eli5 How does Las Vega casinos afford to have major artists and make the money back?


eli5 How does Las Vega casinos afford to have major artists and make the money back?

In: 4

They kinda pack the house every night for big residencies, mark my words T Swift and Beyonce will be there in 15 years.

U2 is playing the Sphere over a couple of weeks in September. Starting price $500 for the worst seats in the house. They will sell out every single night.

Think it’s only big names? I had the opportunity to see Ka when they first opened in 2005, sold out. Had the opportunity to see Ka in 2016, sold out.

Vegas is all about entertainment. If you do nothing else when you’re in Vegas, you still see a show because they’re all amazing.

Major artists will bring visitors to your hotel where people will spend money on rooms or eat at one of the restaurants or gamble a bunch of money away at the casino. You’d be surprised how much they make off gambling alone, they are making more than their money back.

Unlike other venues, casinos run all year round. So their costs are spread out over many events/concerts. This is unlike most other concert venues which might hold around a dozen or so big events a year. They have to recover their annual costs on fewer events.

Then there is a “network” effect. Essentially since there is a concentration of venues, there is a concentration of spectators who find it convenient as a one stop shop going to many events over a few days. This attracts even more artists who can save/share on setup, travel, ticketing, marketing and promo costs and already have venues already designed for them. This becomes a positive feedback loop – more artists, more performances, attract more spectators who then attract more artists.

The casinos benefit from more spectators since they make money in the casino, shopping and events all of which benefit from more customers.

So a medium/high tier artist might prefer Las Vegas simply because they can have a fairly low costs and while they might have to share a larger part of their revenue with the casino, they can perform over weeks/months (2-3 days a week) rather than having to tour the country with far fewer events.

The very TOP tier artists might experience something different. They can draw the crowds and charge really premium prices for tickets. So for them sharing might be less optimal. Holding a dozen concerts in a tour where they can make $5m a concert is better than having 40 performances where they make $1m per event.

Unlike a concert at a sports arena or club, a casino is designed to entice guests to gamble in every way possible. Every concert guest walks past gaming tables and slot machines on their way to the show – it’s pretty much impossible to go anywhere in a casino without walking across the casino floor. And if people gamble casinos make money – as a pit boss once told us in a “how to play craps” session, “Look around, see the beautiful decorations? This casino is in the business of making money off of gambling, there is no system that will beat the house. If you gamble long enough we will win, so always take your winnings and leave while you’re ahead.”

Also, another thing to consider, casinos operate on an economy of scale when it comes to service. It is cheaper to create an infrastructure that allows a guest to stay in a hotel, order room service, go to a restaurant onsite, see a show, get a drink on the casino floor, etc, than it is to manage the infrastructure for typical concert, where you drive to a restaurant, park at an arena, head to a bar afterwards, etc. They are so optimized towards customer service that I’m willing to bet that their overhead for a concert is lower than a typical venue rented by a promoter.