Money For Nothing: Live’s Back … And So’s Inflation

Just as the live industry is emerging from its most difficult years, which included a laundry list of maladies we know reflexively well and that don’t bear repeating—comes a doozy: Inflation. It’s an insidious economic force that negatively impacts goods and services across not only this industry but the entire economy sparing no one. That April’s inflation rate hit a staggering 8.5%, the highest in 40 years, cannot help but impact the live business in myriad ways, perhaps not yet fully realized though its sting is already being felt.

“It’s just astronomically driven our costs up,” says Zito of Zito Production Services, who’s currently working on “The Hella Mega Tour” with Green Day, Weezer and Fall Out Boy. The stadium trek is on its way to Europe after an impressive North American run last summer. “We’re up about 40% right now so we’re trying to compensate for that by scaling back, but there’s only so much you can do at the end of the day. There’s a lot of tours on right now getting hit with the costs after already scaling and pricing the tour, so it’s not like you can make up for it by increasing ticket sales. So essentially, at the end of the day, you’re kind of stuck with it.”

Indeed, many of the first quarter’s tour prices were set well before or during the pandemic when inflation was still relatively in check. That’s why some ticket prices seem relatively stable as inflation’s impact has yet to hit full force. According to box office reports submitted to Pollstar, for the first three months of 2022 vs. 2019, average ticket prices for clubs and theaters remained stable, rising modestly from $30.14 to $34.27 and $62.37 to $64.54, respectively. We see a greater impact at the arena level, where average tickets came in at $72.89 in 2019 and hit $91.81, a nearly 26% increase for the first three months.

That said, industry experts Pollstar spoke with for this story believed ticket prices will rise moving forward, but it may not be as dramatic as some are predicting.

“Clearly, in the long run, they go up, there is no question. I don’t think anyone along the food chain wants to lose a lot of margin,” says Bill Zysblat, a veteran business manager and founder of RZO whose clients include The Rolling Stones, U2, Lady Gaga, Sting, Steely Dan, David Byrne, Shania Twain and Luis Miguel, as well as the estates of John Lennon and David Bowie. “I think everyone will take a little bit of a hit. I don’t think it’ll all get passed down to the consumer like it does with food and other commodities. I know that the tours that we have going out this year have not raised their prices, period. The artists have said basically, ‘We’ll eat the inflation and let’s see what happens next time around.’ I don’t think it’s going to be point for point.”

Which is good news for music fans, especially if prices remain stable or decrease. Inflation is triggered by several factors, chief among them gas prices. According to AAA, as of May 4, the average price for a gallon of regular gasoline was $4.226; a year ago it was at $2.913, a staggering 45% increase.

“Touring is about getting from point A to point B,” says 10th Street Entertainment President Chris Nilsson, whose management clients include Mötley Crüe, Ice Nine Kills and Five Finger Death Punch. “A lot of the inflationary pressures start and end with energy costs. And there really isn’t an area of this business or really any business that isn’t affected by that in one way or the other. The cost of buses and trucks, obviously, are going to be higher.”

One analyst noted that the spike in recent gas prices is only relative to 2020 and 2021’s lower prices. Compared to 2014, the percentage increase to today would only be a 12.5% jump.

There are, of course, other economic pressures beyond transportation adding to inflation. This includes labor costs, which have increased with the so-called “Great Resignation,” which in December saw some 4.3 million people change careers or quit jobs, according to Department of Labor statistics. This resulted in tours and festivals, in some cases, doing more with less and having to pay more for labor.

“We went through this last year with Green Day where we were one of the first stadium tours to market (in North America),” says Zito. “We went out and there weren’t enough stagehands; they hadn’t come back yet and people had gone into other fields. Through the end of the year, it got a little bit better as there was enough work and enough incentive for people to come back. But now, going into Europe, we’ve found ourselves in the exact same situation. A lot of these places haven’t had shows since 2019 and are just starting to open up. We’re trying to compensate by overstaffing and carrying extra people. We’re hearing from everybody, ‘Well, we know you asked for 100 guys, we’re hoping we can get you 60 stagehands.’ I can’t really afford to scale back and spread our team too thin, so that’s our emergency plan to get the show up when we get into these cities and don’t have the labor we need.”

