Chapter 14 The Future of the Live Music Industry

There can be no doubt that live music today is in an extremely healthy state. But what does the future hold?

Cycles

Changing music tastes in the UK during the late 1980s and early 1990s had a profound effect on the UK live music industry. The so-called “Second Summer of Love” (which actually lasted two years!) saw the prevalence of the drug Ecstasy fuel an explosion in youth culture. Music fans jammed into illegal warehouse parties and outdoor raves, all but abandoning the live music of the day.

Live concerts continued, but the post-rave era of the early 1990s saw massive growth in legal clubbing as “DJ culture” grew. Live music promoters, especially those dealing with student venues, definitely felt the pinch and had no choice but to move into this area of promotion as well.

There are no specific figures to illustrate the financial impact the DJ-culture years had on live music in the UK, but I remember vividly speaking to promoters at that time who were predicting the death of live music. In their view, paying a couple of hundred dollars to a guy with a box of records was a lot easier than dealing bands, trucks, sound checks, and lighting rigs.

The late 1980s and early 1990s was obviously the bottom of a cycle for live music in the UK. Could that happen again? I’m not sure. Live music seems to be so powerful these days. Powerful enough to tempt people out of retirement….

Reforming

The lure of concert ticket cash, merchandise, and associated sponsorship deals is enough to tempt the most unlikely bands out of retirement. Motley Crüe, Take That, Genesis, and now the Police have all reformed and have toured or are planning to tour. It is interesting that none of these acts has released any new material, nor are they planning to. The immense earning potential of a quick world tour involves nothing more than rehearsing all your old material.

These reunion tours are a huge boost for the live industry as well. The Police tour is predicted to gross around $175 million; on top of that, you still have bands such as the Rolling Stones bringing in $138.5 million for 39 shows.

Concert-Going Experience

One major change for the live music industry appears to be the role of the promoter in creating a concert-going experience for the audience. Michael Rapino, CEO of Live Nation, says, “For 20 or 30 years, every promoter was a business-to-business brand. It was about servicing the artist and the artist community, not the consumer.” To change this approach, Live Nation bought Musictoday, a global entertainment merchandise supplier and branding company (see Chapter 9). “Our mission is no longer limited to the two-hour concert,”says Rapino.“It’s about taking that two-hour experience and turning it into a 12-month relationship. There’s so much around the show itself that we realized we should be selling: a photo at the show, song downloads, the concert poster.” Fans can already buy CDs of the concert they have just seen; this same CD can also be sold to fans who did not go to the show.

Live Nation has also started collecting contact details for the audience (e-mail address), something they had not thought important before because the audience was not buying tickets to see Live Nation the promoter , but to see the band. That situation has not changed; audiences pay to see the act on stage, not the guy promoting the show. Still, if the audience has a lousy time at a show because of bad car parking, poor facilities or high ticket prices then the promoter is going to lose customers. Promoters are learning to listen to their audience and  can get direct feedback about the venues the promoter owns   and the shows it promotes. Rapino explains, “If you went to a show at Jones Beach, we’ll send you an e-mail and say, ‘Thank you for going. Would you like to participate in our survey? We have some ways of rewarding you if you do.’ Was the parking good? Did the food suck? The sight lines? How can we make it better?”

As the superstar agents demand higher fees and the promoters increase ticket prices to pay those fees, making the concert-going experience better for the fans can only be a good thing.

Globalization

With its increased health and wealth, the live music industry is behaving like any other trillion-dollar industry and moving more toward globalization. The larger promoters, such as AEG and Live Nation, have had a busy couple of years acquiring smaller promoters, both domestically and in other countries. These takeovers are creating global super-brands out of the promoters.

On a smaller scale, two large US-based booking agents have recently opened offices in London, tempting the cream of the UK booking agents, along with their artist rosters, to head up their new offices. William Morris Agency and Creative Artists Agency (CAA) now operate in London, New York, and Los Angeles, with CAA also in Nashville.

Is the reason for these new offices to expand globally or just to acquire a whole new roster of clients overnight? Gaining a new client roster is certainly a possibility. If you can tempt a super-star agent to your company you will undoubtedly also gain the high profile acts in that agent’s roster. As bands have a relationship with their agent, regardless of what company the agent works for, you would find it very difficult to tempt a top act to your new agency without bringing the agent along with them.

Ticketing

One big change in the future of the live music industry will be ticketing. Until quite recently, a promoter printed and sold the tickets for the show using a distribution system that involved the venue box office, a few record shops, and mailing tickets in the  post. The promoter would collect the money from sales as they were made and hold onto it until the settlement.

Now a whole raft of ticketing purchasing and distribution systems are available. You can purchase your ticket online or via your mobile phone, and then print it out at home or have a code sent back to your mobile phone. You take your phone to the show where it is scanned, allowing you entry. No more waiting for the post to arrive or standing in line at a box office to but tickets.

This technology is great for ticket-buying fans, and its use is only set to increase. Some estimates put the sale of print-at-home tickets or mobile-phone-code tickets at 80 percent of all tickets sold in five years’ time. There is a problem, though. The promoter is no longer receiving the cash directly—it is going to the ticketing companies. Could this mean that the larger ticketing companies—such as Ticketmaster, which sells 15 million tickets a month—could just cut out the promoter and deal with the bands directly?

