Playing to the crowd

How a leading entertainment and sports event presenter aims to fill seats in China

The running of large venues that have been purpose-built or adapted for Olympic Games and other major events is a massively complicated task in the first instance.

But when the torches go out and the great occasions are over, and when the will to succeed at all costs expires, the problem generally gets much worse.

This is a particular concern in China in the wake of the 2008 Olympics, and as more arenas, stadiums and other large venues spring up around the country, many of which lie in wait, hoping to snatch a passing event to help them survive.

Most massive sports facilities are in the red and struggling to find a viable business model. In 2011, the symbolic Beijing National Aquatics Center, also known as Water Cube, lost 11 million yuan ($1.7 million, 1.4 million euros), even with a government subsidy and 88 million yuan income, mostly from visitors to the aquatics center and a water park built after the Olympics.

Nationally, it is a challenge that John Cappo, CEO of Anschutz Entertainment Group (AEG) China, is confident can be met, thanks to the Chinese people's increasing demand for live events and AEG's experience in operating more than 100 arenas around the world, including the Staples Center in Los Angeles and the O2 Arena in London.

"The speed of development in the cultural and entertainment industry in China is astonishing," Cappo says, "especially in Beijing and Shanghai."

AEG, the wholly owned unit of Anschutz Co, headquartered in Los Angeles and controlled by Denver-based billionaire Philip Anschutz, operates three venues in China - Beijing MasterCard Center, previously known as the Wukesong Arena when it hosted basketball at the 2008 Games; Shanghai Mercedes-Benz Arena, formerly the Shanghai World Expo Cultural Center; and the recently completed Dalian China National Games Arena for the 2013 National Games.

The Mercedes-Benz Arena and the MasterCard Center are profitable commercial operations that do not require government subsidies, Cappo says.

In October 2009, after a major redesign, the MasterCard Center hosted its first major event, a concert by Beyonce. In 2011, AEG staged 65 events in the center, about a 60-percent increase on the previous year.

After the 2010 Shanghai World Expo, the use of Mercedes-Benz Arena also increased because artists, especially international ones, prefer to tour the two cities. In 2011, AEG staged 75 events in the arena.

For AEG, about 30 percent of its income in the United States comes from naming rights, founding partnerships and leasing of suites, with the majority from other sources such as food and beverage, parking and shopping.

In China, AEG venues make most of their money from naming rights, founding partnerships and hospitality suites. The group is aiming to improve the income by turning the venues into integrated entertainment centers.

Forty percent of the Water Cube's revenue and half of its profitable neighbor's, the Bird's Nest, rely on curious visitors, although these are reported to be falling annually by 40 to 50 percent.

In early 2011, Wukesong Arena was China's first Olympic arena to sell naming rights. AEG's deal with MasterCard is for at least five years, but no exact value has been revealed.

Around the same time, AEG sold the naming rights of the Shanghai World Expo Cultural Center to Mercedes-Benz. It gained $80 million (63.8 million euros) from the 10-year deal, according to a New York Times report.

Beside the naming rights, both AEG venues have a total of 120 luxury suites that are rented on an annual basis. At the Mercedes-Benz Arena, a 21-seat suite costs more than 1 million yuan ($157,000, 126,000 euros) with a 12-seat suite at 800,000 yuan. The prices will rise by 6 percent next year.

As for ticket sales, AEG wouldn't reveal any figures, but said the majority of the performances were sold out.

Cappo believes that business opportunities offered by live concerts and events will increase as China welcomes more cultural exchanges and communication with other countries.

"The Chinese audience is eager to experience the best in sporting events and live performances," he says.

According to the Beijing Trade Association for Performances, the number of commercial performances in the capital last year grew by more than 10 percent on the previous year to 21,075. Income totaled 1.4 billion yuan, 28.9 percent higher than in 2010.

Last year, there were 300 pop concerts on the Chinese mainland, the most ever. Beijing hosted 110 of them.

At AEG venues in the past three years, as well as national pop stars such as Faye Wong and Chris Li, Chinese audiences were excited to see Beyonce, the Cranberries, Avril Lavigne, Westlife, Akon, Usher, the Chinese Basketball Association All-Star Game and NBA China Games.

As one of the world's largest sports and entertainment providers, AEG works directly with international artists and their agencies to arrange world tours. The events on AEG China's 2012 calendar include concerts by Elton John in both Shanghai and Beijing, Jennifer Lopez in Shanghai and NBA games. Many other events are still under discussion.

"Historically, China was not a stop on most touring circuits for international artists," Cappo says. "One of the major reasons was that the venues were not up to the international standards, and the approval process was complicated and opaque."

When Beyonce performed at the MasterCard Center, there were no other venues in Beijing that had a mother grid, from which lighting, sound and other heavy stage equipment is hung.

"Now, many top acts are beginning to understand that the Chinese market is developing quickly and will be a must-play stop on the Asian touring circuit," Cappo says, adding that all three AEG-operated venues "are equipped with the best technology and facility standards in China".

The world-class facilities also mean that the multi-purpose venues can be transformed from a basketball court into a concert venue or an ice-skating floor within hours.

Cappo says the MasterCard Center, Mercedes-Benz Arena and Dalian China National Games Arena are the only multi-purpose venues in their cities that can professionally host sports, music, corporate and culture events.

The multi-purpose design of a venue at its inception is the secret of making it "successful and sustainable", Cappo says.

At the end of last month, the Mercedes-Benz arena presented Art on Ice, a mix of ice-skating, music and dance, and later this year, it will turn into a giant catwalk for the Mercedes-Benz Fashion Rocks event, when popular international and Chinese music acts will combine with leading global fashion houses.

AEG's newest charge, Dalian China National Games Arena, also has a multi-purpose design. At the start of the year, AEG signed a 15-year cooperation agreement with Dalian Xinghai Bay Construction and Development Administration Center to jointly operate and manage the venue.

AEG has plans for other operational modes to make their Chinese venues more profitable.

"General admission - standing areas with no seating - is also something we want to introduce to China," Cappo says.

Meantime, AEG's focus will be on London where Cappo has just attended a group meeting. Its O2 Arena will host the gymnastics and basketball finals at the 2012 Olympics, which start next month.

yangyangs@chinadaily.com.cn

(China Daily 06/08/2012 page21)