by : Business, May 2017

Desert Trip’s Multiplier Effects

Desert Trip’s Multiplier Effects

The Desert Trip music festival at the Empire Polo Club in Coachella Valley, Indio, California, has focused attention in the industry. This October offering was run out of season. It attracted a cross-country audience, much of it middle aged, of about 150,000 over two weekends. The lure was an A list of legacy acts, including Paul McCartney, The Rolling Stones, and Bob Dylan.

Planning started in May, and media coverage was relentless. The gathering of greats, put together by Paul Tollett of Goldenvoice, a subsidiary of top concert promoting company AEG Live, was expanded to two weekends when tickets for the show sold out within the first five hours. Approximately 400,000 people attempted to buy admission, exceeding the show’s maximum capacity of 75,000 per day.1 General one-day admission started at $199, three-day admission at $399, and reserved-seating three-day weekend passes sold for $1,599.

In the event Desert Trip became the most lucrative festival ever for Goldenvoice and probably made the all time record for music festival profits. Gross returns reached upwards of $160 million, not including expected proceeds from post-festival merchandise such as CDs, DVDs, and streaming. Revenue overcame production costs of nearly $100 million for a festival talent budget of $35 million. Each was reportedly paid upward of $5 million.2

Goldenvoice and AEG also run Coachella and Stagecoach in April and May, respectively, and neither festival seems to compare. The 2015 Coachella Valley Music and Arts Festival, one of the most memorable  in history, grossed $84.3 million; Stagecoach, instead, fetched $21.9 million, so profits in both cases were much smaller.3 The irony is that it took years of effort, smarts, and constant promotion to establish Coachella, since 1999, and Stagecoach, since 2007. Obviously, the power of stellar headliners together in one place like never before trumps even the best long-term marketing plans.

The Multiplier in Action

Goldenvoice operates all these festivals in Indio, a deliberate strategy. Coachella and Stagecoach are known to boost audiences in tandem. Since 2012 visitor spending has increased 60% at Indio on account just of Coachella and Stagecoach. The economic impact of both festivals is in fact larger, and the total spending multiplier has been put a total of  $254 million in 2012 and $403 million in 2016. Desert Trip’s instant success is estimated to have doubled that stimulus to $805 million.4

The affluence of Desert Trip’s baby-boomers, the target audience of the festival, cannot be in doubt. The average ticket buyer was 51 years old, for an incredible performer mean age of 72. With almost half of all national festival attendees under the age of forty, Desert Trip was the first mega music festival to specifically cater to middle aged/senior audiences. A single stage setup helped, as did smooth evening sets, and a less electric atmosphere overall. It could be said that the object of Desert Trip was to create as little agitation or commotion as possible while building on the cross-generational, and more universal, appeal of its megastar acts.

Baby boomers, born post-WWII in 1945 to 1964, are currently the second largest generation — the runner up to the millennial generation.5 At 73 million, there is one boomer for every five Americans.6 Moreover, they are the wealthiest generation.7 Festival producers, of course, priced tickets, food, lodging, and reserved seating at a significantly higher rate than Coachella or Stagecoach in the knowledge that demand would be firm.

No doubt there was an experiential component that drove boomers too. They were willing to travel in search of their own cultural identity, embodied in the iconic Woodstock festival of their youth, where, in 1967, fresh lifestyle approaches were celebrated with music that, in so many ways, was the agent of change. Paul McCartney, the Rolling Stones, and Dylan were heroes they could embrace again.

The Value of Live Music

As shown above, Desert Trip demonstrates that the value of live music far outstrips concert ticket grosses. In Indo, CA, there were many multiplier effects from festival ticket sales. This is obvious, but needs to be spelt out better to make the case for the larger and positive indirect economic effects that music making has on the economy. For instance, when a property’s rent is pushed up from $2K to $3K to accommodate the influx of festivalgoers at Coachella, the whole local community benefits, not just concert promoters.

Festivals are here to stay, so the case for live music as a driver of the entire music market will remain strong. According to Neilsen Music, 52% of all music money spent in 2015 went to live performance, between live concerts, festivals, live DJ events, and small live music sessions.8 As revenue from digital and physical music sales continues to decline, the industry will continue building its case that live performances is its own unique experience.

In the meantime, artists will oblige with the supply of talent for there is hardly a way out. Recordings are no longer the cash cow of the business, and projections of revenue from just live music ticket sales, based on data from Pollstar and Billboard’s Boxscore, are growing overall, beating handsomely the growth rate of the US economy well into 2020.

In addition, live music has become the main source of income not just for starting artists but for marquis acts as well. In 2015, approximately 94 % of the Rolling Stone’s $40 million dollar net income was derived from touring while streaming represented just 0.96%. In the same year, The Grateful Dead made $24 millions, 94% on live shows and only 0.48% in streaming.9

The economics of the business, in short, point towards more live music events and, from society’s point of view, the typical transaction should not just be measured by a single purchase of a recording or a festival or concert ticket. There is much more to music than meets the eye.

 

By Ashley Cook

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Sources:

1. Lewis, Randy. “Desert Trip Mega-concert Tickets Sell out in 5 Hours.” Los Angeles Times. Los Angeles Times, 10 May 2016. Web. 23 Dec. 2016.

2. Lewis, Randy. “Desert Trip Brought out the Boomers, but Its Appeal Was Ageless.” Los Angeles Times. Los Angeles Times, 9 Oct. 2016. Web. 23 Dec. 2016.

3. Waddell, Ray. “Coachella Earns Over $84 Million, Breaks Attendance Records.” Billboard. Billboard, 15 July 2015. Web. 23 Dec. 2016.

4. Martin, Hugo. “Desert Trip to Nearly Double the Economic Impact in Coachella Valley.” Los Angeles Times. Los Angeles Times, 23 July 2016. Web. 23 Dec. 2016.

5. Fry, Richard. “Millennials Overtake Baby Boomers as America’s Largest Generation.” Pew Research Center. Pew Research Center, 25 Apr. 2016. Web. 23 Dec. 2016.

6. Colby, Sandra L., and Jennifer M. Ortman. “The Baby Boom Cohort in the United States: 2012 to 2060.” Current Population Reports (2014): n. pag. The Baby Boom Cohort in the United States: 2012 to 2060. U.S. Department of Commerce, May 2014. Web. 23 Dec. 2016.

7. Steverman, Ben. “The Richest Generation in U.S. History Just Keeps Getting Richer.” Bloomberg.com. Bloomberg, 12 July 2016. Web. 23 Dec. 2016.

8. Resnikoff, Paul. “In 2015, Half of All Music Spending Went to Live Concerts.” Digital Music News. Digital Music News, 11 Jan. 2016. Web. 23 Dec. 2016.

9. Billboard Staff. “Taylor Swift Tops Billboard’s Top Money-Makers List of 2015.” Billboard. Billboard, 5 May 2016. Web. 23 Dec. 2016.

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