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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

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"Guys like us, we didn't make any money," says Warped Tour founder Kevin Lyman, who attended Cal Poly-Pomona with Tollet and became friends. "Paul and myself, we had to bring in partners to make it work. Paul put his heart and soul into it, but it was his heart and soul, so he had to bring in AEG to share his whole business because he believed so much in it. I had to bring in Vans as a partner to kind of keep me going until we gained traction. I know that it takes a while to be successful."

Sponsorship is key to any festival, even if it tries to keep things low-key - as Goldenvoice does at Coachella, more than its sister country-themed fest, Stagecoach, the following weekend. It can be the difference between losing and making money, especially in the beginning, and it helps salve the wounds when the weather turns foul. (Rain is an outdoor festival promoter's greatest enemy and single biggest wild card.)

Lollapalooza founder Perry Farrell tried for a while to keep the corporate brands at bay but found sponsorships the only acceptable way to keep ticket prices down. From 2003 to 2010, music sponsorship of concerts and multi-day festivals doubled from $574 million annually to $1.17 billion, with much of that increase coming from festivals.

Of course, sponsorships aren't sitting on a shelf like bottles of Mountain Dew. The good ones typically are reserved for established festivals, and sometimes not even then. While there was a moment when Warner Brothers considered buying Paid Dues from Murs, he hasn't had any luck finding a top-of-the-bill partner for arguably the finest hip-hop festival in the country. This while securing backing from shoe companies for his solo tours.

"It's funny because I haven't been approached by anyone. People tend to shy away from hip-hop. For something that's been proven as an art form and is here to stay - so many people back away from it. It's like pulling teeth to get a sponsorship. I appreciate Monster Energy, Heineken, and some of these sponsors for us, but to get a title sponsor...," Murs says with a sigh. "I understand it's a risk, because it's just the nature of hip-hop culture there are some violent aspects to it, but there's a difference between gangsta rap and what Paid Dues represents."

click to enlarge Red Hot Chili Peppers
  • Red Hot Chili Peppers
Even after bringing in AEG Live, it wasn't all smooth sailing for Coachella. Its 2001 return was almost sunk by failure to land a suitable headliner. The festival received a lifeline from Farrell, who reunited Jane's Addiction for the second time to play Coachella. By 2003, it had begun to gather real steam with a headlining bill featuring Red Hot Chili Peppers, Beastie Boys and a reunited The Stooges. By 2004 it was a sellout, and has remained so ever since. Even last year when it added a second weekend, it sold out in hours, the lineup still unannounced.

"We've evolved to the point where there are a lot of artists who want to play Coachella, Bonnaroo, Lollapalooza, Austin City Limits, and because these festivals are so well established and in some cases sell out before they even announce the talent, that puts the promoter in a very good negotiating position," says editor Gary Bongiovanni of industry trade publication Pollstar. "They're able to get better deals, though that only works with the established festivals."

There are only so many big-name acts to anchor a big festival, and they earn good money. While the lowest-rung act at Coachella made $15,000 in 2010, headliners can command seven figures. It's turned into a nice living for some acts.

"There's a whole circuit of bands now that seems like all they do is play festivals, and it's turned into a fairly lucrative career," says Lyman, though the drop-off is steep from one shelf to the next. "It drops off very quickly. Kings of Leon, Arcade Fire, Mumford and Sons, Chili Peppers, you're at one echelon, and then [the money] does go down steeply."

For bands further down the rungs, an appearance at a big festival like Coachella or Bonnaroo carries validation and helps attract the attention of other festival promoters. Beyond that, there's the opportunity to reach an audience who might never otherwise hear your band.

"The festival scene has changed everything for musicians and bands. We're just thankful to be a part of it," says Adam Grace of alt-country group Truth & Salvage Co. "There's so many bands and so few slots to fill. It feels really good to kind of be in the club. It's so important doing it just to reach multitudes of people. We know one Bonnarroo performance in terms of fans can be worth three months of touring. So, business-wise, they're great gigs. That's why everyone wants to do them."

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