Moderator: Adam Friedman, Nederlander Concerts
Marc Bodnick, Elevation Partners
Dave Goldberg, Benchmark Capital
Jeff Walker, CCMP Capital Advisors

Adam Friedman, Jeff Walker, Dave Goldberg and Marc Bodnick

This is the concert business, not a benevolent society, and the concert business knows the value of money. And the panelists might know the value even better than the concert industry.

Unlike the majority of CIC panels, packed with people who work inside the industry, this one featured venture capitalists and investors who took an objective look at the concert industry.

Moderator Adam Friedman kicked things off by bringing up record companies and identifying some of today's problems: lack of artist development, illegal filesharing, rising talent costs and online music becoming a "business of singles." Obviously, record companies' reversal of fortune has generated much interest from private equity firms.

The panelists weighed in on Terra Firma's recent $6.7 billion acquisition of EMI and Warner Music Group, which is part-owned by an investment group led by Thomas H. Lee Partners, Bain Capital and Edgar Bronfman Jr.'s Music Capital Partners. First off was Jeff Walker, chairman of CCMP Capital, a global private equity firm with $10 billion in assets under management and committed capital.

"The Terra Firma acquisition is still in question," said Walker, who was the principal investor in House of Blues and directed its sale to Live Nation. "I'm not sure if they have a growth schedule."

Marc Bodnick of Elevation Partners, although likely skeptical, noted that "there is definite value in record companies, and private equity doesn't often get the opportunity to buy the top of the market."

Adam Friedman

Asked why private equity firms continue to come back to such a high-risk field as music, Dave Goldberg of Benchmark Capital said the demand for music is as high as ever, despite distribution issues.

"It is the one sector where the whole business will be online; it's a huge market opportunity. Of course, much investment won't work," he said, likening music to the wine business which "attracts more money than it deserves at times."

And, he said, part of it comes down to the fact that "music is fun. People want to be a part of it."

The panelists showed mostly skepticism for another controversial topic, one that permeated much of CIC 2008: 360-degree deal.

"Theoretically it's not a bad idea, but a label isn't in a good spot (to do it)," Bodnick said, adding that it makes more sense if a label has a publishing deal with the artist. "You need to add value."

Walker was blunt: "The record company is the middle man, and not necessary now."

He was equally succinct in discussing the Madonna/Live Nation deal, saying he is "not excited" about the Madonna negotiation because it lacks growth opportunity.

"Artists are key but maybe not at that level," Walker said. However, "[Live Nation has] shown talent that record labels are not important."

He said an interesting model would be if artists made direct contracts with venues.

As is the case in all things CIC, the secondary market became a topic of discussion. Bodnick said the only reason it has thrived is because tickets are inefficiently priced. Walker criticized artists' "bizarre arguments" in their ten-dency to price tickets affordably, thereby reducing profits.

Bodnick said he likes the idea of ticket auctions, and thinks there should be a more noticeable demarcation between the front seats and the back. Cheaper seats need to be cheaper and the front seats should cost even more, producing a higher gross potential.

Walker said he came in from the "customer side" when he invested in House of Blues.

Jeff Walker

"The Chicago and New Orleans clubs were a good place to see a concert. It was a good model to cookie cut."

He said he thinks this method could be successfully applied to other franchises. Asked why there are only two major players in the touring business, Walker gave a Wall Street answer. It was serious, concise and amused the crowd.

"There's no growth. We haven't seen [the touring business] as predictable or sustainable," he said, drawing laughter.