ADMINISTRATIVE REPORT
Date: May 28,1997
TO: Vancouver City Council
FROM: Director of Civic Theatres
SUBJECT: Theatre Rental Rates -
September 1, 1997 to August 31, 1998
RECOMMENDATION
THAT Council approve the Schedule of Rental Rates for Civic
Theatres, detailed in Appendix A, effective September 1, 1997.
CITY MANAGER'S COMMENTS
The City Manager RECOMMENDS approval of the foregoing.
COUNCIL POLICY
Council annually approves the Schedule of Rental Rates for the Queen
Elizabeth Theatre, Vancouver Playhouse and Orpheum.
PURPOSE
This report seeks approval to extend the theatre rental rates
established for 1996-1997 to apply to the period September 1, 1997 to
August 31, 1998, unchanged.
BACKGROUND
Rental rates are reviewed during preparation of the annual operating
budget and any adjustments are made effective September 1 of each year
in alignment with the traditional performing arts season. The rental
rates are periodically reviewed in relation to those of comparable
facilities in other cities to ensure that Vancouver s rates are
correctly placed in relation to the local, national and international
markets.
In 1995, rental rates were increased by 4.6% and in 1996 the increase
was 3%.
Event and Audience Statistics; 1990-1996
These are for all three theatres combined. The QET seats 2,930, the
Playhouse 668 and the Orpheum, 2,780. It is also important to
remember that the Playhouse, in any year, has 60 to 80 more performances
than the QET or Orpheum.
Year Events Audience Average
1990 700 952,936 1361
1991 752 1,113,996* 1481
1992 657 833,462 1269
1993 698 1,008,367* 1445
1994 674 861,115 1278
1995 622 768,464 1235
1996 616 787,487 1278
1997 est. 630
* Long summer runs of The Phantom of the Opera and Joseph and the
Technicolour Dreamcoat at the QET.
Of the total events in 1996, approximately 40% were by the resident
performing arts presenters who receive grants equal to rent for uses of
the civic theatres. Their programming volume from year to year is
relatively stable thanks to the grant program, although the grant
program does not cover all of their activities. The major variables are
in for-profit and community programming. These presenters are most
vulnerable to market forces. For example:
Music Events Only at QET & Orpheum; 1994 - 1996
1994 195 375,000 1923
1995 145 264,000 1820
1996 141 254,000 1801
Accepting that the VSO is relatively stable from year to year with
around 80 events, there was a huge drop from 1994 to 1995 which
continued into 1996. This was not a local phenomenon. The popular
music industry reported exactly the same drop for all of North America
in 1995, for venues of less than 10,000 seats. The industry is
predicting a modest upswing in 1997 and this appears to be true for
activity at civic theatres so far.
Operating Costs
Seventy percent of Civic Theatres operating costs are in salaries and
wages with half of that in casual wages only incurred when there is a
show. Settlements of collective agreements have been running at 0% to
1.5%. General inflation seems to be holding at about 1.5%.
DISCUSSION
Comparisons With Other Venues
In reviewing our rental rates in terms of other venues, we have usually
compared with Portland, Seattle and Toronto, all of whom can be
significantly higher because they charge a base fixed rent plus a
percentage of the box office plus expenses plus equipment use charges.
We have kept our rental rates (and terms of rental) competitive with
these venues.
We have not tried to match our rates to the Canadian theatres between
here and Toronto because their rates are all much lower as a result of
government mandated discounting for local presenters and high levels of
government subsidies, provincial in most cases. These same theatres are
under pressure from their governing bodies to reduce their dependance on
those subsidies and we expect to see their rental rates and structures
change in future. Nevertheless, these lower rates to the east continue
to influence our rates.
The Live Entertainment Market
The market has changed rather suddenly, and for the worse, during the
past year. There has been a general decline in audiences across the
spectrum of live entertainment events, although once again the
non-profit performing arts companies are relatively more stable, likely
as a result of loyal subscription audiences.
Again, the decline is not localized but seems, in varying degrees, to be
continental in nature, at least for traditional events such as Broadway
musicals. In the same way that there was a recent seminar in Vancouver
on the topic of "Where is the Audience?", Broadway producers recently
met to discuss the same question with respect to Broadway and the North
American touring market. The growth represented by "CATS", "Les
Miserables" and "The Phantom of the Opera" has not been sustained by the
shows that followed.
As expected there has been considerable speculation on the causes
ranging from effects of the aging baby boomers, to lack of job security
to inconsistent quality of the product leading to distrust by the
audience to a lack of good new shows and the high fees being charged by
the artists (in pop/rock the band typically takes 90% of the box office,
leaving the local presenter with 10% for expenses and profit). There is
no visible concurrence on the question, except that it is once again a
good year to be very conservative.
Action
To summarize, there are several factors which motivate maintaining the
rental rates at the 1996-1997 level.
* The rate of inflation is very low; increases in costs of operation
are in the minimal to negligible range.
* The volume of bookings is relatively low.
* Audiences have been unpredictable, even in previously stable
or growing sectors, creating a higher risk environment for
presenters of all kinds.
* In the past few years, our rent has increased at a rate higher than
inflation.
Accordingly, Civic Theatres proposes no increase in rental rates for the
1997-1998 season.
FINANCIAL IMPACTS
The 1997 operating budget was prepared on the assumption of no rental
rate increases in 1997 and projects a year-end surplus of $48,000. A
rental rate increase would actually only impact the last four months of
1997. If a 1% increase were added, the net result for 1997 would be
approximately $9,000, of which approximately 50% would be from the
grants equal to rent budget.
There is a risk that this proposal may make it difficult to balance the
1998 operating budget since these rates will apply to nine months of
next year. If the same 1% were applied, the net result would be
approximately $16,000 of which approximately 30% would be from the
grants budget. It remains to be seen whether there will be any changes
in the costs of operation, booking volume and attendance levels that
will cause positive or negative financial impacts in 1998.
CONCLUSION
For a variety of reasons to do with low inflation, small or no increases
in labour costs and market instability, Civic Theatres recommends that
the theatres' rental rates continue unchanged for the coming year.
* * * * *