Tour Losing Money?

[doctorwho]

This is a question - is the tour losing money?

I see it selling out every show. I see the concerts grossing more than ever. I see U2 charging higher ticket prices. Yet, per an article on the main Interference page, McGuinness is claiming the tour is losing money. This doesn't make sense to me.

Therefore, I need someone who has all the facts and numbers to do some crunching (if you are up for the challenge). What has been the gross and estimated cost per each leg to date?

Do not factor in T-shirts and souvenirs as that is unknown. I want to see the basic tour costs first.

Thanks!

 

[Popmartijn]

I don't see that article on the main Interference page. It's probably sloppy journalism. I haven't seen McGuinness claim that the tour is losing money. In September last year he gave an interview to Billboard where he said that they hadn't reached the break-even point yet, but that the tour would end in the black after the second leg.

From that Billboard interview: U2 manager delighted to bring stage show full circle

Billboard: How long will it take to get into the black?

McGuinness: When do we hit the break-even point? We haven't hit it yet. But we will sometime between now and the end of this leg.

Billboard: So next year is gravy?

McGuinness: Not exactly gravy, because whether we're playing or not, the overhead is about $750,000 daily. That's just to have the crew on payroll, to rent the trucks, all that. There's about 200 trucks. Each stage is 37 trucks, so you're up to nearly 120 there. And then the universal production is another 50-odd trucks, and there are merchandise trucks and catering trucks.

As for the gross of the tour, there's the boxscore thread in this forum.
http://www.u2interference.com/forums/f225/u2-360-boxscore-discussion-200001-23.html#post6507805

 

[doctorwho]

It is not the headline of the article, only part of the article called "Bono Yelps" written by Jaime Rodriguez. Here is the actual quote:

The 360 Tour breaks attendance records everywhere it goes. While football stadiums are completely packed, U2 won virtually no music awards this year, so even less money has been spent on traveling to award shows—and perhaps even on fancy beanie hats for The Edge. Yet, Manager Paul McGuiness claims the tour is still losing money.

Now, is this, as you wrote, just some sloppy journalism in what is supposed to be a funny column about Bono's investments, or is this an actual comment by McGuinness? If the former, it's misleading - even if written for humor. If the latter, then this is the first time I've heard about the tour losing money as I also haven't read any quotes from McGuinness or the band on this. Therefore, I wanted to see any comments from those who have been monitoring the tour's grosses vs. expenses (and I know the grosses thread - as it is right below this thread - but I thought those in the know could do a better estimation of grosses vs. expenses).

 

[coolian2]

i wouldn't put much stock in anything on the main interference page, truth be told.

 

[hedge]

i wouldn't put too much stock in anything on any Interference page!

 

[AussieTroy]

I've tried crunching the numbers on the tour plenty of times. It isn't the most profitable tour U2 have done, but it is profitable.

Here's my take on the numbers.

The tour lasted roughly 120 days last year at a cost of $750,000 a day. This comes out to $90m in total operating costs for the year.

I'm guessing the tour startup costs at around $70m based on what I've read about the cost of building the 3 claws and the fact that they undertook rehearsals with the actual stage setup in the venue for a few weeks prior to the start of the tour.

This means a total cost of $160m for the tour last year.

In terms of income, I think U2 probably used a guarantee plus percentage fee structure for the tour.

I'm taking a big guess and saying, based on the cost of the tour and the expected gross, that they negotiated a guarantee of $3.5m per show or $154m in total (paid by Live Nation) as well as 90% of the gross per show after allowed deductions.

The allowed deductions would include the guarantee plus any other cost incurred by Live Nation in putting on each show. I'm estimating these other costs at $1.5m per show. Then Live Nation has probably also negotiated a guaranteed profit margin of 15% so that means that total deductions are $3.5m + $1.5m x 1.15 or $5.75m.

With an average gross of $7.068m per show, this leaves $1.318m of which U2 takes 90% or $1.186m.

This gives U2 total percentage earnings of about $52m, which when aded to the total guarantees of $154m, gives total income from the tour for U2 of $206 million (the remainder of the gross goes to Live Nation, the venue etc).

$206 million minus the total expenses of $160 million give U2 a profit for the tour of $46m not including merchandise sales, sponsorship etc.

This works out to around 15% of the total gross, which is a bit lower than the 25-35% profit margin that I've read is common for large, high overhead tours.

The profit for this year will probably be even lower as even though, U2 don't have any startup costs this year, the running costs are the same and they are playing smaller venues, with a only about 2 shows being played a week, which will eat away at their profits.

