Most live-music executives began the new decade with an optimistic outlook, expecting it to begin with record grosses in the touring business. Over the last month, however, the outbreak of COVID-19 completely changed that, as what initially seemed like a pause for live music turned into a longer break, then a complete standstill. Now that, combined with an increasingly uncertain economy, is threatening the already fraught balance of power among concert giants Live Nation and AEG, the independent promoters struggling to compete against them and the major talent agencies that are already coming to terms with a rapidly consolidating business.
In less than a week — starting with the March 6 cancellation of South by Southwest (SXSW) and ending with Live Nation and AEG’s March 12 decision to temporarily stop presenting concerts — the live-music business went from preparing for a summer with over 50 million advance tickets sold and a 30% year-over-year increase in shows scheduled to facing a nationwide directive prohibiting gatherings of 10 or more people. Overnight, billions of dollars in ticket revenue and artist payments were frozen in accounts controlled by, respectively, Live Nation and AEG, and the four major talent agencies: WME, Creative Artists Agency (CAA), Paradigm and UTA.
Everyone else in the business — indie promoters, staging companies and food/merchandise vendors — continued to receive bills but not the money they were counting on to pay them.
When concerts do start happening again, the industry behind them will have changed significantly. Venue contracts will be renegotiated to account for months of inactivity, and the brands that sponsor tours and festivals will almost certainly slash their budgets. Most importantly, at least some indie promoters (and promoters that lack the resources of their larger competitors) may shutter, unable to weather the storm or get the credit they need to endure it — leaving their giant rivals with even more power.
The most immediate change will be layoffs. A week after Live Nation and AEG suspended shows, Cirque du Soleil and Feld Entertainment, which produces the Jurassic World Live tour and Marvel Universe Live!, pink-slipped over 6,000 employees between them, representing 90% of their collective workforce. On March 20, talent agency Paradigm furloughed over 200 employees. Right now, at least, there aren’t any jobs in the concert business that need filling. “There is no opportunity for work,” says Gregg Perloff, CEO of Berkeley, Calif.-based indie promoter Another Planet Entertainment, “so people who lost their jobs aren’t going to be able to find work elsewhere.”
With virtually all live events canceled or postponed through at least July, the industry as a whole — which, before the pandemic, had employed 50,000 salaried and contract employees and 200,000 part-time and seasonal workers — could be on track to lose $10 billion to $12 billion.
Live Nation and AEG, which together control about three-quarters of the concert business based on ticket revenue, have both the resources to weather the economic fallout and the kind of scale that will allow them to mitigate it. They have the bargaining clout to get the best deals possible, to the point where they can get very different terms from agencies, and the acts they represent, than their indie-promoter competitors.
Right now, when so much revenue is tied up, the most important terms involve the guarantees that promoters give acts — especially how much is due when the performance is scheduled compared with when it takes place. Already, Live Nation and AEG pay less upfront, partly because agencies know they’re well capitalized. Smaller promoters pay more, which means more of their capital is already tied up in concerts that have been postponed. It’s hard for them to borrow money right now, so agencies are asking for more upfront than usual, for fear of cancellation.
It’s a vicious cycle: the more money they need for advances, the less financial stability they have; the less financial stability they have, the more money they need for advances. And it’s creating a liquidity crisis that couldn’t have come at a worse time. Promoters that have gone without revenue for several months need to book as many shows as possible, even as agencies are asking for the kind of advance payments that makes that impossible.
“Most indie promoters operate brick-and-mortar venues and having to totally shut down will have a devastating effect on their staff and partners,” says Rev. Moose, the co-founder and managing partner of media and marketing firm Marauder, which organizes Independent Venue Week. Worse, he adds, those who are betting that future shows will enable them to rebound “are facing impossible demands from agents.”
Live Nation and AEG have different size venues all over the world, “but independent operators have to fill their venues five to six nights a week,” says Steve Sternschein, managing partner of Austin-based indie promoter Heard Presents, who’s faced with laying off employees after the cancellation of SXSW wiped out a slate of over two dozen shows at the two Austin clubs he owns, Empire Control Room & Garage and The Parish. With so much money locked up, some in deposits and some with ticketing companies, “the cash you had available to book 20 nights per month can now only cover deposits for five shows.”
When the concert industry does open for business again, Live Nation and AEG will have the smoothest path forward. But that could disrupt the rest of the business. In the long run, fewer indie promoters would mean fewer potential bidders for talent. That means the concert industry that does return will be both even more consolidated and competitive than it is now.
Every day after April 1 that Live Nation can’t put on concerts, it misses $30.3 million in revenue, based on 2019 second-quarter financial results. Already, the company’s stock price has dropped by half, wiping out $9 billion in market value.
It’s harder to know how AEG is faring, since it’s a private company. In 2019, AEG reported $550 million in ticket sales to Billboard Boxscore, but that doesn’t include revenue from venues it owns outright, such as the O2 Arena in London and Staples Center in Los Angeles (which grossed $159.1 million and $57.3 million, respectively, in a 12-month period, according to Billboard’s 2019 Arena Power List) or ASM, its joint venture with SMG that manages 300 stadiums, arenas and other venues.
