We were delighted to have McGill University student Jacqueline Graham working with us recently. In addition to some valuable work on private art galleries and collections, Jackie found the time to research music industry trends and their implications for live music destinations. In this article, she describes what she found.
Should I start a band? I’ve been playing guitar since I was ten, so this is a question I have often asked myself. Aside from my lack of any real musical talent, I wanted to find out what other obstacles lay in my path should I decide to put studies on hold and follow my dream of leading a present-day Josie and the Pussycats. With the social media outlets and at-home recording that exists, it must be easier for up-and-coming artists to record and distribute their own music, right? But how do I get from there to a sell-out tour of major stadiums?
Digitisation and Changes to the Music Industry Model
Everyone knows that digital distribution has changed the face of the music business. If video killed the radio star, then digital definitely killed the LP artist. Music streaming and individual song downloads have completely eclipsed album sales. Twenty years ago, album sales for an established artist could easily pass 1 million sales, but in 2013, the highest selling albums were barely selling half that and the trend is ever downwards.
Instead, customers are subscribing to streaming platforms, such as Spotify, Tidal or Apple Music, where they access individual songs rather than purchasing whole albums. The market for songs by a much broader spectrum of artists is booming. We have the musical equivalent of Attention Deficit Disorder. The market for streaming service subscriptions now totals 40 million and is growing at a rate of 50% per annum. In this singles-driven economy, artists are only known for a few songs, rather than their entire repertoire. They are ephemeral. They don’t have the time or the staying power – much less the marketing budget – to build up a large, loyal fan base. Furthermore, artists make less money through streaming because they receive smaller royalties.
The conventional wisdom is that this has pushed them to focus on live performance as a way to make up for the lack of album sales. What this assumption ignores, however, is the way that digitisation has affected the live music industry itself and the venues that serve it.
The Future of the Stadium Tour
The 1970s saw the rise of the stadium spectacular, where rock bands would put on explosive shows for sold-out crowds of tens of thousands. Now, these artists are in their 60s and 70s, continuing to dance and thrust for crowds that have grown up (and old) with them. These musicians have spent a career creating a series of carefully curated albums and building enormous followings that know their entire back catalogue. So today, stadium shows are thought to be dominated by two types of act: (a) ‘heritage rock’ bands like the Rolling Stones, The Who and Fleetwood Mac, and (b) ‘event’ shows like the reunion tours of broken-up boybands.
Although the logic is sound, the data does not fully support this view. We looked at the data published by Pollstar on the ticket sales of the 150 highest grossing tours from 2009 to 2014 and explored the impact of age and longevity on metrics like ticket sales, ticket pricing, number of shows and, importantly, average tickets per gig. Some of the results are intuitive and easy to explain. Older acts like Paul McCartney and Leonard Cohen perform significantly fewer shows (Figure 1), but charge markedly higher prices (Figure 2).
McCartney and Cohen have been touring since the early 1960s, so they can be forgiven for playing 30-40 shows per annum instead of 100. They probably don’t drive their cars into swimming pools anymore either. Moreover, their longevity is the consequence of a committed and loyal fan base and loyal fans will pay more to see a show by a beloved artist. So far, so predictable.
What does come as some surprise – given that all of the punditry and prognostication suggests that only ‘heritage rock’ bands can play Wembley – is the fact that there does not seem to be an obvious correlation between longevity and the average number of tickets per gig (Figure 3).
It’s true that older acts are generating more income through live performance, but they aren’t doing it by performing more or to larger audiences. Quite the opposite. They are touring less and to smaller venues – creating the scarcity that drives up ticket prices and their consequent profit margins.
That’s not to suggest that anyone else can fill the gap in the stadium programme. It takes time to hit those stadium heights. None of the tours by artists that debuted in the last decade averaged any more than 20,000 seats per show over the past 5 years. Beyond that, however, ‘younger’ artists like Coldplay and Justin Timberlake are just as likely to play the major stadiums as old-timers like U2 and ACDC.
What the data does make clear is that there is a ‘sweet spot’ of circa 15,000 seats that is optimal for any destination that is looking to attract the widest range of big name acts. It should come as no surprise, therefore, that the O2 Arena – with configurations that can easily adapt from 15,000 to 25,000 seats – is one of the world’s most successful live music venues. It is exactly the right size to meet the needs of the world’s biggest promoters. Its recent experience bears this out. Since The O2 Arena’s opening in 2007, ‘heritage rock’ bands have made up some 31% of its live music programme, while the remaining acts are contemporary pop royalty, such as Beyonce, Taylor Swift, and Kanye West.
