Cash for culture: Drama at the Palais

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By Daniel Wilson

In a deal that has divided a Council, and divided a community, the City of Port Phillip has decided to lease the Palais Theatre to corporate giant Live Nation for the next 30 years. Supporters of the deal claim the 2,896-capacity venue has been saved, detractors say Live Nation has conflicts of interest and the Palais will never be the same again.

In 2014 the Palais almost had to close its doors. The roof was falling in – literally – and the façade was crumbling. A campaign that involved Tex Perkins, Molly Meldrum, Dave Hughes, and Paul Kelly, just to name a few, brought sufficient attention to the issue that the Council and the State Government are currently funding emergency refurbishment works, worth $22 million, which will be completed by early next year.

Palais Theatre - Photo by Trash World

Palais Theatre – Photo by Trash World

And now that the iconic 89-year-old theatre has a new cashed up tenant, proponents of the deal suggest the Palais will stay in top condition for current and future generations, without ratepayers being asked to fund another rescue.

Live Nation will contribute nearly $60 million (in today’s dollars) over the life of the lease. They move in by 1 April next year and the first year’s rent will be $857,000. Within the first five years Live Nation will contribute $7.3 million in redevelopment works. The deal included other sweeteners like the Palais Theatre Community Fund, potentially worth more than $4 million (50 cents from every ticket sold). And Live Nation will make the theatre available eight days a year for community use at cost (worth $2.4 million) for events such as the St Kilda Film Festival.

But it is not the deal itself that has ruffled feathers, it is the company that will lease the Palais.

Live Nation Entertainment is a multi-billion dollar company with tens of thousands of employees. Headquartered in California, its tour operation is said to be the largest in the world, organising tours for the likes of U2 and Beyonce. It puts on 25,000 events in a year, including over 70 festivals such as Lollapalooza and Creamfields. It operates over 160 venues worldwide from The House of Blues to Warner Theatre. It is an artist management company that plots the careers of 350 of the biggest stars from Jay-Z to Shakira. And it is also the largest ticketing company in world, Ticketmaster.

Now the Palais Theatre will be added to Live Nation’s trophy cabinet. Critics of the deal have approached St Kilda News suggesting Live Nation will not deliver on its promises – bookings will decline and the community will suffer.

Some have gone on record with their displeasure. Cr Serge Thomann, Deputy Mayor of the City of Port Phillip, was at pains to distance himself from the decision to award the lease to Live Nation, saying he shared the concerns of many in the music industry. “Live Nation is not the right operator . . . the Palais will never be the same. Shame.”

Cr Thomann was one of the two councillors who voted against awarding the lease to Live Nation. It was a four to two split decision in May this year. Live Nation was recommended to Council by a panel following a two-stage selection process. Expressions of Interest were sought in 2014. Three bids were received in 2015 from Live Nation, Playbill Venue Management, and the current operator, Palais Theatre Management. Following negotiations with Playbill and Live Nation, the appointed panel recommended Live Nation to Council.

Peter Holland ran in the Federal Election as an independent on the single issue of the Palais. He argues the panel that recommended Live Nation was not up to scratch. He is comparing this decision to the controversial decision to award the St Kilda Triangle to Citta Group in 2007 – a decision that was reversed after a community backlash. On reviewing that process the Ombudsman “did not consider the City of Port Phillip had the relevant experience and expertise to undertake such a significant project, especially when it was not subject to the same high level of checks and approvals associated with a state government development”.

However, as the Victorian Government owns the Palais, Council’s decision for Live Nation to be awarded the lease had to be approved by Energy, Environment and Climate Change Minister Lily D’Ambrosio. In July this year she endorsed Council’s decision, but declined to be interviewed for this piece. A spokesperson from her department advised, “Management of the St Kilda Triangle, and the process for selecting the operator of the Palais Theatre are matters for the City of Port Phillip.”

Palais Theatre - Photo by Trimba

Palais Theatre – Photo by Trimba

Similarly a spokesperson advised that Minister for Creative Industries Martin Foley, who has been credited as being instrumental in securing funding for the emergency refurbishment works for the Palais, has no role beyond being briefed on the Council’s decision on this.

Cr Bernadene Voss, Mayor of the City of Port Phillip, is standing behind the decision, arguing there is “a strong operating strategy, backed by extensive international venue management expertise and plans to appeal to wider audiences by increasing the diversity and number of events and access to artists, all contributed to Live Nation being considered the superior candidate”.

Michael Coppel, who runs the Australian arm of Live Nation, said he is thrilled to have secured the long-term lease, “As a major presenter of live events and as a Melbourne-based and staffed music business firm, we are very aware of how important the Palais is to the St Kilda community and the people of Melbourne in general, and what a very special performance space it is”.

“To have been granted stewardship of this iconic venue carries a great responsibility, and we will seek to restore the Palais to its former glories, better adapt it to the changing requirements of live performances, and operate it for the benefit of all stakeholders, hirers, staff and patrons,” Mr Coppel said.

But critics say Live Nation will not be able to increase the number of events, instead events will decrease and the wider economy will suffer. The issue boils down to Live Nation being both a venue operator and a tour promoter. A competing tour promoter might be wary of calling a competitor and discussing venue availability.

A local tour promoter Maggie Gerrand, who brought Buena Vista Social Club to our shores, told St Kilda News she will be very hesitant to book the Palais. “As a promoter I am not going to go to them and say I am thinking of touring x, do you have availability?”

Promoter Michael Chugg echoed this concern. He told Fairfax media that in the US Live Nation had established “a monopoly and they are wiping out other operators”.