There is also the increasingly thorny issue of “secondary ticketing,” or scalping. As if the promoters did not have enough to worry about with the primary ticket sellers perhaps taking their business, they now have to contend with companies such as StubHub, who are making massive profits from the promoters’ hard work. (Figure 14.1)

Figure 14.1 StubHub.com. They take your unwanted tickets and re-sell them. Great if you are a fan looking for a ticket to a sold out show. Not so good if you are the band, booking agent or promoter because StubHub keep all the money.

StubHub (which was acquired by eBay) is a secondary ticketing company, giving people with unwanted concert tickets the chance to sell them online. This is reported to be a $10 billion industry, and StubHub (and others) sell tickets for an average of $145 (the average price for a concert ticket in North America in 2006 was $50.35)This is not the original price for the ticket—if you were unfortunate enough to want to buy a Rolling Stones ticket after they sold out, you would end up paying $263 for a $137 ticket through StubHub. Indeed, the average mark up paid to StubHub is  $67.50 per ticket. Of course, the artist and promoter don’t get any of that extra money; the deal has been done on the original ticket price, and StubHub walks away with a nearly 100-percent profit.

No one is accusing secondary ticketers of ripping people off—these companies are simply being entrepreneurial. What annoys bands, their management, and the promoters is that the secondary ticketers are letting the promoters do all the hard work and then sitting back and making huge profits.

Your Future

What is your future in this new world of after-show DVDs and global booking agents? How will you and your music fare?

DIY

A consensus sweeping the industry is that bands do not need record labels anymore and that DIY (do it yourself) is the way to go. As CD sales decline, labels are increasingly demanding a share of their artists’ entire income—live performance, merchandise, and sponsorship. EMI Records, for instance, signed singer Robbie Williams for a reported $90 million in 2002. The deal included EMI receiving income on all Robbie’s touring and merchandise income, as well as CD sales. Other artists, outraged by this apparent greed by the labels and encouraged by the opportunities of the Internet, are increasingly staying away from the major labels. The focus is on building multiple revenue streams and not relying on album sales. “We are in a different business now,” says Michael Hausmann, who manages Aimee Mann. Mann has released three albums on her own label, SuperEgo. “We can license a song onto TV or a film and make twice as much money (as we would on a major label), or we can book a tour or whatever.”

Other artists agree that DIY is the way to go. “People will make a lot less money, but more people will make money. I could give away all my music for free and still make a living from live shows and T-shirt sales,” says Akira the Don, an independent artist who was signed to Interscope Records.

Wait a minute, though. I have spent most of this book telling you that touring is expensive and that you are very unlikely to make much in the way of performance fees when you are starting out. How are you going to be able to tour without support from a record label? Enter the sponsors….

Bands as Brands

Bands as brands. Remember those words—you will hear them all over the place. Artists who are perhaps shunning the labels still need investment in order to go out and make thousands of dollars playing live. Bands are now leveraging their brand appeal—that is, working with companies who want to use their image to advertise their products. This goes beyond mere sponsorship. Bands are becoming brands and receiving cash from non-music-related products. Young British singer/songwriter Lily Allen now has a deal with a High Street fashion chain. Despite being only 21, Lily Allen has already had a number one single in the UK and has toured extensively. The deal with the clothing brand will see her advertising the chain, as well as designing a collection for the shops. Obviously she will earn money from both activities.

You may not have the brand value of a Lily Allen yet. If you are thinking about going down the DIY route, you should start to look at how you can turn yourself into a brand. Don’t be put off by possible accusations of selling out. In a recent survey by Entertainment Media Research of 900 males and females aged 15 to 50, 51 percent said they thought brand involvement in music was appropriate.

Being appropriate does not mean your musical audience (or the consumers of the products with which you are involved) will actually agree with the promotion tie-up. The survey also found that  46% of those asked though that the tie-up between Apple and U2 (Figure 14.2) was a ‘good fit’, i.e. it was appropriate. By contrast, only 13% thought the sponsorship deal between McDonalds and Justin Timberlake was a ‘good fit’ – in fact 28% of the people asked thought it was a ‘bad fit’.

Figure 14.2 Apple iPod and U2. Neither really needs the other to carry on selling but both are now powerful brands – each gives the other the impression of quality, technological innovation and lasting appeal.

Investment

Another recent innovation in the wake of the labels losing their hold on artists is the advent of music venture capital trusts. Venture capitalists (VCs) work by persuading people to give them money, which they then invest in startup companies or use to aid growth for established companies. Traditionally, VCs operated in the millions-of-dollars territory, and attracting investment into the music industry was not even in the same state, let alone the ballpark.

Now the situation has changed. Patrick McKenna, chairman of Ingenious, a media investment and advisory business, says, “The demand for live entertainment, in all forms, has increased significantly in recent years as consumers look for new and unique entertainment. This consumer-led growth in live revenues has been fueled by brands wishing to sponsor and advertise around major events of both an entertainment and a sporting nature.” See—it’s that bands as brands thing again!

Ingenious has two music venture capital trusts, which are set to raise $98 million (£50 million) for investment in companies producing and promoting new and established live events. This is an amazing amount of money and a new development that has fantastic implications for an already booming industry.

Make sure you are part of it!