OCEAN CITY – An agreement between Ocean City and the OC Air Show was derailed this week amid a debate about the profit-sharing plan for the event’s live-stream.
The Memorandum of Understanding (MOU) between the city and the air show, set for June 19-20, is typically an innocuous chore needed to be completed before the event that carefully spells out each party’s responsibilities. However, this year the MOU approval became more complicated because of some of the language in the 2021 document, especially regarding the profit-sharing of advertising sales revenue from the event’s live stream.
Last year, the air show was postponed in June, with the promise to revisit the event if and when COVID-19 restrictions eased to the point it could be pulled off successfully. It was later scheduled for mid-August, but ongoing COVID restrictions limited large gatherings, essentially eliminating the traditional show center on the beach near 15th Street.
Instead, the 2020 air show – limited to just Saturday due to poor weather — was live-streamed with narration and music choreographed to the action in the skies, allowing people to enjoy the show from afar and hotel and condo balconies, for example. The live-stream was a critical success, although it is uncertain if it was a financial win, given the short timeframe the promoter’s third-party provider had to gain sponsors and sell advertising.
When it appeared the air show was not going to go off as planned last year, the Mayor and Council agreed to provide the promoter with a $100,000 investment on top of its typical $35,000 commitment to ensure it would be held and to offset the cost of providing the live stream. The city’s additional funding came with stipulations, including it would only be used to pay invoices, the town would receive 50% of live stream ad revenue and the city would get the email addresses of live stream subscribers.
On Tuesday, Special Events Director Frank Miller and Ocean City Air Show promoter Bryan Lilley was seeking to expand the show center footprint on the beach in order to accommodate this year’s ticket holders along with the tickets he was honoring from last year’s altered show.
“The promoter is looking to expand the show footprint on the beach,” he said. “It would allow them to expand the show center to 13th Street and provide them with more opportunity to sell tickets since they are honoring the 2020 tickets.”
A motion was made to approve the MOU for the 2021 air show, but before a vote was taken, the Mayor and Council had some questions about certain specific language in the document. For example, Councilman John Gehrig questioned the section regarding headline acts.
“What are we defining as headline acts?” he said. “The Thunderbirds and the Blue Angels are headline acts, but I’m not sure about some of these others. Bringing in headline acts are tied to the town’s funding commitment.”
Frank Miller explained the Thunderbirds and the Blue Angels certainly qualified as headline acts, but the same could be said about the Canadian Air Force Snow Birds, or even the single aircraft military performers such as the Warthog or the Harrier, for example.
“We’ve been very privileged to have back-to-back performances by the Blue Angels and the Thunderbirds in recent years,” he said. “Most air shows don’t have that luxury. The Snow Birds are a fabulous performance and the military single-ship performers are still strong and draw big crowds.”
Frank Miller said Ocean City was fortunate to have a run in recent years of performances by the top military jet teams.
“We have been lucky,” he said. “If there was ever a year when the Thunderbirds or Blue Angels weren’t available, it doesn’t mean we wouldn’t have an air show. We’d just have to discuss it.”
Perhaps more importantly, Gehrig broached the subject of the profit-sharing from advertising sales from the live streaming of the air show.
“Did we get any revenue from ad sales last year?” he said. “This MOU specifically states the promoter shall provide the town of Ocean City with 50% of all revenue from the live feed.”
Lilley said he hoped to bring back the livestream of the event for 2021, but there was no funding mechanism in place to do that at this point.
“That was an accommodation last year because of the COVID circumstances and no narration or music at show central on the beach,” he said. “At this point, we have no funding dedicated to the live stream. The air show does not have a financial model to absorb the cost of the live stream.”
When pressed about the town’s $100,000 commitment last year, Lilley, who was participating in the meeting via cell phone, said that investment was not explicitly linked to providing a live stream.
“The $100,000 commitment last year was just to have an air show,” he said. “Without that investment, there was no air show. That funding was about keeping the air show alive last year.”
According to language in the MOU, the town is supposed to receive 50% of the revenue derived from the live stream, with the promoter receiving the other 50%. However, Lilley pointed out he had to contract with a third-party to produce the live stream and gain sponsors and sell advertising, which cut into his share. For example, if the town got its 50%, then Lilley might get 25% and the third-party might get 25%.
Lilley said he would like to continue to provide the live stream, but it might not be fiscally possible this summer.
“It’s a great value-add,” he said. “People were watching from their balconies and their hotels. Would it have had an impact on the 2021 show? Not necessarily. Was it needed for the 2020 show? Absolutely. We needed it for the narration and the music without a show center.”
As the debate wore on, Lilley suggested separating the live stream profit-sharing issue for another day and moving forward with approval on the overall MOU.
“Maybe what we need to do is separate that out,” he said. “We can figure out how to share the revenue between the town and the Ocean City Air Show.”
Gehrig, however, continued to press the promoter in the explicit language about the 50% share for the town.
“Last year, we didn’t expect anything because of COVID,” he said. “That’s why we invested the $100,000 and we took a lot of heat for that. We have our deal as the primary sponsor and that’s all we can control. We can’t control your third-party arrangements.”
Lilley said that arrangement was not likely possible this year.
“We can’t possibly do what you’re suggesting,” he said. “We can’t spend the money for the live stream without taking money from somewhere else, such as eliminating some of the acts.”
Council President Matt James recalled the discussion last year and the town’s late $100,000 commitment.
“My understanding was the $100,000 was to help offset the losses because of COVID, but a portion of that was an investment in the equipment for the live stream,” he said. “I think the discussion was times have changed and people would rather enjoy watching the air show from their balconies and hotels.”
Gehrig remained adamant about the live stream profit-sharing issue.
“There is no negotiation on this,” he said. “You came to us last year in desperation and we agreed to the $100,000. That was the agreement.”
Lilley again countered there was a cost associated with contracting a third party to produce the live-stream.
“The third-party provider has to get a percentage,” he said. “Are they going to be willing to give up their half? I’ll honor the agreement. I’m just not sure it will bear fruit.”
Lilley said he and his staff were in the air show promotion business and the live-stream last year was borne out of necessity because of the COVID restrictions.
“We don’t sell live streams,” he said. “We promote air shows. If you want to maximize it, we have to have their expertise and sales team to go out and sell it. There is a cost associated with that.”
There was some question if the MOU clearly required a live stream of the air show this year and in future years. An addendum to the 2020 MOU states, “the Ocean City Air Show will provide a livestream for all future air shows now that the town has invested the $100,000,” a point not lost on the Mayor and Council..
“Last year, you didn’t really know what to sell,” said Mayor Rick Meehan. “Now you know, and it was very successful. Now you have an asset and you know what you have. You have an asset and we want you to honor that agreement.”
Lilley said he intended to do so, but figuring out how to distribute the gross revenue would be challenging.
“I will honor that, but it will have to come at the cost of something else,” he said. “It just doesn’t fit into the financial model.”
At the end of the day, the motion to approve the MOU for the 2021 air show was rescinded. Instead, Frank Miller, City Manager Doug Miller and the town’s legal counsel will go back to the drawing board with Lilley and his staff to work out the profit-sharing issue. The council did approve a separate motion allowing for the expansion of the event’s footprint on the beach to 13th Street.