Effects of Consolidation within the Live Event Industry
The only constant in the live event industry is change. Twenty-plus years ago the makeup of the industry was very different than it is today, and it continues to be in flux. The market was filled with a range of companies, from small to very large, full service providers to single discipline firms, and a range of niche services. During that timeframe, the industry went through a ‘renaissance period’ of sorts, and flourished under such a diverse composition, causing rapid growth and building the pathway to becoming the multi-billion dollar global industry it is today.
When industries thrive, they attract attention and investors take notice. Private equity firms have discovered enormous ROI potential and financial value to be found within the event staging business. To that end, in the last few years, we have seen the emergence of publicly traded companies, and private equity firms have been acquiring and merging event technology providers across the industry. As a result, the current industry landscape is dominated by fewer and larger firms that are gaining market share, and the trend is continuing to grow.
But, is this recent industry landscape good for the customer? In general, owner-operated firms, now in the minority, are more likely to employ teams with the passion and entrepreneurial drive to produce great events. Simply put, when a firm operates under founders with a vested interest in its success, there is a greater drive to be the best and operate at a higher service level from firms that are wholly-owned by private equity groups, or publicly traded, answering to a board of directors. The focus of private equity groups or publicly traded companies is to buy low and sell high; profit is the main driving force. In most cases, the customer will take a backseat to increasing the bottom line.
This new trend of consolidating event service providers is causing competition to dwindle across the marketplace. Customers should have options in selecting their providers, and are best served through competition. The merging industry has produced a few very large event technology providers, a scattering of mid-sized firms, and a bunch of small companies. For large events, there is a very narrow field of equipment providers with the resources to support a show of that scale with a degree of technical sophistication. Competition enhances the marketplace, and makes companies work harder to stay ahead of the pack when it comes to how they approach quality, innovation, performance, and price.
The live event industry is becoming an oligopoly, where a few firms dominate the market, and drive the pricing structure. When a few large firms dominate the industry and make it difficult for mid to smaller firms to compete, they can inflate prices because the customer has less options. For example, if an equipment provider is the in-house audiovisual provider in every hotel within a destination city, the customer is most likely going to see a similar quote in that locale. The customer can attempt to bring in an outside provider, but the in-house company that dominates the market can produce barriers to entry, and set the rules for exclusive services, such as power, rigging, and internet. Often times, the pricing negotiation and discounting of these exclusive services will depend on whether the customer has opted to use the in-house provider for audiovisual services. These barriers can make it very difficult for the customer if they pursue outside options, and they are often backed into a corner in terms of overall pricing and maintaining budget parameters for event services.
The lack of competing firms can also seriously affect innovation. When there is an abundance of equipment providers trying to differentiate themselves from each other, the race to offer the latest technology is extremely heated. Private equity firms drastically slow this race in two major ways. First, the acquisition and merging of firms across the market simply produces fewer companies, especially firms with the capital to continually invest in new products and services. A smaller pool of companies equals less innovative technology, and less options for event producers. Second, and more importantly, private equity firms aren’t focused on investing in innovation. A private equity firm has short term goals when acquiring and merging corporations – to make a profit and sell. Typically, that translates to a reduction of major capital investments across the board.
The structure of these larger firms can also make it difficult to provide high end service for customers within the fast-paced and ever-changing live event industry. For a company to succeed long term, it’s critical to adapt and change. When a firm becomes extremely large, similar to an aircraft carrier, it becomes challenging to turn in different directions. Larger firms, in general, can be inflexible when it comes to supporting customers in ways that are outside of the norm. Long term, client expectations for high quality solutions and customer service levels could degrade.
Indeed the only constant in the live event industry is change, and the way it operates today will differ from twenty years down the line. Industry consolidation is the current trend driving the market, but where it will lead is the question. Private equity groups and publicly traded companies propelled by financial engineering are not designed to deliver innovation and service. The formula for successfully executing compelling live events, whether a large, medium, or small firm, consists of people that are passionate about what they do with a strong desire to deliver state of the art technology and showcase their commitment. If an event technology provider can maintain that entrepreneurial spark and drive, live events will continue to evolve and bring the visions of event producers to life in new ways. After all, the show must go on.
