Is Coachella too big to fail?
The Southern California festival begins its two weekend run on April 10 with a fate that has never been more uncertain.
Rattled by a cascade of bad headlines around the spread of the novel coronavirus and fears that concerts and live events could facilitate the rapid spread of the COVID-19 disease, live music executives are nearing the panic moment many have spent weeks hoping to avoid.
“I wasn’t worried about the virus until about 10 minutes ago when I saw that Ultra was postponed,” said one live music professional on Wednesday before Miami's Ultra Music Festival was canceled, who like many in the business didn’t want to be named in an article about the rapidly worsening situation.
Booking agents, concert promoters and music managers are now being forced to imagine what a concert season stalled by public hysteria over coronavirus would look like -- and most agree the picture isn’t pretty.
“I wouldn’t doubt over the next 20 days if we see a festival a day canceled,” says Kevin Lyman, founder of Van’s Warped Tour, who believes the situation will get much worse before it starts to get better.
The two most vulnerable states right now are California and Florida, which host the bulk of the spring and early summer festivals. More than 50 cases have already been confirmed in Los Angeles where Mayor Eric Garcetti declared a state of emergency Wednesday morning. The move is largely preparatory in nature but does not bode well for events like Coachella, which begins early next month and takes place over two weekends, followed by Stagecoach the weekend after.
Coachella takes place about a two-hour drive from Los Angeles in Indio, California, in Riverside County, where officials decided later Wednesday to activate its emergency operations center due to coronavirus concerns. This action may soon be followed by the county’s own emergency declaration. All of this, according to industry experts, would lead to increased pressure from public officials to take action and pave the way for the festival’s cancellation.
“There’s no one managing it at the federal level, which means this is going to be decided by local officials who wield a ton of power,” Lyman says.
Concerned local citizens in places like Austin -- where more than 40,000 people have asked that South by Southwest be canceled later this month -- coupled with increased news coverage and widening scrutiny over the use of public resources for a for-profit concert would likely mean increased pressure on promoters to cancel their events.
That would initiate the beginning of a private and public round of “negotiation through threats and hedging,” Lyman says, as the major stakeholders -- promoter Goldenvoice, headlining artists and the major agencies -- begin to outline a possible wind down. Because the industry is designed in a way that the first person to wave the flag is usually the one that pays the price, this stage can be the most chaotic and visceral.
“The music industry is always a game of chicken and we always push things right to the edge because that’s what we’ve always done,” Lyman said.
Officials with the country’s two largest concert promoters -- AEG and Live Nation -- have already publicly signaled they won’t pay anyone if a festival gets canceled, since tickets will have to be refunded and revenue from food, parking, drink sales and merch will not be realized.
Artists and their agents, in turn, will argue that promoters like the AEG-backed Goldenvoice carry event cancellation insurance and that both their costs and their profits will be covered. As such, they will likely demand part or all of their promised payments.
But insurance is complicated. Most promoters -- including AEG, according to sources -- aren’t covered for pandemic diseases within their event cancellation insurance because most event insurance policies exclude infectious disease coverage in their policies. Event producers who want it typically have to purchase a waiver to opt in -- which few producers actually opt for, and now is too late to buy.
“Insurance isn’t going to get us out of this one,” explained one music major executive, who said his company’s attorneys are poring over existing artist contracts and agency agreements for what will usually be the precursor for the final phase -- the assignment of blame.
In Coachella’s case -- which this year features Rage Against the Machine, Travis Scott and Frank Ocean as headliners -- because the festival is ultimately being canceled because of global pandemic, Goldenvoice will likely cite the force majeure clause of the performance contract which waves liability for cancellations beyond a promoter’s control. The Latin phrase translates to “superior force” and is often referred to as the “hand of God,” meaning weather events, emergencies and unforeseen crises that make a concert impossible.
“Essentially it applies to something that is beyond anyone’s control,” says agent Jared Arfa with Artist Group International, which represents a number of top tier artists on tour this summer, including The Strokes and The Smashing Pumpkins. Force majeure clauses generally state that promoters are not required to pay artists for cancellations caused by external factors, like a local government agency pulling an event’s permits over Coronavirus concerns.
Over the years, agencies have increasingly tried to demand contractual changes that weaken force majeure to ensure their artists are paid something or have their costs reimbursed. For this year’s South by Southwest, agents have been demanding no force majeure, meaning artists get paid by promoters even if the entire festival gets canceled. Corporate events and festivals from new promoters are also seeing no force majeure clauses written into contracts, but Arfa said most big promoters will not accept changes to force majeure when they’re putting millions of dollars on the line.
That then leads to the final stage for Coachella -- the triggering of force majeure, which has to be done by an outside agency like a local health department of law enforcement agency. It’s not enough for a concert to be worried about negative press from the spread of pandemic disease -- for force majeure to be triggered, a promoter has to be able to show that they were given no other choice but to cancel, often at the insistence of public officials.
“That puts a lot of power in the hands of local officials, many of whom are unelected,” Lyman says. While some officials could be quick to cancel an event despite the lack of a clear threat, others could refuse to issue a cancellation order out of fear of retaliation or to protect a city’s investment in an event that may generate tax dollars through hotel stays and sales tax revenue.
(In 2016, Coachella and Stagecoach were projected to bring in $704 million in overall economic activity, according to the Coachella Valley Economic Partnership and Greater Palm Springs Convention and Visitors Bureau.)
An official cancellation would trigger refunds, and most fans would see money automatically redeposited in their accounts. There would also be significant damage to the local economy as income anticipated for home rentals, event spaces, transportation services and restaurants would all be lost. While some local businesses likely have business disruption insurance, payouts could take more than a year to materialize, and it’s likely only a fraction of vendors and local landowners’ losses would be covered.
“If Coachella gets canceled, there’s really no events that are probably safe,” says Lyman, noting that the collapse of one of the world’s largest festivals would undermine confidence in the entire live music ecosystem.
“They still have a little more time before pulling the cancellation trigger, but unless the situation improves soon, the momentum might be too much for Goldenvoice to stop,” says one source. “If this is going to work out, things need to start going right very soon.”