The Economics of Music Festivals
50 years ago, Woodstock spawned the modern music festival. Today there are festivals in more parts of the world than ever before, and ticket prices are higher than ever before. Why are music festivals so expensive?
Attending music festivals is expensive. A three-day pass for this year’s Coachella music festival in California cost $429. Tickets for the Glastonbury Festival in the UK went for £253 ($321). Lollapalooza Festival in Chicago ran for $340, with VIP tickets costing $2,200. Add in the cost of parking, food, drinks, and travel expenses, and for a lot of music fans, a few days at a festival comprise a large share of their monthly income.
Economies of Scale
However, according to economist Alan Krueger, music festivals are a bargain. In his recently released book Rockonomics, Krueger shows that concert ticket prices in the US have exploded over the past 40 years. The cost of the average concert ticket increased from just $12 in 1981 to $64 in 2017, according to data from concert data tracker Pollstar. If ticket prices instead grew in line with inflation, they would be about half as expensive today.
Festivals allow artists to share the costs of crew, lights, and security. With multiple acts playing on a stage each day, each set is cheaper to put on. Festivals, as seen by an economist, are an elegant way to improve the productivity of performers. As a result, in aggregate, the shows end up cheaper for music lovers.
The downside of festivals is that an attendee can’t spread out the fun. For many people, seeing five of their favorite artists in one day isn’t as fun as seeing those same five artists spread over the course of a year. Still, it’s better than never seeing them at all.
There are many aspects to putting together a music festival that contribute to ticket costs. It is a lot of work and can be like setting up a small town or city, with many different budgets. The obvious expenses are water, food, restrooms, waste management, and security to accommodate the crowds and the production costs. Other expenses include internal and external traffic management, wi-fi, scaffolding, electricity, and artist transport. Additionally, a weekend festival can easily require hundreds or thousands of workers to pull off successfully.
Another reason why prices are rising is the “out of control” cost of hiring the big-name acts. These are the names that draw the most important sponsors. In turn, fans feed the cost increases.
There was a time 20 or 30 years ago when artists wouldn’t allow their names to be on tickets if they were excessively priced. Now artists charge as much as they can because that is how they make money.
Many artists have significantly increased their fees to make up for downslide in music revenues due to digital streaming revolution. The artists rely more on live shows and festivals to make money now, rather than relying on selling songs. This is a direct result of the increase in popularity of music streaming. As a result, major artists such as Calvin Harris charge an event planner up to 550 thousand US dollars per gig.
Two major corporations: AEG Live and Live Nation now dominate the music industry. They each own and operate multiple venues and festivals and are exporting their brands around the world. They have also have bought out smaller festivals and event planners, reducing competition. These corporations are able to get artist fees at a discount because they can offer an artist multiple bookings. On the other hand, a smaller festival would not be able to make such an offer, which pushes their prices for top-notch talent up.
Willingness to pay
Nowadays, a festival patron is expected to pay hundreds, if not thousands, to join ‘the experience’ of a festival. And many fans are willing to do it, enabling the promoters and sponsors to continue to charge exorbitant prices.
Fans have changed too. Many are more interested in being seen than the music, she states.
Gary Bongiovanni, president, and editor-in-chief of Pollstar says today’s music festivals are more focused on celebs and luxury than the old days.
He explains as follows:
They drink their $15 beverages, eat their $30 fish-and-sprout tacos, buy their $50 t-shirts, take the selfies that prove they were there and they’re done. They feel their cred comes from being in the right place, with the right people, and if the music is provided by a legendary or super-hot band, that’s just an added bonus.Gary Bongiovanni
When music festivals first emerged in America, some five decades ago, they were considered a special event and they especially courted young people.
Now, the promoters and organizers court sponsors and vendors. The sponsors and vendors want the attendees to be of a demographic that can help them reach their goal of making the most money. So, the festivals charge a higher admission and attract patrons with more expendable income to buy their goods.
“Baumol’s cost disease.”
The rising cost of concerts can be compared to what economists refer to as “Baumol’s cost disease.” This is the idea that when certain industries experience rapid productivity growth, it makes industries that don’t have as much productivity growth relatively more expensive. For example, manufacturing has become way more productive in the past 50 years, but education and healthcare have not. As a result, college debt and medical bills now take up an increasing share of the typical person’s income, while the share of spending devoted to household goods and clothing has decreased.
Live music is an area that has not seen its productivity increase; it takes Paul McCartney just as much time to play his hits as it used to. The productivity in live performance is a bit better, thanks to improvements in speakers and microphones, but this is not enough to make a meaningful difference in the price of a show.