Neighborhood Council Budget Advocate. Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at: [email protected])
-cw
CityWatch
Vol 13 Issue 24
Pub: Mar 20, 2015
