Concert Revenues are Roaring. But is Trouble on the Horizon?

Practically 100 years ago to this very day, began a decade affectionately known as the Roaring Twenties, named in large part for the impactful strides in industry, art, and culture that took place in the years immediately following World War I.

Similarly, throughout the decade that just ended, the concert industry, which is built on art and culture, roared to the tune of record touring revenues. But, there may be cause for concern as we head into the Twenties that are now beginning.

Pardon the buzzkill as 2020 gets underway, but after 10 years of historical box office returns, a few major flops from 2019 should serve as cautionary tales for an industry looking to maintain its massive profit trajectory. Are disasters such as the Chance The Rapper Big Day tour cancellation, Madonna's much-maligned Madame X tour, and the ill-fated Woodstock 50 merely aberrations? Occasional misses for a concert space that is more voluminous and active now than it's been at any other time in its history? Or is it the signal of a possible disturbing trend?

To be fair, with nearly 40 million tickets sold amongst the top 100 acts alone touring North America in 2019, it stands to reason that not every performance or tour would be a success. That there are some notable misses amidst the hits is not an indictment in and of itself. Stock brokers sometimes give bad tips, doctors occasionally misdiagnose illnesses, you can get a lousy meal at the best restaurant in town; and, as too many of us have seen throughout the holiday season, Amazon is fully capable of messing up your order! So, the fact that a few tours missed the mark is not a reason to sound the alarm. But, there are some troubling aspects to consider, specifically in the ways that the concert industry engages with its audience, that should serve notice to all interested parties that the concert road may yet get rocky.

In some critical ways, the music landscape has changed over the last decade and a half or so, seemingly right before our eyes. Musical piracy of the good old Napster variety dealt such a significant blow to record sales in the early 2000's that the recording industry took the "if you can't beat 'em, join 'em" route and capitalized on legitimate streaming services such as iTunes and its various proteges. The result was a divestment from albums to a medium that presented a product piecemeal and with incremental returns. Nowadays, some 80% of recorded music is accessed through streaming. Sometimes, the music is essentially free as part of a subscription to another service, like with Amazon Prime members receiving complimentary Amazon Music. Those who pay-per-song can sometimes do so for less than $1 per file and complete albums don't command the $15 that they once did. One benefit of cheap or free music in the age of the viral video is that it can literally be everywhere at any time. But there is a drawback to the shift as something can be said for spending some time with your music, for the sonic narrative of an album that you don't achieve in the same way when a song is simply part of a playlist. The demise of the LP not only cut deeply into a revenue stream, but it's hampered the ability for music to make a lasting impression and ingrain itself into the psyche of pop culture. If you think about it, have there really been many "great albums" created in the 21st Century? Sure there are plenty of popular artists, some of which have exhibited true staying power, at least while they remain active. But the move away from presenting music that you can actually sit with for an hour and come back to time and again may yet prevent contemporary artists from creating lasting legacies.

To compensate for the plunge in recording profits, not to mention the dissapearence of M from MTV, the music industry has gone all in on touring as artists play live with greater regularity and some tours seem neverending. Currently, touring accounts for 70% of artists' income, as opposed to 30% a quarter century ago. In addition to material cashflow, a live concert also requires that an audience actually invest time in the music, if only for an evening.

According to an article recently published in the Wall Street Journal not only are artists hitting the road with record frequency, but ticket prices for the most sought after tours now average close to $100. Over the past decade, the average ticket prices for the top 100 North American tours have risen more than 50%, to a record of approximately $95 per ticket. With an average price of $226 per seat, the Rolling Stones' 16-date No Filter tour from last summer was the highest grossing of 2019, taking in almost $178 Million. The new norm of high-frequency touring coincides conveniently with climbing ticket prices, as promoters have implemented a variety of dynamic pricing mechanisms in order to capture more of the revenues that they felt were falling into the hands of the secondary ticket markets. Some of these pricing strategies include upcharging for seats on the aisle and the seats immediately next to them, premium pricing for the best seats, and variable pricing which adjusts the price of the ticket to meet demand. Ironically, variable pricing, which on Ticketmaster is deemed "Official Platinum" always sees ticket prices rise.

This pricing philosophy is based on a perceived willingness amongst the audience to buy tickets at particular prices, and it borrows a page out of the airline pricing model, in which specific seats are priced differently from others and individual flights are generally priced based on a variety of fundamentals. That said, there are some stark differences between the ways that airline tickets and concert tickets are sold. For one thing, airlines outsource their tickets to third party aggregators such as Orbitz and Travelocity, as well as sell them through their own platforms. The aggregation model not only allows inventory to receive greater visibility, but it gets presented in various ways and up against competing travel itineraries, thus establishing true market value. In fact, this is exactly what the ticket resale market provides to consumers: competing marketplaces that present event tickets at market rate, which can be above or below face value, and it offers the consumer a favorable shopping experience through differentiated service models. As it stands, there is no official outsourcing of event tickets by the primary ticket suppliers, which around 80% of the time happens to be Ticketmaster. Because of this, the event-goer is still subject to the whims of a single ticket vendor that can adjust pricing at a moment's notice and manipulate inventory in other ways. Suffice to say, the resisting of an open market is partly responsible for some prominent backfires, and it may be the sign of more trouble to come.

