Time to Sell DCI

[garfield]

In exploring this idea a bit more, rather than paying out a substantial initial payment, the individual organizations could be better served instead by a long-term minimum commitment (corps could plan on predictable revenues at least 5 years into the future) and aggressive investment into new and diverse revenue streams that could also help support the individual organizations.

Also, timing of distribution of revenues would be key part of the plan. Revenue distribution would be timed to actual expenses, allowing organizations to pay for things ahead of time, rather than hand-to-mouth on the road. Regular payments during the offseason would help to keep the lights on and retain a focused staff through the fall/winter months.

A deal like this could not only keep top corps satisfied, but could keep groups like Glassmen and Teal actually on the field.

Again, selling DCI to private investors does really seem like the best opportunity to create stability and predictability, which is something the activity needs right now a lot more than autonomy.

I get where you're going but, again, DCI has no revenue with which to pro-forma a profit stream whether you pay it out up front or annuitize it over a longer period.

Any private corporation (or group of same, or LBO team) will look for profit, not revenue, to capitalize on their investment by squeezing out inefficiencies.

Further, a typical buy-out firm mentality is not so much interested in increasing revenue as it is maximizing same through efficiency and leverage. With DCI a lean as it is, it's not reasonable to thing significant gains can be made via increasing productivity.

A different kind of buyer, let's call him the "Buffet-esque" buyer, is more interested in taking an equity position in a company that has highly-qualified management, then leaving that management alone to run their business as they see fit. Rarely does a true investor fire senior managment and input their own guy because he can run that business more-profitably (look to Sears as a good example). They send in a hatchet-man to cut out the fat, while at the same time they convert current obligations to long-term debt, use debt financing to provide an initial boost to production, sell off unrelated division to pay down the debt, and watch their equity position increase as debt declines. Then they plan their escape.

Actually, planning an escape is done before the LBO is put on the table. Is that good for the long-term health of drum corps? And, if not, is the "Buffet-esque"-style investor really reasonable when your whole contention is based on the ill-prepared nature of DCI's existing management?

[danielray]

You have to assume that this statement is true so that the rest of your arguments can follow.

This is the same fallacy of logic that is the philosophical underpinning of the G7 proposal.

If that "given" is not actually true - or not true to the degree you assert - then none of the rest follows.

The sky is not falling.

The sky is, in fact, falling. DCI, as a consortia, is currently McGyvered together... barely... with the main issues driving this being financial pressure and future stability.

[danielray]

I get where you're going but, again, DCI has no revenue with which to pro-forma a profit stream whether you pay it out up front or annuitize it over a longer period.

Any private corporation (or group of same, or LBO team) will look for profit, not revenue, to capitalize on their investment by squeezing out inefficiencies.

Further, a typical buy-out firm mentality is not so much interested in increasing revenue as it is maximizing same through efficiency and leverage. With DCI a lean as it is, it's not reasonable to thing significant gains can be made via increasing productivity.

A different kind of buyer, let's call him the "Buffet-esque" buyer, is more interested in taking an equity position in a company that has highly-qualified management, then leaving that management alone to run their business as they see fit. Rarely does a true investor fire senior managment and input their own guy because he can run that business more-profitably (look to Sears as a good example). They send in a hatchet-man to cut out the fat, while at the same time they convert current obligations to long-term debt, use debt financing to provide an initial boost to production, sell off unrelated division to pay down the debt, and watch their equity position increase as debt declines. Then they plan their escape.

Actually, planning an escape is done before the LBO is put on the table. Is that good for the long-term health of drum corps? And, if not, is the "Buffet-esque"-style investor really reasonable when your whole contention is based on the ill-prepared nature of DCI's existing management?

I'm actually thinking more of a buyer that this deal would make sense to them due to personal relationships that they could immediately bring to the table that could immediately change the dynamics.

They would most certainly put their own management in place, but would likely retain current management in different roles (and would pay them better than now to do so).

Again, this is a much different kind of deal in that everything would be done as a new, clean entity.

[BRASSO]

In order for drum corps to be profitable, current levels of performance must be retained.

" retained " ?

I don't think that'll cut it if you are looking for potential investors interested in purchasing DCI with hopes of making a healthy profit on their investment. There are lots of investors every day looking to take over organizations they believe they can run themselves into a profitable venture. The fact that DCI has not had overtures from potential deep pocketed investors is because in their judgment there is little opportunity to take " the product " to the marketplace thru effective marketing & PR sufficient enough that at the end of " the process " that'll return a good healthy profit to their team of investors. Unfortunately, while I like your esteem and love for Drum Corps, it is frankly a niche activity that has unfortunately very limited appeal to the general public. Dont take my word for it, take the word of the producers at ESPN who make a good living evaluating what the public wants and enjoys in competitive youth sports and in evaluating new ventures. You and I love Drum Corps, but we can't delude ourselves that there are saavy investors out there willing to buy DCI in hopes of turning a profit. If there was, it would have manifested itself years ago, when the audience was larger than the one DCI struggles with in numbers today.

Edited February 4, 2013 by BRASSO

[danielray]

" retained " ?

