UPDATED: How did an Iowa festival lose $2.3 million? Industry professionals weigh in

Matthew Leimkuehler | The Des Moines Register

Show Caption Hide Caption Adam Rippon in Iowa: being yourself is 'powerful' Olympic figure skater and LGBTQ advocate Adam Rippon talks coming to Iowa and the power of being yourself.

Editor's note: This story, originally published on Aug. 23, was updated on Aug. 24 with comments from Scott Tallman, former GO Cedar Rapids community events director.

Entertainment professionals in Iowa share a head-scratching bewilderment as to how a Cedar Rapids festival lost millions of dollars in its inaugural year.

Newbo Evolve, a three-day arts and music event curated by the city’s convention and visitors bureau, Go Cedar Rapids, said Tuesday it lost an estimated $2.3 million. The Aug. 3-5 festival teamed Maroon 5 and Kelly Clarkson concerts with lectures featuring Olympian Adam Rippon, designer Christian Siriano, HGTV star Clint Harp and more.

Newbo Evolve cost roughly $3.8 million, a budget approved by the convention and visitors bureau's 18-person board of directors. The festival generated about $1.5 million, selling 8,340 concert tickets and 602 three-day passes, the latter costing $400 before fees.

Prior to the festival, the board approved a loss of $644,000, said chairman John Myers. Go Cedar Rapids CEO Aaron McCreight falsely presented ticket sale information to the board in the weeks leading up to the event, Myers said.

Board members were led to believe 15,000 tickets had been sold to the event. Organizers said they hoped to bring 11,000 concertgoers and 4,000 passholders to Newbo Evolve. A $1.5 million line of credit, originally $2.25 million, remains open with Bankers Trust.

It is unclear if the board was mislead “intentionally or negligently," Myers said. McCreight did not share copies of daily Ticketmaster sales reports with the board.

“He shared numbers compiled into his overall report to the board,” Myers said Thursday via email. “We never asked to see the reports from Ticketmaster, as we took the information presented to us as true and valid.”

McCreight and Scott Tallman, GO Cedar Rapids community events director, were fired following the event.

McCreight, in an interview with the Cedar Rapids Gazette on Tuesday, said organizers knew they “took a risk” from the beginning. He did not return the Register's request for comment.

“We knew this was an investment in travel and tourism and awareness of the destination,” McCreight told the Gazette. “I certainly wish that the investment wasn’t as large as it has been reported.”

Tallman, speaking to the Register on Thursday, said he attended two board meetings during festival planning; that he can't patently say what McCreight communicated to the board, but that "I do know the (executive) committee and board chair were kept in the loop pretty tightly."

He defended the final product, explaining that the festival's first year was dedicated to introducing and building the Evolve brand.

"I'm very proud; I think we built a really good brand," Tallman said. "Anybody that was there got what we were trying to do and was dying to come back and do it again."

Ticket price

Why did Newbo Evolve financially fail? Start with a nearly $400 asking price, said Terry Peters, president of Townsquare Media Cedar Rapids. In 2006, Peters aided the launch of the Big Country Bash in Des Moines.

Newbo Evolve sputtered out of the gate by pushing a $400 pass instead of individual concert tickets, Peters said. Individual concert tickets cost $54.50 to $107.50, with Maroon 5 tickets running $70 to $134.50 before fees, respectively.

“They came out almost using the $400 VIP thing as a badge of honor,” Peters, who manages four Iowa radio stations, said. “When they went on sale, all you heard about was $400. Joe and Susie Lunch Bucket in Cedar Rapids said, ‘You know? Forget it.’ And they don’t listen to anything else after that.”

The individual concert price wasn’t unreasonable, said Dan Green, director of Des Moines-based 515 Alive Music Festival, but $400 for a pass “was just crazy.” Green took over 515 Alive six years ago, growing the festival from roughly 3,000 daily attendees to an estimated 12,500 the event welcomed to Water Works Park last Saturday for electronic headliner Bassnectar.

Introducing the Newbo Evolve model — lectures, happy hours and pop-up shops during the day and music at night, similar to SXSW in Austin, Texas — at a small, affordable scale could’ve offered the event room to grow into hosting acts such as Maroon 5 in future years, Green said.

Organizers planned Newbo Evolve for Aug. 3-5 because the date landed between RAGBRAI and the Iowa State Fair, each prominent summer events in the state. Lollapalooza in Chicago and Hinterland Music Festival in St. Charles, established festivals in the Midwest, took place the same weekend.

“I just don’t know if that market over there can sustain and has enough interest in a mini-SXSW,” Green said. “They expected people to travel, but people were also traveling that weekend for Lollapalooza and Hinterland. They went up against some giants.”

