Live, at a Field Near You: Why the Music Industry is Singing a Happy Tune

Paying $175 for the right to cram into Orlando's Citrus Bowl Park with 50,000 other people for two days straight might not sound that appealing to some. But throw in nonstop live music on a slew of open-air stages and people will turn up in droves, even in a state with one of the highest jobless rates in the country. That's the thinking behind Los Angeles-based entertainment giant Live Nation's latest endeavor in the music-festival business. The company's Orlando Calling festival, which will host more than 50 music acts, including headliners the Killers and Bob Seger, on Nov. 12 and 13, is one of eight new festivals it launched this year as a way to boost its profits in a down economy. Says Alan Ridgeway, Live Nation's CEO for international operations: "Festivals are one of the big growth areas of our business."



Music festivals are a rare bright spot in the struggling music industry. The festival business has grown from almost nothing a few decades ago to roughly $1.36 billion in Britain, one of the world's largest festival markets. In the U.S., where music fans are acquiring a similar taste for outdoor paloozas, live-music revenues have nearly doubled over the past decade, to $4.6 billion last year, fueled in part by the growth in festivals. That has shifted the music industry's focus from recorded albums to live performances. After a decade of dwindling sales of recorded music, caused in part by free Internet downloads from music-sharing start-ups like Napster, live entertainment is the industry's new cash cow — one that can't be infinitely reproduced. According to trade group IFPI, global sales of recorded music have plummeted more than 40% in the past 10 years, to $16 billion in 2010. Ticket sales for live music in Britain, meanwhile, have nearly quadrupled over the same period, to $2.4 billion. In the digital age, people "yearn for actual experiences, like concerts, and they're willing to pay a premium price for them," says Nick George, a media analyst at PricewaterhouseCoopers. (See the top 10 albums of 2010.)

The festival boom could mean big changes for the music industry and its customers. Digital media, which lend themselves to endless replication and piracy, have driven down the value of recorded music over the past decade. But live shows, which are by definition a limited number of one-off events, promise to continue turning profits for years to come. That's good news not just for big media conglomerates like Sony and Warner, which have been fishing for ways to redefine their music divisions in the digital age; it could also help boost the incomes of struggling musicians, especially independents who rely on even the smallest gigs to make a living. For music fans, festivals mean more access to live music in bulk and the chance to discover new bands in the flesh rather than through computer screens or on the radio.

Festivals haven't always held this kind of appeal in the music industry. A decade ago, many musicians viewed live performances as at times tedious marketing plugs for their latest albums. Nowadays the opposite is true. Artists are finding that touring is the way to make "the big money," says Douglas Arthur, a music-industry analyst with New York City investment bank Evercore Partners. 2008 marked the first year artists in Britain made more money from live performances than from recorded-music sales, according to PRS for Music. Rave reviews of appearances at high-profile festivals can help acts sell records. And by pooling artists' audiences, festivals allow them to broaden their fan bases. (See pictures of the Pitchfork Music Festival.)

Corporate executives are seeing dollar signs too. For media-savvy companies, festivals have become a form of "experiential" media, interactive events through which they can market their brands. Unlike giveaways or ads, enjoyable experiences give brands "long-term engagement with a captive audience," says Bryan Duffy, a marketing executive at New York City consulting firm MKTG Inc.

And the audience is growing. Britain, host of the famous Glastonbury and Reading festivals, now puts on more than 670 music events a year, a 73% increase since 2003. There were 2,500 to 3,000 festivals this year in Europe, according to trade magazine IQ. Festival operators have attracted a wide range of music lovers by expanding their repertoire beyond rock music and featuring nonmusical entertainment like comedy, poetry and theater. "Festivals are now attracting the types of people who would never have gone to one before," says Dave Newton, a co-founder of online ticket agency WeGotTickets, which expects a 20% increase in festival ticket sales this year.




Bigger audiences are attracting bigger investors. Although the global festivals industry is dominated by independent operators and entrepreneurs, bigger umbrella groups like Live Nation and Music Festivals have designs on becoming festival empires. Music Festivals owner Vince Power, who runs Spain's Benicàssim and Britain's Hop Farm festivals, raised $10.4 million on London's small-cap Alternative Investment Market in June to grow his festival business into a $160 million operation over the next five years. Music retailer HMV has also jumped into festivals — in 2009 it bought live-music company MAMA Group, which hosts Britain's Great Escape and High Voltage — as a way to revive its struggling brick-and-mortar business.

Still, the road to expansion is fraught with risk. Attracting artists big enough to fill hectares of empty pastures with fans is costly and requires a certain finesse. Outfitting an empty field with temporary infrastructure robust enough to accommodate tens of thousands of fans also isn't easy. And there's the threat of bad weather, which can wreak havoc on events where fans are unprepared for torrential downpours and muddy fields. Last year, when ash from an Icelandic volcano grounded flights across Europe, attendance at Power's Benicàssim festival plummeted. At Belgium's Pukkelpop festival in August, four people died and more than 70 were injured when strong winds from a thunderstorm caused a stage to collapse. Building a fan base also takes time. Newbie operators "don't realize that you're probably not going to sell 50,000 tickets in the first year," says Live Nation's Ridgeway, and cash-flow problems can occur when events don't sell out. Glastonbury has flirted with bankruptcy, most recently in 2008, when festival loyalists were turned off by the decision to headline the traditionally rock-oriented event with rapper Jay-Z. (See pictures of Jay-Z at Glastonbury.)

Barring those pitfalls, the payoffs for well-executed festivals can be huge. Putting thousands of people in close quarters for two or three days creates an ideal sales environment for high-margin food, drink and merchandise vendors. And when the audience is big enough, corporate sponsors like Ford, Jack Daniel's and Intel come running.

Corporate involvement has taken its toll on festival culture. What was once the playground of '60s hippies is now a more mainstream affair, often flush with upscale amenities like babysitting services, waitstaff and rentable Winnebagos. But many of today's festivalgoers don't seem to mind. In fact, corporate backing can actually "make festivals seem less threatening" to mainstream audiences, says Andrew Bengry-Howell, a sociologist at the University of Southampton who co-authored a recent study on festival branding.

With money pouring in, more European festival operators are looking abroad, especially to the U.S. Surprisingly, the country that invented the concept with California's Monterey Pop in 1967 and New York's Woodstock in 1969 hosts only a handful of major pop events, including Tennessee's Bonnaroo and California's Coachella. "It's such a huge place, and it's underserved," says James Barton, who runs Creamfields, a popular 13-year-old electronic-music festival near Liverpool. Bonnaroo's 80,000 attendees this year paled in comparison with the 700,000 people who turned out for Poland's Przystanek Woodstock in April. (See pictures of the Polish Woodstock.)

Crowds like that are drawing attention to untapped markets in Eastern Europe, Latin America and parts of Asia. Already Barton has expanded his Creamfields empire from the U.K. to 11 other countries, including Argentina, Australia and Malta. Sony Music bought a majority stake in Hungarian live-events group ShowTime Budapest last year to build on "the many synergies between the recorded and live-music industries," said Marton Brady, managing director of ShowTime Group. Ridgeway says Live Nation is looking at prospects in Australia, Dubai and Hong Kong. And Festivals Republic head Melvin Benn is eyeing China's Guangdong province, home to over 150 universities. "One would assume that a market like that could accommodate at least one big festival," he says. For a country with 200 million young people craving more access to pop culture, that's an understatement.