Palais Theatre - Photo by Hayden Charles

Palais Theatre – Photo by Hayden Charles

But the Panel was aware of this issue and recommended to Council to build in safe guards to protect other promoters, which include operating the theatre at arm’s length from its promotion and ticketing business. This is built into the lease, and Council can terminate the lease if there is non-compliance with the agreed fair competition and confidentiality policy.

Gerrand is not convinced, “Sure they have this confidentiality thing, but that doesn’t wash. So suddenly Palais is off the list. I won’t be using the Palais again.” She went on to say, “to give the venue to someone who is not impartial is not wise. I think the City of Port Phillip have made a big mistake and that will just play out in the future, but it seems too late to do anything about it.”

Greg Gillin, Senior Vice President Venue Development at Live Nation, couldn’t stress enough that promoters will have nothing to worry about. “We have an agreed booking process in the lease that we have to follow, and we have to make that available to the Council, so every time a booking is made or an enquiry is made, it is recorded – time, date, who made the phone call, and that is recorded in an automated computerised booking system – Council has access to that at any given time. So if there is a change, we have to record why that change happened.”

Mr Gillin, who ran Melbourne Park for 13 years, said “it’s a fairly standard industry practice of running a booking calendar . . . we would always have promoters come in and challenge other promoters, we know they are all bidding on the same event, because we get a flurry of calls on the morning that an artist releases its dates for Australia.”

Cr Voss explained that should a rival promoter feel their confidentiality was breached this would entail “first making a complaint to Live Nation. If they were dissatisfied with the response, they would then escalate the complaint to Council, which would review, and if necessary, investigate the complaint. To the extent that a breach in the policy would also represent a breach in the law, this should be reported to the relevant authority – in the case of the competition law, this is the ACCC.

“The operating model proposed by Live Nation is not unique to the Palais Theatre. This model has been successfully implemented in a number of venues nationally and internationally,” Cr Voss highlighted.

The New Zealand arm of Live Nation, also headed by Michael Coppel, took operation of Auckland’s 12,000-capacity Vector Arena last year. Mr Gillin suggests Live Nation’s association “hasn’t impacted any of the hirers at all”. The upcoming roster supports that sentiment: While Live Nation is bringing Selena Gomez and Slipknot to the venue, competitors Frontier Touring and Adrian Bohm Presents are bringing Ellie Goulding and comedian Michael McIntyre respectively.

Further, Live Nation is not the only organisation to incorporate a touring company, a venue operator, and ticketing company. Live Nation’s biggest competitor is AEG Worldwide, also headquartered in California. AEG operates the Brisbane Entertainment Centre, a 13,500-capacity multifunction arena. It hosts events organised by a variety of tour companies. Live Nation is bringing comedian Amy Schumer to that venue later this year.

Australia has its own version of these turnkey operators. Headquartered in Sydney, TEG Live is a touring company, venue operator, and a ticketing business (Ticketek). TEG Live operates the 21,000-capacity Qudos Bank Arena in Sydney. Just like Live Nation and AEG venues, Qudos Bank Arena hosts events organised by a variety of tour companies. Live Nation just brought The Cure to that venue.

Live Nation cannot rely entirely on its own venues to put on tours. Nor can it solely fill its venues with Live Nation tours. As Cr Voss explains, “Irrespective of the added protections of the Fair Competition and Confidentiality Policy, it is in Live Nation’s commercial interests to be seen as a trusted, professional and reliable service provider to tour promoters. The vast majority of hirers [of the Palais] will be non-Live Nation affiliated organisations. The market is sensitive to venue operators behaving badly and if Live Nation behaves in such a manner, its business viability will be impacted.”

Despite all the safeguards and all assurances, one might wonder why even take the risk? The current operator is widely praised in the industry and is solely a venue operator without promotions interests. Palais Theatre Management, run by Neil Croker, had turned the venue into the most successful concert theatre venue in Australia.

Cr Voss explains they gave the lease to the best offer, “Live Nation’s proposal met or exceeded all our objectives and we are excited at what can now be delivered for our community and live music fans across Australia”.

Neil Croker (Palais Theatre Management)

Neil Croker (Palais Theatre Management)

Neil Croker was magnanimous is defeat, “We (Palais Theatre Management) are very disappointed to lose the management rights to the Palais Theatre after nine years of successfully revitalizing this magnificent historic theatre to its current strong international and national position in the live performance industry. Before our lease term finishes on 30 December 2016 we have over 65 events to present which we will continue to focus on, after that the new operators will have a vibrant theatre to take custody over, and we wish them success.”

Mr Gillin is enthusiastic about the future of the Palais, “Our first priority is to maximise the patrons’ experience, and we will do that through the refurbishments and developments that we are planning on introducing – things like increasing the circulation space in the foyer by taking out the administration block, and then putting in the new period façade, renovating and refurbishing the dome internally, . . . installing a disabled lift, and disabled seating in the upper level, so we are increasing the flexibility”, and Cr Voss also mentioned the “old fireplaces will come back to their former glory”.

Mr Gillan went on to say, “The other thing we are really looking to do is stabilise the operating costs, by introducing things like a solar array heat pump, rainwater harvesting – try and lower that cost of putting on events”. This should make the Palais more accessible to promoters who might have found the cost of putting on an event there prohibitive.

It is difficult to reconcile the doomsday predictions with the success that Live Nation has enjoyed around the world. Last year, world-wide revenues were up 11 per cent to US$7.6 billion and attendance was up 8 per cent to 63 million. Will they make a mess of the Palais? We will have to wait and see.

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