Among recent notable debacles is the Chance The Rapper Big Day tour. In a vague statement he released December 16th, Chance informed his audience that his already postponed tour would in fact be totally cancelled so that he could focus on family and creating new music. Perhaps details will emerge as to what exactly prompted the decision to completely pull the rug out from under a 35-city arena tour. Let's just hope that there is nothing too serious happening with him personally or with his family that would prohibit him from being on the road for an extended period of time. But, a general need for family time as a reason to stop coming to work wouldn't exactly sit well at any job, let alone for a popular emerging entertainer who's performances are expected to generate substantial revenues. Unless, of course, early receipts from the upcoming tour were falling drastically short of expectations.

Eventually, the decision makers that be may have to reassess the investment that the audience is willing to make in order to sustain its handsome gains. Had there been some legitimate personal reasons why Chance could not tour, then the public would have known it by now, and the public would have been understanding. It's not as if Chance The Rapper is particularly private or reclusive given his numerous endorsements and TV appearances, for example recently hosting Saturday Night Live and guest hosting The Late Late Show with James Corden. But the more reasonable explanation was that the Big Day tour had become such an albatross that it made more sense for investors to cut losses completely than to try and carry it to the finish. The tour had already been postponed from fall to winter, amidst the need for some admitted re-structuring. That in and of itself is a tell-tale sign that ticket sales were so paltry that promoters saw it necessary to pull the tour back and then effectively re-introduce it in order to try and goose sales. But with General Admission tickets going at a face price of around $200 in some markets, and upper level reserved seats costing upwards of $100, the audience was simply not willing to shell out that kind of money on a primary sale. In cities like Chicago and others, 2-for-1 deals and other deep discounts were being offered several months before the scheduled date of the concert; never a good sign.

Chance The Rapper was not the only recent example of severe price/demand miscalculation. Madonna's Madame X tour, which was a series of intimate theatre concerts in large markets, was such a whiff at the box office that Madonna herself decried the fact that an established stadium act of her stature couldn't fill theatres. Some of the limited dates were cancelled at the onset, and her run of shows in Boston were also dropped altogether because Madonna had gotten ill. One would imagine that had ticket sales been healthier, then Madonna might have been as well... or at least the affected performances would have been rescheduled. Madame X followed the blueprint of the wildly successful Springsteen on Broadway run, where The Boss played nightly to soldout houses for almost two years, with audience members typically paying in the quadruple digits per ticket at the 900 seat Walter Kerr Theatre. The idea of a musical legend playing introspectively for the most devoted fans was a boon for Bruce, and the Broadway theatre proved to be an exciting venue for pop music, as fellow icons, Morrissey and Barry Manilow also cashed in bigtime on smaller-scale Broadway residencies. So, having Madonna, adored throughout the world for nearly 40 years, and a true musical pioneer, play in a similar setting seemed like a no-brainer, but with many tickets priced well above $1,000 on the primary sale, the public passed on the initial offering. To make matters worse, Ticketmaster conducted a lottery as a way to manage the expected "demand". For many reasons, ticket lotteries don't work in providing fairness, mainly because the resellers that they try to shut out still manage to get tickets, while at the same time, there's no guarantee that the "true fans" that they're meant to appease will necessarily get tickets on any given date. If anything, they end up being very useful marketing tools for the primary ticket seller. In the case of the Madonna tour, it created the illusion of scarcity and committed the lottery winners to a high value purchase. Curiously, if there was so much inventory left over after the lottery, why weren't there more winners? Or, why was there a even a lottery to begin with?

Resellers bore the brunt of the losses, as many had to mark down their prices exponentially until the public bought in, often times selling at prices of about 30 cents on the dollar. Perhaps it was a lesson in strong-arming to the brokers, but it didn't account for the amount of sales that were expected, proving that the value placed on Madonna tickets by the tour's promoters clearly misjudged the appetite of the consumer to pay the high price that was decided on, and that created a PR nightmare. The strategy was to price inventory based on where the resale market was expected to be, so that resellers would resist buying fearing marginal returns, if any. Who knows? Maybe it was based on what Springsteen On Broadway tickets went for on resale. If the brokers ended up getting hurt, then it's their mistake as well. But much of the public clearly didn't see the value in such prices, further illustrating the idea that the primary ticket market doesn't know its own market as well as it claims to. If it did, more tickets would have sold at the onset, and more brokers would have at least broken closer to even.

