It’s a High Risk Business: Music Festivals

In the past decade music festivals have become bigger and bigger as attendance at major festivals continuing to grow. One of larger festivals in the US is Coachella Music and Arts Festival located in southern California. Coachella started out with a crowd of 25,000 people in 1999 and has grown to more than 600,000 attendees in two weekends. It’s not just Coachella that has record breaking attendance, the Electric Daisy Carnival in Las Vegas recorded 400,000 attendees in a single weekend. With attendance numbers like this it is worthwhile to take a look into incentives for companies to organize these festivals and the ways in which this business has high risk for festival organizers.

The music industry has created tools for the new generation to become more connected to music, both recorded and live. Of course there are new streaming apps and companies such as Spotify that allow users to listen and find all the music they could imagine, but now a huge demand for live music has become apparent. Festivals like Coachella and Bonnaroo sell out their tickets within hours because of this demand for a weekend of nonstop music. But there is a connection between apps like Spotify and huge music festivals; they both allow users to consume a large amount of the product for a relatively small and convenient fee.

Spotify charges its members $10 a month for premium service which includes streaming and downloading music. A pretty good deal right? Well large music festivals offer this same type of convenience for consumers except that it offers live music instead of recorded. Festival attendees are able to see 10 to 20 of their favorite artists for around $350. Music lovers are drawn to this way of experiencing live music and are willing to pay to have this experience. Festival companies and organizers are noticing this increase in demand for music festivals which is the reason that more festivals are being created every year and big festivals are just getting bigger. But how is this actually turning out for these festival organizers?

Even though the market for music festivals is growing, many festival organizers are expressing the ways in which it is a high risk business. The price that each festivalgoer pays doesn’t encapsulate all of the revenue that the festival makes, because taxes and licensing take away about 23%. Organizers also face expenses such as electricity which are a primary necessities for putting on these type of events. But what troubles most festival/event planning companies and organizers is the risk factor. Flooding and cancellations are huge risks that have caused trouble with festivals in the past. A year of planning can go into a music gathering and something as simple as bad weather or a headlining artist being sick could lead to a huge loss financially. It’s easy to see recording breaking sales and attendance for events such as music festivals and think, “I can’t believe how much those companies are making.” But it becomes incredibly hard to guarantee a successful venture in an unpredictable business.

One Reply to “It’s a High Risk Business: Music Festivals”

  1. Have you looked into the careers of the Grateful Dead or Phish? They managed to tour for long stretches of time with festival concerts.

    … also great music.

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