PAPER D

Purpose : for Decision

REPORT TO THE EXECUTIVE

Date : 21 MAY 2003

Title: THE ISLE OF WIGHT ROCK FESTIVAL

REPORT OF THE PORTFOLIO HOLDER FOR TOURISM AND LEISURE

IMPLEMENTATION DATE : 3 June 2003

SUMMARY/PURPOSE

1. Members are asked to consider varying the terms of the Council’s agreement with Solo to make use of Seaclose Park as a venue for an Isle of Wight Music Concert.

REASONS FOR URGENCY

2. This report did not appear on the forward plan as agreement with Solo was thought to be finalised and the need to report to the Executive has only been determined since the publication of the May Council plan. The decision cannot wait until the publication of the June forward plan, given the date of the 2003 event on 14/15 June.

CONFIDENTIAL/EXEMPT ITEMS

3. The detailed breakdown of the financial basis of the proposed agreement is set out in the confidential annex 1.

BACKGROUND

4. At its meeting of 5 November 2002 the Executive reviewed the outcomes of the two week Isle of Wight Festival held to celebrate the Queen’s Golden Jubilee and to consider the Council’s options in staging further festivals.

5. Much of the debate at the time focussed on the “high profile” concert for that festival and this report also has future such events at the heart of its considerations. For clarity, Members agreed to enter into an agreement with Solo whereby:-

· The Council would provide the Seaclose site, local liaison with statutory and voluntary bodies and cross marketing with the Community Festival to Solo in support of an annual major concert event.

· In return Solo would provide the Council with 4,000 tickets for each event which the Council was to sell under certain restrictions and retain all proceeds for its own use.

6. The Executive agreed to utilise these proceeds to offset the costs of the Council’s investment in the 2002 festival and also to fund some of the activities associated with future community festivals. At the same time it recognised that Solo required a five year contract with an option to renew in order for it to proceed with the agreement and that whether the concert event would ever take place in any one year would ultimately be at Solo’s total discretion.

7. At best the Council’s receipts from the sale of its tickets were estimated to be £500,000 over the 5 years of the agreement. At worst the Council could receive nothing, either because the event did not take place or because of failure to sell tickets allocated to the Council.

8. Following the 5 November decision it has been somewhat difficult to complete the Council’s agreement with Solo. This is largely because Solo’s focus was on securing the acts to perform at the 2003 event. Nevertheless, Solo did announce a line up for the concert and also agreed to the Council beginning the sale of its 4,000 tickets on 5 March 2003. From 1 April 2003 the Council has also been selling tickets on behalf of Solo. At the date of this report the Council had completed 4,900 ticket sales and is holding £141,000 on trust for the ticket holders. These receipts must be returned if the event fails to take place.

9. The Council’s legal department prepared a contract and forwarded it to Solo for completion in March. The response from Solo was that its original offer of so many tickets to the Council had been an over generous offer and it was not able to complete it. More especially, in light of the fact that it was taking all of the financial and operational risks in staging the annual concert.

10. On the basis that the event(s) would make a contribution to both the social and economic well being of the Island and that cancellation would lead to great disappointment in the community, officers entered into a dialogue with Solo to seek an alternative agreement for Members’ consideration. A key driver in these discussions was also to ensure that the Council could still derive an income from the event to offset the 2002 investment costs whilst still bearing no financial risk for its delivery.

11. Following a number of protracted discussions which culminated in a final ultimatum being given to Solo, a revised proposal has now been received. The details of the proposal are shown in annex1 but the key elements are summarised below:-

12. The Council…..

· Will provide the Seaclose site, local liaison and cross marketing with the community festival for the concert event(s).

· Will not bear any financial or operational risk in the staging of the event(s).

· Will transfer no monies to Solo prior to the successful completion of the 2003 event.

· To be given a 10 year agreement for the Council’s input.

13. Solo…..

· To make the Council a fixed payment for the ten years of the agreement (subject to the event taking place). The payment is to be made in 10 instalments, paid annually and the amount of each instalment shall be higher than the previous year in accordance with an agreed payment schedule.

· To pay the Council a minimum percentage of each event’s income from ticket sales (net of VAT and PRS). This percentage to increase once the admissions for any one event exceed an agreed amount.

· If it fails to deliver an event in any one year of the agreement, then the Council shall have the right to terminate the agreement.

· The new agreement to replace all existing agreements between Solo and the Council.

· Shall not hold a similar event at another location on the Island for 3 months either side of any concert.

· Will not be under a positive obligation to promote the community festival in future years.

14. Solo have agreed to sign a copy of the revised agreement proposals in advance of the meeting. Confirmation that this has in fact been done will be reported verbally.