I don't think that'll cut it if you are looking for potential investors interested in purchasing DCI with hopes of making a healthy profit on their investment. There are lots of investors every day looking to take over organizations they believe they can run themselves into a profitable venture. The fact that DCI has not had overtures from potential deep pocketed investors is because in their judgment there is little opportunity to take " the product " to the marketplace thru effective marketing & PR sufficient enough that at the end of " the process " they'll return a good healthy profit to their team of investors. UAnfortunately, while I like your esreem and love for Drum Corps, it is a niche activity that has limited appeal to the general public. Dont take my word for it, take the word of the producers at ESPN who make a good living evaluating what the public wants and enjoys in competitive youth sports.

Or maybe there are investors out there that, for example, have unique relationships with a group like ESPN and could cut a much different deal than DCI because it would be bundled in with other properties they have that are of value to the network?

In the model I am thinking about, the ideal investor would not consider DCI to be a standalone holding, but simply something added to the mix of their existing portfolio, which would have complientary holdings.

Think beyond where you are thinking now...

[garfield]

I'm actually thinking more of a buyer that this deal would make sense to them due to personal relationships that they could immediately bring to the table that could immediately change the dynamics.

They would most certainly put their own management in place, but would likely retain current management in different roles (and would pay them better than now to do so).

Again, this is a much different kind of deal in that everything would be done as a new, clean entity.

Yes, I know you are. And there may be, in fact, a small (very small) group of executives out there that believe they can take drum corps mainstream enough to introduce their other "relationships" to the activity.

But, this activity has been funded and promoted by the biggest musical corporations in the world, and they've yet to introduce it to their peers for funding and promotion.

I'm not saying that a consortium that your envision can't be formed, but I'd question why that activity hasn't occured already if there is, in fact, a profit to be made from drum corps.

[BRASSO]

Or maybe there are investors out there that, for example, have unique relationships with a group like ESPN and could cut a much different deal than DCI because it would be bundled in with other properties they have that are of value to the network?

In the model I am thinking about, the ideal investor would not consider DCI to be a standalone holding, but simply something added to the mix of their existing portfolio, which would have complientary holdings.

Think beyond where you are thinking now...

Believe me, such bundling has been thought of before by potential investors. You are not the only one that has looked at DCI to see if it might be bundled with something else that is a good match for its current portfolio. The fact is that DCI is a unique enterprise and there is nothing out there that it can be bundled with that will attract saavy investors interested in advancing venture capital in hopes of turning a good profit down the road. You need a product that is under marketed and that investors believe has GREAT potential to bring in lots and lots of new customers if marketed correctly. DCI may or may not be the best at marketing Drum Corps ,but don't kid yourself that there are hundreds of thousands or millions of people out there clamoring for this activity if only " the product " was marketed better. If that was the case, investors would have contacted DCI by now to buy "the product"and market the product to the public itself, either as a standalone or as a piggy back to what they currently have.

Edited February 4, 2013 by BRASSO

[mark r]

Here's one question potential, profit seeking investors might ask of DCI.

Why do you hold your marquee events in stadia where the percentage of use vs. total capacity is so low?

If, for example, Lucas Oil Stadium has a capacity of say, 75,000, and finals draws 20,000, that's about 26% of capacity. Why would an investor or investment group put serious money in a venture that at best could draw 30-35% of the total number of seats where they hold a major contest?

Last year I went to Met Life to see the TOC show there. The week before, I ran into acquaintance who happens to be a supervisor of ushers there. When I mentioned the show, he smirked and said the number of people expected was so low he'd have to work as a regular usher.

DCI isn't football, I get that, but anyone serious about ROI would want to know why this happens at so many shows.

Of course, the solution would be to create shows that appeals to a wider expanse of seats, but that has only happened once that I remember.

Just asking.

[TerriTroop]

Here's one question potential, profit seeking investors might ask of DCI.

Why do you hold your marquee events in stadia where the percentage of use vs. total capacity is so low?

If, for example, Lucas Oil Stadium has a capacity of say, 75,000, and finals draws 20,000, that's about 26% of capacity. Why would an investor or investment group put serious money in a venture that at best could draw 30-35% of the total number of seats where they hold a major contest?

Last year I went to Met Life to see the TOC show there. The week before, I ran into acquaintance who happens to be a supervisor of ushers there. When I mentioned the show, he smirked and said the number of people expected was so low he'd have to work as a regular usher.

DCI isn't football, I get that, but anyone serious about ROI would want to know why this happens at so many shows.

Of course, the solution would be to create shows that appeals to a wider expanse of seats, but that has only happened once that I remember.

Just asking.

Or perhaps the simplest and most effective cost cutting idea would be to put drum corps back into smaller and/or cheaper (i.e. outdoor) venues. I just might be sold on THAT idea alone....

[Michael Boo]

...

Also included in this should be a buy-back clause, where the member organizations may buy back various rights (name and other IP) if the investors do not meet specific conditions of the agreement.

...

Daniel: It seems that every two weeks, you come up with why something has to be totally changed...i.e.: marching shoes. I thought this was the month when you were going to redesign the trays that Lucas Oil Stadium nachos are sold.

As for the corps having the option of buying back the activity in the event the investors don't meet certain conditions, if those investors screw things up that bad, there may not be anything left of the activity worth buying back, much less the money among the various corps to do so.