In early March 2020, with many international governments slow to react to initial levels of COVID-19 infections and seemingly paralysed by uncertainty as to what action, if any to take, a growing number of events cancelled or postponed: SXSW cancelled for the first time in 34 years; Ultra Music Festival In Miami cancelled; Coachella & Stagecoach festivals postponed and initially rescheduled to October 2020; BBC Radio1 cancelled its ‘Big Weekend’ music festival originally scheduled for May; and then the 50th anniversary of Glastonbury Festival was cancelled as a result of the threat of the developing pandemic.
The world’s major live-entertainment companies, combined to announce the formation of an industry task force which included Live Nation CEO and President Michael Rapino, AEG President and CEO Dan Beckerman, AEG Presents Chairman and CEO Jay Marciano, Creative Artists Agency Managing Partner and Head of the Music Division Rob Light, William Morris Endeavor Partner and Head of Music Marc Geiger, Paradigm talent agency founder and Chairman Sam Gores, Paradigm Head of Global Music Marty Diamond and United Talent Agency Global Head of Music David Zedeck.
On the 20th March the UK Prime Minister then ordered all cafes, pubs and restaurants to close except for take-away food, whilst all the UK’s nightclubs, theatres, cinemas, gyms and leisure centres were told to close ‘as soon as they reasonably can’.
At that stage there was little appreciation of the likely impact of the pandemic in terms of the eventual tremendous loss of life, societal lockdowns, evolving health protocols and the long COVID-19 interregnum that would restrict any opportunity to re-embrace the spectacle of live music.
In the market research report ‘Music in the Air: The Show Must Go On’ (Goldman Sachs, Equity Research Report, May 14th 2020) Goldman Sachs forecast that the COVID-19 impact to the global live music sector would be an approximate 75 percent downturn in revenues and declared that 2020 would be a ‘lost year’ for the industry.
Global Live Music Market 2007 (Actual) – 2030 (Estimate)
The report further noted that whilst live music had been one of the most resilient parts of the music industry for the last two decades, the nature of the crisis meant there was considerable uncertainty over the timing of any return and what that may look like.
Further commentary included the observation that following any relaunch for the initial period revenue per individual event would be lower, with an assumption of only 65% of that previously achieved in 2019. This performance was ‘impacted by potential caps on audience size/density, travel restrictions and general economic weakness weighing on consumers’ discretionary spend’.
More confidently Goldman Sachs did forecast that the long-term growth outlook for live music was intact as it was unclear as to whether livestreaming would replace the live experience. Further the ‘millennial experiential economy’ would continue to drive event demand and sponsorship revenues would return (because of the younger demographic’s continued attraction to live music), and that Artists would remain largely dependent upon touring to supplement their income.
The reality of COVID-19’s actual impact to the industry quickly became apparent within the various Quarterly Reports by public companies operating in the international live music sector, despite language designed to assure investors and the wider market:
Then in September 2020 PwC issued its ‘Global Entertainment & Media Outlook 2020-2024’ report which stated that revenues generated by live music ticket sales and sponsorships had already fallen 64% in 2020 with approximately US$18Bn having been wiped off the value of the international concert industry.
Unfortunately, for many in the live music sector the actual decline experienced was substantially worse.
But without a centralised UK live music reporting platform, it is difficult to accurately detail the specific COVID-19 impact to revenues, ongoing employment, organisations that utilised furloughs and/or redundancies, internships and apprenticeships lost due to the lockdown, individuals who may not have qualified for any of the various government business support schemes and/or claims for Universal Credit, or the number of companies that may have applied for loans but fell into financial administration.
However, the August 2020 ONS update (Coronavirus and the economic impacts on the UK: https://www.ons.gov.uk/businessindustryandtrade/business/businessservices/bulletins/coronavirusandtheeconomicimpactsontheuk/27august2020) reported that the arts, entertainment and recreation industry (albeit not an exact match for the live industry but the most similar ONS category) had the largest proportion of the workforce furloughed, at 51 percent (compared with 13 percent across all industries). Additionally, 23 percent of the arts, entertainment and recreation businesses reported their risk of insolvency was severe to moderate (compared with 11 percent across all industries), and also reported the highest percentage of businesses indicating that footfall had decreased, at 76 percent when compared with normal expectations for this time of year.
