How festival promoters make money, and how new laws hurt fans
It’s no secret that the new festival laws are really hurting promoters. However, if Facebook comments are anything to go by, a lot of fans seem to think something along the lines of, “Big whoop, festival promoters are greedy, make too much money, and rip us off anyway.”
Well, it’s time to set the record straight.
What fans need to know is how incredibly risky festival promotion actually is; and like with any business, the more risky your investment, the more rewarding the return.
So yes, if a festival does well, the promoter does make a lot of money. However, if it does poorly (and the odds are truly in favour of any festival going poorly) then the promoter can stand to lose millions.
To keep it really simple here’s what a high-level P&L might look like for a festival selling 10,000 tickets.
EXPENSES TOTAL: $2.6mil
Artists booking costs: $800k
Venue + Facilities: $600k
Admin: $180k (insurance, APRA fees, etc.)
INCOME TOTAL: $3.05 mil
Ticket Sales: $220 per head | $2.2mil total
Merch: $10 per head | $100k total
Food and Drinks: $50 per head | $500k total
Sponsorship: $250k total
PROFIT AT TICKET SALES:
The below outlines how much profit (give or take) the average promoter would make on a festival selling about 10,000 tickets at AU$220 each. We have scaled the profits down to 75% of tickets sold so you can see the high-risk nature of the business.
- 100% (sell-out): $450k
- 95%: $340k
- 90%: $230k
- 85%: $120k
- 80%: 10k (break-even point)
- 75%: -$100k (loss)
As you can see above, even if a promoter sells 7,500 tickets, they will still lose $100k! And at best, they’d make $450k on sellout.
Would you risk $2.6 million dollars for a $450k return? Sure, $450k profit is a lot of money, but the stakes are enormous.
Given this, very few people have the stomach to promote a festival. It’s a highly stressful job. Most people are too risk-averse, too scared and too conservative to ever think of taking on such a ridiculous investment.
Yet, we are very lucky (as are fans) that there are people willing to do it.
The NSW Government is now upping the cost for music festivals dramatically, especially for the ones they deem “High Risk“. Some festivals are reporting increases of over $500k in forced government costs for medical, security and police.
What do the new NSW licensing laws mean for a promoter?
If the above model is anything to work off, it means their festival goes to a loss-making venture even if they sell out the whole event. However, even if the NSW Government only increases costs for some festivals by $100k, (or $200k in the case of Mountain Sounds), you can see it the “break-even point” jumps up by 10%. This will halve the profit margin.
This means fans would be asking promoters to risk $2.6mil to make $200k. No promoter in their right mind would do that.
What does this mean for music fans?
The Industry Observer reached out to key Australian promoters to understand exactly how these new laws will mean for fans.
1. INCREASED TICKET PRICES
“The first thing we’d do is look to raise ticket prices to cover the increasing government cost, but then inherently that increases our risk as higher prices will likely deter fans.”
– Jaddan Comerford (Unify Gathering).
2. LESS INTERNATIONAL TOURING ARTISTS
“If NSW festival legs become less viable, it affects not only the Australian artists viability to tour the country, but also the viability of bringing international artists to Australia, as you have the biggest state in the country not being able to contribute to the tour budget in the way that it once did.”
– Ben Tilman (Yours & Owls)
3. LESS FESTIVALS
“The issue with being a promoter is that we all need to be full shit is a means of survive.
Why? The entire live music economy revolves around urgency and inspiring punters reach into their pockets buy tickets. The only way to create urgency is by constantly projecting confidence.
The NSW election victory of the Liberal Party creates a dilemma for every promoter. Do we come clean and tell the truth about how catastrophic these changes are going to be and risk losing consumer confidence? Or, do we come out publicly and tell people about the wafer-thin profit margins and the horrific losses we are about to get?
Or worst still, do we risk pissing off a government that now has power for the next 4 years and put a target on our backs?
For the governments to be slapping a whole bunch of new and exorbitant costs on events that are currently breaking even or making very small profits is just going to just drive a stake through the heart of the industry.
Festivals will cancel, stop running or simply miss the NSW on a nation run.”
– Anonymous Promoter
This article originally appeared on The Industry Observer, which is now part of The Music Network.