Questions and Answers: Lady Gaga
1. If you were Troy Carter, which of the three touring operations would you pursue for Lady Gaga? Why?
As Lady Gaga’s manager, I would try to develop a new plan of managing the tour in order to reduce the costs involved before Kanye West cancelled his participation. Troy had full knowledge of the risks that could be caused by postponing, downsizing or running a solo tour. The manager needed to consider the impact of the tour to the promoters, Live Nation, and agent, which is WME. The best choice for Troy is to take the first option of proceeding with the live concert without Kanye West. The option of cancelling the tour would lead to more losses despite the fact that the sunk costs were already involved and the tour would not be profitable. Since Lady Gaga was a new musician, she just needed a platform for interacting with her fans and developing her image during live performances. According to Coppel (2009), Lady Gaga would, therefore, benefit in doing live performances in small venues where she could connect with her fans through theatrical performances. As part of her marketing mix, she has to deliver the product to the actual consumers.
2. How much money does Gaga stand to gain or lose under each option? In your view, do the potential rewards justify the investment? And can Carter do anything to mitigate the risks of pursuing a solo tour?
If the team decides to pursue any of the three tour options, there is a chance of losing approximately $4 million in sunk costs. If the team decides to delay the concert, there is a possibility of incurring more losses and the Lady Gaga’s brand image may be diminished. The event managers plan to spend at least $12 million as start-up, although it is a financial risk because Lady Gaga has not performed on live concerts prior to this show. Nevertheless, the benefit in this case is that tickets for live concerts average between $100 and $120 with a prospect of selling over 20,000 tickets. Thus, this option can helps realize over $2 million per show. In addition, Lady Gaga can run micro-concerts in smaller venues where the financial risk is low, but incentives are higher. The ticket price would cost half the price of a major concert and with a sitting capacity averaging 7,000 per theater, the artist can build her image and stage confidence during such events. Such shows may also be a launching point for a scaled back tour in a few weeks.
3. Are Gaga’s main partners – Live Nation, WME, and her record label Interscope – likely to have the same preferences regarding the three options? Are the incentives generally aligned with Gaga’s?
Income from the music industry basically relies on selling records and live performances as the primary sources of revenue for the artist and promoters. Live Nation and WME would benefit financially, if the live shows for Lady Gaga proceed as planned. In fact, music business offers the musicians numerous technical possibilities that help raise a significant amount of money from their live performances. In addition, the amount of money earned from the live shows is often higher than the amount received from the sales of records. Considering the fact that the biggest market share is based on live performances, Lady Gaga’s financial responsibility would be to align her financial opportunities with those of the promoters.
In addition, the costs incurred since the project had started by the promoters and the agency may be reduced, if Lady Gaga’s team uses the efforts put forward by Kanye’s team. More significantly, WME and Live Nation’s incomes can be invested in the concert together. If the decision to use small theatres is adopted, the profit margin for the promoters may decrease as well. Lastly, Carter can consider involving inter-scope records labels that work with the most popular people in music. In such case, the revenue can be obtained from selling more records in addition to recognition of awards.
4. How would you evaluate Gaga’s launch as an artist up to September 2009? How can her team best go about further developing her touring and recording career going forward? And how can the team of Gaga best leverage her social-media presence?
Gaga’s formation as an artist started in September, 2009. Herbert, her producer, discovered her popularity potential after launching the media site of the singer called ‘My space’, where the celebrity could connect with her online fans. Later, she opened her official accounts on both Facebook and Twitter, where more online users could easily interact with her, enjoy her music, and comment on her performance. Lady Gaga never hired social media management team as she preferred being herself and dealing with her fans directly. She believed it was the best way to express herself acting however she liked on the social media. Through all these channels, the fans could interact, relate, bond, and feel her expressing true feelings, as well as see her reaction to their posts. Lady Gaga continued performing in smaller venues providing her fans with the opportunity of communicating with her directly. Through the social media connections and live performance in small venues, Lady Gaga established a strong foundation for her local and international fan base.
Gaga’s management and support team continued expanding the foundation she had set. By freely expressing herself in the social media, the followers had an opportunity to make other fans subscribe to singer’s account. The growth of tickets and records sales was scheduled for the most enthusiastic fans to enjoy. Maintaining a small revenue base played an important role in lowering the production cost and interacting more with the fans. Social media will continue playing an important role in developing Gaga’s music and reaching more supporters. The connection between her and her fans will remain provided she maintains control of what is posted to the public. Fans will learn how to decode the information transmitted and identify whether it is real or corrupted based on understanding how Lady Gaga expresses her ideas to her fans.
5. How important are concert ticket sales versus recorded music sales for an artist like Gaga? Where should Gaga’s team focus its efforts in the future?
For an artist like Gaga, sales of concert tickets have a huge impact on her career compared to the recorded music. Since 2008, there has been a declining trend in sales of recorded music as compared to sales of concert tickets. Due to huge costs relating to the recorded music sales, most artists have received millions of dollars for unrecouped royalties. The huge amounts of money and time invested for an artist to make records are unreasonably high and a recorded artist only benefits from live performances (Elberse & Christensen, 2011). Therefore, Gaga will be required to develop and nurture her fan base in order to generate revenues and profits from sale of concert tickets as it was done by Madonna in 2008, who ranked third after making $185 million in that specific year. Madonna was able to reach this target after being only three decades in music. It is estimated that her fans enjoyed the ambience of her concert settings even though she has never ranked among the top ten musicians.
The operating environment is different today as fans are able to download music to their computers and share it without even paying additional charges. It is one of the reasons why live performance appears to be the only option for Lady Gaga to connect with her fans, sell her brand, and earn money. The event management team should continue developing her relationship with the fans in order to sustain a market of live performances. The future revenue plan should be focused on creating more concerts as opposed to making more sales of records.