Last year, John Mayer’s Battle Studies tour was humming along globally. Chaos Visual Productions, winner of the 2010 Parnelli Award for Video Company of the Year, had assembled a complex 50-by-20-foot LED video wall composed of 45 Martin LC 2140 panels with four Barco 20k projectors that shot onto a custom screen, as well as a four-HD camera system to capture and play back the concert to the audiences.
A Fateful Day
The Battle Studies tour included 122 shows in 331 days and traveled through the U.S., Canada, Europe, Asia, Australia and New Zealand. But it was a stop at 30,000-seat concert venue located on the grounds of Hershey Park Stadium in Hershey, PA on July 25, 2010 that suddenly elevated a decision about insurance to be the most critical one made on the tour. That day, just as the wall was up and ready to go, the sky turned black and a massive rainstorm and high winds literally blew in and destroyed the $1-million video wall in a matter of seconds.
The call went to Chaos’ insurance carrier, Take1. Adjusters flew in and got the show back on the road, literally, replacing the damaged equipment. This is a scenario that might have seemed extreme at the time, but in the wake of Mississippi River flooding in May, a lethal tornado outbreak in the Southeast in April, the March earthquake/tsunami/nuclear reactor disaster in Japan, and a devastating earthquake in New Zealand last year, natural disasters seem to be on the rise, regardless of your feelings on global warming. And, unfortunately, these catastrophes come at a time when the entertainment industry remains in a bit of a revenue slump, with music touring down 15 percent in North America last year, the second down year in a row, as per Pollstar.
A Unique Business
I had a chat with Scott Carroll, executive vice president and program manager at Take1 Insurance, which is the entertainment-industry specialist division of insurer U.S. Risk. The first thing that emerges is that the entertainment business is unique enough to warrant a highly specialized insurance response. In other words, the multi-city tour, new club venue or theatrical production some are about to embark on isn’t the kind of thing you can tack on as a rider to your Allstate homeowner’s insurance, though that kind of under-insurance is rampant when the underwriter doesn’t know enough about the fine points of those endeavors. Reviewing all the sectors that Take1 covers, from underwriting film and television production, companies, DICE (Documentary, Infomercial, Commercial, Educational) productions, touring, concert/playhouse venues, concert promotion and specialty rental operations focused on audio, visual, lighting, sound, grip, and production, Carroll makes it clear that whoever is insuring these kinds of activities and entities needs to know a little about what they entail.
More insurance companies are entering specialty markets like these, in part because they’re also feeling the pinch of the recession and are seeking new markets. That has an upside and a downside. Those paying the insurance premiums are benefiting from added competition, but not every insurer is necessarily familiar with the ins and outs of show biz. “We’re seeing a slowdown in insureds across the board, in all the entertainment sectors that we underwrite,” says Carroll, attributing that to businesses closures and to other businesses trying to reduce costs by self-insuring themselves (essentially relying on their own assets to cover any damage or liability claims). That might actually work for some smaller companies, but any service provider that wants to work in conventional halls, arenas and hotels will generally be required by law and regulation (and, in some instances, by union contracts) to be able to show proof of minimum liability insurance and workman’s compensation coverage.
Keeping Costs Down
Carroll says that he and other insurance companies have had to become more competitive on rates during the recession. “In a recession, people still want their entertainment, and concerts and shows are a big part of that,” he says. “There’s more and more competition out there to underwrite the bigger shows, the ones that are selling tickets, so promoters and service providers are benefiting from that.” Also helping hold down rates is the fact that Live Nation and AEG Live have consolidated a larger percentage of the concert touring business, and they can apply their pricing power to insurance as well.
To differentiate his company from the increased competition, Take1 has developed a more comprehensive insurance package that’s tailored to live event production, and he cites the Battle Studies incident to back up assertions that the servicing of claims is equally top-of-the-line. Features of the policies include that it automatically applies everywhere in the world, without the need for additional riders or endorsements; it eliminates co-insurance, thus protecting 100 percent of the insured value of the equipment covered; it provides automatic replacement cost valuation; it allows for separate limits in key individual coverage areas like owned equipment, equipment rented from others, equipment in the insured’s Care Custody and Control (CCC), and equipment in transit; it offers flood coverage for equipment in transit; and offers blanket limits that eliminate the need for clients to itemize each and every cable and LED panel.
Insurers have some advantages, though, too. For instance, they can track the success of various artists and tours using a variety of reporting sources, including Pollstar and Billboard, targeting the most profitable ones. Insurance rates and premiums for shows and tours are calculated, Carroll explains, based on a projected headcount, which itself is often based on past performances. The laws of supply and demand apply: tours and venues that consistently do well at the box office get more, and more competitive, rate bids while more marginal clients may have fewer carrier choices and higher insurance premiums.
Learning from the Past
Another factor that’s helped make liability coverage more accessible and affordable for the entertainment industry in general has been better self-policing of regulatory compliance and more sophisticated risk management by venues. “They’ve gotten much better at having the proper barricading, better mosh pit security, traffic flow, credentialing,” he says, singling out Lollapalooza for especially improved risk-management skills. “The entities that can do well with their insurance rates are the ones that engage risk management professionals and listen to them.” The Station nightclub tragedy in 2003 was a wakeup call and a turning point for the concert touring business and the insurance industry that covers it, Carroll agrees. “People have become much more vigilant in the wake of that,” he says.
The bottom line is, take advantage of some of the pricing dynamics in the insurance market at the moment, but do it with companies and brokers that have an actual understanding of what you do for a living.
