CIC 2006 • February 11 - 13, 2006 • Las Vegas
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Keynote Speaker Updated March 7, 2006 - click on photos/graphs to enlarge
Fan Obsessed
Michael Rapino, Live Nation

Click to listen to an Mp3 of the Keynote Address

Click to enlargeI'm very proud and excited to be in Las Vegas, addressing a room filled with many of the people I have long admired as the pioneers and visionaries of the business. I would especially like to acknowledge and thank some of the original founders and builders of the Live business. Namely Don Law, Larry Magid, Brian Murphy, Ron Delsener and Jack Boyle.

I believe this type of gathering is important to our industry - especially at a time when the key leaders come together to exchange ideas and take a collective temperature on the health of our business.

For me, there is one issue that rises above all the rest. It is a major concern deserving of our immediate attention - and our most serious thinking. I am talking about the growing divide between the people who run our business - that's the people in this room - and the people who pay our bills ... the music fan.

I consider myself the quintessential music fan. I grew up in a small town in Canada - Thunder Bay, the home of Paul Schaffer and the inspiration behind Neil Young's song "Helpless." Anyone who's ever driven along the north shore of Lake Superior would understand why I say there's not much to do in Thunder Bay except play hockey and listen to music. After I realized I wasn't going to follow Wayne Gretzky into pro hockey, my recreational interests narrowed to one.

I was nuts about music. I was obsessed.

I vividly remember to this day the time I saved up enough money for the 16-hour bus ride to the big city of Toronto, where at 15 years of age I saw my first live concert. It was Robert Plant and the beginning of a life-long love affair with the live music experience. I was hooked.

As powerfully etched as those early memories of music devotion remain in my mind, they have little relevance in helping me understand the music fan of today. I don't believe our biggest challenge is the ticket price debate, or the guarantee or even who won which tour. The real problem is - do we know our fans and how to service them in 2006?

I promoted my first concert when I was 20 years of age. It was the Jeff Healey Band and they played in the Thunder Bay Coliseum. That was also the day I left the free paying fan base and became part of the system. Since that time, I've become steadily removed from the reality of who that fan really is, and what that fan truly feels. When I joined the system, my life became all about the deal, the guarantee, tickets, laminates, backstage catering, and guest lists that didn't include the average fan. The industry, and its trappings, place us in an unreal world that only serves to further distance us from the fan. That's the reality.

It takes effort and deliberate choice to stay connected ... to maintain a bridge to the fan ... to communicate in a meaningful way ... and, ultimately, to deliver to our fans the product that they want. That's my new passion.
We have to fight to stay in concert with the fan. We have to truly feel for the fan.

Click to enlargeIn my early days in the business I idolized - as did everyone else who worked in the business in Canada - Michael Cohl, Arthur Fogel and Donald Tarlton. They were the evangelists. They were to Canada what Bill Graham was to the U.S. system. I was fortunate to meet and work for Michael as he went from being the King of the Canadian music scene to reinventing the world touring model. His words of wisdom have remained with me. He said: "If you want to be a promoter you can either keep working with the same model, or you can try to invent a new one." When I got the Live Nation CEO job, my first question was, "How can I change this model?" I have strived to be an innovator all my working life. Now, innovation is the mission of Live Nation.

At Live Nation our priority is to direct our resources towards research that helps us understand the fan better than anyone else. Here is what we have learned.

Live fan concert consumer spending is miniscule (1%) when compared to total entertainment spending.
80 percent of consumer spending on music product is on recorded music content. Within the overall music category, money spent on recorded music dwarfs concert ticket spending by a ratio of 4 to 1.

Music fan preferences for recorded music continue to shift to the digital realm and are driving growth in overall music sales.

Click to enlargeStatistics demonstrate the enormous growth in digital music consumption and purchase as more & more fans download digital music. In fact, total consumer spending for online entertainment content will grow by 260% over the next five years and reach a market size of $9 billion - up from the current $2.4 billion that is being spent online.
Consumers of digital products, who our research tells us are also music lovers and our greatest fans, will spend $135 billion on consumer electronics by the year 2008. They also own on average 25 consumer electronic devices, spend an average of $1,250 a year on electronics, own on average three TV's, and are most likely to have high speed/broadband internet access.

Click to enlargeTo truly understand the fan, we also need to consider the impact of mobile technology.

There are currently 200 million wireless users in the United States alone. Some 50 million of these users are under the age of 25 and they spent $20 billion just on their cell phones in 2005. SMS text usage is increasing every day, and the ring tone business has gone through a phenomenal growth spurt, surpassing the $500 million dollar mark last year. In fact, when you consider how rapidly consumers are embracing new applications in the mobile category, you can suddenly see the emergence of a whole new world of opportunity and experiences with the music fan, such as mobile ticketing solutions, supported by currently available e-commerce practices.

Click to enlarge Going back to the Live business, you will recall that consumer spending on live concerts is relatively small, just 1 percent, when compared to total Entertainment consumer spending. This only means that there is a huge potential for growth. When compared to the Sports gate, Theme Park admissions and Movie box office takes, Live Music concert tickets gross only eight percent of the total spend. The picture becomes even more dramatic when we look at Live concerts' share of the number of fan purchases across these four areas. Live concert purchases represent just two percent.

Click to enlarge Here's an interesting perspective on the music fan based on concert attendance. Surprisingly, of the total American population, 71 percent did not attend a live concert last year. Almost three out of every four Americans did not experience a live music concert in the past year. That means only 29 percent of the population do attend live concerts every year. And you can see from the chart, that we can group these fans based on the number of shows they attended in the past year. What we call our Occasional Goer, those who only attended one concert in the last year, represent 23 percent of the population. Our Concert Goer group, those attended two concerts in the past year, represent just four percent of the population. And finally, our heavy fans, those we have called our Concert Aficionados, who attend three or more concerts a year, represent a meager two percent of the total population.

