Reversing course from a pledge made earlier this year, executives at Louisville-based Churchill Downs on Wednesday canceled plans to stage the company's second HullabaLOU Music Festival in 2011.
The company also dissolved its division that organized entertainment events including the festival, which lost more than $5 million in its first and only go-round.
Held the last weekend of July, HullabaLOU attracted 78,000 people, the company said, but that fell short of the more than 100,000 expected.
The company blamed hot weather, but others noted that Churchill priced tickets too high during a fragile economy. They also question Churchill's statement that the festival might return in future years, given that executive Steve Sexton, the brains behind it, has resigned.
"The decision was surprising when you consider management's generally optimistic view shortly after the event concluded," said Jeffrey Thomison, a vice president and research analyst at Hilliard Lyons in Louisville.
After announcing the event lost twice the amount of money that Churchill had budgeted, CEO Bob Evans in early August defended the decision to hold HullabaLOU again, noting the company hoped the event would work like night racing, which lost money until its second year.
"We learned a lot with HullabaLOU this year, and I guess we should have. It was an expensive education," Evans said at the time. "And we believe we can make the changes to revenue and cost necessary to make this a significant asset for the company."
But on Wednesday, Evans said in a prepared statement that "it has become clear that launching new, upscale entertainment events in the current economy, particularly with the persistently high levels of unemployment, is extremely difficult."
The company continued to blame high temperatures for the festival's lower-than-anticipated turnout.
Thomison said the festival's promotion of free water refills also cut into highly profitable beverage sales.
An encore eventually?
Thomison said he expected the event to lose money in 2010, break even in 2011 and become profitable in 2012. It would be an important step forward in using Churchill's track at times other than racing season, Thomison said.
"I was supportive of the creation of the entertainment division first and foremost and thought highly of Steve Sexton," Thomison said of the former executive who had overseen Arlington Park near Chicago and led Churchill's namesake track in Louisville for several years beginning in 2002. During that time, Sexton oversaw a massive $121 million renovation.
"I found him to be a very capable, very knowledgeable executive and one that I, over time, grew to have a lot of respect for," Thomison said.
In a statement issued by Churchill Downs, Sexton said, "I am looking forward to expanding my career in a new direction."
The division being dismantled also means the end to the recently held Fork, Cork and Style food and wine festivals at Churchill on Sept. 12 and Arlington Park on Oct. 2.
Three other entertainment division employees are leaving the company, too, according to a statement.
Despite the cancellation and dissolution of the entertainment division, the company said HullabaLOU might return in future years once the economy and live-music business have "fully recovered."
But Thomison said he would be surprised if that happens.
"Normally I would say if key division personnel remained intact, that the event would return. But with this key departure of Steve Sexton and others, it would be difficult to believe that there will be another HullabaLOU."
And that's a blow to music lovers in Kentucky, said Clark Case, owner and manager of the concert venue Buster's Billiards and Backroom in Lexington.
"You hate to lose any kind of a festival that's starting up because Kentucky doesn't necessarily have a huge anchor festival yet," he said.
Ticket price trouble
Case noted that established festivals have had trouble this year because of the economy and the fact that "the ticket prices are just too high."
Thomison said Churchill's prices for HullabaLOU, which were $200 for a three-day pass or $75 for a single day, were excessive given the economy. The headliners were 1980s rock icons Bon Jovi, country star Kenny Chesney and the Dave Matthews Band.
"In a normal economic environment, I think those prices would have been fine," Thomison said.
By contrast, the coming Voodoo Fest music festival in New Orleans is charging $150 for a weekend pass with headliners that include Muse, Ozzy Osbourne and the Louisville band My Morning Jacket and an undercard including MGMT, Weezer and Metric.
Churchill's decision leaves the Forecastle Festival, which was held in early July, as the main Louisville music festival. The event attracted almost 30,000 people, said J.K. McKnight, the festival's founder.
"They put a lot of money behind what they did," he said of Churchill. "I do think it's difficult to come out of the barrel like that.
"We've been doing this for nine years and started it with 150 people and a couple hundred dollars."