hollywood billionaire

Chapter 472 HMG
The overall cost of the Mad City Music Festival is so high that it is almost luxury.

The total cost for artists, including performance fees and the team's food, accommodation, transportation, rider requirements, material procurement and other expenses after landing, actually amounted to US$1536 million.

In terms of stage production, Mad City's three-in-one real-life stage costs more than another super-large music festival in Las Vegas, EDC, and much more. The total production cost of the EDC main stage was $300 million, while Mad City reached a staggering $570 million.

In the venue rental segment, MGM's offer remained unchanged and no additional expenses were incurred in the end, totaling US$350 million.

In terms of marketing, Hanchang reported that it spent $412.35 million, with both decimal and integer figures. The reason why the figures are so specific and trivial is that marketing is not as simple as buying online advertising space or offline billboards.

Hiring a ticket sales team in the secondary market, a booth sales team in the VIP area, or even the sales commissions generated after consumers read a promotional article and purchase tickets based on the jump link provided in the article are all counted under the general category of marketing.

In addition, there are $280 million in security, medical care, cleaning, electricity, network, fire protection and other items in the "operation" category. The "administration" category includes ticket handling fees, performance licenses, team office costs, and non-artist reception costs, totaling $140 million.

And the actual amount of $12 million allocated from the 116.9% emergency budget. The emergency budget of a super-large music festival is usually used to deal with various unforeseen emergencies, such as extreme weather. If the local meteorological station predicts that there may be abnormally high temperatures on that day, the organizer must purchase emergency tents and heatstroke prevention medicines in accordance with regulations. If there is a heavy rain, awnings and raincoats are even more needed. Not only are they distributed free of charge to the audience, but they are also used to cover the stage equipment that cannot be soaked in water and the musical instruments brought by the artist team to avoid damage.

If a technical failure occurs that will have a significant negative impact on the performance, the organizer will also need to pay for it from the emergency budget - if any part of the LED wall fails, a spare screen will be rented from a local supplier. If a set of speakers suddenly stops making sound, the local distributor of the equipment will be asked to send a technician to urgently troubleshoot the problem. If it is a problem with the connection of the wires, the wires will be replaced; if it is a maintenance problem of the equipment itself, the equipment will be replaced. The first priority is to ensure the smooth progress of the performance, and the disputes will be dealt with after everything is settled.

Of course, it’s not just these obvious problems that may occur, but also some details that non-industry insiders can’t even think of, which can lead to a series of headache-inducing extra expenses.

For example?
For example, if an artist had a great time in London yesterday and missed the departure time of the private plane that was requested in advance, the organizer will have to pay for the rebooking fee - because the artist knows very well that they can cancel the performance with the excuse of "the plane's technical failure and the flight cannot be carried out", which is not a force majeure factor. The worst consequence is that they will just have to return the performance fee that has already been received. On the other hand, the organizer of the music festival has to face the storm of public opinion and the wave of ticket refunds due to the sudden absence of the heavyweight guest. Therefore, most organizers will accept the small problem that can be solved by 20,000 or 30,000 US dollars.

For example, a few days before the music festival, someone suddenly posted a threatening video online, announcing a terrorist attack at the music festival. Even if it was just a bad joke, even if the video came from an anonymous netizen who no one knew, it would become a stumbling block to the smooth implementation of the music festival. The organizer had to do emergency public relations and try hard to reduce the impact of the threatening video, while increasing security personnel, hiring expensive professional armed guards, and waiting for notification from law enforcement agencies to raise the security level to the TSA level at any time, which is the security level commonly used in US airports.

More importantly, no matter how complete the security plan is, the county or city police department or even the FBI may stop the event at any time.

18 U.S.C. § 2331: When a performance involves terrorist intent (such as receiving a credible bomb threat or intelligence of a biological weapons attack), the FBI may work with the Department of Homeland Security to invoke Section 802 of the Patriot Act to force the termination of the activity.

California Penal Code Section 409.5: When a third-degree public disturbance occurs (violent conflict, arson, or the presence of deadly weapons involving more than 500 people), the police have the right to declare an unlawful assembly and clear the scene.

洛杉矶97%的市政许可包含“公共安全例外“条款，警方可因以下情形撤销许可：1、实时人流超过消防承载量120%，2、毒品过量率突破0.3%/小时。

For the organizers, how to ensure that such threatening videos "do not involve terrorist plots", how to ensure that emergencies do not escalate to "level three public disturbances", and how to ensure that the real-time flow of people does not exceed "120% of the fire carrying capacity" are all huge government public relations expenses.

Not only that, in this country where lawsuits are rampant, music festival organizers have to prepare a reserve fund related to legal disputes. If an unexpected situation occurs at the performance, money is needed to deal with class action lawsuits from the audience. If the songs performed by the artists are not cleared in advance, or unauthorized samples are suddenly played, money needs to be reserved for dispute settlement. Even if the noise exceeds the threshold, the discarded garbage exceeds the carrying capacity of municipal facilities, and the emergency situations handled on site exceed the normal number of calls received by the fire department by a certain percentage... This series of problems all require money to settle.

