Lefsetz Letter » Blog Archive » Inventory

This is what they call concert tickets. You put a show and the tickets are in stock. All summer talking about Springsteen tickets, flex prices, four figures, but what about the rest of the show?

Live Nation is a publicly traded company that generates stellar numbers. Business has gone beyond health, but moving forward?

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

“From Shortage to Surplus: Scotts Miracle-Gro Buried in Fertilizer – Scotts ramped up production during pandemic, then consumers shifted, retailers slashed orders, leaving massive inventory. It’s now trying to dig its way out.”: https://on.wsj.com/3RRr3fI

The story has been in the business press for months. How these companies produce so many products that the public doesn’t want to buy.

There are various factors. People were stuck at home during the pandemic, and now they’re not. I’m sure you’ve read about Peleton’s disaster. Not that it’s unpredictable. If you don’t have spare gym equipment at home, you’ve never bought it, and many don’t! People get excited at first, then their interest wanes, and then they don’t even realize they’ve stopped. They take one day off, then two days off, and then they’re off the beaten track, and they’ve got a new hanger. I mean how big was the market for Peleton to begin with? Check out all the hype about GoPro. Like everyone needs one. Shares are now down 90%. Give the company credit, it’s moving into the service space, but… it’s never going to reach the heights investors can dream of. Then again, professional investors go to the bottom and profit from the spread long before people realize they are wrong.

So, too many clothes, it seems too much for everything but cars. The companies couldn’t keep up with demand, they ramped up production and then found that people were no longer interested. Will the same thing happen to the concert industry?

Here is the relevant passage from the WSJ article:

“Versions of this story are playing out across industries, where manufacturers of everything from clothing to kitchen appliances went from trying to catch up with demand to succumbing to the weight of their own inventories in a matter of weeks. Now, many companies are laying off workers, leaving factories idle and work to undo the many other steps they have taken to ensure there is enough product to sell.”

in a few weeks!

If you’re in the industry, you know that ticket sales have been up and down over the past year. I mean they move, then they don’t, then they start again…are we ready to slow down?

Another article I read today:

“Is there room for another big music festival in Southern California? Primavera Sound is coming soon”: https://lat.ms/3qH8aQK

The Los Angeles Times is known for switching headlines, and if you Google it, the headline reads: “Primavera Sound debuts in LA amid shaky festival market — launching any festival is risky, but in the face of inflation and excesses Between a saturated market, the face of the upcoming LA version of Primavera Sound…”

Headwind because I didn’t even realize it! Consciousness is the first obstacle.

Then there’s the bill, price and location.

If you read this story, you’ll find that true insiders also know that a lot of festivals that are canceled for a specific reason are actually canceled because they can’t move their tickets. Festivals are an investment for both promoters and participants. The question is not only how much we need, but also the price. Public festivals are expensive, even ones that don’t require lodging and long-distance transportation, I mean how much would you pay to stand with someone unwashed for a few days?

Historically, certain behaviors are recession-proof. Definitely those with hot records right now. And then you have superstars…but the superstars are always around, and a lot of people have seen them. As for smaller shows, moving to larger buildings, they’re not guaranteed to sell out…their die-hard fans need to see them, but if it’s deemed too expensive, everyone else can pass.

Like the products the Wall Street Journal talks about, there were absences, and now there’s an oversupply. No gigs, too many now. And a lot of tickets were sold before the pandemic, those shows are airing now, so what about the future?

It doesn’t look as bright and you don’t have to wear sunglasses.

As for the price…in the LAT article it mentions that people are waiting for the cost to come down! Below face value, when scalpers, whether they are professional or amateur, need to get rid of their inventory!

Concerts are all about disposable income. Concert prices continue to rise, if for no other reason than rising costs. Are there times when people stay home? I think there is. I’m not saying business will turn into a dumpster fire, I’m just saying some people will get hurt.

And the concert business is opaque, as almost all performing arts businesses are. They don’t want you to know because it’s all about the image of talent.

And there’s no guarantee, concert promoters don’t know, they’re always taking a risk. They certainly don’t know what will happen after the first year of the year.

The response to LAT writers is that Los Angeles is a walkable town. No, historically this is not true. However, historically, urban behaviors do more of the pedestrian business. In fact, the public is protected. The frenzy is gone. People have screwed up and they don’t know what’s wrong with them. Inflation rebounded and mortgages hit 6%. If you have money, you will be afraid, if you have no money…

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