Hurricane Sandy to Cost Live-Entertainment Business Millions in Lost Profits, Expenses
With an ever-increasing number of live events being cancelled or postponed as Hurricane Sandy nears the Eastern Seaboard, stakeholders in the live entertainment industry are reviewing their insurance policies and contemplating big losses in marketing and promotion expenses and lost or delayed profits.
“I’m getting lots of questions today — ‘What does our policy cover, What happens if?’-type questions,” says Paul Bassman, president of Dallas-based entertainment insurance firm Doodson Insurance Brokerage. “Nothing’s really happened yet, but in New York City alone, if the subways are shut down, you can’t have shows.”
So who gets hurt? According to Bassman, “Everyone’s going to take a hit, but it’s part of the business. That’s why we’re here.”
Potentially, hundreds of events could be impacted. “A major weather occurrence like Sandy is, obviously, disruptive both in the daily lives of the communities we work in and the clients we tour,” says Randy Phillips, president of AEG Live, the world’s second-largest promoter, which is extremely active in the New York metro area. “It will have an impact on our budgets and earnings — if even in the short term, since we average a couple of hundred shows a week in those markets that have had to hunker down while the storm passes through.”
Besides potential property damage, which is typically covered by liability insurance, promoters and venues are looking at the prospect of millions of dollars in lost marketing and promotion expenses in some of the most expensive media markets in the country. For them, and artists, profits could also slip away, or at least be deferred until a later date.
“If you’re doing a show at Madison Square Garden, for example, and you’re going to walk off with a million-dollar profit, you’re not getting that profit,” notes Bassman (although the Garden has no concerts scheduled for this week). “You can reschedule, but the show’s not going to happen until later, and the rescheduled date is one you can’t play somewhere else now.”
Most venues don’t carry insurance for loss of revenue due to a weather cancelation, Bassman says, though policies differ widely. “Some venues may carry ‘loss of utilities’ coverage, however there are so many different kinds of insurance coverage, it just depends on what they carry,” he says.
Force majeure, or “act of God,” clauses in contracts cover stakeholders on both sides of the talent buyer-entertainer equation. “Depending on how it’s worded, something like this would typically invoke the force majeure clause, and the [promoter] would not have to pay the guarantee to the artist,” says Bassman. “But [the promoter] would still be out all kinds of money for marketing and promotion, not to mention lose out on the profit potential for that show.”
Big companies like Live Nation, AEG Live, and Bowery Presents — the three most active in the New York metropolitan area — are well-insulated from serious weather events, Bassman says. “It’s the one-time promoter that’s going to get crushed.”
Bassman is scheduled to be a speaker at the Billboard Touring Conference next week in New York. Though conference insurance is relatively inexpensive, Bassman says, the BBTC is not expected to be impacted by the hurricane.
Source: Billboard