Still, both Live Nation and AEG should emerge from the shutdown with their market share intact. AEG has a steady venue business, and deep-pocketed owners in the form of The Anschutz Corporation, which owns sports teams and events in addition to venues. Live Nation is coming off its best year ever: Its 2019 revenue was up 7% to $11.5 billion, with operating income up 19% to $325 million. It also holds $2 billion in cash reserves, another $950 million in accounts receivable and owns Ticketmaster, which is sitting on hundreds of millions of dollars in future ticket sales for shows that are slated to be rescheduled and thus haven’t been refunded. In addition, the company has a variety of revenue sources, since it operates on the “Flywheel Model,” where concerts, ticketing, management, sponsorships and other ventures all strengthen one another, while each generates revenue on its own.
That gives Live Nation an enormous number of levers with which to exercise power. It is already trying to negotiate no-advance “door deals,” in which artists don’t get a guarantee but rather a share of ticket revenue — usually 80%, with the company taking 20%. That reduces Live Nation’s risk while still allowing it to make money in its other businesses, from ticketing to concessions. It would also mean that agencies and artists wouldn’t get paid until after a show takes place. “Nothing is set yet,” says a Live Nation executive who requested anonymity, adding that the company and AEG have formed a task force with the heads of CAA, WME, Paradigm and UTA to develop “a few ideas to help all.” That coalition is credited with helping to orchestrate the Coachella music festival’s planned move from April to October, but indie promoters are skeptical of the group’s intentions.
Agency sources also say that Live Nation and AEG are postponing shows, rather than canceling them, because that allows them to keep ticket revenue instead of refunding it to consumers. It also creates the possibility they’ll pressure agencies to renegotiate deals.
Live Nation and AEG are the only promoters that own their own ticketing operations (Ticketmaster and AXS, respectively), which gives them more control over the flow of revenue. Generally, ticketing companies pay promoters when tickets are sold, before a show takes place, on the condition that the money is refunded if an event is canceled. Promoters, in turn, rely on that revenue to finance these shows and future bookings. But the postponement and cancellation of so many concerts at once has led ticket companies to freeze those funds.
On March 12, Julia Hartz, CEO of event management and ticketing website Eventbrite, emailed the hundreds of indie promoters it does business with to tell them that “to ensure your funds are readily available in the event you need to issue refunds to your attendees, we are holding your scheduled payouts for all published and future events.” That protected Eventbrite and consumers, but it further squeezed promoters. Since Live Nation and AEG control their own ticketing, they don’t have to worry about this. Moving forward, Hartz continued, payouts would be held until “five days after your event ends.”
That puts indie promoters in a tough position, says Matthew Smith, GM of the UC Theater in Berkeley, Calif. “We’re pushing back against agents’ demands for all [of an artist’s] money in advance and asking them to let us pay them night of show,” he says, “only to have the ticketing company we’ve contracted tell us we can’t have it until five days after we need it.”
Danny Hayes, CEO of concert promoter Danny Wimmer Presents, stresses that agents need to continue being supportive of indie promoters. “The industry, and the agency business, are healthier if there are more than just two promoters.”
In a world of just AEG and Live Nation says Hayes, “artists are going to ask themselves why they’re paying an agency commission.” Already, artists such as JAY-Z, U2 and Madonna have avoided paying an agent commission on eight and nine-figure tours by signing direct deals with Live Nation. Others, including Taylor Swift, Shawn Mendes, George Strait and Kenny Chesney, use agents for aspects of their career that don’t involve touring and work closely with AEG on global tour deals.
On March 12, about 75 indie promoters held an emergency conference call to discuss a path forward in the wake of the coronavirus. Entertainment lawyer Tim Epstein advised them to halt all capital improvements, hold as much cash as possible in reserve and maintain their insurance policies, because, he said, “even though they don’t contain coverage for coronavirus, slips and falls and workers comp accidents typically go up during an economic downturn, and you want to make sure your business is covered.”
There wasn’t much more he could say.
For now, at least, every promoter in the country is relying partly on holding on to money consumers have already spent on tickets for shows that still need to be rescheduled — and probably won’t take place for months. Depending on how long the concert business stays dark (and how bad the economy gets), at least some ticketholders are likely to ask for it back.
Under the terms of sale for tickets, promoters have the right to postpone shows without issuing refunds. “But we’ve never had a situation where every show in the country, for months on end, gets postponed at the same time, indefinitely,” says veteran promoter James “Disco” Donnie Estopinal. “How are you not going to give someone a refund when they’ve lost their job and haven’t been paid in months?”
How the promoters and ticketing companies eventually deal with that, as well as the innumerable hassles caused by rescheduled shows and festivals with new lineups, will determine what consumers think about them — and the live-music business as a whole. Once restrictions on public gatherings ease up, will the concert industry be seen as essential, an important part of both life and commerce, much as airlines are? Or, by failing to meet consumer expectations, will it come to seem like just the high-end part of nightlife?
“Music is so vital to everybody, and there’s a lot of people who make their living on the road and bring joy to so many people,” says Another Planet Entertainment’s Perloff. At the same time, “it’s also a business that works on a very low margin, very much like a grocery store.” The live-music business will inevitably come back from the current shutdown, but it could look very different, with a few big companies even more dominant and their smaller rivals more uncertain than ever.
*For more coverage of COVID-19’s impact on the music industry, check out Billboard‘s newest Deep Dive, A Pandemic Playbook, here.