Click to enlargeClick to enlargeTo put this into perspective, if we line up 100 random people against the wall, we know that only 29 of them have gone to at least one concert a year. The other 71 people never go to concerts. Why then do we spend millions of dollars on TV, radio & outdoor mass media trying to reach just these 29 fans. Our advertising dollars are wasted on the 71 people who never come to concerts anyways.

Here's another way of looking at it. If we look at the same sample of 100, only three of them are Concert Aficionados. And yet these three represent 24 percent of our revenue. Imagine that, only three people out of the 100 random people we lined up against that wall represent a quarter of our business. In other words, if we concentrated on talking to only these three people and convinced them - or gave them some incentive - to come to twice as many shows in the year, we could immediately increase our overall business by 24 percent.

Click to enlargeA further analysis of our fans shows that on average they attend 2.2 concerts a year. However the number of tickets they purchase per order, or in other words the number of people going to each concert with them, is on average 2.7. The insight here is that while older concert-goers attend in pairs, fans in the younger demographic go in groups of four, which, when you think of it, represents a tremendous marketing opportunity. Think of how you could restructure venue services to cater to groups of four rather than groups of two at shows that attract the younger music fan.

When asked how they got their information on an upcoming show, 56 % of young fans, age 13-24 years, found out about it online.

Once again, this raises the question: Why do we continue to spend so much of our advertising dollars on conventional mainstream media such as television, radio, print and outdoor? Last year, Live Nation spent only 1 percent of our $200 million dollar advertising budget on online media, where we now know almost 50% of our young adult fans find out concert information online.

The Internet now represents 54 percent of all concert tickets sold. The growth in online ticket purchase is illustrated by how U2 tickets were purchased in 2005, vs. Bruce Springsteen concerts in 2002. I must thank Alan Krueger of Princeton University for this data. You can see that internet purchases jumped from approximately 10 percent to 50 percent.

The timing of a concert ticket purchase has also changed considerably. Our research reveals that 43 percent of fans aged both 13-17 and 18-24 buy their tickets within a couple of weeks of the show. Once again, fan behavior has major implications on the way we market our product and the old model of focusing all our activity around the on-sale date must adapt to the new market realities.

We've got a lot to do, and we must re-engineer our business to service the new fan of today. The tables have turned. Power has shifted to the consumer. There are new rules of engagement. To be current and connected, we need to remain immersed in technology, grounded in the streets and we must remain in constant contact with our customers.

In order to do that, we must be prepared to reorient the way we think and the way we behave. We must stop "talking AMONGST OURSELVES." We need to start "listening TO THE FAN."

Artists are doing their part. They are creating fantastic music - more diverse and more accessible than ever before. The product has never been better. Now - we need to do our job to help them reach their fans and sell them the live experience.

Click to enlargeThe live industry is uniquely positioned to enhance the fan experience. We allow them to connect with their favorite artists in a way that may be imitated - but can never be duplicated. We touch the fan every night giving us this amazing opportunity to understand, to observe and to service their needs ... we need to exceed their expectations.
The basic premise is simple: Give customers what they want and they will help articulate your business model. Companies like Google, Yahoo, Starbucks, and Best Buy know this to be true. This industry was founded on the basic principle of building events for fans. The pioneering promoters who understood the importance of catering to the fan were known for the creative twist that they always brought to the Live experience.

While the industry today seems to be drifting away from these fundamental rules, there are still those exceptional people who continue to abide by our original code of conduct. People like Leon Ramakers, who heads up Mojo in Holland. When I arrived in Europe to run the music division, Leon took me through the meticulous detail he went through in planning services for the fan. Simple things like adequate toilets, a sufficient supply of bottled water. To his further credit, Leon built numerous festivals from the ground up and he invested in a Mojo barrier to protect fans - a barrier which now is a worldwide standard at festivals.

People like Don Law. When I returned to run the Entertainment Group in the US, Don took me through one of his venues, the Tweeter Center. While on the tour I noticed a greenhouse on the grounds and I asked Don what that was for. It was with great pride that he told me about how concerned he is with the appearance of the venue grounds and in wanting to create a true fan oasis or getaway atmosphere. So he built a greenhouse on site.

People like Paul Tollett, a competitor of ours at AEG. Paul built an entire festival, the Coachella Festival, from the ground up, in direct response to fan requests for an indie/alternative music festival in the Los Angeles area.

And people like Marek Lieberberg in Germany. When one of Marek's rock festivals looked like it was going to lose a lot of money, Marek didn't cut any fan services like toilets, etc., in the interest of profit.

The Live business is truly blessed with the most creative and forward thinking people in the world. These are the people who have inspired me to "change the model." The new model is all about the fan.

The fan is obsessed with the artist. So must we be obsessed with the fan.

We at Live Nation have a lot to do to take advantage of this new fan-centric model starting today. We will build upon the fan department we created inside our company this past fall. We will have our managers spend 2 days a week serving our fans in our venues. We will expand our existing Fan First Venue survey program to include more shows, at more venues, in more markets. We will talk. And we will listen. Nothing shall detract us from our obsession with the fan.

Live Nation will be a critical agent of change. Not by holding onto the past, but by building upon it. By respecting the legends who brought us to where we are, and then by moving ahead as we turn ourselves into the company trusted by artists and fans - the greatest live entertainment company in the world.

We are a worldwide community built upon the foundation of one simple, but profound and powerful common bond... the love of music.

I began today with an anecdote from my youth. I'm sure many of you in this room have similar experiences and feel the same nostalgic warmth when you look back to what made you fans in the first place and what ended up defining your careers.

Today, I urge you to find that 19 year old fan within and fight for them.

Thank you.


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