On Ticketing, Loans, and Economic Impact

North of America played on the Common (in the Pavilion).

Well, looks like a federal election is going to swamp the media for the next 45 days.  This means that the Halifax concert scandal will slide off the front page for the next while.  Before I go back to blogging about things I want to see in Halifax, as opposed to what I DO NOT want to see, I want to wrap up with a resource piece about how concerts work from a money perspective.

I know Councilors and staff are reading this site now, so maybe this is a bit of a public service.  Sorry it is so long!

Before I dive in, I want to say part of me feels really badly for what Harold MacKay is going through.  Eight years ago my business, the work of eleven years of my life, went out of business. I have lived the pain, the frustration, the self doubt.   I can’t say I felt comfortable watching what he was going through that week.

Ultimately though, this isn’t about MacKay, it is about the processes at HRM, at Trade Centre Limited (TCL) and its affiliates.  Unfortunately, dissecting Friday and Monday’s media requires talking about MacKay again.

Let’s start with the ticket money.  In the Herald, MacKay said:

“We were accessing our own money, not anybody else’s money,” the promoter said. “It’s perceived out there that we were accessing all this money to host the concerts. We weren’t. We were accessing our own money — the ticket sale money.”

So first thing we need to talk about is who’s money is it?

You buy a ticket from a ticket company.  That ticketing company provides a service to a venue, or directly to the promoter.  The promoter ultimately gets paid the ticket money, minus fees for processing and credit card charges.  What normally happens?

Well in accounting terms, the ticket money is what is called unearned revenue.  This means the ticket system has collected money, but because the show has not happened yet, the money is not yet earned.

In accounting terms, unearned revenue is recorded as a liability, or a debt, not as earned revenue, or a sale.  This is because if the show is cancelled, you have to refund the money.

The example I used the other day was if you book a photographer to shoot a wedding, you pay a deposit.  That deposit is unearned revenue.  If the photographer does not show up and shoot the wedding, you get the money back, because they didn’t do anything.  Any kind of deposit is unearned revenue.

Now, full disclosure, my job right before I got hired at NSCC was working to bring TicketPro, the rival ticketing system to Ticket Atlantic, to Atlantic Canada.   So I know a lot about ticketing.

So from a ticket company point of view, the money is held “in trust” against returns.  I’m not going to say that promoters don’t access ticket money before a show. Sometimes a small advance may happen close to the show, sometimes the promoter is there with a cheque to pay the day of show, sometimes they transfer the money the day after.

Okay, we are halfway there!

Big promoters with lots of shows often are drawing money from tickets sale.

If you are Eventko or Spectra out of Montreal, or Sonic in Halifax, and you are doing a lot of shows, the ticket company may let you draw against sales because odds are good that if one show cancels, they will do the returns against the cash flows of the other shows that are still on sale.

In the case of Live Nation, the worlds largest event company, well, they own Ticket Master, so you know, the line gets pretty blurry.

But if you are doing one show at the Metro Centre, or Cohn, or Forum, or Alderney Landing, odds are you are not going to be able to access funds from tickets on sale.

Most importantly, no normal promoter doing a one off would be able to get an advance on sales that have not even started yet, which is what happened when Ticket Atlantic advanced $500,000 to Power Promotional Events a couple weeks before the Black Eyed Peas even went on sale.  This was not normal operating procedure in the entertainment industry.

This loan would have created all sorts of risk for Ticket Atlantic as the ticketing arm of Trade Centre Limited, the provincial crown corporation, if they had advanced it.

But they didn’t. According to the HRM Audit and Finance Committee Report, page 2, the money was loaned from Metro Centre Limited (MCL) and was to be paid back out of ticket sales.

MCL is wholly owned by HRM and only managed by TCL.  Unless the Auditor General finds this report is wrong, HRM loaned the money to Power.  This was no simple advance.

If it had gone bad, HRM would have been holding the bag, trying to collect $1.85 million from MacKay and the other guarantors.

So, lets back up.  TCL owns Ticket Atlantic, and manages the Metro Centre.  TCL also operates Events Nova Scotia.

What is most galling about Mackay’s defence this week was his use of economic impact to justify the expense and risk.

While at one point he said direct economic spend might have been $2 million, he did also say in several media outlets that Events Nova Scotia estimated the economic impact was  $13 million for last summer’s concerts.

To reach $13 million, each of the 12,000 people who got free would have had to spend $434 a person!

Presumably, people who were came because they got free tickets are not fly in tourists.  Even if they were from away they were already here spending money.

I wonder if the statistics are so high because TCL, MCL, Event Nova Scotia and HRM’s senior staff person and the Mayor had so much at stake.

I am wondering if Events Nova Scotia wants to re-evaluate these statistics, or produce some methodology that can be reviewed independently.



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