Behind the booming Supply and Demand of Music Festivals
With summer holidays on the horizon, there’s no doubt that a good proportion of us uni-goers are looking forward to attending one of summer’s iconic pastimes; music festivals. For music lovers, there’s certainly quite a bit to look forward to; from the mainstream tastes of ‘Falls Festival’ and ‘Beyond the Valley’ to the more psychedelic end of the spectrum with events like ‘Rainbow Serpent’ and ‘Earthcore’. The burgeoning number and variety of music festivals at home is reflective of the growth of the music festival industry across the globe, with corporate interests scrambling to establish a hold within the industry. To get a sense of just how lucrative music festivals can potentially be, the iconic ‘Coachella’ music festival, which attracted nearly 600,000 attendees across the 6-day event, completely sold out within an hour of release, with ticket prices ranging from a minimum of $375 to VIP ticketing of $899.[i] This inevitable commercialisation of the music festival industry is particularly ironic given the countercultural roots which many music festivals have claimed to originate from.
As economics students, we know that virtually anything under the sun can be deconstructed and simplified with some economic theory. So what’s behind the surging supply and demand for music festival events?
The supply side: Music Festival Organisers
The music industry, primarily the recorded music industry, has suffered a tremendous blow to profits over the past decade thanks to the availability of digital music and changing consumer behaviour. Digital music sales, which helped ease the rapid decline in physical music sales, have been overtaken by subscription streaming services such as Apple Music, Spotify and Pandora as of late, with revenue from subscription services increasing by 52% in 2014-15 and a corresponding decline in digital music sales by 9%.[ii] Record companies and artists are clearly not the ones profiting enormously from subscription streaming, with the songwriter for Megan Trainer’s pop hit, ‘All About That Bass’ allegedly netting a meagre $5,697 in royalties for the song despite over 178 million plays on streaming platforms.[iii] The state of the marketplace has left music companies and artists with little choice but to pursue alternative avenues to maintain the same revenue they might once have enjoyed from conventional music sales. Being paid to perform live at venues such as music festivals has no doubt been one of the primary avenues of choice, leading to the flourishing supply of these types of events.
The Demand side: Attendees
Of course, an increased supply of music festivals alone would not explain the burgeoning ticket prices and attendee numbers at music festivals. Attendees, of which unsurprisingly Millennials comprise the largest proportion,[iv] clearly are enthralled enough with the experience that we willingly hand over hundreds of dollars without much hesitation. The reason for this phenomenon is quite simple; experiences rather than goods have been proven to makes us happier. A study conducted by technology company, Harris, in conjunction with Eventbrite in 2014 found that over 3 in 4 Millennials would choose to spend money on a desirable experience over a desirable purchase, with 72% of Millennials stating they wished to increase their proportion of spending on experiences compared to physical things in the following year.[v] Music festivals are also an inherently communal activity, with only 4.1% of event attendees going to live music events alone.[vi] It seems that, corny as it sounds, the prospect of creating and sharing memorable experiences with others is the catalyst that keeps drawing the crowds through the gates of music festivals.
Not all smooth sailing:
Despite the unquestionable upward trend that the industry has experienced over the years, it is easy to overlook how challenging it is to consistently host a profitable music festival. Recent years have been marked with the collapse of many Australian icons, with the one-size-fits-all ‘Big Day Out’ festival closing its doors in 2014, as well as both ‘Future Music Festival’ and ‘Soundwave’ in 2015. Popular EDM festival ‘Stereosonic’ also took a temporary hiatus this year, citing financial difficulties with its US owners.[vii] Costs appear to be a major stumbling block. Renown artists are demanding staggering fees to perform at music festivals, with Soundwave paying one of the headline bands, ‘The Smashing Pumpkins’, a grand total of $1.27million to play in Adelaide, Sydney, Melbourne and Brisbane in the 2015 festival tour.[viii] Music festival necessities such as venue setup costs, adequate security, production and utilities also do not come cheaply, with electricity costs alone for a 10,000 capacity festival expected to be over $100,000 AUD.[ix] In light of mounting costs, it is little wonder that music festival operators can quickly find themselves in financial strife when they misjudge the profitability and demand for their events. In the backdrop of the booming music festival industry, the collapse of these icons is a reminder that regardless of how lucrative a market may appear to be, economic fundamentals always hold true. The gravy train is but a pipe dream.
Image source: http://www.milicacuckic.com/wp-content/uploads/2015/06/Summer-Music-Festivals.jpg