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DPAC first-year numbers exceed expectations many times over in profitable start

Dpac_photo One big question about the DPAC has been, quite simply, what the reaction of the market would be to the massive, 2,800 seat arts center in the heart of downtown Durham.

When the Independent Weekly ran its gloomy scrutiny on the project last fall, their reaction was one of civic concern:

When DPAC became a reality, there were some eye-popping numbers. First and foremost was the sheer size of the venue: 2,800 seats. Then there were the numbers regarding sales expectations: The break-even point is to sell 60 percent of tickets for 100 shows a year, at $55-$60 per ticket.

It seems a tall order for a small city with significant, pressing demands on dwindling public resources, at a time of widespread consumer gloom. Still, the team assembled by general manager Bob Klaus, a veteran of Raleigh's Walnut Creek outdoor concert shed, has been booking performances all year and has much to show for its efforts….

Indeed, the faltering economy is one unfortunate hurdle that programmers have to clear. According to Gragg, the venue "expects to have over 6,000 season ticket holders by opening night of Rent in January." But come March, will there be 2,800 Triangle residents who will have spare $75-$450 for a Robin Williams show?

In these nervous times, Durham has an expensive new investment that's less than two weeks from opening.

Well, the first set of numbers are in. And, by all accounts, it looks like DPAC has exceeded expectations for its first year of operations -- by what BCR is calculating to be a sixfold improvement over full first-year projections.

Through eight months' time, the facility's shows brought in $6.5 million in ticket sales, a number that's on par with the back-of-envelope breakeven number the Indy calculated last fall ($6.4m, adjusted for 8 months of operation.)

But it's not ticket sales alone. Round up those miscellaneous numbers -- like service charges ($529k), concessions ($219k), building rental charges and other facilities fees (north of $300k) -- and you have another $1.5m in revenue to boot.

Add all that up for first fiscal year revenue of almost $8 million. After stage show production costs of $5.7 million and general and administrative costs of almost $1.3 million (almost of half of which appears to have been earmarked to advertising and promotion), and you end up with a net income of $1 million.

It's a return on the City's investment that's well north of original projections, since the City of Durham gets 40% of net operating income as a management fee from the facility. ($100k of this was loaned to PFM/Nederlander for initial marketing expenses and will be withheld from the payment.)

The City had projected $100,000 in profits on the first full year of DPAC operations. The local press (as covered by the Herald-Sun and N&O among others) have picked up on the $400,000 share earned by the City as a quadrupling of the budgeted line.

But when you note that DPAC had only been open eight months at the time of the first audit statement, it's really closer to a six-fold improvement on the budgeted line.

It's more impressive that this has happened in a down economy.

The DCVB noted in a recent news release that the DPAC's SunTrust Broadway Series is weighing in as one of the handful of best-selling season tickets for national touring programs in the country, a data point that aligns with data we've heard coming out of the facility.

And the DPAC's operators have suggested that Durham is a uniquely balanced market, in which shows across a wide range of styles, target audiences and other programmatic categories all seem to do well -- a diversity that bodes well for being able to host a wide range of show types.

The extra profits are a useful bird-in-the-hand for the City, for two reasons.

First, the positive first year -- and the good feelings that seem persistent with operators PFM and Nederlander -- are critical in maintaining a strong partnership with the operator, which is now one year in to its five-year operational agreement with the City for the facility.

Second, while the facility's profits don't directly cover debt service on the project, the additional funds help the overall bottom line for the City, which is responsible for meeting a total of about $2.5 million in debt service per year.

The facility is slated to receive a portion of county occupancy tax revenues, up to $1.4m annually. In the FY10 budget, however, the City allocated only $1.2 million, given the current recessionary climate which has hit business travel especially hard.

The debt service currently draws about $200,000 a year from the downtown revitalization fund as well.

A surcharge on every ticket sold helps to meet the debt service -- another way in which good DPAC results help to provide a positive feedback loop of more funding for the building.

Also outstanding: naming rights, which have seen mixed results to date. You'll note, for instance, that it's still the Durham Performing Arts Center -- not the GlaxoSmithKline Center for the Performing Arts, or the EMC Entertainment Pavilion, or the Merck Center, or whathaveyou.

Until more naming opportunities are sold, we wouldn't be surprised to see the City very happy to have all the profit it can get out of the facility -- directly through operations if not through signage.

After all, while the profits on-stage are fantastic, they represent one small part of the overall financial picture for the facility. But making the entire picture work off-stage depends on the numbers clicking on-stage. And as far as that's concerned, the DPAC is a home run so far.

Comments

GreenLantern

Well, I for one never doubted the success of the DPAC, nor the continuing success of our other venues like the Carolina when the debate raged on about how supporting the DPAC would run the others out of business. It was a worthwhile investment.

Let's see how long it takes for Meeker to propose a copycat venue for the City of Oaks. After all, they can't let poor, dirty Durham grab all the good acts.

Steve Bocckino

I did worry about the Carolina (still do) and I was never a fan of the city getting involved in the entertainment business (professionally, that is). But l I've heard nothing but raves from patrons, and now the return on investment is exceeding expectations.

The turnaround of downtown Durham has been an amazing success and the pols, DDI-ers, and developers who labored to make it happen deserve a standing ovation.

Dave

I have attended several events at the DPAC, from the Broadway series to concerts by Ben Folds and Leonard Cohen to the ADF this summer. The staff at this venue are amazingly friendly, the acoustics are fantastic, and the customer service we've received when issues arose with our season tickets was superb. Couple this with the proximity of the venue to new and exciting restaurants and bars, and the DPAC is a shining example of the vitality of downtown Durham.

Our household income is not high, but DPAC events have a variety of price points and although we'll probably never be in the orchestra, the seats we do get are always great.

Toby

GM Bob Klaus deserves a lot of credit for his commitment to customer service. I have sent email to him twice (once regarding an issue with the sound at the Cirque Dreams show, and again with a suggestion to book the Beatles revival group Fab Faux). Both times he responded personally within 24 hours! This attention to the concerns of patrons has clearly filtered down through the staff and volunteers who work at DPAC. Everyone is polite, friendly, and helpful. This, combined with quality programming, a great downtown location with convenient parking, and reasonable ticket prices, makes people want to come back again and again.

Laura

I must be in the minority but I was very disappointed with my experience at DPAC for Fiddler and don't plan to return. Those of us in the cheap seats had a difficult time hearing the dialogue and music and there are no bathrooms at that level. It's very inconvenient to take a quick restroom break. It's just not worth the price to me - I'd rather be in a more comfortable setting at Memorial Hall in Chapel Hill or all the way in Winston-Salem at the Stevens Center.
Don't get me wrong - I'm glad that DPAC is turning a profit. I just don't plan to be a part of that profit scheme.

Steve

This doesn't surprise me at all. We're two shows through our Broadway season tix at DPAC, and I've been overwhelmed by the high quality of the venue and - even more so - by the high quality of the staff and volunteers we have encountered.

From the people who greet you at the door, to those handing out programs and directing traffic, to those at the concession counters, everyone has been remarkably friendly and professional. Maybe I'm just jaded by the overall lack of pride people seem to have in providing excellent customer service, but these folks have blown me away.

I guess I'm with Toby. If anyone has had a different experience, I'd be interested to hear about it.

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