Key to understanding the venue choice for major acts – new or old – is to understand where the ‘sell out risk’ resides – who pays the price for unsold tickets? With all the logistics and costly pyrotechnics that go into a major music tour, artists and promoters need to be sure that the show will pay off. The tour can no longer be considered the loss-leading promotional arm of a business model driven by album sales. It has to be profitable in its own right and promoters – in particular – cannot take the risk of a half-empty stadium when they have paid a flat fee for the venue in advance. They are better off booking two nights at The O2, with the option of a third. The shows sell out faster, which creates a bigger buzz and maintains a measure of scarcity, which drives up the price.
The Emerging Artist Scene
This is, of course, the story of what’s happening at the peak of the industry – that minority of artists that are big enough to ever make it onto Pollstar’s radar. What of the army of artists that are still out there busking in the Underground or playing in the pubs?
‘Making it big’ in the music industry has always been difficult, but there was always a sense that talent would shine through and that anyone with a musical gift and a willingness to work hard at least had a shot at fame and fortune. That’s not the case anymore. While established artists can juggle a combination of income generating opportunities – sales, royalties, reissues, concerts, appearance fees, etc. – up-and-comers are being squeezed from all sides. In a singles-driven market, even a breakthrough artist that makes the iTunes Top-10 might not stick around long enough to translate that success into a viable tour. They can’t draw crowds in sufficient volume or charge high enough prices to make the numbers work for the artist, promoter, agent and venue that all need a share of the spoils.
From 1981 to 2012 the average price of concerts rose by almost 400 %. For ‘once-in-a-lifetime’ acts, such as The Rolling Stones or Barbra Streisand, spending £450 on a concert ticket is viewed as a rare indulgence. They have a much older fan base that can afford to pay those prices to relive their younger days. But smaller and midlevel acts are caught in a catch-22. They need to charge higher prices to put on bigger shows, but their audience is a predominantly younger and more price sensitive crowd. What do they do?
Breaking Down Barriers Between Artist and Audience
If digitisation has indirectly driven concert prices up – putting a financial barrier between new artists and their fans – it has also created opportunities for artists to engage more directly with fans through other channels.
Social media platforms are eliminating that whole industry of A&R, label and promotional intermediaries that previously mediated the message between artist and consumer. With the quality of new home recording and production technology, allied to digital distribution through streaming services, who even needs a record label anymore? No longer having to rely on major labels to record and promote their music, artists can release material directly to their fans and market themselves through sites like Facebook, Instagram, Vimeo and Youtube . They have unprecedented independence in the production and distribution of their own material. The challenge is no longer to be ‘signed’ – it’s to be noticed.
This independence is, at least in part, set against the collapse in royalties paid for recorded music. The barriers to entry for new bands have never been lower; but neither has the market’s willingness to pay for new music. It points to the spectre of artistic elitism that shadow Culture Secretary Chris Blunt raised earlier this year in a very public spat with James Blunt – the idea that emerging artists cannot make money by making art, which makes it an activity that only the privileged can take a chance on.
In fact, digital developments may be the solution to the very problems they created. The emerging artists with the best chance of success are those that simultaneously embrace live performance and digital engagement with fans. Zoe Keating, an award winning cellist and composer has been recording music since 2001, including major movie and television soundtracks. She communicates directly with fans through social media and song-sharing platforms like Soundcloud, finding out where they are and what they want to hear. She then books shows ranging from 100 to 300 seat capacities that are generally pre-sold before she has incurred any booking fees.
A New Model for Live Music
The old business model of making a demo, getting signed to a label, selling albums, and generating buzz through live shows is obsolete, and every part of the supply chain – from the artist’s brain to the listener’s ear – is groping uncertainly towards a new business model that works in a digital age.
The live music industry and the venues that serve it are no different. The older, established artists that have the fan base to fill a stadium seem generally reluctant to play that kind of show, preferring instead to drive higher profit margins through higher ticket prices for smaller gigs. Younger, emerging artists are far less likely to enjoy the longevity needed to build a fan base large and loyal enough to ever fill that kind of venue. These two ends of the spectrum seem to be converging toward a ‘sweet spot’ of circa 15,000 to 20,000 seat venues as the new pinnacle of pop music achievement. This is a critical insight for any developer that needs to scale a new venue.
The path to The O2, however, is no longer via the hard graft of touring from the pub circuit through sequentially larger venues – all the while supported by the marketing and distribution arm of whatever label chooses to sign you. It involves constant communication and interaction with fans through digital channels combined with live performances that feel more personal and intimate as a result. Purely ‘functional’, fit-for-purpose venues that were built for last year’s music industry will continue to struggle and close, while those that can provide a unique or unusual experience will be rewarded. While digitisation has all but eliminated the costs of mass production and distribution, the live performance remains a singular experience that can never be fully replicated. No two gigs are exactly the same. That is its strength and enduring appeal and venues that cater to that will benefit e.g. by creating unique, interesting environments for audience and artist or by building in the functionality to scale up or down at speed or record the performance as it happens.