I should also say to take all of my figures with a few grains of salt. I'm no expert on these things, I just have too much time on my hands. I'm only guessing and I could be completely wrong. so don't take them too serously.

Hope that helps.

 

[digitize]

I've tried crunching the numbers on the tour plenty of times. It isn't the most profitable tour U2 have done, but it is profitable.

Here's my take on the numbers.

The tour lasted roughly 120 days last year at a cost of $750,000 a day. This comes out to $90m in total operating costs for the year.

I'm guessing the tour startup costs at around $70m based on what I've read about the cost of building the 3 claws and the fact that they undertook rehearsals with the actual stage setup in the venue for a few weeks prior to the start of the tour.

This means a total cost of $160m for the tour last year.

In terms of income, I think U2 probably used a guarantee plus percentage fee structure for the tour.

I'm taking a big guess and saying, based on the cost of the tour and the expected gross, that they negotiated a guarantee of $3.5m per show or $154m in total (paid by Live Nation) as well as 90% of the gross per show after allowed deductions.

The allowed deductions would include the guarantee plus any other cost incurred by Live Nation in putting on each show. I'm estimating these other costs at $1.5m per show. Then Live Nation has probably also negotiated a guaranteed profit margin of 15% so that means that total deductions are $3.5m + $1.5m x 1.15 or $5.75m.

With an average gross of $7.068m per show, this leaves $1.318m of which U2 takes 90% or $1.186m.

This gives U2 total percentage earnings of about $52m, which when aded to the total guarantees of $154m, gives total income from the tour for U2 of $206 million (the remainder of the gross goes to Live Nation, the venue etc).

$206 million minus the total expenses of $160 million give U2 a profit for the tour of $46m not including merchandise sales, sponsorship etc.

This works out to around 15% of the total gross, which is a bit lower than the 25-35% profit margin that I've read is common for large, high overhead tours.

The profit for this year will probably be even lower as even though, U2 don't have any startup costs this year, the running costs are the same and they are playing smaller venues, with a only about 2 shows being played a week, which will eat away at their profits.

I should also say to take all of my figures with a few grains of salt. I'm no expert on these things, I just have too much time on my hands. I'm only guessing and I could be completely wrong. so don't take them too serously.

Hope that helps.

Great analysis.

 

[Edge_Orchestra]

They make money off the tickets. They make money off of merchandise.

As for the money to get the tour off the ground (building the claw/etc), the tour has sponsorship from Blackberry. That helps cover costs.

While they did mention the fine line between running 'in the black' and 'in the red' during the ZOO TV and POPMART tours, I've not heard management or band complain about costs, barely breaking even or losing money.

I have seen articles showing the 360 tour was one of the best grossing tours of 2009.

So all in all... I don't think losing money on this tour is an issue.

 

[ramblin rose]

There have been quite a few articles about the tour not breaking even until the end of the 2nd leg.

One of the last ones was in 9.09.

Despite being on the road since June and playing dozens of gigs across Europe and the US, the Irish supergroup have yet to see a profit.

With overheads of a staggering £470,000 a day - whether the group play or not - manager Paul McGuinness said U2 would not go into the black until the end of the North American leg of the tour next month.

U2 360° World Tour: Paul McGuinness Says U2 Bono, Edge Have Not Made Profit Yet From Tour | Business | Sky News

 

[robbrecon72]

The tour made money, everything is rediculous speculation. just look on billboard.com today. U2 was the #1 money maker for 2009 with earnings of $108,601,283 after all expenses paid for. There is no way they made all of that from just CD sales and merchendise. Springsteen was #2 with $57,619,037.


Music News, Reviews, Articles, Information, News Online & Free Music | Billboard.com

 

[BigMacPhisto]

It might have something to do with a lot of the excess profits going to LiveNation and in return, LiveNation pays U2 via their contract. So perhaps U2 is getting their money via the contract?

 

[U2FanPeter]

How does the "daily" cost of 360 compare to the international/Euro Vertigo dates and the Popmart tour?

$250,000/day is the number popping up in my head for 1997.

 

[U2FanPeter]

It might have something to do with a lot of the excess profits going to LiveNation and in return, LiveNation pays U2 via their contract. So perhaps U2 is getting their money via the contract?

Don't LN also get all the service charge money since many of the ticket distributors owned under the same umbrella?

 

[U2girl]

How does the "daily" cost of 360 compare to the international/Euro Vertigo dates and the Popmart tour?

