2008 Business Analysis
All Things Considered
Pollstar estimates total concert ticket sales hit another record in 2008, rising more than 7 percent to $4.2 billion in North America. This number is based on face-value ticket prices and doesn’t include ticketing add-on fees or the premium spread added by the unregulated secondary ticket market.
All things considered, the concert industry had a much better year than really should have been expected in light of the worldwide economic downturn. Fans continued to buy increasingly expensive tickets during the year. However, it should be noted most fourth-quarter ticket sales were made before the spectacular collapse of major financial institutions began in the fall.
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Fine At The Top
The Top 100 touring acts of 2008 grossed a record $2.43 billion which was up about 6.5 percent over the $2.28 billion generated by the Top 100 acts touring in 2007. The previous record was $2.37 billion in 2006. The average show gross was a record $640,589, which was up about 11.7 percent or an average of $67,563.
The total number of tickets sold by the Top 100 acts was down about 2 percent to 36.03 million. The industry record in this decade was the 38.7 million sold in 2003. The average number of tickets sold was 9,231, which was up about 3 percent over 2007. The Top 100 acts managed to achieve all this by working nearly 5 percent fewer total shows in 2008.
The biggest change, and the primary reason for the rising gross revenue figure, is the stunning 8.4 percent increase in the average ticket price. These numbers are astounding considering the economic environment in which they were generated.
A ticket to see one of the Top 100 acts averaged a record $67.33 which was up an eye-opening $5.26 over the $62.07 average in 2007. That is by far the biggest single year increase since ticket prices began their rapid rise in the mid-’90s. Even more surprising is that it comes on the heels of the modest 49-cent average increase seen between 2006 and ’07.
More Big Shows
An examination of the Top 200 individual show grosses in North America looks a lot more like 2006 than 2007.
It took a gross of $1.76 million to fill the No. 200 spot in the 2008 rankings, which is only slightly more than it took in 2006. An act only needed $1.57 million in 2007 to make the cut.
A more interesting reflection of the business comes from looking at the year’s very biggest shows. There were 10 shows that grossed more than $10 million in 2008. That contrasts with just four shows in 2007 and eight shows in 2006.
Live Nation’s Madonna tour accounted for 19 of the Top 200 shows. The AEG-promoted tours by Celine Dion (18), Bon Jovi (14), Kenny Chesney (14) and Tina Turner (12) followed closely behind. Not counting multi-act festival bills, a total of 17 headline acts contributed to the Top 200 grosses.
It was also a good year for big shows at Canadian venues. The Air Canada Centre in Toronto hosted the most shows with 12 while Montreal’s Bell Centre added another four. Madison Square Garden hosted 10 box office bonanzas, the United Center in Chicago accounted for 7 spots while Boston’s TD Banknorth Garden added 6.
Records & Touring
Physical album sales in 2008 continued to drop rapidly, plunging 20 percent to 362.6 million units according to Nielsen SoundScan. Digital album sales were up 32 percent but only accounted for 65.8 million units, which doesn’t come close to offsetting the decline in the bricks-and-mortar world. That helps underscore that most artists today are increasingly making the bulk of their income from touring rather than record sales.
Taylor Swift, who spent nearly the entire year providing very strong support for Rascal Flatts, sold more than 4 million units making her the biggest selling artist of the year. AC/DC moved 3.42 million units, which is made all the more remarkable because the band’s new record was only physically distributed through Walmart.
The conventional wisdom used to be that the entertainment business, and concerts in particular, were largely recession proof because people need to be entertained even in tough times. That was certainly true before the industry’s ticket price spiral resulted in average prices more than doubling in the past 10 years. Going to concerts is no longer a frivolous expense. The cost of today’s average concert experience easily hits three digits for most couples.
The movie industry, with most tickets priced under $10, can probably still lean on the recession-proof label. Movie box office receipts hit $9.63 billion last year which was essentially the same as 2007. Total tickets, however, was down about 4 percent according to Variety.
Ticket To Fight
The prime industry story of the past year had to do with all the moves being made by Live Nation as it prepared to take on Ticketmaster in the event ticketing business.
It’s a battle that will eventually involve nearly every venue and promoter in North America and many other parts of the world as both companies seek to lay claim to the ticket business and the extremely valuable underlying customer database information it generates.
There is little doubt that 2008 was a tough year for Live Nation. The company managed to make a profit through the first three quarters only to be rewarded by having its stock immediately hammered in the fourth. After trading much of the year in the teens, LN stock dove toward $2 a share before rallying back above $5 at year’s end.
Some observers have said the concert industry is not really a good fit for publicly traded companies that rely on quarterly earnings reports that must make more money in every year-over-year period or suffer dire consequences. The concert business just doesn’t run that way. Product and pricing is controlled by the artists and even an industry giant like LN can only wield a limited amount of influence.
Wall Street also doesn’t understand that it is quite possible for large and small promoters to make money in a down economic environment. Profits can be generated even in a recession if the right deals are made.
With its stock trading at such depressed prices, this may be the year that Live Nation is either acquired by a larger company or exits the public market and goes private. Live Nation has a public float of about 74.71 million shares, and including officers and insiders, has about 78.2 million shares outstanding. At a premium of $10 per share that places the company’s book value at close to $800 million.
The remaining large record companies seem to think their salvation is going to come from shifting their artist signings to 360 deals. They want to tap into the larger revenue streams generated from touring and merchandise to offset the decline in recorded music profits. Such plans have not yielded much success thus far. In that light, a scenario of Live Nation being acquired by a Universal or a Sony might not be that far fetched.
Leave It On The Table
The concert industry defied logic during 2008 by raising prices as the economy crumbled around us. Still, with the exception of Janet Jackson, there were few big misses.
Live Nation took a chance on the NKOTB reunion and was handsomely rewarded. AEG laid down a huge bet on Britney Spears that looks like it will pay off nicely in 2009. But in this economic environment, there will be some huge disasters for those that overreach.
Nearly all economists predict that the global financial crisis will get worse in 2009 and that a recovery is not likely for more than a year.
Artists need to set conservative touring goals with ticket prices and venue size. This is not the time to try and grab every dollar off a table that may only be standing on three legs as it is.
And promoters who want to survive the coming year need to stand up and say no to unacceptable risks or face extinction.