Monday, April 27, 1998 | 9:51 a.m.
For nearly 15 years, performers with the famed Legends in Concert show have imitated famous people and made people happy at the Imperial Palace hotel-casino.
Now, On Stage Entertainment Inc., the publicly traded corporation that owns Legends in Concert and several other entertainment productions, is doing its best imitation of a big corporation by consolidating a fragmented industry and boosting revenues with its acquisitions.
The corporation has a tougher crowd to satisfy -- Wall Street still doesn't know quite what to make of the Las Vegas-based company that went public last fall. Analysts haven't cheered as loudly as the crowds that line up to watch look-alikes and sound-alikes of Michael Jackson, Madonna, Dolly Parton and the Blues Brothers.
"Our goal is to hit $100 million in revenues by 2000," said Kiran Sidhu, senior vice president and chief financial officer of On Stage Entertainment, which is headquartered in an office-warehouse that houses everything from a scheduling center for its 450 entertainers to a wood and metal shop for the construction of sets and props.
It'll be a long climb for the company, which took in $8.8 million in 1994, $14.3 million in 1996 and $15.7 million in 1997. But Sidhu said the company projects revenues of $40 million this year. The reason: On Stage has acquired Gedco USA Inc., which produces a variety of shows and dinner theater productions in Orlando, Fla., and Southern California.
As part of the transaction, On Stage Chief Executive John Stuart added Gedco's top executive, Gerard O'Riordan, to his senior management team. O'Riordan, who founded Gedco, formerly worked with Rank PLC, Planet Hollywood and Hard Rock Cafe.
The Gedco acquisition brings a pair of Wild West shows, a medieval production and a dueling piano bar show called Blazing Pianos to On Stage's repertoire.
With On Stage's Legends franchise leading the way, Blazing Pianos could go from an interactive song-request show to a celebrity shootout between Elton John, Billy Joel and Jerry Lee Lewis -- or, more accurately, actors who play and sound like them.
With a production infrastructure already in place around Legends, any new shows On Stage acquires with its "roll-up strategy" should translate into a greater profit margin for the company since scheduling, planning, marketing and merchandising are already operational.
But there are risks. Many of the shows On Stage produces are "four-wall" presentations in which the production company takes the risk away from the hosting property.
Under a four-wall agreement, the host partner provides the venue and On Stage works independently to develop the show, hire the talent, market the production and sell associated merchandise. The host and the producer split the gate receipts. While it's a risk for the producers, a formula as successful as Legends minimizes the chance of failure.
The Imperial Palace presentation is the longest running independently operated show in Las Vegas.
In addition to the Legends show at the Imperial Palace, the company has similar productions running in Bally's Park Place in Atlantic City, N.J., the Surfside Theater in Myrtle Beach, S.C., the Legends Family Theater in Branson, Mo., and at the Estrel Residence & Congress Hotel in Berlin. Ironically, the Berlin show is an impersonation presentation offering the best of Las Vegas.
There are 13 Legends shows in operation throughout the world, each incorporating the impersonation theme and each in a tourism mecca. More than 6,000 people see a Legends show each day and 1998 ticket sales could top $100 million.
Sidhu said part of the success of the show is its appeal to a middle-market audience -- tickets go for $15 to $45, depending on the venue, instead of the $60 to $75 sought by big production shows, such as off-Broadway theater or Las Vegas' gaudy extravaganzas.
In addition to the theater presentations, On Stage has made its mark in offering similar corporate productions for annual meetings and business celebrations. Corporate clients have included McDonald's, Hewlett Packard, IBM, Pitney Bowes, Levi Strauss and Texaco. On Stage presented 185 special corporate shows last year.
In addition to broadening its presence on stages around the world, On Stage is expanding its merchandising arm. It has an alliance with Kodak to produce photographs of performers with patrons. The partnership minimizes capital risk because of the minimal up-front costs. The company also has a line of logo hats and shirts in varying venues and sells at the theaters and at small stores at or near the venue.
On Stage has its own clothing designers and a $6 million inventory of costumes for its own shows and other productions. There's a rehearsal studio at company headquarters at 4625 W. Nevso Drive to audition talent and smooth the rough edges off show tunes.
The company also is in the repair business -- Stuart hires himself out as a production consultant and will tell a show producer what's wrong with a presentation and how to fix it. Repairs also extend to props and sets, which are manufactured on site and involve work for shows other than those produced by the company.
On Stage also builds its own custom road cases to transport set pieces and props. A production studio in the 36,000-square-foot facility tapes commercials and promotional pieces using celebrity impersonators.
Analysts believe On Stage's growth strategy has begun to work. Following a net profit of $900,998 (22 cents per share) in 1996, the company lost $2.8 million in 1997 -- attributed to charges taken related to the initial public offering, which generated $5.7 million. Analysts project net income of $2.3 million this year (33 cents per share) and $4.3 million in 1999 (a range of 46 cents to 50 cents per share).
"On Stage is positioned to have a breakthrough year in 1998," said Joseph Lucarelli in an investors' report for Whale Securities Co., New York. "With the Gedco acquisition and at least two new Legends shows scheduled to open this year, revenue growth in 1998 is expected to exceed 150 percent over 1997. In addition, profit margins will significantly increase in 1998 due to reduced spending ... the elimination of duplicate expenses associated with acquired productions and preopening costs associated with new shows which will likely be expensed in 1997 rather than amortized over future periods."
David Rogers of Marion Bass Securities, Charlotte, N.C., cited the company's gross margins as a formula for success. On Stage gets 35 percent while leisure outlets like successful restaurants hit around 15 percent.
"We're impressed by the inherent freshness and longevity of the Onstage product because its marketability depends on the appeal of proven celebrity entertainers," Rogers said. "As times change, the celebrity impersonator roster is easily updated."
Stuart is a driven producer and director with entertainment in his blood. In his high school days, he sang with Brian Wilson and Mike Love, who later became the foundation for the Beach Boys.
When he decided to pursue theater, he landed roles in musicals that starred Howard Keel, Juliet Prowse, Goldie Hawn and Gordon McRae. He also appeared in two films, "Dead Men Don't Wear Plaid" and "The Man with Two Brains," with his high school and college buddy, Steve Martin. Martin and Stuart also performed at the Bird Cage Theater in Knotts Berry Farm while they attended Cal State-Fullerton, where Stuart received a Bachelor of Arts degree in drama.
With theatrical experience and an eye for detail, he came up with the concept of Legends in Concert, which he opened at the Imperial Palace in 1983. The show is in an indefinite run in the 800-seat theater.
In other Legends venues, On Stage has either a four-wall, two-wall or guaranteed fee arrangement as a tenant. In the former Gedco sites, the company either owns or leases properties.
Stuart hooked up with Sidhu when Kenneth Berg, a former On Stage director and chairman of restaurant operator Koo Koo Roo Inc., learned Stuart was seeking a financial officer. Sidhu, a former officer with Merrill Lynch Capital Markets' mergers and acquisition division and Price Waterhouse's strategic consulting group, recommended Stuart take the company public.
Stuart and company insiders own 56 percent of the company's stock while institutional investors have less than 5 percent. Stuart agreed to take the company public to effect the rapid growth strategy.
Stuart and Sidhu said they hope to capture 10 percent of the live entertainment market, which currently is without a major publicly traded player. In 1996, analysts estimated the market at $1.2 billion and since 1990, it has been rising by more than 10 percent per year.
While the stock recently has been trading at the low end of its range since the initial public offering, at around $4, analysts are targeting value to hit $10 by the end of the year.
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