Novatour’s Capital Idea

The film industry has for years taken advantage of state and local tax incentives that have helped stem the tide of overseas production that was once thought to be less expensive than filming in the U.S.

The state of Louisiana, however, is the only state so far to expand those incentives to include the concert industry.

Novatour, a joint venture of financier Film Production Capital and facility management giant SMG, was recently formed to provide the type of tax incentive-based capital to the concert industry that the film business enjoys.

At present, Louisiana is the only state that offers tax credits and incentives for live events and touring productions. SMG operates numerous venues in the state, including the Louisiana Superdome and New Orleans Arena while FPC has long provided tax incentive-based financing for the motion picture industry.

So it was only natural that SMG Executive VP Doug Thornton and FPC President Will French would put their heads together to see how best the companies could develop a strategy to put more money to the table for artists choosing to work in Louisiana.

“We’ve been looking at it as an easy offshoot from our film tax incentive business but we didn’t know the first thing about the concert touring industry,” French told Pollstar. “SMG happened to be looking at it because it would benefit their local venues and venues across the country. But they didn’t have the tax incentive financing expertise.”

After an initial meeting in December, Novatour was created in February specifically for the live performance industry to leverage Louisiana’s Live Performance Tax Credit to make touring artists eligible for cash advances or operating expense savings.
“We had been looking at the tax credit for two to three years,” Thornton told Pollstar. “We were trying to figure out how to leverage those tax credits in order to fill dates in our buildings here.

“Some of the tax credits helped finance a new entertainment district next to the Superdome called Champion Square. We started to research how we could use those to leverage the live entertainment into our buildings. We found it adds value to our clients, including municipal clients, by bringing more content into their buildings and it also stimulates live business growth in the state,” Thornton said.

Artists need not be residents of Louisiana to take advantage of the credits, but if they choose to base a touring production in the state by using a venue for rehearsals, hiring a Louisiana trucking company or construction crews for staging, those credits can be leveraged by Novatour into a sizeable new revenue stream.

“Looking at some of the hypotheticals, it’s almost as though they are going to get revenue from one or two performances without actually having to perform them,” French explained. “It’s a nice pool of additional revenue that can be shared among the various parties – the artist, the promoter, the managers and so on to make touring in the U.S. more profitable and keep that business here where we want it.”

Thornton and French believe Novatour represents a win-win for the industry as well as the state of Louisiana, hard hit by Hurricane Katrina in 2005 and the BP oil spill in the Gulf of Mexico last year.

“If the subsidy can provide good additional revenue that they’re not used to, you’ll see more of the industry coming down to Louisiana to use crews and vendors, performing here, building sets, and doing all those various things that helps Louisiana grow its music industry,” French said. “And Novatour is prepared to start offering cash financing to the concert tour industry at a time when the industry needs additional revenue sources to come into the game.”