Friday, November 26, 2010

New York's Club Scene - Survival of the Fittest

Last week I read in an article, in reference to the opening of District 36, the following question: “Will there be an ensuing game of musical chairs, with some clubs losing business or closing because of this new entry? Or will the scene become more invigorated, with more people going out?” My opinion is two fold.  On one hand side, New York’s party scene has become significantly more vibrant over the past three years, as evidenced by several competing party concepts and the frequency of appearances by already established and highly regarded DJs as well as new upcoming DJ talents In New York.  There is a sense that the New York scene is going through some changes as, what I define as “sophisticated” electronic dance music, appeals to a larger crowd. This would entail, that more people are in fact going out, and could imply that clubs would not necessarily lose business because of the entry by District 36 into New York’s club scene. However, things aren’t that easy, are they? Larger clubs such as Pacha and District 36 have in my opinion a different target audience. House heads are generally committed to a certain style of electronic music. Judging by my own perception of Pacha and District 36, I feel that (note that I will use the party scene in Ibiza as a reference point realizing that this approach is probably way too simple but it helps me drive home the point) the former is akin to the Pacha in Ibiza and as such appeals to the same clientele whereas the latter targets clubbers who would chose a club like DC10 0r Space in Ibiza. As long as larger clubs target a different group of music enthusiasts, it appears to me that these bigger clubs can co-exist. There are a few smaller clubs on the periphery, however, that will in my opinion struggle for survival as some of these clubs’ strategy and target audience tend to overlap with larger clubs. In order to offset the decrease in revenues club owners have basically two options to keep their lights on (1) higher revenues and/or (2) lower expenses.  However, most expenses are fixed and any reduction in variable expenses (e.g. cutting bar staff, cutting maintenance staff, etc.) would most likely have a negative impact on the clubbers’ experience. It must be noted that expenses associated with running a club in New York are extremely high relative to other metropolitan areas.  Unlike the party scene in Berlin for instance where numerous smaller venues were able to co-exist together with the more established larger clubs due to the city’s relatively low cost of living, New York is unique in that respect and has implications for the smaller venues. In New York with its high cost of living, clubs have to deal with numerous, specifically New York related expenses, such as higher rents, higher insurance premiums, licensing fees, lobbying fees, or large legal fees. The latter is attributable to the more frequent crackdowns on clubs by the city’s special task forces. The first option, higher revenues that is, is achievable, however at a higher cost to the consumer. As we all know, the two main revenue streams for club owners are (a) cover charge, and (b) drink prices. Given the high expenses associated with operating a club, clubs could turn to higher admission fees at the cashier booth or introduce bottle service.  However, most clubbers who associate themselves with electronic dance music, are neither willing to pay a ridiculously high cover charge nor do they want to purchase a bottle. As more clubbers could flock to larger clubs, smaller club owners will have to deal with a deterioration of profits. However, hope is not lost yet. What will ensure the smaller clubs’ survival in my opinion will not be higher admission fees or bottle service but creative thinking.  

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