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As Coronavirus Spreads, the Concert Industry Braces for the Worst

After the Coachella Valley Music and Arts Festival was postponed and South by Southwest canceled, the concert industry — which is an all-important source of income for artists in the streaming era — is reckoning with what could be still more damaging consequences of the coronavirus, from jettisoned superstar tours to lost wages for crew members, merchandise sellers and a range of others who depend on live music.

As the virus spreads, concert promoters and artists’ managers are contemplating a difficult year that could be full of postponements and cancellations — and with that, the potential for millions or even billions of dollars in lost income.

“It’s already devastated touring,” said Allen Kovac, manager of Mötley Crüe, which is set to begin a stadium tour in June. “You have people delaying on-sales for tours, and you have people who are going to postpone tours. It’s chaotic and stressful, from agents and managers to artists, their families and their support teams.”

The reach of the concert industry is global, with many tours stretching deep into Asia and Latin America; last year, U2 played its first show in India.

And the concert industry has grown steadily over the last two decades to become a primary source of income for many artists — a position that has become only more pronounced in the age of streaming, when a hit can catch fire almost instantly around the world but royalty income can still be minuscule.

According to a report last year by PricewaterhouseCoopers, the global market for ticket sales and sponsorship for live music was predicted to reach nearly $29 billion in 2020; according to industry practice, the majority of ticket sales go to the performing artists. By comparison, the global market in recorded music was recently estimated to have around $22 billion in sales, with artists’ royalties typically representing a much smaller proportion of the profits.

For now, at least, the industry been holding relatively steady. Billie Eilish opened her spring arena tour in Miami on Monday, as planned, and last week fans began registering to buy tickets for Lady Gaga’s latest outing.

But there have already been signs of delay. This week, Pearl Jam postponed its coming tour, and Neil Young announced that he was considering delaying his new shows.

Some leaders in the industry have seen Coachella’s decision to postpone its event — rather than cancel outright — as a promising sign that brought out a spirit of mutual cooperation throughout the business. Some festivals are now negotiating with local municipalities to adjust permits and other agreements to allow spring and summer events to take place later in the year.

“This is a unique time,” said Michael Rapino, the chief executive of Live Nation Entertainment, the biggest concert and ticketing company in the world. “Everyone has to figure out how the show goes on, and how it goes on smartly and safely.”

The stock market has not been as sanguine. On Wednesday, Live Nation’s shares fell 16.6 percent as foreboding news continued to build over the coronavirus. The World Health Organization declared Covid-19 a pandemic, and the German chancellor Angela Merkel on Wednesday said that the virus was likely to infect about two-thirds of the German population. And, close to home for the live-music business, an usher who worked at two Broadway theaters tested positive for Covid-19.

For artists and their managers, waking up each day to reports of rapidly growing numbers of coronavirus infections has fed a frustrating uncertainty, said Jonathan Daniel of the management company Crush Music. Green Day, Fall Out Boy and Weezer, which are all represented by Crush, are also planning a stadium tour together this year — and have already canceled dates in Asia.

“Usually in real-life events, you are in a reactive position,” Mr. Daniel said. “If there is a hurricane, you postpone shows; it’s after the fact. This is a proactive position, which is part of why there is so much uncertainty about it all.”

For artists and their teams, the postponement of Coachella is about more than just reshuffling dates. Coachella, which is promoted by Goldenvoice, a division of the concert giant AEG Presents, holds a special position in the touring market as a tastemaker, and is closely watched in the industry for its bookings, its fashions, its hashtags.

It also represents a vital marketing opportunity for artists, who often book their tours around Coachella and rely on its halo of buzz to sell tickets elsewhere. Even the festival’s live video stream is a powerful form of media promotion; its 2018 edition drew a reported 41 million viewers in more than 200 countries.

“We launched the last Lorde album at Coachella,” Mr. Daniel said. “We set up our entire plan around that festival.”

One consideration is insurance coverage. Promoters and many artists typically buy policies that cover cancellations caused by things like inclement weather or an illness that affects an artist’s ability to appear. Communicable disease is less commonly covered. But by mid-January, once coronavirus was recognized as a serious risk to public events, insurers began to exclude Covid-19 from most new policies, said Peter Tempkins, the managing director of entertainment for HUB International Limited, a global insurance brokerage.

“Everybody now knows about Covid-19 and so they want to buy coverage,” Mr. Tempkins said. “But you can’t — it’s too late.”

After South by Southwest was canceled, its organizers announced that they did not have insurance coverage for coronavirus, and this week the festival laid off about one-third of its full-time employees.

A lack of coverage for coronavirus may lead more artists and promoters to postpone events rather than cancel them outright, according to artist managers and industry executives. But that could lead to a pileup of tours in search of new dates in the fall or even next year. And even if new dates are found, it may mean empty arenas and theaters in the short term — which could translate into lost revenue and wages for venues and workers.

Bob Bailey, the chief underwriting officer for ProSight Specialty Insurance, said that one result of the coronavirus could be more scrutiny of — and higher insurance rates for — large outdoor live events, like music festivals, where crowds may be harder to contain and control than inside a building.

“For the people who attend them, you may be signing a waiver,” Mr. Bailey said. “Like if you go to a motor sports event, you say, ‘I am attending this event, but I understand that there may be a limit to how much can you protect my safety.’”

If concert revenue declines, another question is who would be hurt the most. Top artists, who have a variety of income streams available to them, may be best able to weather any storm. But the impact could be felt broadly through the complex economic chain that supports the concert business, from sound and lighting crews to merchandise and ticketing companies, hotels and others, said Jerry Mickelson of JAM Productions, an independent promoter in Chicago.

And for promoters themselves, size matters. In a recent conference call with investors after reporting Live Nation’s latest quarterly earnings, Mr. Rapino said his company expected only a modest impact, and that its vast size allowed it to absorb the effects of canceled shows. “The beautiful part of our business model is, it’s dispersed over 30,000 shows covering all types of venues and genres,” Mr. Rapino said on the call.

Mr. Mickelson summed up the effect on companies like his.

“Live Nation and AEG have the financial ability to withstand the loss of income by postponing their concerts,” he said. “Other smaller independent promoters might not be as fortunate.”

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