Headwinds & Turbulence? The Live Industry’s Outlook In Unpredictable Times

The live entertainment industry is on a bull run. Pent-up demand was unleashed and the torrent is still coursing.

At the top of the market, Live Nation is reaping the benefits with the giant reporting more than $3 billion of revenue in its first quarter earnings report, besting 2022 by 73 percent and beating analyst expectations once again. More than 19 million people worldwide
attended Live Nation events in the first three months of the year.

The company sold 90 million tickets for events scheduled for this year, portending continued success.

Using Live Nation as an analog for the entire industry isn’t perfect, by any means.

Those aforementioned staffing and supply difficulties are much easier to manage at scale for a global corporation than they are for an independent. Live Nation has multiple revenue streams that spin its flywheel and the company benefits from high-demand artists playing arenas and stadiums. Your local mid-cap does not.

What’s undeniable across the market is this: Grosses are up. More tickets are being sold than ever before. There’s high demand and high supply. Stuck inside for years with the rest of us, artists have been eager to get back on the road and festivals have been eager to open their gates.

Live Nation’s consumer studies say fans plan to spend more on going to shows this year. Surveys conducted by secondary ticketing companies agree, as do forecasts from the economists. President and CEO Michael Rapino said on the earnings call that tickets are still underpriced.

“We’ve seen the artists looking at their ticket price and [ask] ‘How do we bring the prices down in the back, bring the prices up in the front, so we can sell out and make sure everyone gets a ticket at an affordable price?’” he said. “But let’s not let secondary run away with the front row. So we think that we’re still dramatically underpriced versus demand, and you see that every day on the secondary.”

So there’s still room before tickets hit the ceiling and there are signs that, in fact, people will spend more. … for now.

Things haven’t been universally perfect. Atlantic City’s long-running Bamboozle canceled a week before showtime. There was a raft of reasons. The promoter announced what fans saw as an underwhelming lineup that the festival itself admitted had no “high-dollar headliners.” Ticketbuyers filed complaints with the state, alleging deceptive business practices. The festival’s liquidity took a hit due to a surfeit of refund requests. A lawsuit filed in state court alleges that promoter John D’Esposito failed to pay back a $500,000 loan (with 20% interest). Bamboozle suffered from a cascade of missteps but there may be a broader trend at play.

For a year or so, it’s been enough to simply be out and be live. People were starved for live performance and flush with record levels of saving. Now, with inflationary pressure, consumers are demanding more for their limited dollars. Premium packages became more prominent in 2022 and industry leaders, including Rapino, expect further expansion.

“I’ve said many times [that] this is an industry that has … not done a great job of doing a premium experience for customers,” Rapino said. “The sports [industry] and new arenas and stadiums are doing a great job on that. But … the music industry has not done that.”

In a May report, Bank of America found even lower-income households are eager to spend on leisure post-pandemic, at a higher proportion than high earners.

“Most recently, lower-income consumers have increased levels of spending compared to the other income cohorts. This could be a positive sign for the leisure sector as we look forward to the rest of 2023,” BOA’s Institute wrote.

It’s a pat sentiment that music is “recession-proof ” and it’s true to a degree. Goldman Sachs found that during the 2007-09 recession, the live industry grew at a rate of nearly 4 percent per year, but remained flat for the six years following. People wanted to be entertained in tough times, but the hangover set in as the economy rebounded.

Economists are predicting recession won’t hit until late in 2023 (if then; there’s little consensus on how the cycle will shake out), but if the pattern from the Great Recession holds true, live may maintain its growth in the short term.

In a November consumer sentiment report, Bank of America found that more households planned to reduce in-home entertainment than planned to cut out-of-the-home leisure spending and that study came at a time of lower consumer confidence with more acute fears of recession. Since then, the Fed’s rate hike has made credit more expensive, which may have a knock-on effect when bills come due, further hinting that while the bull may keep running for live throughout the year and ease in ‘24 and beyond, particularly if unemployment ticks up, the expected reaction to higher rates