Step Back / The Reason For This Project / Transition To Digital?

  

 

Outside of what I deem specific research on the subject matter of immersive theatre, my reading this year has increasingly informed my thinking on the project itself. This reached the point a fortnight ago where I considered changing my question to a broader, more theoretical version of my own, perhaps using the event Escape To Atlantis To Interzone as some sort of case study. Upon reflection, this isn’t a necessary step – in fact the new knowledge gained is just part of my research, but on a more macro level – and if anything is a slight step back, a more  academic justification for the project itself. I will attempt below to summarise my learnings and how they relate to this project:
Why Immersive Theatre, Nightlife and Technology?
 
Why Are Promoters Always Sad? 
My experience as a professional music events promoter for the past 15 years allowed me to observe a phenomenon which only struck me upon stepping away from the business; promoters (and particularly venue bookers) are consistently unhappy with the industry in which they work – bitter, angry, enraged, exhausted. The usual culprit for this ire is ‘the industry’ or often ‘booking agents / managers’ who represent talent, but the vagueness is indicative of the fact that the difficulties of being a promoter are related to the structure of the industry itself rather than any specific stakeholders within the system.
In my opinion the main explanation for these feelings stem from the economic structure of this industry, and it’s contrast to the perception of it’s structure by those involved.
Being part of the music industry, most perceive music promotion as being a ‘creative industry’, whereas it is far more like a commodity business. Promoters compete to book talent (DJs and bands), and that talent is the chief driver of demand to the audience. Whilst other factors (venue, opening hours etc) affect demand, ultimately the most important driver of consumer decision making derives from talent, a commodity promoters have to compete for against competition based largely on price. Like any highly competitive market, intense competition pushes the price of talent to the point where all profit is competed away.
From Zero To One – Peter Thiel:
“Perfect competition” is considered both the ideal and the default state in Economics 101. So called perfectly competitive markets achieve equilibrium when producer supply meets consumer demand. Every firm in a competitive market is undifferentiated and sells the same homogeneous products. Since no firm has any market power, they must all sell at whatever price the market determines. If there is money to be made, new firms will enter the market, increase supply, drive prices down, and thereby eliminate the profits that attracted them in the first place. If too many firms enter the market, they’ll suffer losses, some will fold, and prices will rise back to sustainable levels. Under perfect competition, in the long run no company makes an economic profit.
This competition is further intensified in the night life industry, by the social currency to ‘being a promoter’, and by low barriers to entry allowing motivated amateurs to hire a venue for one night and book their favourite DJ (often willing to overpay due to lack of knowledge or motivations outside of profit). This is a derivation the phenomenon of interns competing to work for free in highly popular industries such as fashion.
Another way to illustrate competitiveness within an industry is how much of the value created is captured by the companies in question.
Again from Zero To One – Peter Thiel:
U.S. airline companies serve millions of passengers and create hundreds of billions of dollars of value each year. But in 2012, when the average airfare each way was $178, the airlines made only 37 cents per passenger trip. Compare them to Google, which creates less value but captures far more. Google brought in $50 billion in 2012 (versus $160 billion for the airlines), but it kept 21% of those revenues as profits—more than 100 times the airline industry’s profit margin that year. Google makes so much money that it’s now worth three times more than every U.S. airline combined.
Clubs may generate huge amounts of revenue from tickets, but the vast majority will go to the talent, when said talent is the driver behind those sales.
One argument is that avoiding the ‘surefire’ ticket selling talent in favour of upcoming talent is a solution to this problem, but there are two chief problems with this. Firstly, in an efficient competitive market, new talent is cheap for a reason – it generates correspondingly low audience demand.
The Lion King On Broadway
Secondly and critically, event promotion in its current form is not subject to the Pareto Principle (often referred to as the 80/20 rule). This is the idea that 80% of profit (or productivity, or growth, or sales etc) stems from 20% of the activity – a heuristic shown to be consistent across many domains. In the context of the creative industries (where it can be even more pronounced, often a 99/1 rule), many industries can lose money on nine out of ten ventures but that one pay for the cost of all ten. This is true for record sales, book sales and more, and allows for high levels of risk taking / experimentation in those industries. People often cite the absurdity of so few authors recouping their book advance, but for our purposes it’s more important to understand why an industry can exist where that is the case.
From Blockbusters – Anita Elberse:

In 2011, 102 tracks sold more than a million units each, accounting for 15 percent of total sales. That is not a typo: 0.00001 percent of the eight million tracks sold that year generated almost a sixth of all sales. It is hard to overstate the importance of those few blockbusters in the head of the curve. And the trend suggests that hits are gaining in relevance.


