Churchill Downs Inc. president and CEO Bob Evans

Churchill Downs Inc. president and CEO Bob Evans

Anne M. Eberhardt

Evans: HullabaLOU Was 'Expensive Education'

Churchill Downs will have estimated $5 million loss on inaugural music festival.

Churchill Downs racetrack’s move into the concert business proved to be an "expensive education," and despite an estimated $5 million loss on the HullabaLOU music festival there are plans to bring it back next year, according to Churchill Downs Inc. president and CEO Bob Evans.

In its quarterly earnings report released Aug. 4, CDI reported that it would experience a loss estimated at $5 million on the July 23-35 music festival attended by more than 78,000 people. That figure was well below the projected attendance total for the event, which was apparently impacted by the hot weather and an overall softness in the concert market this year.

More than 65 musical acts, ranging from Bon Jovi to Kenny Chesney, performed outdoors at HullabaLOU.

"The question here is this: given that we lost over $5 million on this inaugural event why have we already announced that HullabaLOU will be back in 2011?" Evans said during an Aug. 5 conference call with financial analysts. "Our goal is to produce a national music festival" along the lines of major music festivals in other areas of the country, including the New Orleans Jazz festival that takes place at CDI-owned Fair Grounds annually.

"We also know, based on these other festivals, it will take us several years to establish the HullabaLOU brand and to get to the point where the economics are meaningfully positive," Evans said. "We learned a lot with HullabaLOU this year and I guess we should have. It was an expensive education."

In organizing this year’s event under the Churchill Downs Entertainment Group, "we decided to spend the money to get the right artists, the right venue, and the right level of customer service and take the risk we could sell enough tickets, parking, sponsorships, food and beverage and branded merchandise to keep the planned loss to between $2-3 million," Evans said.

However, the 95-plus degree temperatures during the festival, combined with industry figures showing a 17% decline in sales for the top 100 concerts through June of this year nationwide, HullabaLOU fell short of expectations, he said.

"Ticket sales on the actual event days were dramatically below our plan," Evans said. "Walk-up sales were virtually non-existent. While over 78,000 people showed up, we hoped to exceed 100,000 for the three days."

Despite falling below its financial goals, however, HullabaLOU was well received by attendees and artists, with exit surveys showing 70% would definitely attend again and 28% would likely attend, depending upon weather. Ninety-nine percent said they would recommend HullabaLOU to others, according to CDI.

"In many respects, HullabaLOU was like our night racing experience," Evans continued. "Where we lost money on night racing in 2009, we learned how to make money on night racing this year. We believe we can make the changes to revenue and costs necessary to make it a significant economic asset to the company. If we can’t, HullabaLOU will not continue for the long-term."

Evans said all aspects of the event—number of days, when to hold it, number and type of acts, and pricing—are on the table for the 2011.

"We are going back to rework our thinking on this entire thing," he said.