‘There Will Be Thousands Of Bankruptcies, But They Will Return’: Q’s With DEAG Founder Peter Schwenkow
The concert industry was the first to shut down, and it will be the last to reopen. The team at DEAG, like other promoters, has been developing and executing creative event concepts, including drive-in concerts, which have emerged as the industry’s go-to, yet short-term, solution for maintaining a modicum of business under the government-imposed restrictions on public life.
It’s hard to say, how long these measures will remain in place. Different countries and states are coming up with different ways of gradually easing restrictions.
Pollstar spoke with Prof. Peter Schwenkow, founder and CEO of Deutsche Entertainment AG (DEAG), one of Europe’s largest promoters. The company has a track record of conceptualizing and executing new event formats and we wanted to know whether Schwenkow had any aces up his sleeve that would get him and his team through this crisis relatively unscathed. And, of course, he has.
Pollstar: You’ve been active in this business for more than 40 years. In all those years, did you experience anything even remotely comparable to this crisis?
Prof. Peter Schwenkow: No, I don’t think any of us have. We’re fighting a war on two fronts at the moment, one against the virus and one against the bans and restrictions that need to be fulfilled to obtain approval. I don’t think anyone ever had to go through anything like it.
Even during war, restrictions on public life weren’t this tough.
Even during war, you had live entertainment. You had the Glenn Miller Orchestra, for instance. Right now, we have nothing.
Even during war, you had live entertainment. You had the Glenn Miller Orchestra, for instance. Right now, we have nothing.
What’s the state of business at DEAG?
DEAG is doing comparatively well. For a start, we’re insured against event cancellations due to a pandemic in all the markets we operate in, Germany, Switzerland and the UK.
This means events that either had to be cancelled or postponed to next year are insured. Which is why the ban on what we estimate to be some 3,000 to 4,000 events may cause us a significant amount of work in terms of rescheduling events and servicing customers, but it doesn’t hit us financially.
It is, of course, an extraordinary privilege to be in this situation. It mostly means that a part of the profits we would have made this year will only be made next year. As opposed to what you hear from and read about other promoters, we expect to produce a positive EBITDA in 2020. That’s one reason we’re comparatively well off.
What’s the other?
Every year in December we promote the Christmas Gardens in various cities across Europe. We welcomed around one million visitors at our Christmas Gardens in 2019. The event format is compatible with Covid-19 restrictions, which means we have a product that can be executed in its full scope, even with restrictions in place in November in December, which I expect there to be.
The very concept of the Christmas Gardens is to only let in a limited amount of visitors during certain time slots on site. Distances can be easily maintained. It’s open-air, which is another health advantage.
We decided to promote at least eleven instead of the usual six Christmas Gardens in November and December this year, raising the total visitor count from 950,000 to 1.5 million in an enormous effort.
So, aside from insurance, we have a product that will most probably if not certainly be executed in its usual format in Q4. Both factors taken together have led to what I’d describe as a combative spirit of optimism, rather than despair.
How long do you reckon restrictions, in particular on large-scale events, will remain in place?
That’s where I’m indeed pessimistic. We’ll either have to reach complete herd immunity, which means an interspersion with the virus of at least 60% of the population, it looks like the Swedes have a chance of achieving that, or we need a vaccine.
I spend between two and three hours per day learning more about this virus and the restrictions imposed by the people in power. My thesis is that people will only lose their fear of visiting live events, once we have vaccinated enough people by March, April next year, at the earliest.
We’re talking about the biggest hit any sector had to take: since mid-March, we’ve been the first out, and we’ll be the last in after at least 12 months.
DEAG has a track record of inventing new event formats. Do you have any ideas aside from drive-in concerts, for putting on events in line with government-imposed restrictions?
No. One thing we all have to learn is that everything we thought we knew last week – I don’t even want to talk about last month – may have changed entirely by next week. One day children can pass on the disease, the next day they can’t. One day hospitals are facing bottlenecks with emergency beds, the next day they aren’t.
In Germany and Switzerland, we got through it comparatively well, despite all the fear mongering. The UK is still in the thick of it, maybe two to three weeks behind us. In the U.S. it’s calming down, instead Brazil has been hit.
It also seems to affect certain demographics more than others, including the old and the poor.
Because of all this uncertainty, we can only ever anticipate what we’ll be offering in four, six, eight weeks. Aside from creativity, it’s also about the speed with which things return. You could be developing all kinds of concepts for concerts in cars, and after three weeks you suddenly don’t need the cars anymore, because distancing restrictions have been lifted, and people go elsewhere for music.
We do have a track record of developing events, and we have four, five other event concepts in the pipeline or in the early stages of their realization, which we are going to present within the coming weeks. None of these concepts is defendable enough for me to tell you more about it at this point.
Michael Clemens – Scene from the Christmas Garden 2019 in Berlin
Michael Clemens – Maintaining social distance in the Christmas Gardens is easy
Is it fair to say that the social distancing requirement was the worst that could have happened to this industry?