Arts, Entertainment & Recreation Industry – Risk of Insolvency
In addition to staff directly employed across the live music industry there are many freelancers, self-employed and zero-hours employees working across the broader ecosystem of the sector.
For example, for any event production, there is an army of crew who work on site in specialist roles, such as sound engineers, riggers, and lighting engineers. These technical experts are usually freelancers, working job-to-job, or employed week-to-week.
Additionally, at any event there are also large numbers of less specialised support staff who work as stewards, concierge, bar staff and more.
Lastly, there are also highly specialised professionals, including lawyers, accountants, insurers, graphic designers, social media & marketing, as well as press & PR agencies, who typically work on a retainer contract basis, whom will all have experienced a substantive decline in demand for their services from the live music industry.
Their collective situation worsened during 2020 with complete shutdowns triggered across all international markets.
Additionally, the Carey & Chambers report for LIVE ‘UK Live Music: At A Cliff Edge’ (https://livemusic.biz/research-publications/) identified an annual revenue fall of 81% for the UK sector when compared with the previous year, with zero revenues for many operators since March 2020.
Across the global live music sector 2020 revenues therefore fell from the estimated $28Bn (2019) to little more than $5Bn with huge levels of ‘debt’ to consumers in the form of tickets acquired for postponed events. And 2021 did not bring any immediate relief.
Not in Q1.
And then not with any scale or consistency across many international territories (with the exception of Australasia) in Q2.
There was increasingly a sector-wide realisation that any relaunch, whenever it would occur, was beyond the direct control of the industry and so the lobbying of civic and national governments, funding agencies and regulators accelerated.
The key issues were the ongoing fiscal collapse of live event partners (at all levels) caused by a non-existent cashflow directly linked to the legal inability to re-open; the timing and scale of various vaccination programmes and transmission of COVID-19 variants; the limitations on event capacities due to social-distancing measures with associated P&L impact; and event-specific matters such as event insurance (including pandemic-related cancellation, artist & public liability), the logistics of equipment and personnel, improved event hygiene protocols, and the hoped-for consumer desire to return to mass-spectator activities.
Locally, campaigning by the AIF, LIVE, MVT, NTIA and UK Music (amongst others) with the apparent support of the Commons DCMS Select Committee, were however faced by a UK Government that felt unable (or unwilling?) to lend specific sector support.
And then the June 21st timetable for relaxation of the social-distancing restrictions on events, was threatened with a further delay.
The largest single operator within the live music industry is Live Nation, formed in 2005 following its spin-off from Clear Channel Entertainment, and since its subsequent merger with Ticketmaster in 2010 (described at the time by The Economist as ‘a union of pariahs’ – https://www.economist.com/business/2010/01/28/a-union-of-pariahs), the acquisitive conglomerate has experienced a dramatic increase in concert revenues, audience and managed events.
The precise market share that Live Nation and Ticketmaster has developed in North America and elsewhere varies, primarily due to an internal or external perspective, from a competitive 30% to an aggressive and monopolistic 70%, and then some.
Anti-trust scrutiny and/or competition regulation is normally triggered by an agreed definition of market with accurate measurement of its leading operators, something that the live music industry (or regulators) has seemingly been unable to calculate with no agreed clarity regarding who are (like-for-like) sector competitors, clear definition of GTV, revenues, or actual ticket sales etc. and with little apparent desire for such sector transparency.
However, Live Nation within its SEC filings and other public pronouncements continues to declare that competition in the live entertainment industry is intense. It further stresses that it competes primarily on the ability to deliver quality music events, sell tickets, and provide enhanced fan and artist experiences, arguing that its track record, reputation, and fiscal stability are key strengths. (Not withstanding the substantive addtional $1.2Bn debt taken on to weather the COVID-19 crisis.)
Despite the ‘enviable market share’, especially in North America, and its growing international network (https://www.livenationentertainment.com/global-sites/) there are still a number of sector competitors including: AEG Presents; Caesars Entertainment; Evenko; FKP Scorpio; I.M.P.; Kilimanjaro Live / DEAG; Ocesa / CIE; TEG Dainty / TEG Live etc.