Therefore, the emergency budget of Mad City Music Festival, which accounts for 12% of the total budget and a total of 336 million, is not an exaggeration. The average annual emergency expenditure of Coachella Music Festival, which is also located on the West Coast, is 430 million US dollars, accounting for 11.7% of the total cost. As for Tomorrowland, the largest electronic music festival in Europe, it needs to comply with Belgian legal requirements and plan 15% of the total budget as a mandatory emergency reserve.

Fortunately, the first Mad City Music Festival had many minor problems, but no major ones. The most serious problems we dealt with were the compensation for the "overtime work" of the Las Vegas Metropolitan Police Department, the rain and wind protection reinforcement of some equipment on the live stage, and various temporary additional needs of the artists and the work team.

Madison Beal's tour manager was too busy with work and missed the working lunch at the Sahara Hotel, so he ate out instead. Will this be reimbursed?

The on-site director feels that the real-time broadcast effect is not good enough and wants to apply for two more cameras and two photographers. Will this be approved?
When setting up the stage, I found that a batch of wires were missing. Should I buy this?
To buy wire, I need to rent a truck to travel to and from Los Angeles on the same day. The driver's overtime service fee...will you give it to me?

Each problem may seem like a small one, but when accumulated together, it only took up $116.9 million of the emergency budget, which is considered to be a result of proper planning and good operation by Han's professional team.

In the end, the total cost of the three-day event of the first Mad City Music Festival in 2016 was set at US$3405.25 million.

In comparison, the 28-city North American tour led by Demi Lovato and Nick Jonas, which Madison Beer and Billie Eilish participated in a while ago, had a total box office of only half of this figure.

This shows how much money large-scale music festivals cost.

But high investment means high returns, especially in the live music industry. The top budget means you can invite the top artists, and the top artists are often directly equated with the hottest box office performance.

At least for Mad City, this equation is completely true.

The dream lineup of 24 groups that can drive music fans crazy no matter where they are in the world has brought one of the most exciting box office performances for the performance market this year.

Han Live originally planned 53100 single-day tickets and 55300 three-day passes. Among them, among the single-day tickets, there are 6000 early bird tickets, 39000 ordinary pre-sale tickets, 7500 VIP tickets, 600 VVIP tickets, and the total revenue of three-day single-day tickets is 1630.98 million US dollars. For three-day passes, there are 3000 early bird tickets, 50000 pre-sale passes, 2000 VIP passes, 300 VVIP passes, and the total revenue of three-day passes is 3360.54 million US dollars.

"Based solely on the original price in the primary market, the theoretical maximum box office revenue of Mad City is $4991.52 million."

There is no need for a teleprompter, as these data are stored in Han Yi's mind extremely clearly.

"But according to the plan, Han Live will directly put some tickets on the secondary market through various channels to obtain higher returns. This method is used to test the US market's acceptance of the dynamic pricing strategy in 2016."

"In the end, we put about 15000 three-day passes on the secondary market, with different premium ratios for different ticket types. After deducting agency fees and sales commissions, the net income was $945 million. The one-day tickets were 14000, and the net income was $420 million."

"After deducting the tickets transferred to the secondary market, the actual total box office revenue in the primary market was 4630.32 million US dollars, which was 361.2 million US dollars less than the theoretical maximum, but the portion sold at a premium in the secondary market reached 1365 million US dollars."

"In other words, by using the secondary market to conduct dynamic pricing, Han Live directly increased its revenue by $1003.8 million. The actual total box office... was $5995.32 million."

"It is 20.11% higher than the original theoretical maximum box office revenue."

After throwing out a series of dazzling data, Han Yi paused here for a long time on purpose, not only to get applause, but also to let the professionals working for him calm down and think about the shocking nature of these data.

This is the fundamental reason why more and more ticketing platforms and organizers will adopt dynamic pricing in the next few years. In any case, the primary market will be in short supply, and consumers who are late to the party will have no choice but to pay a premium. So, instead of handing over such a generous premium income to scalpers in the secondary market, it is better to take action yourself and further tap the potential of the consumer end.
"Add to that $370 million in sponsorship revenue, $210 million in commissions from artist-related merchandise, and $325 million in commissions from on-site catering and beverage sales. The gross profit of the first Mad City Music Festival reached $3495.07 million, with a gross profit margin of... 102.6%!"

Han Yi would definitely not make a mistake in remembering these two figures regarding gross profit and gross profit margin.

Because, now they are lying quietly in his memo.

"Do you know what this means?" Han Yi pointed casually at Quavo, who was standing at the edge of the crowd, sipping on a cigar leisurely, "Quavis, do you know?"

"Yeah." Quavo adjusted his sunglasses. "That means we're fucking richer than those rich assholes."