While most now say filling positions on tours is manageable, others note they’re losing out on the seasoned professionals they’ve successfully worked with in the past because of the number of tours currently out at the same time. “It’s like everybody wanted to go out at once,” Zysblat says. “You had people, mainly lighting and sound people, who had two or three major clients that were off cycle from each other. But now, everybody’s on the same cycle and that’s been the hardest part to maneuver. Everybody wants to go out in the next 18 months. So, to me, getting your people back has been the problem, not just getting people.”

Zysblat says another added tour expense is insurance, or the lack thereof, which impacts touring costs in significant ways: The first is the unavailability of COVID coverage, which means it’s paramount that larger tours institute their own safety protocols. “We do a dramatic amount of testing on tours,” he says. “We test everybody maybe every other day and everything gets sanitized five times over.” The veteran business manager says artists are shouldering those expenses. “There has not been one discussion of passing that incremental cost along to the consumer,” he says. “That’s one where every client just seems resigned to eat it. In all fairness, even for a big client, it’s tens of thousands of dollars, not hundreds of thousands or millions of dollars, but it does add up.”

The other cost, Zysblat and others note, is the cost of available insurance. “The biggest cost rise in the last two years,” he says, “has been on non-appearance insurance. It’s doubled in some cases and completely eliminated coverage for COVID. So you’re paying twice as much and the one thing you need covered, you can’t buy if you want to.”

But according to Peter Tempkins who, after 35 years, this past month retired as managing director of HUB International Insurance, the risk on shows has increased significantly. “Inflation has nothing to do with the rising insurance costs,” he says. “It has to do with claims and a changing marketplace. The total income to the markets that write event cancellation insurance, which encompasses more than just concerts – it’s expositions, conferences, (sporting events) – the total income was about $400 million, but they had losses somewhere between $2 billion and $3 billion.”

There are also ways to control touring costs to help mitigate inflation’s impact. “We’ve cut back on catering just to try to save some money, not only for ourselves, but for the promoters, also,” says David ‘5-1’ Norman, who works as both a tour accountant and a production manager with clients including Tyler, the Creator and My Morning Jacket. “I’m seeing some flying commercial airlines like Southwest Airlines, because you get free baggage.”

Norman also says when he makes tour budgets he pads the total to help lessen the blow of rising costs and unexpected expenses. “In all the tour budgets I do before we go out, I always put in anywhere from a 5% to 10% contingency plan to cover things such as this,” says Norman from New Orleans where he is running production on the Congo Square Stage for the annual Jazz & Heritage Festival. “Some tours add contingencies to their budgets, some don’t. I think it’s foolhardy for people to not add at least 5% to 10% contingencies in their budgets because you never know about fuel costs, catering costs. You might have to reroute a tour which involves extra fuel, hotels, flights, salaries, per diems and all of that. You just have a buffer in your budget. So if those things don’t come to pass, then you can roll that money into extra income.”

Thankfully the other side of inflation is consumer demand, which in 2022 thus far has shown no signs of flagging. As this issue was going to press, Live Nation, the world’s largest promoter, had just released its quarterly earnings, which by nearly every metric was cause for optimism, calling Q1 its “best first quarter ever.” In its report, the company stated that it sold 70 million tickets for 2022, which represents double-digit growth over 2019; its concert bookings through late April were up 44% over 2019; ticketing had its second best quarter ever delivering $206 million in adjusted operating income, making it the second best quarter ever for ticketing; and its sponsorship operating income was up 83%.

“This was our highest Q1 AOI ever,” said Live Nation president and CFO Joe Berchtold on the earnings call, “exceeding Q1 of 2019 by $94 million, which had been our previous record first quarter.”

Anecdotally, too, touring professionals say they are seeing insatiable consumer demand in real time. “I have seen a real appetite with fans wanting to see shows again,” says 10th Street Entertainment’s Nilsson. “We just had this tour with a band of ours, Ice Nine Kills with Motionless in White and Black Veil Brides. They sold out almost every show. It was really incredible. The kids loved it. Everybody went. People wanted to get in that couldn’t. To me, that was an unbelievably healthy example of pent-up demand. It did absolutely phenomenal business. The merchandise sales were through the roof. It was super successful.”