#DigitalSkeptic: SXSW Leads Live Event Revenue South

NEW YORK (TheStreet) -- When it comes to conferences, it's Digital Age deja vu all over again.

"The value of an event to the conference owner is in the engagement they get, not from the dollars they collect in fees," said Jordan Schwartz, CEO of Pathable, the Seattle live-event app development and support company. "That age is over."

Schwartz first opened my mind that the live event business was not all it's cracked up to be about six months ago, when we talked through how his firm uses social media to aid engagement at conferences, sales meetings and conventions. Schwartz, who put in a decade at Microsoft before starting his firm six years ago, argues that the live happenings he helps host wrestle with what are by now familiar, grim Info Age economics. Today's affairs have little choice but to pass up real dollars today for hard-to-monetize "relationships" that may, or may not, pay off tomorrow. Schwartz contends that what helps drive this live event dysfunction are hip, mega meet-ups such as CES, Burning Man and, yes, even South By Southwest, which gets going this week in Austin.

"It's a mistake to talk about other conferences in the same breath as a South by Southwest," he explained. "It's powered by a reputation that is almost impossible to re-create these days."

Far more common, says Schwartz, are large events such as the American Society of Anesthesiologists' annual convention of 16,000 doctors. Or Salesforce.com's Dreamforce local brand tours. These live gatherings often face the daunting and low-margin prospects of managing the itty-bitty details of a three- to five-day affair -- then maintaining and monetizing those relationships over the entire year.

"The biggest mistake I see is groups looking at the event as just an event," he said, "and not as part of a larger engagement strategy that drives sales or memberships. Unless you have fingers on that longer-term narrative, making it on tickets and booth fees is very difficult."

The un-live event business 

It takes all of five minutes to confirm that Schwartz's strange, new live-event world is absolutely acknowledged by the larger professional event industry, whose meetings face an explosion of competition and increasingly sophisticated low-cost online options such as meet-ups and un-conferences.

"The convention exhibits and trade shows professional needs new options versus the current model," Deborah Sexton, president and CEO of the The Professional Convention Management Association, said in a recent report from among the organization's excellent online archive.

Digging into public disclosures from even the live-event business' brightest stars shows just how nasty putting on a live show has become. South By Southwest, for example, produces an extravagant annual economic impact report. The 2013 version is filled with gaudy stats, including an estimated $218.2 million pumped into the Austin economy. But tellingly, the report and Elizabeth Derczo, media coordinator at the organization, declined to comment on the specifics of revenues and expenses for the show itself.

Other major events are not so coy. The nonprofit Consumer Electronics Association discloses exact expense data for hosting its Consumer Electronics Shows. According to its 2012 IRS forms, a total of about $5.5 million was paid to independent contractors -- mostly Las Vegas-based exposition service companies and convention center rental fees. That on just $732,000 of total meeting and conference revenues, indicating that losses run north of five times revenue on that part of the profit-and-loss statement.

The $20 million Burning Man
Now, before Web hipsters dismiss CES as an out-of-date, geezer boondoggle of strip clubs and steak joints, may I direct you to the utterly noncommercial Burning Man. This happening -- which, remember, takes place in a desert, so many people can attend naked and camp to cut costs, is utterly transparent about what it takes to put on. In 2011, the last year it reported, it burnt through more than $20 million(!) in support fees, costs and licenses.

Investors blithely accepting the argument that a live show somehow heals the wounds of sales lost to the Digital Age in sectors such as media, cloud-based software or financial services have to realize: It's actually the fastest way to burn any business to the ground.

"It's like spinning plates on a stick," Schwartz said. "The live event is the way you touch that plate to keep it spinning. But unless you have the touch for keeping all those dishes spinning all year, it's really easy to start breaking the china."

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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