"Well said." Since he chose a rapper to answer this question, this was the effect Han Yi wanted. He laughed a few times with the other audience members before continuing, "We are indeed very rich now. The gross income on the books is enough for us to do another Mad City. We can also use it as a fulcrum to attract more artists to join the Han Live matrix - why did we have to choose Live Nation and AEG Live? We want to loudly declare to all musicians that the stagnant live entertainment industry now has a powerful barbarian, who can use the most abundant financial budget to bring the most extreme live experience to their fans. This barbarian... is us."

"You may realize how great this success is, but you may not really understand the full picture, nor are you really amazed at the magic behind these numbers." Han Yi raised his index finger and emphasized, "Let me give you some facts that will surprise everyone: Mad City broke the single-day box office record of the Coachella Music Festival."

"What?!"

There were a few exclamations from the audience. Everyone knew that Mad City was a huge success both commercially and critically, but no one could have imagined that the first Mad City would actually break the single-day box office record of the Coachella Music Festival, which has become a totem of West Coast music.

How can this be?

"That's right. Coachella's total box office revenue this year is 9420 million U.S. dollars. This is a record they set in six days of performances, with an average daily box office of 1570 million U.S. dollars. And our average daily box office? 1998.44 million U.S. dollars, nearly 30% higher than Coachella." Han Yi pressed on, "Do you know what's even more exciting? What's even more exciting is that they start performing at p.m. every day and end at a.m., a full twelve hours. And we start performing at p.m. and end on time at a.m., which is only eight hours."

“With a profitability of $83.2 per hour, we have redefined the commercial ceiling for large-scale music festivals.”

"This miracle is built on four pillars."

Han Yi paced back and forth on the stage. Every time his heels touched the ground, there was a dull sound, and after each dull sound, there was a shocking number.

"First, the most luxurious artist lineup brings absolute pricing power. The premium rate of VVIP passes in the secondary market is as high as 427%, and the average transaction price of ordinary three-day tickets on StubHub is 2.3 times the face value - music fans are voting for top content with real money."

"Second, we pioneered a dynamic pricing system. We introduced the airline industry's revenue management model to live entertainment for the first time, and used algorithms to adjust the secondary market inventory in real time, increasing the marginal profit margin by 61%. The "floating premium for single-day tickets for Dr. Dre, Snoop Dogg, Eminem and 50 Cent performances" alone has harvested an additional $220 million in consumer surplus."

"Third, we have precise operations at the forefront of the industry. The stage cost is 90% higher than EDC? I don't like this statement. I prefer to say that our audience experience value per unit area is 2.7 times that of theirs! We have used less than 12% of our 35% emergency budget, which shows that our plan completeness leads the industry and that we spend every penny where it should be spent."

“Fourth, we put equal emphasis on experience and safety. We have zero class-action lawsuits, zero copyright disputes, and zero government fines. Do you know what the Metropolitan Police Department of Las Vegas said about us? ‘The most disciplined large-scale event organizer since the opening of the Venetian Hotel.’”

"What is the real business revelation behind all these numbers? The real business revelation is that when we increase the production budget to 2-3 times that of competing products, the marginal benefits will increase exponentially - top stages attract top artists, top artists generate box office premiums, and the premium space feeds back to production upgrades. This is the flywheel effect of the modern entertainment industry! Facts have proved that this strategy is effective, and it will continue to be effective as long as money remains the cornerstone of human society."

“Ladies and gentlemen, I hope you can remember this number - 3495.07 US dollars. This number is not only a profit, but also a declaration: live entertainment is not a red ocean, but a deep blue ocean waiting to be explored. As long as we maintain our obsession with perfection, our hunger for innovation, and our awe of risks, Mad City, Han Live, and our business will always stand at the top of the industry pyramid!”

Every inch Han Yi raised his clenched fist, the cheers from the audience became louder.

"We won't stop here, we're going to run faster than anyone has ever run in history!"

"Next year, you'll see a series of live performance projects that will shock the world..."

"The Shrine Music Festival is coming to Miami in March!"

“Still held on Halloween, the second Mad City continues to have an upgraded lineup!”

“Hip-Hop Legend Eminem’s Global Stadium Tour!”

“Teaming up with Apple Music, a classic music festival bigger than Desert Trip!”

“And the first commercial concert in Saudi Arabia, this ancient and mysterious country, is about to take place!”

“Ladies and gentlemen, this is a new era for the brave. What can conquer the world is never a prudent and perfect plan, but a group of paranoid people who blast through the glass ceiling with blood, sweat and noise, and refuse to compromise with the ‘impossible’.”

"We will do it bigger, we will do it better, and we will make those old guys at the top of the tower realize one fact - real music is not the holy water sprinkled from the top of the mountain, but the magma surging from deep in the earth's crust!"

"We will gather our courage and speed up to crash into that seemingly indestructible wall!"

"It's not just about the live show, guys, it's not just about the live show! I also want to announce an exciting news that many of you have been waiting for a long time!"

"Starting from January 1 next year, our record company and copyright distribution company will be integrated into a unified and powerful music group - Han Music Group, H-M-G!"

"Now, please allow me to introduce to you the CEO of Han Music Group——"

"DR——"

"DRE!"

(End of this chapter)