Touring

'The Talent Ate Good for Years': Promoters to Shift More Risk Onto Artists When Concerts Return

Frazer Harrison/Getty Images

Live Nation and AEG want to move toward a deal structure more like in clubs, where acts receive a percentage of tickets sold, with less guarantees.

Like record labels, concert promoters have long operated on a model in which they offer advance payments against a percentage of sales — with artists getting paid more when shows do well and often keeping the guarantee when they don't. In addition to bankrolling the business, in other words, they bear most of the risk. But the concert business that's expected to return at some point in 2021 won't only look different, due to having at least some coronavirus precautions in place — it will almost certainly operate in some new ways as well. There will be fewer venues and more negotiating leverage in the hands of giants Live Nation and AEG — and a major push on the part of promoters to shift risk toward artists.

Restarting a concert business that has been dark for about a year will be complicated: Artists are eager to get back on the road, desirable dates will be in short supply, and competition will be brutal. The risks will be both harsher and harder to assess — especially in the event of another outbreak. Understandably, the promoters bankrolling big shows will be cautious. There's also a widespread sense that they're using this crisis to make structural adjustments in what many believe has become an increasingly unsustainable business model.

"All deals in 2020 will be renegotiated regardless if they went on sale before the start of the crisis," wrote AEG Presents president for North America Rick Mueller in an April staff memo detailing how AEG would handle rescheduled club and theater shows. It said that artists could be offered lower guarantees, with earnings tied more closely to ticket sales. The memo also said its deals would be "all-in," meaning all expenses, from artists' costs to payments to opening acts, would come out of the offer. Also on the chopping block: support for album bundles, which added music, and costs, to ticket purchases. (Since then, Billboard has changed its chart rules; it now only counts albums purchased as paid add-ons to tickets.)

Live Nation followed with its own memo, outlining a set of policies that also shift more risk onto artists' shoulders. Its author — Charles Attal, co-president of Live Nation subsidiary C3 Presents — later walked it back, saying he had been circulating a "draft" proposal to facilitate discussion but that nothing was official.

"The talent ate good for the past three or four years," says Marcus Allen, co-founder of the Broccoli City Festival in Washington, D.C., which is produced in partnership with Live Nation Urban. But since promoters often bid against one another, driving up guarantees that had to be paid whether or not ticket sales lived up to expectations, they were often left to pick up checks they couldn't profitably cover. Now they're trying to use the pandemic as a "reset" that will bring most guarantees down to earth in order to remove some of the risk, should shows underperform or even get canceled due to factors beyond their control. Before the pandemic, big artists could command guarantees of 80% to 100% of the event's earning potential, even before a single ticket had gone on sale, and standard contracts called for promoters to make artists whole in the event of a cancellation. (In some cases, promoters would be reimbursed by their insurance.)

Live Nation and AEG want to move toward a deal structure more like the one used for clubs, where acts receive a percentage of tickets sold, with less substantial guarantees. In the event of a pandemic-related cancellation, when ticket sales are refunded, acts wouldn't receive any money except costs in some cases. Artists could still do very well under these circumstances — they won't necessarily make less money per ticket sold — but they would have to carry much more financial risk. For acts that keep a touring crew on their payroll, that's a big ask.

Allen says that promoters will have to leverage the relative scarcity of available dates — and their financial stability compared with the indies — to get artists to accept these terms. And some probably will. "A lot of the artists who had been promoted and pushed through the system by a great agent or manager, that stuff is going to get pulled back unless the numbers match," says Allen. "If you're not an artist who can truly demand that top dollar — like Drake, Kendrick Lamar, Beyoncé or Taylor Swift — the days of getting a $100,000 per show based on a mixtape are over."

These changes come as Live Nation and AEG prepare to emerge from the pandemic and face an uncertain future. Fans still seem interested in seeing shows: Only 14% of those holding tickets to canceled concerts have requested refunds, according to Live Nation. Both companies have taken on significant debt to survive the pandemic, however: Live Nation's public disclosures show it borrowed $1.2 billion at 6% interest to stay afloat during the shutdown, and while AEG is a private company, executives there say it's borrowing money from owner Philip Anschutz.

Eventually, there's also the possibility that the reset itself will be reset. Even early on, reliable headliners will be more reluctant to agree to these new terms, says Jarred Arfa with Artist Group International, which represents Metallica and Billy Joel, among others. "There's always someone else willing to step in and pay to win the business," he says, noting history shows that new players will enter and "try to serve superstars and help them deliver groundbreaking entertainment options."

After the pandemic truly ends and consumer demand for concerts grows, the power balance could inevitably shift back toward talent. "If ticket sales quickly grow, it can be hard for the promoters to avoid bidding battles for top-tier artists," says Arfa. "That will always exist." Promoters may have leverage over midtier artists, but not A-listers.

"Talent always wins," says a top Live Nation executive who requested anonymity. Even if the recovery goes slower than expected, there are only so many acts that can fill the biggest venues in the world. "As long as there is competition for superstars," the executive says, "the artist will come out on top."

Jimmie Allen's Billboard Live At-Home Performance | Billboard

This article originally appeared in the Sept. 19, 2020 issue of Billboard.