Sfx Rapidly Becoming Entertainment Goliath

NASHVILLE‹SFX Entertainment is rapidly bringing to the live entertainment industry what SFX Broadcasting and other powerhouse players helped spur in the radio business: consolidation.
The latest round of acquisitions by SFX Entertainment, which was recently spun off from the broadcasting entity, takes its total purchases over the past 16 months to around $750 million, further bolstering a company already rich in promoters and venues. It also positions the company as a potentially major entity in the ticketing business, with some observers speculating that it could become a national player.
On May 4, SFX announced the acquisitions of several entities: sports agency Falk Associates Management Enterprises (FAME) for $100 million; New England concert promotion company Don Law Co. and its ticketing arm, Next Ticketing, for $80 million; the 4,800-seat Oakdale Theater in Wallingford, Conn., for $12 million; and an 80% interest in Event Merchandising Inc. (EMI), owned by manager Howard Kaufman, for $8 million.
Also announced as part of the shopping spree was the purchase of Avalon Attractions, a Southern California-based concert promoter, for $27 million.
SFX CEO Mike Ferrel says in an interview that the purchase of FAME‹best known for representing NBA superstar Michael Jordan and other basketball greats, as well as for orchestrating the Air Jordan campaign‹brings big-time marketing and endorsement clout into the SFX fold.
"The opportunity now with SFX is to broaden our marketing efforts on a national scale as well as further diversify the company," Ferrel says, adding that SFX's acquisitions represented some 45 million in ticket sales in 1997.
FAME was founded in 1992 by its CEO, David Falk, and its president, Curtis Polk, both formerly of ProServ. Recently, FAME represented an unprecedented six first-round draft picks in the NBA, negotiated $400 million in contracts for its free-agent clients, and negotiated four of the five largest contracts in team-sports history.
"Our acquisition of FAME is a significant entry point for us into the high-growth sports entertainment business, an area of striking similarity to our other live entertainment interests," says Robert F. X. Sillerman, SFX's executive chairman.
Don Law Co. has been the leading concert promoter in New England for more than two decades. It owns and operates Great Woods Amphitheatre in Mansfield, Mass., which has averaged more than 60 shows annually in recent years. Additionally, Don Law operates the Harborlights Pavilion, a 4,600-seat Boston venue, and the Orpheum Theater, a 2,800-seat facility.
"We would look at taking what Don Law has done with Harborlights and developing that idea in other markets," Ferrel says, adding that Law's company "solidifies" SFX's presence in the Northeast.
As has been the case with past SFX acquisitions‹such as PACE, Bill Graham Presents, Contemporary Productions Inc., Delsener-Slater, Sunshine, and Concerts/
Southern‹Don Law Co. will operate as a wholly owned subsidiary. Law says he expects most, if not all, of the company's 150 employees to remain.
TICKET-BUSINESS RAMP-UP
Calling the SFX purchase "a perfect fit," Law says the acquisition will let his company grow its ticketing and facility interests. Next Ticketing is the second ticket operation purchased by SFX; the St. Louis-based Contemporary Productions, purchased last December, also has a significant ticketing operation.
The sophisticated Next Ticketing operation offers much more than ticket distribution, Law says.
"This is probably the best in terms of a high-speed, high-tech system," he says. "Clearly it is a strong asset for SFX to expand upon. For example, if Jimmy Buffett goes on sale, this system can sell 60,000 tickets in an hour and a half and at the same time capture everyone's name, address, and telephone number."
Unlike the St. Louis system operated by Contemporary, which is still largely based in retail outlets, Next Ticketing "has almost none of that," Law says, adding that Next's system is based on phones and high-speed Internet connections.
Speculation is that SFX could eventually take all of its ticketing in-house, adding yet another source of income from its growing list of assets. If so, Next Ticketing might be the prototype for an in-house SFX ticketing system.
"Don has built a great ticketing company," Ferrel says. "It's tomorrow's system, whether it's voice response or Internet."
Ferrel says Ticketmaster contracts at SFX venues "begin to expire in 1999 and roll out through 2000. Whether we become a national ticketing company or not depends on a number of factors, including the outcome of conversations with Ticketmaster."
VENUE SYSTEM
The newly acquired Oakdale Theater and the 20,000-seat Great Woods Center for the Performing Arts in Mansfield, Mass., (owned and operated by Don Law) are more pieces of a growing venue puzzle. With the completion of all acquisitions, SFX's holdings will include 46 venues either directly owned or operated under lease or exclusive booking arrangements in 22 of the top 50 markets. These venues include 12 amphitheaters in seven of the top 10 markets.
The Oakdale Theater includes a new 4,800-seat indoor facility specializing in concerts and live theater, as well as an original dome facility that has held concerts in the round for many years. The new theater, which opened in mid-1996, was designed to emphasize ancillary revenue opportunities with luxury boxes, platinum-club facilities, and sponsor suites. In 1997, its paid attendance was approximately 385,000.
As for EMI, the merchandiser has long-term agreements with 26 North American amphitheaters, among them PNC Bank Arts Center in Holmdel, N.J.; the Hollywood Bowl; Jones Beach Amphitheatre in Wantagh, N.Y.; the Irvine (Calif.) Meadows Amphitheatre; and 13 other SFX-controlled venues.
"Adding the expertise and marketing of EMI is also a natural expansion for us," Sillerman says. "We know them well as a supplier to SFX, and we now look forward to further strengthening our relationship with them and extending their reach in the important merchandising area."
WHAT NEXT?
Sillerman has already made overtures to the Marquee Group, a sports marketing company that he helped found, in regard to its purchase.
Marquee Group now has a strong entertainment component headed by QBQ's Dennis Arfa. All indications are that SFX is showing no signs of slowing down its aggressive strategy.
"We will continue to broaden our entertainment network and develop key relationships with content providers," Ferrel says. "As we have stated and demonstrated to those that were skeptical, we intend to continue to operate within the agency system."
Industry observers, meanwhile, continue to warily watch the SFX buildup, unsure of what its ultimate impact will be.
"We're obviously seeing the consolidation of two businesses‹the live entertainment and sports agent businesses‹happen simultaneously, being driven by one company," says John Scher, head of New York-based Metropolitan Entertainment Group, a firm with interests in concert promotion, artist management, venue ownership, and theater production. "Only time will tell whether or not this is a good or a bad thing for the industry at large."
SFX Entertainment or SFX-owned subsidiaries have eight tours on the road this summer: the Ozzfest; the George Strait Country Music Festival; Michael Crawford; Wynonna and Michael Bolton; Stevie Nicks and Boz Scaggs; Rod Stewart; Chicago and Hall & Oates; and the H.O.R.D.E. Festival.

Assistance in preparing this story was provided by Paul Verna in New York.