Banking On Concerts: Pollstar Talks To Music Industry Group’s Andrew Kintz
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With all of Pollstar’s focus on ticket sales and concert grosses, it’s easy to forget where the money often comes from to get the whole thing started.
“You need financing to get from point A to point B, certainly in live music,” First Tennessee Bank Executive Vice President Andrew Kintz told Pollstar.
Kintz runs the bank’s Nashville-based Music Industry Group that finances everything from bus rentals to artist holds for major festivals. This gives him some valuable insight to the overall health of the business, and his predictions have to be … money.
“We’re looking at growth for our clientele in live music between 15 percent and 20 percent over last year – that’s gross revenues as well as net income,” he said. Although concert promoters are professional risk takers, Kintz says he has to be pretty close when making these calculations, adding with a laugh, “I cannot be wrong” and adding, “I’m so glad that the industry has matured to a point where it is run like a real business.”
“We really like the live music business particularly because it’s growing,” Kintz said. “You’ve got real professional owner-operators that know what they’re doing. We have a lot of confidence in them.”
Kintz shared with Pollstar some predictions, stories about the “professional risk takers” known as concert promoters and insight into how bank money gets tours, festivals, venues and musicians out there to make money.
– Andrew Kintz
The First Tennessee Bank executive Vice President Andrew Kintz runs the bank’s Nashville-based Music Industry Group.
What sort of thing does your bank finance music-wise?
Kintz: You need financing to get from point A to point B, certainly in live music. In general, say there’s a tour. The artist would have a touring entity, usually it sets up an LLC that has some substantial expenses up front before they even go on tour and sell their first ticket, or are paid for their first ticket from the promoter. A lot of those expenses are local and in the area where the artist is based – it’s for personal space and renting that and getting their routine down. It’s also for a lot of times if they can pay up front for staging and lighting and audio-visual equipment they can get a break there. A lot of times the break they’re getting is bigger than the interest rate we’d be charging just for the couple of months getting our principal back.
We have touring lines of credit. We also facilitate touring cards, they’re essentially corporate cards, where an artist from C-level to B-level all the way up to A-level would use large corporate touring facilities to pay for all the hotel rooms, pay for gas and the bus, pay for the lease on the sprinter van. Literally picture every level of artist and the fact they have the spend money to make money, essentially. We also bank a lot of the companies that are in the ecosystem of the live music sector of the music industry.
So that would be the staging and lighting companies, the audio-visual companies, the bus companies. A lot of times we’re even financing the venues, the places where the live music is going to take place. A lot of times we just have big commercial mortgages on the building, the land, the site where the live music event is going to happen.
We also bank festivals, a lot of times with festivals that has to do with “Hey, we need a line of credit.” I can’t tell you the names of all my clients, but let’s say, a large festival that’s well known, calls and says ‘Hey we need to put guarantees out to all the artists we have. ‘ They usually put the guarantees out long before their onsale. When they do that they’ll borrow the money from us, get all the major a-level acts, essentially the headliners, then turn around and start selling tickets. And after a number of months of selling those tickets they’re usually out of our line of credit.
But I will say we are a bank. We only charge a small, single-date interest rate. We’re not taking any equity in these things. We need to make sure we’re going to get paid but there’s a lot of ways to structure those facilities to make sure that we do.
Why do major festivals need credit?
A lot of the owners are high net worth but illiquid. So they might have money tied up in real estate – a lot of times their money is tied up in the ownership of the festival. Usually in the first two or three years festivals are losing money. Most of that is coming out of the owner’s pockets. So they continue to feed it, to feed it, to feed it. Then there’s inflection point where the festival turns a corner, it’s on the map, all of a sudden Live Nation and AEG are chasing them and throwing offers at them.
So OK, we’ve created something here and it’s worth something, but it’s all tied up in that investment they’ve made. (A lof of times) we’ll basically take the intellectual property of the festival as collateral. We’ll take the brand that the festival has become and include in that the overall collateral pool. We have not had to foreclose on a festival. We haven’t done any work on any of the festivals that have had some major issues, thankfully.
I think that’s generally because we have a good relationship with the owner-operators, we’ve known them a long time. We talked to them earlier, because they became a bankable festival. Because of that, we feel good about even if they’re not the festival that’s making a ton of money, there’s other ways for us to get money back if we’ve structured the deal right.
Would you consider concert promoters gamblers?
They are professional risk takers! Every promoter I’ve ever known, it’s fun to say, I always ask this question. “Tell me about the biggest bath you’ve taken.”
The stories are incredible about how these guys took a lot of risk, planned on something happening, and all kinds of really bad stuff could happen.
Thank the lord for insurance companies. There are a lot of specialty insurance companies. And that’s something that would be a requirement in our lending agreements.
“Hey, have you talked to HUB or Robertson Taylor or any of these specialty insurers to make sure that, if something goes wrong will the insurance company cover some piece of this?”
What happens if an artist just wakes up one morning and says “No thanks, not playing today” ?
(Laughs) “You got a real problem. You really do. You’re reminding me of a story that a great promoter, longtime, seasoned promoter … the no-show is even worse than a hurricane. The no-show can be far worse than a weather event.
How about Fyre Fest and Pemberton. Do you think consumers are gun-shy after these kind of high-profile failures?
They probably gave the consumer more confidence in the longtime, branded festival that has been around for a decade-plus, and been going on well over many years. It also probably helped AEG and Live Nation, and the companies that do this professionally, instilling more confidence in the festivals where they have a role.
Let’s hear more about future predictions.
We see strong growth growing forward. We have what I would call a direct line of sight. I’m getting projections from bus companies of what they already have on books, what’s already contracted. I’m getting projections from the staging and lighting companies. I’m getting projections from the actual festival companies. And and they see happening, some of which is already contractual and some of which is very likely based on good assumptions, we’re looking at growth for our clientele in live music, between 15 or 20 percent, over last year.
That’s gross revenues as well as net income. The biggest macro thing is that people feel wealthy. This is a discretionary dollar that people are spending on tickets. If it’s a festival pass it might be $500. But they feel like they have the money.
Their houses are worth more, their accounts are worth more. We’ve had a small pullback over the last couple months. But the reminder is since January of 2017, we’re up more than 20 percent. So if you’ve got a retirement account or taxable account invested in equities, you’re worth a lot more on paper. So all of that is playing into oh my gosh, I can go to more festivals,. The other thing has to do with consumer behavior, it’s also macro. People really want to buy the experience. We’re kind of a look-at-me society.
Because of social media you want to go to an experience with friends, have it be unique and special but also share with all your friends or acquaintances even. “Look where I am, look what I’m doing. Look at this special experience I’m having.” All that kind of feeds on itself. So when people do that, others will follow suit. I’ve actually seen some things with more college aged students that are saying we’re going to go to Tortuga in Ft. Lauderdale for our spring break.
That’s how we’re going to spend it. Not just going to go to the beach house or New Orleans or something. The festival is the destination for the spring break.