Albeit economists have noted the oligopoly market structure, with a consolidating number of larger multi-territorial operators increasingly dominating the industry and deterring new entrants from competing for significant market share.
This live sector consolidation follows a decade-plus period of growth, with more venues, whether nightclubs, theatres, arenas, stadia, or greenfield sites, in more international territories, increasingly attracting sponsors and promotional partners for a growing number of events enthusiastically attended in greater numbers by consumers (rebadged as fans), who increasingly pay more, and more, to see their favourite Artists perform.
In the live music industry the Artist / Attraction / Star is the prime economic beneficiary of concerts, residencies or tours, albeit that promotion, marketing & ticketing distribution has historically been key to event monetisation.
So the incentivisation of talent has been a key obective for the live music industry – in order for others to then earn their margin (For further analysis of live music economics and net Artist earnings: ‘Putting The Band Back Together’ Jason Bazinet, Mark May, Kota Ezawa et al. (2018) – https://www.citivelocity.com/citigps/music-industry/).
As noted by the Wall Street Journal in December 2019, live revenues then accounted for some 75% of (gross) musician’s income (Anne Steele ‘Why Concert Tickets Are So Expensive. Over the past decade, the average ticket price for the top 100 North American tours has increased 55% to $94.83’ – https://www.wsj.com/articles/why-concert-tickets-are-so-expensive-11577371024) and the immediate future seemed assured for the live industry.
In a triumphant, if not hubristic, Pollstar 2019 end-of-year report:
‘Perhaps the best way to sum up our industry’s phenomenal growth for this year, the past five years and for the decade would be to reference a song title by this year’s Artist of the Year, Pink.
The Global (Recorded + Live) Music Industry (2019)
Music is vitally important to millions across many generations, providing not just an evolving soundtrack, but for many an inspiration to personal identity and self-worth, providing access to a shared experience, community, fun and good times – ‘sex n’drugs & rock n’roll’.
Historically the recorded and publishing sectors dominated the cultural perception and commercial reality of music industry revenues controlling content, marketing and release schedules, pricing, licensing, and distribution with touring plans typically scheduled to follow album release priorities and extend catalogue revenues.
However, commentators over recent years have highlighted the money shift that occurred following the advent of internet file-sharing, whereby a whole generation opted out of paying to consume recorded music.
For a decade and more live revenues grew whilst recorded shrank until the scalable adoption of streaming whose technology (largely developed by former bit-torrent ‘poachers turned gamekeepers’) with slick UI, convenience and near-universal catalogues finally enabled some form of return to health for the record companies (leaving to one side for the moment the ongoing debate about the level of net music streaming royalties paid to individual artists) with approximately $20.2Bn total revenues in 2019.
Global Recorded Music Industry Revenues 2001-19 (US $Bn)
By comparison, the live music industry experienced significant and prolonged growth during the same period with PricewaterhouseCoopers (PwC) calculating that the total revenues of the live sector (ticket sales + event sponsorship) eventually exceeded that of recorded + publishing + sync.
Global Entertainment & Media Outlook 2011-2020
(c) PwC / Ovum
Within a later edition of its annual report ‘Global Entertainment & Media Outlook 2018-2022’ PwC then predicted that global ticket sales would grow from just over $22Bn in 2019 to more than $25Bn in 2023, whilst live music sponsorship would also grow from $5.91Bn to $6.46Bn over the same period, equating to a live music industry worth approximately $31.49bn in 2023 (https://www.iq-mag.net/2019/09/global-live-music-ticket-sales-top-25bn-pwc-outlook-2019/).
But concentrating on actuals as opposed to projections (with research collated from various public and private sources), in 2019 the combined global music industry (recorded + live) therefore equated to approximately $48Bn, of which recorded contributed $20Bn and live music $28Bn.
As the live music industry nervously gears up for its return (‘The first to close, the last to reopen’), mindful of the evolving regulatory authorities’ response to COVID-19, vaccination roll-outs, levels and locations of any new Coronavirus variants, and their own internal organisational and fiscal preparedness, there are a number of questions relating to both the velocity and scale of any relaunch.
Not least because the hoped-for recovery may not be nearly as swift or as straightforward as desired following the last year+ of postponements, cancellations, and multiple lockdowns with politically-directed and oft inconsistent health guidelines.