Live music has a lot to do with closeness, happiness and togetherness. We’re the modern campfire for the like-minded to gather around. It’ll take at least one generation to find ways of generating atmosphere in an arena, where chairs are placed with a distance of two meters apart.
Live requires closeness. And we’ll only have closeness again, once the virus is under control or we have vaccines. I’m convinced there will be vaccines, but I’m even more convinced that there’ll also be meds. We as an industry need to return to situation, in which people aren’t afraid of visiting events anymore.
The crucial question is: how long will that take? And how many of those working in this business, which are hundreds of thousands across the world, are going to survive as entrepreneurs? How many will we lose?
Our industry depends on the passion of each professional working in it. A first-class sound engineer, who hasn’t worked as a sound engineer for 12 months, or a brilliant lighting designer, who didn’t have a job for 12 months – they might end up in a new profession, and they might be passionate about their new profession as well.
Imagine that it may take us 12 months to get this virus under control, after which everybody will want to go on tour again, but there might only be half the stagehands, bus and truck drives, lighting designers, sound engineers, security personnel etc. available. That would create some problems with rebuilding this business.
We’re in the business of selling small pieces of happiness. And we’re selling it with passion. We need to make sure not to lose this passion due to all of the difficulties we’re currently facing.
Are you worried that might happen?
I’m worried about the entire business, but I also know it will never go down. It may downsize, concerts may get smaller, maybe also cheaper. We still have a lot to do, even if it’s not as much as during normal times, but we also take time to look back on 40 years of growth.
40 years of professionalization, 40 year of bigger, better, faster, stronger. I started out promoting concerts in small rooms with two spotlights on each side of the stage and a few Marshall speakers in the back, and the concerts weren’t worse than those produced with a monster effort and expenditure.
So, maybe this is a time to realize that concert production doesn’t always have to get bigger and more expensive, that capacities, ticket prices and artist fees don’t need to rise constantly. Maybe, after 40 years of bigger, better, faster, stronger, this is a cut, admittedly a very deep cut, that can bring us all to our senses.
Are you happy with the help the German government has promised the cultural sectors?
I reckon that by June 3 or 4, we’ll be receiving precise information. The status quo is that there will be no separate cultural fund, but rather an alternative fund that does the job as well.
The current plans concern businesses from the gastronomy, MICE, hotel, and cultural sectors, which have suffered a sales slump of at least 60% during April and May. Concert promoters, of course, had a sales slump of 100%.
Those businesses that qualify will receive a grant of up to €50.000 per month from July to December, depending on the revenues that would have been generated during that time period. That means any business that has been hit hard will receive up to €300,000 across six months. It’s a program that costs the German government €25 billion.
I believe every small and medium-sized promoter can really use that money. It won’t be enough to move from the red into the black, but in combination with placing workers on short-time compensation, I believe it can really help many.
Did you consciously insure all of DEAG’s events against a pandemic back when you took out the policy?
If you sign a three-year insurance contract with a company the size of DEAG, you’re talking a premium of several millions of Euros across that time period. You have to audit these types of contracts very thoroughly.
We asked the question, ‘how much would it cost to take out all the exclusions mentioned the fine print?’ Of course, that made the policy more expensive.
But we knew it would allow us to sleep better at night over the next three years, even if no one ever expected anything like Covid-19 back then. We paid more for our insurance policy than our competitors, but it has paid off.
Which part of this sector are you worried about most?
I’m worried about the small and independents, I’m incredibly worried about the music clubs, anything from a 300 to a 1,500 capacity – those that promote the loud, hot, sweaty concerts, the real concerts.
You cannot survive if you’re running a 800-capacity club, and you have to pay rent while not selling any tickets or beverages. I’m worried about the individual market players.
I’m not worried about the business in the long run, though. Say you run a small business and declare bankruptcy in the next ten months. The club’s operator may be bankrupt, but the club is still in existence. And there will be somebody, who says: ‘Okay, I’m going to wait another three months, until I can have hot, loud and sweaty concerts again, an reopen the club.’
There will be thousands of bankruptcies, declared by private individuals, clubs, promoters, but they will all return.
Do you predict an acquisition spree by the big players post-crisis?
The small businesses go bust, the medium-sized ones struggle, the big ones will then pick then pick the cherries in a wave of consolidations, once the business is back on track.
That’s how it always goes, whether that’s the steel, tourism, hotel, or any other service industry, and even some production areas. In the end, five strong players survive, and they will take a look at the damage and take over what can be repaired.
In our last interview, you said artists had the right to be greedy. Do you see major artists limiting their greed, now that everybody in this business had to take a pay cut?
Yes, for sure, everyone wants to get back on stage, everyone wants to earn money again. But I’m afraid this limited greediness will only last so long. Once this business is up and running again, and has been going strong again for 12 months, that greediness will return, I have absolutely no illusions about that.