Lefsetz Letter » Blog Archive » Inventory

That’s what they call concert tickets. You put on a show and the tickets are in stock. And all summer we’ve been talking about Springsteen tickets, flex-priced, four-figures, but the rest of the shows?

Live Nation, a public company, produced fantastic numbers. Business has been more than healthy, but moving forward?

My eye caught this article on the front page of today’s “Wall Street Journal”:

“From scarcity to glut: Scotts Miracle-Gro is buried in fertilizers – Scotts ramped up production during the pandemic, then consumers shifted and retailers cut orders, leaving a pile of inventory. It’s now trying to to go through.” : https://on.wsj.com/3RRr3fI

This story has been in the business press for a few months now. How these companies produced so many products and the public didn’t want to buy them.

There are various factors. People were stuck at home during the pandemic and now they are not. I’m sure you’ve heard of the disaster that has become Peleton. Not that it wasn’t predictable. If you don’t have an idle exercise machine at home, you’ve never bought one, and many haven’t! People get excited at first, then their interest wanes, and then they don’t even realize they’ve quit. They take a day off, then two, then they get out of the routine and they have a new clothes rack. I mean, how big was the market for Peleton initially? Watch all advertising on GoPro. As if everyone needed it. Now the stock is at 90%. Give the company some credit, it’s getting into services, but… it will never reach the heights that investors dream of. Again, professional investors enter the ground floor and can make a profit on the spread long before the hoi polloi realize their mistake.

So there are too many clothes, there seems to be too much of everything except cars. Companies couldn’t keep up with the demand, they ramped up production and then found that people were no longer interested. Will the same thing happen in the concert business?

Here is the relevant passage from the WSJ article:

“Versions of this story are playing out across industries, where makers of everything from clothing to kitchen appliances have gone from trying to catch up with demand to bowing under the weight of their own inventory, in a few weeks. Today, many companies are cutting jobs, shutting down factories and working to undo many other measures they took to ensure they would have enough product to sell.

In a few weeks!

If you’re an insider, you know that the past year has been full of ups and downs in terms of ticket sales. What I mean is they move, then they stop moving, then they start again… Are we ready for a slowdown?

There is another article I read today:

“Is there room for another great music festival in SoCal? Primavera Sound is about to find out”: https://lat.ms/3qH8aQK

The “Los Angeles Times” is famous for its headline changes, if you google it, the headline is: “Primavera Sound Debuts in LA Amid Shaky Festival Market – Launching a Music Festival Is Risky, but between inflation and an oversaturated market, the next LA edition of Primavera Sound faces…”

Headwinds, because I wasn’t even aware of it! And awareness is the first obstacle.

Then there is the bill, the price and the location.

If you read this story, you’ll find that true story insiders also know that many festivals canceled for stated reasons were really canceled because they couldn’t move tickets. A festival is an investment, both for the promoter and for the spectator. Not only is the question how much we need, but the price. Festival costs are high for audiences, even those that don’t require long distance accommodation and transportation, I mean how much are you going to pay to stay with the unwashed for days?

Historically, some acts are recession proof. Definitely those with hot records right now. Then you have the superstars… But the superstars have existed, a lot of people have already seen them. As for the smaller bands, who go up to bigger buildings, which aren’t guaranteed to sell out… their hardcore fans need to see them, but anyone can pass when it’s deemed too expensive.

And as with the products the WSJ reports on, there was an absence, now there is an overabundance. There were no shows, now there are too many. And a lot of tickets were sold before the pandemic, these shows are playing now, so what’s next?

Doesn’t look so bright, you don’t have to wear shades.

As for the prices… In the LAT article, there is reference to the fact that people are waiting for the costs to come down! Below face value, when scalpers, whether professional or amateur, need to get rid of THEIR inventory!

Gigs are a matter of disposable income. Gig prices continue to rise, if only for another reason that costs are rising. Is there a time when people stay at home? I think so. I’m not saying the business becomes a dumpster fire, I’m just saying some people will get hurt.

And the concert business is opaque, almost all show business is. They don’t want you to know because it’s all about image with talent.

And there are no guarantees, concert organizers don’t know that, they always take risks. And they certainly don’t know what’s going to happen after the first of the year.

And the answer to the LAT writer is that LA is a walk-in city. No, historically that is not true. However, urban acts historically do more walk-in business. In truth, the public is guarded. The mania is gone. People have blown, they have no idea what awaits them either. Inflation rebounded, mortgages rose to 6%. If you have money, you are afraid, if you don’t…