Festival Turf Wars

The album is no longer the golden child of the industry. In 2014, recorded music dropped in overall sale value by 11%, deepening its decade old downward trend. Moreover, only two albums went platinum that year: Disney’s Frozen and Taylor Swift’s 1989. Adele notwithstanding, the picture does not paint well either for 2015, although the final numbers will not be released by the Recording Industry Association of America for a few months.

Instead, the $6 billion North American concert industry continues to be a bastion of strength, duplicating ticket sales in value since the mid 1990’s (before adjusting for inflation). Live music provides more revenue for artists than ever –– and the labels that sign those artists to 360º contracts profit too.

In particular, Live Nation and AEG (Anschutz Entertainment Group), the two giant concert promoters, are doing battle over the latest cash cow: live music festivals. Jim Glancey, head of the Bowery Presents, reports that music festivals have become significantly more profitable than traditional concerts for promoters. Established festivals produce promoter profits of up to $5 to $10 million, with tickets ranging from $375 for general admission to $899 for VIPs. For Glancey, a single artist might instead return, typically, $45,000.

On top of such higher grosses, corporations will pay top money to promote their brand at festivals. Compared to a single event, festivals return good value. This is because there are larger audiences there, more music acts and tastes to cater to, and the message lingers over days, not hours. According to the latest statistics, sponsorship money for festivals, music venues, and tours exceeded $1.5 billion in North America in 2014.

This has to do too with historical changes in the production and consumption of music festivals. The majority of festivals are no longer run by independent producers seeking to make a name by pulling together well-known or new acts, like they did during the first days of Woodstock and the Newport Folk Festival in the 1960s. Festivals are now produced and organized almost institutionally, because the technical and business challenges have increased dramatically. For their part, consumers perceive festivals as a three-day break with a special value proposition: an economic way to sample a roster of about on hundred artists while partying, drinking, and sharing the full experience with like minded fans.

The largest music festival by ticket sales is Coachella, which in 2015 year grossed $84 million from sales of 198K tickets. This is an average price per ticket of $424, an all time record. Coachella is owned by AEG. Live Nation, instead, owns one of the oldest and most popular festivals, Lollapalooza. The brand’s main event is in Chicago, but it also runs in Berlin, Brazil, Chile, and Argentina. Lollapalooza grossed $66 million in 2014, and its average take is probably around $300.

The resurgence of music festivals has led to a corporate buying frenzy. In April, Live Nation cornered the market by purchasing a controlling stake in the Bonnaroo Festival. With the acquisition, Live Nation now owns four of America’s top five festivals as measured by attendance. It must be realized that Live Nation owned no festivals at all as late as 2012. For its part, AEG has added at least twelve major U.S. festivals to its portfolio since 2010 through acquisitions, partnerships, and launches. The company reports that in 2010 only one in ten dollars of its bottom line came from festivals; now it is more like one in three.

AEG and Live Nation are also attracting more talent to their festival shows. The steady flow of attendant fans, year in and year out, guarantees a dependable source of income for artists; individual album releases no longer do that and are, in any case, far more unreliable. But earning the loyalty of the customer, i.e. the attendant music fan, is key to Live Nation and AEG. This makes it an all around win-win partnership with the artist.

There is, for sure, much intra corporate competition, especially to secure new locations. Here is where the concert promoting giants turn the heat on against smaller independent festival promoters. Partnerships are aggressively pursued, and when denied, retaliation follows–– which in not good for independent festival organizers or, in some instances, the offer of talent.

The story of New York’s independent Governors Ball Music Festival illustrates this. Failing an agreement between AEG and the promoters of Governors Ball, AEG now plans to hold a parallel event at Queens’ Flushing Meadows, Corona Park, in June this year. It is calling it the Panorama Music Festival. The Panorama Festival would take place two weeks after Governors Ball in Randall’s Island.

The problem for the organizers of Governors Ball is twofold: a potential loss of ticket sales as well as more tepid commitments from attending artists. This is because bands that are booked to a music festival are usually prohibited from performing other shows in the area weeks or months around the date of the event, and talent hoping to make Governors Ball will likely reappraise whether it is in their best interest to attend or switch instead to the Panorama Music Festival. Says Jordan Wolowitz, co-founder of Governor’s Ball: “[AEG] is trying to run us out of town. There are plenty of other times to do a big festival in New York. We’re not suggesting that they not do a festival; we’re suggesting they don’t do it two weeks after us.” Wolowitz points out that other major cities such as Lost Angeles and Chicago hold several festivals a year, “but none of them are two weeks on top of each other; you’re competing for the exact same ticket buyers. It doesn’t make business sense, frankly for either company. [They’ll] have a diluted lineup, we’ll have a diluted lineup, and the fans lose.”

Technology also seems to bias the market in favor of big money and away from independent promoters. Its presence is found everywhere. Wearable tech wristbands, as used at ID&T’s Tomorrowland Festival, serve as more than entry tickets. They provide the festival with a ‘cashless’ environment, where all transactions for food, drinks, and merchandise are uploaded on the wristband. Moreover, fans are able to link up with one another through UHF radio frequencies that connect when users simultaneously press the bracelet’s heart-shaped button.

Other instances of tech applications in the music festival industry are not hard to find. Both AEG and Live Nation have developed apps for smartphones that allow features like wristband activation, friend finder, shuttle tracker, and meal planners. These apps have replaced paper maps by including things such as a 360-virtual reality experience allowing festival attendees to use the app to roam festival grounds, watch live footage, or relive the experience using Google cardboard. AEG has partnered with ‘hearables’ company Doppler Labs in an exclusive deal for the first use of DUBS Earplugs. The earplugs are specially designed for concerts and were handed out in welcome boxes at this year’s Coachella festival. (Interestingly, VIP’s earplugs had an added feature that simulated what a concert might sound like to them in the future if users did not protect their ears now.)

Finally, the importance of streaming and new media conversations is critical to this growing market. Patrick Dentler, director of marketing at the concert promotion company C3, the largest independent promoter in the U.S., says, “music festivals must live-stream now if they want to be seen as credible and extend the reach of their events”. At present, Coachella is the longest-running live-streamed festival on YouTube, and Live Nation is playing catch up to AEG, but this may not last. Independent promoters are even more behind. Today, fans must get a personal sense of the festival’s atmosphere ahead of time if they are to choose it next year. The homogenized and gated experiences of the late 1960s are, in effect, history.


By Brooke Adams


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