[Editor's Note: For this answer, we went directly to Pat Christenson. Pat is a new name to our readers, but he's been around the live-music scene in Las Vegas for 35 years, first as the manager of Thomas and Mack Center and Sam Boyd Stadium, then as president of Las Vegas Events, which promotes five major music festivals. He's also the author of a new book we'll be releasing later this year, Rock City Revolution.]
Take it, Pat:
The cost of talent is a closely guarded secret.
Agents and managers for the acts don’t want anyone to know if a promoter (who books the talent for various venues; in some cases in Las Vegas, the "promoter" is the casino entertainment department) paid less than expected for an act, compared to what other promoters around the country are paying. At the same time, acts don’t want to show fans that they’re getting rich or giving it away, as the case may be.
But we can deduce what acts get paid by doing a little arithmetic.
The first priority of a promoter is to break even. That means making the guaranteed minimum payment to the act and covering expenses. Payment to the act is based on a percentage of the gate, but the band gets a guarantee from the promoter no matter how many tickets are sold.
What’s left after the guaranteed payment is made is usually somewhere between 0% and 15% for the promoter. How can it be as low as 0%? Because the act's agent knows that even if the promoter earns nothing from ticket sales, he gets rebates from venues for food, beverage, and merchandise sales, etc. Still, anyway you slice it, a promoter’s profit margins are very slim.
A little exercise I do to estimate guarantees is to determine gross potential by adding all price points and taking 30% (expenses) off the top.
Example: A club show has a seating capacity of 1,000. The average ticket price is $50. Thus, a sellout grosses $50,000.
An agent’s goal is to maximize what his artist makes, but he needs to make a deal with a promoter to get a guarantee. If he believes his artist should sell 70% of the house (700 tickets, or $35,000 gross), he’ll set the guarantee at around $20,000, which leaves a potential profit for the promoter.
If the act does sell $35,000 worth of tickets and expenses are $15,000, the show breaks even. If the show sells out ($50,000), then there’s $15,000 to split — perhaps 85% to the act and 15% to promoter. For his risk on the $35,000 guarantee, the promoter has made $2,250 (15% of $15,000).
Now, if the show sells only 200 tickets ($10,000), the promoter still has to cover the $20,000 guarantee, plus the $15,000 in expenses, so he loses $25,000. The act nets its $20,000 regardless of how many tickets are sold. What a business!
The extreme is when an act is a sure sellout and the guarantee is the whole $35,000 (1,000 tickets at $50 apiece, minus $15,000 in expenses). For the promoter just to break even, the show has to sell every single ticket. That means the promoter must make all his money from ancillary sources, such as venue rebates — in other words, 0% from ticket sales, with a hope for a share of the bar receipts, a percentage of the merchandise sold, and/or even a cut of the ticket fee/service charge. With those extra revenue streams, the promoter actually makes a little dough.
Most deals are done somewhere in the middle.
Where this gets tricky is when an act sells out at a high ticket price. The Rolling Stones sold all 14,200 tickets to their 2016 show at T-Mobile at an average price of $498. That’s a little more than $7 million gross. My educated guess is that the expenses for the concert (advertising, rent, sound and lights, catering, promoter profit, etc.) added up to around $600,000, leaving $6.4+ million for the band. The higher the ticket price, the lower the percentage for expenses (in this case, around 8.5%).
Or the opposite. The agent knows the act is too small to fill a particular venue. But maybe it’s the only venue available, so the promoter guarantees less for the act, knowing he’ll sell only half the seats. Or maybe the promoter overestimates the act’s potential for ticket sales, so he guarantees too much and eats the loss.
As you can see, it’s a complicated business and there’s no easy answer to the question of how much an act is paid to perform in Las Vegas, or anywhere.
Concerts are no longer loss leaders for casinos and casinos don’t directly promote too many shows (like they did in the old days, when the Sahara’s entertainment director Stan Irwin, for example, booked the Beatles into the Convention Center in 1964, with tickets selling for $2.20-$5.50). Instead, they use independent promoters, who book a showroom, theater, or arena at the casino and pay for rent, security, etc. However, when a casino does book its own show, it’s looking for the same deal a promoter would get.
But when a casino is the promoter, it doesn’t "pay for the shows," as it's stated in the question. It books the shows and hopes to make a profit from its share of the ticket sales and direct food, beverage, and merchandise sales in and around the venue.
In addition, of course, the entire audience is passing through the casino, where some might play before or after the show. And a percentage is staying and eating at the hotel and playing in the casino.