15. Solo has declared a strong desire and commitment to work with the Council to deliver not only the 2003 event, which has already been heavily advertised and promoted, but also events in future years for the economic and social well being of the Island. Nevertheless it reports that its financial position is such that if the Council were not able to agree to the variations in terms as it has proposed then Solo would have to either: -

· Staging the 2003 concert at an alternative location (including on the mainland).

· Cancelling the 2003 concert altogether.

STRATEGIC CONTEXT

16. One of the seven themes in the Island’s Community Strategy, ‘Island Futures’, is to develop tourism. Two of the aspirations within this theme are: -

· To take positive action to promote the Island as a year round destination by emphasising its range of attractions.

· To enhance the quality and range of leisure attractions and recreation and increase the attractiveness of the Island as a visitor destination.

Action 6.1 of the theme relates to the development of a Tourism Development Plan (TDP) which seeks to broaden the market base and length of the season.

17. The Council’s Corporate Plan has a priority to, ”further develop our programme of events, leisure, and cultural opportunities to meet the needs of both visitors and resident”, within the key objective of improving health, housing and the quality of life for all. Also, within the objective of encouraging job creation and economic prosperity the Council has a priority to, “work with the tourism industry to promote the Island as an all year round holiday destination”.

18. Solo’s business plan projections are to sell a minimum of 273,000 tickets for the concerts arranged over the lifetime of the proposed agreement. The concerts will therefore make a real contribution to the Community Strategy and Corporate Plan objectives outlined earlier.

BEST VALUE AND CONTRACT STANDING ORDERS

19. The agreement proposed with Solo is not a contract for services, but is a commercial partnership. On 5 November 2002, applying the principles of contract standing orders, Members determined not to require a tendering exercise to be undertaken. In doing so, Members were invited to continue to rely on a model test undertaken by Wight Leisure in 2001 which revealed that Solo were the only potential partner.

20. It should be noted that the proposed payment includes consideration for the provision of the Seaclose site. The value of the site for the purposes of promoting a festival is, to an extent, untested. However, taking the soft market test, the performance of the 2002 event and the business analysis presented by Solo, Members face a choice between taking steps to secure the medium term future of the concerts whilst recovering some of the investment in the 2002 event or halting support for events in the short-term, to allow a further market test, during which time the pump priming effect of the investment in the 2002 event would diminish

CONSULTATION

21. Discussions have been held with other local Councils as to the terms they conclude with music promoters for use of Council land as a venue for music concerts.

FINANCIAL/BUDGET IMPLICATIONS

22. The Council made an investment of £380,000 in the 2002 Isle of Wight Music Festival for which it organised the high profile launch event. It bore all of the financial risk for that festival and it is essential that it should not seek to be the sole bearer of such a risk in similar ventures again.

23. Under the terms of the original agreement with Solo it was estimated that the Council would receive in the order of £500,000 over 5 years from the sale of its annual allocation of 4,000 tickets. This sum was however not guaranteed, as it was dependent on all of the tickets being sold and the event actually taking place which was not a decision in the control of the Council.

24. Under the terms now proposed the Council will receive a payment of £425,000 from Solo over the ten years of the agreement. This payment is ‘guaranteed’ to the extent that Solo are able to deliver concerts which complete the term of the agreement. The percentage of Solo’s ticket sales which is offered in addition to the minimum payment is felt to be worth between £120,000 to £150,000 to the Council assuming that an annual concert is arranged and that Solo are able to sell a minimum 273,000 tickets for them. A 10% variation in Solo’s ticket sales is estimated to be worth about £12,500 to the Council.

25. Material fact for Members to consider is that the Council has sold 3,660 of its allocation of 4,000 tickets as per the original agreement. These ticket sales have generated net receipts to the Council of £92,000 at a cost of £6,000 for marketing and promotion (ie net surplus £86,000). Based on the income projections from Solo the Council will only have recovered this level of income at the end of year 3 of the proposed new agreement. These actual figures would a also tend to suggest that the original agreement has the potential to generate a net £430,000 to the Council.

26. Solo, however, has given a clear indication that it cannot deliver the 2003 concert under the terms of the existing agreement. Hence the reason for this report. The Council will not therefore receive the full benefit of the £92,000 this year.

LEGAL IMPLICATIONS

27. The Council has the powers (enhanced by the Local Government Act 2000 and S111 Local Government Act 1972) to arrange for the closing of or contribute to the expenses of, anything necessary or expedient for the provision of entertainment of any nature.

28. The report to 5 November 2002 Executive contained detailed advice about the current contractual position between the Council and Solo. That report also advised Members on the licensing and Isle of Wight Act regulations.

CALL IN

29. Rule 15 of the Select Committee Procedure Rules provide for the usual rules on call in to be disapplied where the decision of the Executive needs to be implemented before the expiry of the call-in period.