The board engaged in “significant discussions” on ticket price, but never ordered the organizers to lower it, Myers said.

“Obviously — not only from feedback (on) social media and the public but actual ticket sales — it is grossly apparent that the price was too high,” Myers said.

“We were led to believe that (lowering cost) may happen at some point, but it obviously never did,” he added.

Discussions took place to introduce a la carte ticket options, but Tallman said organizers didn't pull the trigger because day-to-day talent scheduling kept changing. Tallman reported to McCreight during his Go Cedar Rapids tenure, he said.

"We were unable to release a full schedule of non-music talent ... until two weeks before execution," Tallman said. "At that point it seemed too late to offer any sort of day or session passes.

"It just became, for a first time a festival at the point we were, too logistically risky to deal with 'Well, I bought Friday because I wanted Adam Rippon and so-and-so and now one of them is gone.'"

And, despite financial shortcomings, it delivered what it promised ticket holders. Lecturers appeared to engage audiences and the headliners delivered full sets, earning strong reviews.

Luke Matthews, a Clarkson devotee who’s seen the star roughly 20 times, described his Newbo concert experience as “kinda cool.” He took a Friday night trip from Des Moines to see his favorite pop star, paying about $70 for a ticket.

“Ticket price for the individual (concert) was pretty reasonable,” said Matthews, who co-hosts the 93.3 KIOA morning show in Des Moines. “For what I got — I had general admission pit tickets, which is the closest you could be to the stage — it was a really good value.”

MORE: Kelly Clarkson is positively herself at Iowa concert (and that's exactly how it should be)

Low sales

Kelly Clarkson sold 1,862 tickets, down from 5,620 at her 2009 Iowa State Fair Grandstand appearance. Maroon 5 sold 6,478, down from 10,354 at 2011’s Grandstand show.

Fair organizers in ‘09 and ‘11 paid the Clarkson tour $185,000 and the Maroon 5 tour $378,981 for each’s respective show.

DATABASE: Iowa State Fair Grandstand performances, ticket sales and revenues

Myers declined to share how much Newbo talent earned, citing contractual obligations. South Dakota-based Pepper Entertainment booked the headliners.

The festival distributed 3,804 complimentary tickets to sponsors and volunteers in addition to the roughly 9,000 paid attendees.

Complimentary tickets are typically given to sponsors in hopes of boosting concessions, Green said, but handing out nearly 4,000 freebies? He estimates that was “to just get people there.”

And it’s disrespectful to the ticket buyer, Peters argued.

“How would you like to be the person that … bought those tickets and paid that money, and later you see comp tickets falling out of the sky?” Peters said.

$3.8 million budget

The festival’s $3.8 million spending came funded in part by a local hotel-motel tax, which makes up $1 million of Go Cedar Rapids’ $2 million annual budget.

The city advanced Go Cedar Rapids $500,000 of hotel-motel tax for Newbo Evolve, a total the organizer plans to repay by withholding the next two quarters of tax.

The board directed organizers to lose no more than $644,000. Vendors remain unpaid, Myers said, but how many and how much they’re owed is still under internal investigation.

The Go Cedar Rapids board approves “budgets on accounts” but doesn’t typically “look into the line item by line item spending,” Myers said. A third-party audit company plans to conduct a review of Newbo spending.

It’s not uncommon for first-year festivals to expect a loss. $644,000 sounds reasonable for a $3.8 million budget, Green said.

“A lot of these festivals… maybe Year 3 you break even, and maybe Year 4 you start making some money,” Green said.

Despite saying they were misled on overall ticket sales, Myers said the board advised organizers “on several occasions” to scale back on aspects such as concert production and promotional materials.

And Tallman also said he brought cuts to the table, such eliminating sessions, cancelling an outdoor bar area and moving the concert to the indoor U.S. Cellular Center, which would've eliminated the built-for-Newbo outdoor amphitheater.

"There was panic many times on many levels," Tallman said. "Our attendees saw a well-executed, well-oiled machine … but behind the scenes, there was.

"I presented multiple ways to reduce the footprint and the overhead for the program and every time I did I was told 'no.'"

The board plans to announce an interim Go Cedar Rapids CEO in the coming days. The new executive will be charged with outlining a repayment plan for vendors and the $1.5 million credit line.

Myers doesn’t foresee additional layoffs to the Go Cedar Rapids staff. The future of Newbo Evolve remains unclear.

“We’re committed to our staff, and we believe at this given time we will not have to pursue (layoffs),” Myers said.