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Coachella

The Economics of Music Festivals: Who's Getting Rich, Who's Going Broke?

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Wed, Apr 17, 2013 at 4:00 AM

click to enlarge Coachella - JAMEY HOPKINS/WIKIPEDIA
  • Jamey hopkins/Wikipedia
  • Coachella
By Chris Parker

It's as though the sad, lamentable death of recorded music was accompanied by a kick-ass wake. Sure, label executives have had to sell their fancy homes and put their kids in public schools, but the rest of us have been feasting on a musical smorgasbord.

Nothing better exemplifies this than Coachella, the crown jewel among destination music festivals, a sort of spring break for music lovers. Three days of music, over 150 bands, repeated over two weekends (the second week starts on Friday) featuring a wonderful cross-section of music world old and new - Red Hot Chili Peppers, Moby, Wu Tang Clan, Social Distortion, Japandroids, Vampire Weekend, and more.

Coachella is part of a rapid build-up in stationary music festivals, big and small, across the country and reflective of live music's explosion of growth since the millennium. While it won't compensate for a 50 percent drop in U.S. recorded music sales since 1999, concert ticket sales filled nearly 40 percent of that loss between 1999 and 2009.

During that time, North American live music revenues trebled from $1.5 billion to a peak of $4.6 billion before receding a bit during the recession. Last year, concert revenues were $4.3 billion versus $7 billion in music revenues (more than half digital, for the first time). While downloading may have sapped music sales, it's only amplified people's desire to experience music up close and personal.

"You text. You don't call, you don't write notes. You don't pop up at your friends' house. You Skype. We're not touching each other," says the rapper Murs, who founded the Paid Dues festival in Los Angeles. "Technology has separated us so much, it's natural for us to have this desire to come together and [festivals] really cater to that communal nature."

See also: Our Paid Dues 2013 review

It's a booming business, even for newcomers. Last year Firefly Music Festival premiered at a racetrack in Dover, Delaware, drawing more than 30,000 patrons daily, making in the neighborhood of $9 million in ticket sales alone. It's estimated to have injected upwards of $12 million into the local economy.

"There's an increased trend of multi-faceted, social events and people are more willing than ever to make sure they don't miss out on experiential, destination weekends with friends," writes Joe Reynolds, CEO of Red Frog Events, the festival's founder.

Sensing a score, the field's getting crowded. A hardly exhaustive list on Wikipedia logs 110 different major festivals across the country. Live Nation alone put on 18 last year, including Jay-Z's new Made in America, Sasquatch in the Gorge in Washington, and Atlanta's Music Midtown, each of which sold out. Three of the country's biggest, most established festivals - Coachella ($47.3 million, 78,500 daily, six days), Lollapalooza ($22.5 million, 100,000, three days), and Bonnaroo ($30 million, 80,000, four days) - regularly sell out early.

That's the power of an established brand. A 2010 Bloomberg story pegged Bonnaroo's profits at $12 million a year, which would explain the $5 million in charitable donations made during its first decade of existence. It's also why so many promoters are taking their shot.

When you consider the $254 million Coachella brought to the desert region around Indio (and $90 million to the city itself), you can see why a city would do whatever it can to help. Apparently that only holds until a festival's established itself, at which point you grab for more. (See, Indio proposed, then ultimately withdrew, a $4-$6 million ticket tax.)

"One of the obvious reasons music festivals have taken off is a lot of people think they can make a lot of money with them, and it's not that easy," says Grayson Currin, who co-founded the Hopscotch Festival in Chapel Hill, North Carolina, now entering its fourth year. "The margins are pretty small."

***

Coachella founder Paul Tollet came up the way most festival promoters do - in bars and clubs. He began by booking his older brother's Perry's band The Targets. While attending Cal-Poly Pomona, Tollet hooked up with Goldenvoice founder Gary Tovar, who funded his promotion company with proceeds from pot dealing. Tovar eventually took a rap and went to jail, signing over his control in the company to Tollet and his partner Rick Van Santen in '91.

They moved to a 200-square-foot Beverly Hills address to impress the booking agents and benefited from Nirvana's breakthrough as the bands they'd been promoting for years suddenly became big draws. They had plenty of cash flow, and were booking 175 shows a year, but were digging themselves deeper in debt.

Coachella was going to be the big score that pulled them out of debt. Tollet described it as a "Hail Mary" in an OC Weekly story a year ago. He wasn't lying. They were sacked for $1 million. Goldenvoice vice president Skip Page recalls the accountant bawling loudly that last night of the first Coachella when it became clear how much money they'd lost.

That would've been it, had it not been for the relationships Tollet had built with bands over the years. Headliners such as Beck, Rage Against the Machine, and Tool waited patiently for as many as five months to get paid. Employees regularly accepted checks with more bounce than a SuperBall. Tollet and Van Santen eventually sold their promotion company, Goldenvoice, to AEG Live for just enough money to pay off all the people they owed. (Tollet initially retained full control of Coachella and still holds 50 percent ownership.)

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