30. It is proposed that, provided the Chairman of the Council consents, the call-in rules are abridged rather than disapplied entirely.

31. A call-in period limited to midnight on Monday 26 May 2003 will allow for the decision to be referred to the meeting of the Economic Development, Planning, Tourism and Leisure Services Select Committee on Tuesday 27 May 2003 Rule 5(a) shall be disapplied to the extent that it provides for referral back to the Executive for reconsideration, as time will not allow for that step to be taken and for a contract to be completed in good time for the festival on 14/15 June.

OPTIONS

(i) To agree to vary the terms of the agreement with Solo (as reported to the Executive on 5 November 2002) to those set out in this report.

(ii) Not to agree the terms of the agreement with Solo (as reported to the Executive on 5 November 2002).

(iii) To limit the call-in period to midnight on Monday 26 May 2003 to allow the decision to be referred to the meeting of the Economic Development and Planning, Tourism and Leisure Services Select Committee on Tuesday 27 May 2003.

EVALUATION/RISK MANAGEMENT

32. The 2002 concert was the first time that an event of its type had been staged for many years making it extremely difficult to predict likely attendance figures. This notwithstanding the attendance and revenue projections that Solo provided for the 2002 launch concert proved to be considerably overstated. In the light of this and also the volatility of the festival market (success being a function of weather, line up, rival events), the projections produced by Solo and contained within this report are likely to have a high degree of tolerance.

Option (i)

33. This option would secure the potential for a major concert to be staged on the Island for each of the next ten years which should bring with it consequent benefits to the Island’s economy through its impact on the tourism industry. The Council will bear none of the financial and operating risks of the concert(s), these risks are Solo’s alone.

34. If the agreement runs to term then the Council will receive a minimum payment of £425,000 from Solo. It will also receive a percentage of ticket sales which may generate in the order of a further £125,000 to the Council. These sums will be sufficient to recover the costs of the Council’s investment in the 2002 event although it must be recognised that the original agreement set out to achieve this in 5 as opposed to the 10 years now being considered. It must however be borne in mind that the original agreement was reliant on the Council selling an allocation of tickets whereas in the current proposal now before Members the money (excluding the overage on Solo’s ticket sales) received by the Council will be an annual up front payment from Solo. There is therefore an increased likelihood of the 2002 investment being recovered.

35. In both the original agreement and in the current proposed revisions the option as to whether a concert will proceed in any given year will be completely at the discretion of Solo. In the revised proposals the Council would have the option to terminate the agreement if a concert did not take place in a year or to accept an increased payment from Solo in subsequent years to ensure that the minimum payment is still received.

36. Perhaps the principal risk in accepting this option is that if the concerts exceed the expectations of Solo then the Council’s income from the agreement might, in time, be viewed as being insufficient. Nevertheless it must be borne in mind that the financial risk of organising and growing the concert programme is with Solo only and it will expect to receive an appropriate return for its investment and risk. It must also be recognised that if a concert is delivered for each of the ten years of the agreement then the Council will recover its investment in the 2002 event and will have enabled an attraction that makes a significant contribution to the Community Strategy and the Corporate Plan.

Option (ii):

37. If this option were adopted then it would seem likely that Solo would either seek to relocate the 2003 concert to a non Council venue or to cancel it altogether. It is thought most unlikely that Solo would revert to the terms of the agreement as set out in the report of 5 November 2002 and deliver the 2003 and subsequent concerts under these terms.

38. If the concert were to be relocated on the Island then the economic benefits for the Island and especially for the tourist sector would still be delivered but only for 2003. There is no long term view as to whether Solo would deliver a series of concerts at an alternative venue on the Island. If the 2003 event were moved to the mainland then the Island would receive no economic benefits from it. If a non Council owned venue for the concert(s) were used by Solo then the Council would not be able to recover any of its investment in the 2002 event.

39. If the 2003 concert were cancelled altogether then its potential economic benefits would be lost, as would the Council’s ability to recover any of its investment in the 2002 event. It is thought most unlikely that any further concerts could be arranged in the medium term if this was to be the chosen response of Solo.

RECOMMENDATIONS

40. On the basis of the information contained in this report, options(i) and (iii) be adopted.

BACKGROUND PAPERS

41. “The Queen’s Golden Jubilee Celebrations – Isle of Wight”, Report of the Portfolio Holder for Tourism and Leisure Services, to Executive on 5 November 2002.

Contact Point : John Metcalfe, Head of Community Development and Tourism,

( 823825 e-mail: [email protected]

John Lawson, Head of Legal and Democratic Services,

( 823207 e-mail: [email protected]

D PETTITT Strategic Director of Education and Community Development

J FLEMING Portfolio Holder for Tourism and Leisure Services