As discussed in previous posts, the speed of any return, whether to the golden-era of 2019, or earlier, will depend upon a number of factors including: (international) Artist availability (Will domestic talent be able to exploit staggered market re-openings?); the accessibility of event and public liability insurance; the distressed events supplier services and logistics sectors; the need for local licensing authority agreements; and the cashflow impact of the COVID-19 shutdown(s) to event organisers – many of whom have utilised employee furloughs, redundancies, supplier contract terminations and event postponement (avoiding the need to offer consumer refunds for cancelled events) in a desperate attempt to survive.
The cash-deprived live sector, which historically has operated on thin-margins (typically requiring 70%+ paying capacity and then access to bar sales or other incremental revenues for event breakeven), cannot effectively operate with restrictive timeslots or socially-distanced reduced capacities that for example restaurants, galleries, museums, or theme parks have incorporated.
Some Promoter / Producers have already re-negotiated Artist fees requiring a greater level of shared risk, lower or no guarantees, applied downward pressure on show settlements and service supplier agreements to reflect the inherent risk of any relaunch with potentially smaller and/or nervous audiences coupled with the fragility of their own operations as they attempt to recoup the COVID-19 related costs of any newly onboarded corporate debt.
There is also the fiscal and operational reality that aside from restricted capacities some venues and event organisers may struggle to implement any required contactless technologies, increased ventilation, protective equipment for staff, and new health & safety signage whilst ensuring more regularised and intensive site cleaning is undertaken.
Additionally, many of the show reps, stage, sound & lighting crews, security, concierge, and concessions staff and all the other freelance, self-employed or zero hours employees who provide the oft invisible labour force that makes live music possible have all endured complicated, if not futile, efforts to attract furlough support, or collect unemployment benefits.
And then consumers attending events in 2021 (and beyond) may also be presented with a potentially emotionally dislocating event environment which includes: travelling to venues via reduced-capacity public transport with mandatory masks and the more anxious also carrying anti-viral wipes, tissues and disposable gloves; identity verification with temperature scans and/or health certification checks at event entrance; digital ticketing; contactless payments; the enforcement of some form of social-distancing within the event, with traffic-flows for access & egress to bars (dispensing single-portion pre-packaged F&B) and toilet facilities ideally with plentiful hand-sanitiser stations, all supported by onsite First-Aiders & Paramedics not at all exhausted after sixteen months on the COVID-19 front-line.
Will the ‘new normal’ therefore be a more restrained experience, with at least initially, fewer events and venues open, for a smaller than previous number of Artists able to perform (impacted by potentially lower show grosses as well as the added complications of travelling, especially for international artists) with lower than previous staffing levels, or will there be a ‘Roarin20s’ or ‘années folles’ of artistic and cultural dynamism with accelerated consumption?
Arguably it is more likely that the tremendous loss of life – over 152,000 (as of June 2021) in the UK alone – and the macroeconomic impact of the 2020-21 lockdown(s) will re-shape the existing codes of business behaviour, the level, and types of audience engagement as well as the commercial operations of the live music industry.
COVID-19 could prove to be a disruptive moment for live music in the same way that Napster impacted the recorded industry.
However, many Promoters have already claimed that there is an overwhelming demand for the return of live (Do you really expect them to say anything to the contrary?), from both Artists wanting to tour (Not least for economic self-necessity) and by Audiences wanting to re-embrace the live experience.
The daily announcement of new concerts and tours for 2022 and beyond is taken as proof-positive of the strength of this relaunch.
But closer examination of the actual ticket sales reveals many are previous bookings (from as far back as 2019) where customers have retained their tickets in nervous expectation of eventually attending, and new onsales are not consistently being embraced by audiences – in part because of the (over) supply exceeding demand for new events.
Promoters are trumpeting the fact that 2022 is ‘much stronger than usual’, with almost twice as many major touring artists on cycle than a typical year.
But are there more venues or twice as many weekend nights available next year? Further are audiences financially able and likely to attend twice as many events as in previous years?
Or will the glut of tour onsale announcements inevitably become the live music equivalent of ‘shipping platinum and returning gold’ i.e. can everything sell-out, or at least achieve breakeven?
