Reference no: EM132181165

The Joliet Memorial Stadium(JMS) is a 20,000-seat multipurpose stadium located in Joliet, Illinois. It was built in the 1950’s and is dedicated to Joliet residents who fought in World Wars I and II as well as the Korean War. It is the home of the University of St. Francis Saints football team and the Joliet Catholic Academy football teams. This stadium is used for other community events, such as fireworks displays and summer festivals. In May 2009, renovations on the stadium began with the installation of a new, state-of-the-art LED video scoreboard, artificial turf on the field surfaces and a new track surface to surround the field. In 2016, the Park District installed a dome so that the facility could be used year-round for a variety of activities. The Joliet Park District is responsible for the operations of this venue. To provide additional entertainment options to Will County residents, the Park District is considering partnering with Blue Sky Entertainment Inc. (BSE). BSE is the largest diversified promoter, producer and concert operator for live entertainment events in the United States. The Park District Board is considering offering an average of 40 concerts with 12 year-round staff planning and managing each season.

BRINGING CONCERTS TO REALITY

A concert becomes reality in many steps. First, a group or performer with an interest in performing at JMS will discuss with BSE the possibility of performing at the stadium, and look at the open dates. When agreement is reached, BSE and the booking agent for the performer sign a contract. A time is specified for gate openings and once the gate is opened, the show is underway. The job of the staff during a concert is to make sure every patron of the JMS has a pleasant experience and that the mission of the company is clearly seen by everyone that “a concert..... it’s better live.” After a show, It’s a Wrap, Inc. of Joliet handles the cleanup. KEY BUSINESS ISSUES Marketing has an important role in the success of JMS, but marketing expenditures are carefully watched. For every show, the marketing budget is limited to $20,000. For many shows, it is difficult to stay within the budget since the Park District hopes to draw patrons from the southwest suburbs/collar counties as well as Chicago and northwest Indiana. Most of the marketing budget is spent on advertising with radio, TV and print media in the designated regions. Prior to developing advertising plans, the marketing staff analyzes ticket sales geographically. It is important to know the demographics of the regions and compare them with the profile for each performer. The more the Park District can know about the fans, the more they know about where to spend the $20,000. While the different advertising media were viewed initially as cost-based strategic business units, the Park District now considers them to be profit-based SBUs and develops measures of performance and profitability for each advertising media, by region. This type of analysis is important to the Park District because increased ticket sales, through effective advertising, not only affects ticket revenues but also revenue from parking, merchandise and concessions. It is also important because of the increasing cost of advertising. The advertising rates in Will county are similar throughout the entire region. The rates are up two hundred percent over the last five years while the budgets per show are only up fifteen percent over this time. Other areas where costs have increase dramatically include the cost of the performing artist. The average cost for an artist is approximately $160,000. Some of the artists are paid on a fixed-fee basis and others are paid on a per capita basis. Generally, the most popular artists seek a per-capita contract because they are confident of a high level of attendance. In contrast, the artist paid on fixed based is guaranteed whether 100 or 20,000 people attend (the capacity of JMS is approximately 20,000 seats). The fixed-fee shows often have a projected attendance under 10,000. These artists do not have the “draw” of the other artists. In these types of shows, the role of marketing is extremely important, since JMS must work hard to attract attendance for the show. As noted above, lower ticket sales also mean less money spent on parking, concessions and merchandise, so effective marketing is critical. One method JMS uses in addition to advertising is to distribute “comp” tickets to media outlets such as radio stations to build interest in the stadium that will hopefully be realized in the future with paying ticket sales, and because comp customers will still spend on parking, concessions and merchandise. The cost of the performing artists grows annually, so it is very important for the JMS to reduce non-artist costs. There are a number of operating costs at the stadium, including expenses for parking, security, concessions and merchandise. Also, there are a number of other methods used to make the concerts more profitable. For example, the parking service passes out flyers for upcoming events. Also, the stadium trades “comp” tickets for online spots in the radio industry and gives local business tickets in exchange for advertising on their premises.

FUNDING AND FLASH REPORT

The sources of funding for the stadium are ticket revenues, concession (food) revenues, merchandising revenues, parking revenues, sponsorship revenues and other. Exhibit A is a flash report for an example show, Eric Paslay. A flash report is a projection of what a concert or event will cost and what revenues will be received. The guaranteed talent cost ($160,635) is the amount Eric Paslay is guaranteed for the show. Attendance is the number of paying ticket holders, while the “drop count” is total attendance both for paid tickets and comp tickets. The drop count is usually projected to be about 125% of paying attendance. The Flash Report then projects total revenues, including parking, food and merchandise based on a per capita (drop count) rate. Also, other revenues include per capita facility charges and service charges paid by the performer. The parking, food concession and merchandise operations are outsourced to other service providers, so the direct costs for parking, merchandise and concessions are determined based on contracts with the service providers which include both a percent (10%) of applicable (parking merchandise or concession) revenues and a fixed fee. Operating expenses include an allocation of the total of fixed production and operations costs for the season, the advertising expenses for the Eric Paslay event, and other variable expenses. These are then added to the direct costs for concessions, merchandise, parking and insurance to determine total operating expenses.

REQUIRED

1) How would you describe the competitive strategy of the Joliet Memorial Stadium? What do you think it should be?

2) For the Eric Pasley show, how many tickets must JMS sell to break even? (Hint: you need to separate the variable and fixed costs of concessions, parking and merchandise.)

3) For the Eric Pasley show, how many “comp” tickets are there?

4) For which type of performer (Fixed fee or per capita) is breakeven analysis particularly important, and why?

a) From the Stadium’s point of view

b) From the Performer’s point of view

For purposes of solving this problem, segregate the tickets only between paying and comp, not by the type of ticket, i.e. A seat, B seats, etc. If you feel adventurous, you can solve this by ticket type, but it is not required.