Decreased capacity will translate into markedly high ticket prices unless artists play for way less money. We know that is not happening.
By Bubba Krishnamurti
The pandemic is ushering in a rapid metamorphosis of the music business. As the industry oligarchs contract and consolidate the pillars of live music, independent artists, festivals, and venues will be sidelined. Yet industry people will not be the only ones to lose out — many fans will simply be pushed out of a pastime that is now far too expensive to take part in. Everyday that passes, the likelihood of returning to the experience and economics of festivals that we have known drifts further away. According to former William Morris Endeavour partner and co-founder of Lollapalooza Marc Geiger, there may not be concerts or festivals in the U.S. until as late as 2022. “My guess is late ’21, more likely ’22” said Geiger on The Bob Lefsetz Podcast. “In my humble opinion, it’s going to be ’22,” Geiger told the podcast host. “It’s going to take that long before what I call the ‘germaphobia economy’ to be slowly killed off and be replaced by what I call the ‘claustrophobia economy.”
Festivals, once attended by tens of thousands of people, will be an enormous liability at the same capacities. Currently, there are little to no event insurance providers able to underwrite policies in an uncontrolled pandemic and many are excluding coronavirus. Besides, a majority of Americans say they will not return to concerts or sporting events until there is a vaccine.
So, let’s game this out.
Here is our hypothetical: Let us assume that in 6-18 months there is a vaccine. Entrance into any major event will require corroborating a vaccination. Everyone from big box promoters to municipal officials will have a need to mitigate liability and cover their ass. Despite vaccine availability, states and municipalities have made marked cuts to capacity levels at events because the vaccine only provides a limited span of inoculation. Just as scientists are finding today regarding antibodies, they last for a limited time and there is a question as to how much protection they actually provide against re-infection. Many scientists do not believe a Covid-19 vaccination will be nearly as effective as a measles shot. Even with a vaccine, the liabilities on such events at their former volumes could make them both unethical and unprofitable. Entrance would not only require proof of vaccination but also a legal waiver of liability but proof of, ahem, health insurance. Ultimately, the days of 10,000 to 100,000 person festivals could be a vestige of a bygone era.
Let’s walk through the basic economics of a music festival.
Take your average 30,000 person festival. Drawing that many people requires a considerable talent budget. Let’s assume that the talent budget covers Mumble Rapper #2, Burned out but still relevant rock band #14, Press-play DJ #6, 15 Soundcloud rappers,10 non-binary flavor of the month Pitchfork acts, and a handful of ascendant YouTube celebs. At this point, you have a 2 million dollar lineup. Add in venue rental, staging, production, marketing, porta-potties, ticket fees, insurance, taxes, and city fees and that 2 million dollars jumps to 3.5 million. There are 3 primary revenue sources for festivals: tickets (70%), concessions (20%), and sponsorship ( 10%). Everything else is negligible. An ambitious but not atypical strategy would be for a festival to seek to cover their expenses with ticket revenues. Anything above that is profit. Profit that the festival owners would likely pay a 30% tax liability on.
So in the case of our 30,000 person festival, that comes out to $116.00 a ticket to cover their nut. Not cheap but attainable for your average service industry worker, wrench-turner, or member of the gig economy. Now, imagine that same festival was only approved to have an occupancy of 5000 people to give every person 6 sq. feet per person. The ticket price would then jump to $700. Not to mention the fact that food, beverages, and merchandise prices would jump to accommodate the lower volume of sales. What was once an experience that people of all socio-economic strata could attend would evolve into another under-appreciated luxury of the privileged. The fact is, concert giants like Live Nation and AEG will do it. They would have no trouble finding 5000 rich kids per every major market and have no obligation to provide musical experiences to the economically challenged.
This is not an entirely new phenomena. The well-heeled carnie folks that work the major festival circuits see the same ‘trustafarians’ attending Ultra one weekend and Coachella a few weeks later. The economics of providing festivals to a roaming band of privileged twenty-somethings will work just fine if they raise the price of the typical festival drink, the wretched Moscow Mule, to twenty bucks or so.
There is one way out of this dilemma though. If the headliners who charged one million dollars and up could simply perform at festivals for a fraction of the price then festival ticket prices could remain within reach for your average proletarian. All we need is a few millionaires who enjoy absolute luxury and adoration day after to day to take a 70% pay-cut.