Will the industry be able to adapt to and successfully integrate the new (temporary?) health protocols, and event capacity restrictions, whilst ensuring budgeted breakeven-plus (To aid their commercial relaunch and to pay down some of their newly acquired debt), and re-establish the formula of ticket pre-sales funding events several months in advance of the actual spectacle?
Or will Artists, and/or Rights Owners, and their Audiences continue to adopt new innovative platforms enabling remote but immersive connection, and monetisation, whether via gaming, livestreaming, AR, or VR, and, at least partially, sidestep the live experience?
Proud to announce the release today of the ‘UK Live Music: At A Cliff Edge’ report produced in conjunction with Chris Carey (https://www.linkedin.com/in/cjcarey/) on behalf of LIVE (Live Music Industry Venues & Entertainment).
The live music industry has been devasted by the impact of COVID-19 with the enforced shutdown of concerts, festivals and tours, the suspension of furlough support, little sector-specific support, major operators forced to make redundant hundreds at a time, and thousands of self-employed, freelancers and zero-hours staff losing their livelihoods.
Report findings include:
In 2019 live music supported 210,000 full-time equivalent roles, as well as tens of thousands of freelancers & contributed £4.5 billion to the UK economy
In 2020, revenue in the live music business will fall by 81%, and revenues have been close to zero since March
50% of permanent roles will be lost by the end of the year while temporary and freelance roles have already been decimated, totalling 170,000 job losses across the sector by year-end
An eventual return to large-scale international live touring in 2021/22 is obviously subject to access to an effective vaccine(s).
Alongside which is the availability of reasonably-priced event and public liability insurance, the re-contracting of touring logistics (event production, equipment and crew – all typically freelance or self-employed and some of whom may not have fiscally survived the COVID-19 interregnum), enhanced Health & Safety protocols with increased requirements for audience identification and monitoring leading to potentially reduced event capacities, and the new show deals potentially exposing artists to greater levels of risk with low-or-no guarantees, will all combine to usher in a new era of live entertainment.
For the live touring sector there has long been some concern regarding the aging group of heritage acts and stadium rockstars – Aerosmith, Billy Joel, Bruce Springsteen, Elton John, Roger Waters, Rolling Stones, The Who etc. as ‘Saint Death’ inevitably takes hostages.
For concert promoters and festival organisers which of the younger generation would combine that mass market appeal, back catalogue and the desire to tour with the necessary theatrical flair for album-based multi-hour spectaculars?
Whilst they are generally younger than the artists who first came to popular acclaim in the sixties and seventies, are Coldplay, The Killers, Madonna, Metallica, Pink!, Red Hot Chili Peppers, TakeThat or U2 going to commit to the next twenty-to-thirty years with the rigours of touring, and also have a global audience?
Perhaps the new generation of hip hop / rap / dance crossover: Ariana Grande, Beyonce, Chance The Rapper, Drake, Eminem, JayZ, Justin Timberlake, Kanye West, or Usher with the growing internationalisation of tours expanding into China & the Pacific Rim, South America, and eventually Africa will become the predominate touring culture?
This does not mean that the increasingly niche rock market goes away, it just exists alongside Classical, Jazz, Opera and other ossified musical art forms – supported by historical government funding, advertorial media and the slow-moving record business.
Essentially the global live sector is evolving from white rock’n’roll, to a more contemporary and diverse RnB sound with artists that have also attracted new and different audiences – younger, more culturally diverse, socially engaged via smart phones, and experientially-orientated (as the cost of ownership is typically beyond them with housing, transportation & workspaces via subscription – AirBnb, Lime Scooters, Lyft, Uber, WeWork etc.).
The new live music audiences are young, urban and internationalist. They are working longer hours with relatively lower disposable personal income. The digitalisation of content means they experience music via their phones, on the move, or in bars and clubs – the traditional distribution channels of radio, billboard & print has been disrupted. The new consumers stream music but typically don’t buy the physical product. They applaud individual tunes but don’t need to appreciate longer format releases.
To monetise this audience international tour promoters will target the growing global network of arenas (10k+ capacity) in the world’s top 200 capital cities. Whereas the larger theatres are usually only 3K-5K and are typically orientated towards the performing arts and theatre sector, and so the architecture and facilities tend to reflect those core civic constituencies and associated cultural and service requirement i.e. Founder & Sponsor Hospitality, Orchestra Pits, Acoustic Baffling & signature Architectural design. These lower capacity venues also typically don’t provide sufficient event ticketing ROI to incentivise the touring talent and their international event producers.