Since music event promotion is essentially a commodity business, the upside is severely limited. A successful event is extremely difficult to scale upwards when demand is high – ticket prices have an upper ceiling (either self imposed or often imposed by the talent’s representatives), and capacity of the venue is fixed and inflexible. The successful event cannot be scaled through geography (adding dates in other cities) or time (adding extra dates in the same city) without renegotiation with the talent – one cannot scale what one does not own in the first place.
Digital creative products (such as music singles) have virtually infinite economies of scale, they can be reproduced and sold forever for virtually no extra cost – so even if the intellectual property belongs to someone else who takes the lions share, the upside is enormous. Events to which the promoter owns the rights have an upside which is scaleable – The Lion King Musical is the highest grossing entertainment property in history – because it can be scaled in price, time and geography simultaneously.
So how do club / concert events escape commoditisation and capture value? Differentiation (and ownership of that differentiation) and Scalability. We will discuss how later, but first antifragility and optionality in concerts / clubs.
Antifragility
Nasim Taleb shows us how the New York restaurant industry is Antifragile (improves from exposure to stressors, as opposed to fragile or even robust), because of the fragility of its constituent parts, the restaurants. Many highly competitive restaurants constantly enter the market, and many fail for myriad reasons – each failure is noted by the survivors, and so the industry as a whole improves – hence Antifragility (and great food). Having constituent parts that can fail can occur at different scales at once – cells die and are replaced within organisms (strengthening the organism), organisms die and exit the gene pool (strengthening the species), species become extinct (strengthening the ecosystem). A great example of internalising Antifragility is Streetfeast – a venue housing multiple independent food vendors, using the multiplicity as an attraction in and of itself. Should one vendor receive no custom and cease to be profitable it is replaced, strengthening the offering overall.
For a nightlife promotion organisation to itself be Antifragile, it must have constituent parts that are able to fail without the effects being catastrophic to the organisation – indeed the organisation must have ways to improve itself with each failure. The speed at which it’s smaller units can fail and the whole can improve as a result, the faster the evolution.
This ‘overcompensation’ to stressors, i.e. the improvement after each failure rather than simply returning to parity, stems from some form of redundancy in the system.
From Antifragile – Nasim Taleb
Now, it turns out, the same, very same logic applies to overcompensation: it is just a form of redundancy. An additional head for Hydra is no different from an extra—that is, seemingly redundant—kidney for humans, and no different from the additional capacity to withstand an extra stressor. If you ingest, say, fifteen milligrams of a poisonous substance, your body may prepare for twenty or more, and as a side effect will get stronger overall. These extra five milligrams of poison that you can withstand are no different from additional stockpiles of vital or necessary goods, say extra cash in the bank or more food in the basement. And to return to the drivers of innovation: the additional quantities of motivation and willpower, so to speak, stemming from setbacks can be also seen as extra capacity, no different from extra boxes of victuals.
 
The problem with a competitive, homogenous marketplace (such as multiple promoters attempting to book the same band for the same venues) is that with such tight profit margins there is no room for failure – hence no room for experimentation leading to failure leading to growth / innovation. So we can infer that the more competitive / homogenous the market, the more likely it is that one will be a fragile unit within it, rather than an Antifragile organisation containing fragile units. Again, need for differentiation and scaleability.
Optionality
If Antifragility can be defined as having more to gain than lose from uncertainty (in our example of Streetfeast, not knowing which type of food will be popular benefits Streetfeast relative to single restaurants with their own kitchens), then optionality is a direct agent of Antifragility. As long as the upside from being correct from any given option exceeds the downside from being wrong, one does not need to be correct that often in order to thrive.
The Lion King will launch five dates, and if they sell out, Disney has the option to add more (they are currently on over 8500 dates). This is optionality. However when booking premium talent, the event is one off, and the commitment absolute. And since artist’s up-front fees are the majority of the revenue at sell outthis is the mathematical opposite of an option – making the promoter fragile on each event involving top level talent. At sell out profit is small and predictable, anything other than sell out leads to large losses.
The Answer
What can give scaleability, differentiation and ownership to the promoter? What can have more upside than downside (optionality)?
Firstly differentiation – recontextualising music.
An immersive club event, an original story is owned by the promoter, and has no competition. A story contextualising specific music means one can convey the music policy to the audience without needing to book talent.
Optionality is achieved because A) the entire cost is production, which can vary depending on the strength of ticket sales, and B) more dates can be added at will depending on demand.
Scalability. There are economies of scale, because props & costumes are purchased once, and the effort in writing & planning the story only has to happen once. The story can be recreated in price, time and geography.
The main conclusion from reexamining all these ideas, is the impact that true scaleability can have. Anything digital has huge potential upside, so why not make the content on the night a film, which can be reused? This would be a replicable, own-able asset to be franchised elsewhere. Making a film set to the music will be my focus of research in the coming weeks.

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