icon Go back

A portrait of sponsorship marketing in music festivals

image

Brands have always understood the power of music to create emotional connections. As such, music is second only to sports in terms of sponsorship spending.

But corporate sponsorship hasn’t always been welcome in the music world as it was seen as “selling out.” Music events are now much friendlier to corporate sponsors, and brands are using sponsorship opportunities to tap into consumer passion through music. This kind of sponsorship tends to be experience driven and can deliver on objectives in a way that other communication tools often can’t.

That said, the music industry is going through a time of rapid change, and that can have an impact on how brands approach corporate partnerships. Here we take a look at trends in music events, from festivals to live shows to venues.

Festivals and Events

Fyre Fest is not the only music festival that’s gone bust in recent years. Event obituaries include major established festivals like the long-running FYF Fest, the Lost Lake Festival, the Monolith Festival, Riot Fest Denver and Canada’s own Squamish Valley Music Festival in Pemberton, British Columbia.

Some events lasted only a year. Others didn’t even make it to their first edition, with some cancelled days—or even hours—before the kick-off. These include VestiVille in Belgium (dubbed Fyre Fest 2.0), InCuya Music Festival, the Bay Area’s XO Music Festival, Roxodus in Canada, and the pathetic attempt at reviving Woodstock for its 50th anniversary.

Other events have announced a hiatus, such as Panorama (AEG) in New York, Grandoozy (Superfly) in Denver, and Toronto’s Field Trip Music & Arts Festival and WayHome Music & Arts in Oro-Medonte, Ontario.

The cycle of event creation and death is not a new thing. It happened a decade ago in 2008-2009 amid the financial crisis, which had an impact on revenues from ticket sales and sponsorships, and brought the demise of Denver’s Mile High Music Festival, Las Vegas’s Vegoose, and New Jersey’s The Bamboozle, among others.

Promoters need corporate partners to put on festivals with an increasing cost structure and brands that are looking to build a long-term association with an event and its audience. However, festival volatility never sits well with investors.

Festival Economics

The music industry is now back to its 2006 high-water mark of $43 billion dollars (pre-pandemic). While the way music is consumed has radically changed, the structure of record labels, music distributors, and concert promoters still holds.

Artists capture about 12% of music revenues, but this portion is rising thanks to the concert business.

Live events are the main source of income for an average musician in the US and music festivals are also currently one of the most lucrative sectors of the entertainment industry. While physical music purchases are at an all-time low due to the prevalence of music streaming platforms, more and more people are spending on concert tickets.

In the US alone, 32 million people (roughly 10% of the population) attend festivals every year. In the UK, approximately 4 million people (or 6% of the population) flock to festival grounds annually.

Big festivals are a big business, but not an easy one. The economics of running a large festival are tricky. There are multiple factors that can negatively affect ticket sales, including the lineup, increased competition, timing, and—last but not least—the weather.

With event producers getting roughly 2% to 3% of ticket prices, their margins are quite low. For instance, Glastonbury in the UK reported a 50 pence profit per ticket sold on a £37m turnover in 2014.

The recent downfall and bankruptcy of Roxodus is shedding some light on the harsh reality of festival economics: promotion expenses, food and ticketing costs, security, stage set-up, equipment, AV and lighting, sanitation, VIP and artist accommodations, and, most importantly, talent costs can run into the millions, and rapidly climb to the tens of millions of dollars.

Because of this, festivals require substantial financial resources and experienced promoters to see things through. When new events go bust, it’s often because of a lack of both.

Big Events, Big Players

More and more of the massive players in the US music event industry, such as Live Nation, Anschutz Entertainment Group (Goldenvoice), and Endeavor (WME) have been consolidating.

Live Nation (NYSE: LYV) is the world’s largest producer of live entertainment. It owns and produces over 60 festivals and participates in major events such as Bonnaroo, Sasquatch!, Lollapalooza, and Austin City Limits. For its part, AEG owns Goldenvoice, which holds 11 festivals, including Coachella.

Vertical Integration

Many existing events partnered with large music production companies to keep up and reduce the financial risk associated with rising costs, competition, and uncertainties.

Aside from producing events, these companies are involved in talent management, music venues, and ticket sales. For instance, Ticketmaster is now part of Live Nation Entertainment since a 2010 merger. The ticket business generates the lion’s share of corporate revenue.

And while Live Nation’s talent management subsidiaries are losing money, the number of artists being signed has risen. Integration with the concert portion of the business is more lucrative. Coupled with a sizeable roster of great events, venues, and ticketing, this integration allows for greater buying and negotiation leverage, and exclusive deals for headlining artists.

From a partnership standpoint, this can help secure an agreement with a number of properties under a unique contract, which would have been difficult to secure individually. For instance, RBC, Canada’s largest bank, signed an agreement with Live Nation (which claims to have more than 1,000 brands and an audience of 93 million) to launch the RBC x Music program. However, while these blanket agreements offer a large array of benefits and ticket packages, they might not afford the same level of granularity for individual negotiations, and therefore might not be suitable for all brands.

Read “Sponsorship trends in music – Part 1” 

 

To view all the sources and citations, click here.

Photo by Jamakassi on Unsplash

image

Our latest blog posts

Read what our industry experts have to say about the latest trends in sponsorship marketing and learn how to up your game.

Ready to make your play?

Get started