Arenas provide a controlled environment where the architecture and operations of the event space have been highly commoditised and producers everywhere know how to create, organise, and execute successfully. Load-In/Out, Stage Width & Access, Hang-Points & Overhead Clearance, Power Supply, Dressing Rooms, Parking and VIP Meet’n’Greet Facilities are all increasingly standardized within climate-controlled, concrete concourses and padded seats enabling the bling-conscious middle-class of Bangalore, Bogota or Bucharest to all experience the latest concert, theatrical or movie experience.
So, post-COVID whilst there will be fewer blockbuster stadium tours by aging artists celebrating their forty-year careers, it is likely that – because of the new economic and hygiene constraints but aided by the growth of arenas – there will be many more touring artists, albeit possibly only enjoying a four-year career reflecting their pop career, hit-tune, TV spectacular background, or other fleeting breakthrough-moment.
Noted within the Live Nation Entertainment Inc. Q2 2020 Results:
Cost and Cash Management Programs
Given the uncertainty associated with the duration of current conditions globally, we have implemented a number of initiatives to reduce fixed costs and conserve cash. As part of these cost reduction efforts, we have implemented salary reductions for most of our employees, with salaries for senior executives reduced by up to 50%. Additional cost reduction efforts include hiring freezes, reduction in the use of contractors, rent re-negotiations, furloughs, and reduction or elimination of other discretionary spending, including, among other things, travel and entertainment, repairs and maintenance, and marketing.
We are also making full use of government support programs globally. In most European and Asian markets, including the United Kingdom, Germany, Italy, France, Spain and Australia, there are robust payroll support programs to mitigate a substantial portion of employee costs. Additionally, in the United States, we have filed for payroll support under the Employee Retention Credit program established as part of the 2020 CARES Act and expect to receive additional support in the second half of the year. Finally, the CARES Act also provides for deferred payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022.
The company’s $432 million adjusted operating income (AOI) loss for the quarter was driven primarily by operational fixed costs of approximately $334 million, inclusive of approximately $60 million in benefits from various government payroll funding programs.
‘The US secondary ticketing sector is borrowing up to $77.5m via the Paycheck Protection Program (PPP) to remain afloat amid the COVID-19 pandemic, which has brought the live events industry to a complete standstill for four months ……’
Until there are new onsales for new events, at scale, ticket retail companies are living on borrowed time, and for postponed events on consumers cash.
Live Entertainment and Theatre generates £11.25 Billion in Gross Added Value (GVA) in each year
Theatre contributes £4.8 Billion GVA, supporting 290,000 jobs
Music contributes £4.5 Billion GVA with £2.74 Billion GVA from Concerts and £1.76 Billion GVA from Festivals
Music supports 210,000 FTE jobs with 125,000 through Concerts and 85,000 through Festivals
Other Entertainment contributes £1.95 Billion GVA contributing another 100,000 jobs
Under the time constraint it was not possible to commission new lengthy assessments, so instead the approach was to take existing published insights combined with sector expertise and private data from various industry sources to best represent the sectors on a consistent basis.
We attempted to harmonize definitions, avoid any double-counting of revenues by the differing sector service providers (for example, collection agencies and ticketing), whilst modelling additional contributions from organisations representing artists, concert promoters, festivals, and grassroots music venues to produce a coherent structure for sector definition.
We also developed a methodology for defining ancillary services and incremental spend around events, to provide a clear understanding of the total live entertainment activities and economic impact.
The figures for live music were largely built by aggregating various sector reports including UK Music’s (https://www.linkedin.com/company/uk-music-ltd/) long-established ’Music By Numbers’ analysis, the National Arenas Association (NAA) and the Association of Independent Festivals (AIF) annual reports, with other contributions including work by the British Association of Concert Halls (BACH) and the Music Venue Trust (MVT).
For the theatre sector we utilised the invaluable Society of London Theatre / UK Theatre annual reports, as well as data received from the Really Useful Group which utilised pre-existing Arts Council methodology.