$250,000/day is the number popping up in my head for 1997.

I remember Bono in interviews at the time saying they spent a quarter of a million per day on their fans on Popmart. And it was, I believe, 125 000 per day for Zoo TV.

This tour I think is 750 000 whether they tour or not. Don't know for Vertigo, I imagine less with the smaller production.

 

[Mirror Ball Man]

The 360° tour really is pricey. The claw takes huge amount of money to set up and so on.
One claw (they have two) costs 15-20 million pounds. And here is a quote from wikipedia on the claw.
"Daily costs of the production are approximately $750,000, not including the stage construction; the majority of this comes from truck rentals, transportation, and staff wages."

 

[Popmartijn]

The 360° tour really is pricey. The claw takes huge amount of money to set up and so on.
One claw (they have two) costs 15-20 million pounds.

Actually, they have three claws.

 

[GirlsAloudFan]

What does money matter to these bastards? If the tour is losing money, it's no skin off their ass. These four drunk Irishmen wipe their asses with Persian silk and eat Italian sports cars for breakfast.

 

[robbrecon72]

The averge gross per show is now somewhere between 6.5 to 7 million dollars. Do you really think they are losing money? No way. Do the math.

 

[vaz02]

And the dates between each show ? Between each leg ?

 

[nielsgov]

If the tour was really losing money. They wouldn't be doing it.

 

[U2FanPeter]

If the tour was really losing money. They wouldn't be doing it.

Including cancelled shows, I wonder if Live Nation has made a penny yet.

 

[vaz02]

If the tour was really losing money. They wouldn't be doing it.

When is breakeven point do you think ?

 

[phommel]

The break even point is already far behind them.
The tour is making a lot of money. Millions and millions of euros are already earned. People who think that they are losing money with touring should think again. U2 is making their money in their live business, not with album sales.

 

[BGD75]

The break even point is already far behind them.
The tour is making a lot of money. Millions and millions of euros are already earned. People who think that they are losing money with touring should think again. U2 is making their money in their live business, not with album sales.

Exactly.... when you look at what they earn each show (just from ticket sales) and then you deduct the $750,000 costs for set-up/crew etc. there is still plenty of money left. Yes, might of taken some time to 'break-even' but they have done that long time ago..... I am sure their bank accounts are happy!

 

[vaz02]

Exactly.... when you look at what they earn each show (just from ticket sales) and then you deduct the $750,000 costs for set-up/crew etc. there is still plenty of money left. Yes, might of taken some time to 'break-even' but they have done that long time ago..... I am sure their bank accounts are happy!

$750,000 a day regardless if they play or not.

 

[phommel]

$750,000 a day regardless if they play or not.

ok, but to give an example:

let's say the first two legs were spread over 4 full months, 120 days (ehich is an exaggaration).

120 x 750,000 = 90 million

The gross (excluding merchandise!) was 311 million

311 - 90 = 221 million. I don't say all this money goes to U2. There is LiveNation, etc...but...the tour is definately NOT losing money

 

[vaz02]

The claws costed around $100,000,000 though didn't they ?
What about the gap between the end of the 2nd leg to the start of the 3rd ?

I'm not knocking you or playing dumb, I'm just not sure how its all ading up.

 

[Popmartijn]

ok, but to give an example:

let's say the first two legs were spread over 4 full months, 120 days (ehich is an exaggaration).

Actually, that's not an exaggeration. The tour started on June 30 and the second leg ended on October 28, so that is 4 full months (and a bit extra counting the build-up in Barcelona).

120 x 750,000 = 90 million

The gross (excluding merchandise!) was 311 million

311 - 90 = 221 million. I don't say all this money goes to U2. There is LiveNation, etc...but...the tour is definately NOT losing money

No, it's certainly not losing money. But I don't think we have all the numbers yet to get a good calculation. Yes, the tour costs $750,000 per day (show or no show). But there are extra costs for show days (local personnel, also a couple of hundred apparently). Then you have the amortisation costs for The Claws. Plus some more I guess.
Another piece of information is that McGuinness stated last year that the tour would go into the black near the end of the US leg. So my estimation would be that the first year the total costs were around $250 million before the tour started to see an actual profit.

But how the actual calculations are for that, I don't know.

 

[U2FanPeter]

Someone had to pick up the $45m(?) tab for the US tour. The band said they had to write a $15m check, and insurance/LN would get the rest.

 

[Cactus Annie]

Are you enjoying the tour? That's all that matters