The malaise that has lately come over certain tours also affects festivals. If ever there was a music festival that should have taken place, it was the planned Woodstock 50th Anniversary festival that was supposed to be from August 16th to 18th, 2019, exactly 50 years after the original. It would have been a truly fitting celebration for a defining musical, cultural, and political moment in American history to have a similar event take place exactly a half century later. Artists such as Jay-Z, Miley Cyrus, and The Killers were scheduled to perform along with Woodstock legacy acts like Dead and Company and John Fogerty. The festival was plagued with logistical difficulties from the onset, as organizers could not nail down a venue or obtain certain necessary permits, while financiers sought certain guarantees on ticket sales. Festivals have proven to be an important component of today's musical ecosystem. They provide artists opportunities to reach wider audiences, gain marketing traction, and many times support worthy causes. They also allow locales to drum up tourism and the opportunity for outsiders to become acquainted with their unique attainments. Unfortunately, some festivals have suffered from an outsized vision- Too Big to Succeed, if you will, like with the infamous Fyre Festival from 2017. Fyre was billed as a cathartic luxury experience on a deserted Bahmaian island, which included private villas, gourmet chefs, celebrity fitness instructors, fashion models, and of course performances from popular artists. It turned out that Fyre's organizers, most notably Billy McFarland, had no way of providing most of what was promised. None of the music was ever truly booked and the private villas famously turned out to be left over FEMA tents, among other vacant promises. The deserted island location was in fact the back parking lot of a Sandals resort. While the build up to Fyre was fueled by social media, the fallout was equally drastic. Fyre was obviously was an extreme example of an event that had been severely over-promised. But the precedent has now been set that investors are more wary about what they commit to and fans end up losing out in favor of the corporate need for self-preservation, like what happened with Woodstock 50. At least its organizers, headed by original Woodstock co-creator Michael Lang, had enough sense to sadly pull the plug.

Live Nation recently claimed that tickets are actually "underpriced" in a report that appeared in Marketwatch just before the New Year, and boasted that they'll likely go higher. Company CEO Michael Rapino said that tickets are generally an "incredible bargain" compared with other entertainment options and that rising prices represent a "huge opportunity to increase our bottom line". Absent from the discussion was any talk about how raising prices will allow the company to improve the customer experience and offer greater value. One would think that that would be a priority for a consumer facing company with a history of public scorn. Programs like Verified Fan, that attempts to vet would-be ticket purchasers as actual fans and not bots or brokers, as well as the aforementioned lotteries, and other priority onsales have managed to leave out fans as much as they've squeezed out resale, maybe even more. Additionally, technological developments like SafeTix, which presents tickets in a mobile-exclusive format, and with regenerating barcodes, have frustrated many purchasers because the tickets can be difficult to access or transfer. So, what then, are the rising prices doing for the consumer? Speaking of the bottom line, the issue is not about whether a ticket is underpriced or overpriced. It's about what the market will bear for the product. A ticket is a consumable good, not a financial asset, and as such their value should be assessed in the same way that any other commercial good of moderate value is, and not in the same way that shares of stock are. The resale market will always exist because of the limited quantity of tickets, as those who may have missed out on the opportunity to purchase high-demand tickets will need a way to get them. That's just the way our economy works, and it's why websites like Poshmark and eBay exist in the first place, and our multi-trillion dollar real estate market is a resale market as well. Besides this, ticket resale helps to establish what the market will bear because of the variability in pricing that's laid out right in front of the buyer. This will determine what a ticket is truly worth; not the desire for greater corporate income.

The net gains from the current economics surrounding concerts makes even the most significant failures tolerable, at least for now. But the concert industry also cannot ignore the mindset of its customers, the current generation of which is all the more informed and picky than their prdecesors, and which is not accustomed to paying a la carte for music. The Baby Boomers and Gen Xers who grew up buying albums, and who have an affinity for those albums' and artists' places in their cultural landscape will still pay up for concert tickets...within reason. But those generations will soon fade to the background and the price of concert tickets will need to reflect the sensibilities of the contemporary consumer. Regardless of generational differences, one constant that will always remain is that the price of commercial goods in our Capitalist economy is dictated by a competitive marketplace and open distribution, and not by companies who manipulate prices and availability solely on the principle that it benefits themselves to do so, and that it mitigates competition, without prioritizing their customers. It won't be easy to get an entire industry to admit that it doesn't really understand or care about its customers as much as it would like to have those customers believe. But, perhaps the consumer is beginning to roar now in its resistance to pony up for certain shows, and maybe that will be the lesson that will eventually lead to change and fairness.

###

I welcome your feedback on my articles, whatever your opinion may be. I'm fascinated by the ticket market as a facet of our overall economic landscape and often discuss my views in writing. For tickets to any event, anywhere; including the best in sports, concerts, theatre, and more, please visit www.seatslink.com. Feel free to DM me on LinkedIn, email [email protected], or call 718-676-0504 for assistance with tickets and events.