This September, Berthold Seliger (Büro für Musik, Texte & Strategien, Berlin) was a guest of the 9th Vienna Music Business Research Days at the mdw. In the following, he provides mdw Magazine with insights into some key points of his keynote address, “Empire Business or Cultural Diversity. About the Reality of the Concert Business”.
Today’s music industry is unabashedly playing monopoly. While this has long been true of the record industry and music publishing, it now applies to the concert business, as well. The worldwide concert business is dominated by three large multinational corporations: AEG, CTS Eventim, and of course Live Nation, which is by far the biggest player.
This development is worth a closer look especially because the concert business—in contrast to the record industry—was not globally organised until just a few years ago; it had previously consisted of regional markets with a multitude of smaller and larger (but typically independent) festivals, with local event promoters and national tour promoters, and with agents whose activities didn’t range beyond their continent at the absolute most.
Up into the 1990s, the international and regional concert businesses were fragmented. The US music industry was dominated by local and regional event promoters that could be avoided by only a very few extremely big artists like Elvis Presley. The first person to succeed in threatening this system was Michael Cohl, whose firm CPI organised the nationwide “Victory Tour” by Michael Jackson and the Jacksons in 1984.
In Europe, the standard tour business model was as follows: artist (sometimes with manager) / European agent (typically based in Great Britain) / national tour promoter / local event promoter. But today, this model has been largely eliminated by giant multinationals: Live Nation, for example, manages a great number of musicians and bands; they’re simultaneously their worldwide agents and, in most countries, also the national tour promoters. They frequently also work as local promoters, and it’s not uncommon for Live Nation to even own the concert halls and/or the festivals where their bands perform. Everything is in the same hand, integrated both vertically and horizontally.
Now how could it happen that present-day pop culture and rock music, which developed out of subcultures over a period of many decades and, as Patti Smith sings, were situated “outside of society”, have become dominated by large corporations that operate worldwide? How could it happen that a form of music that had been defined by the artists ended up being made into a streamlined shareholder business dominated by the likes of Live Nation, CTS Eventim, & Co.? The fact is that market concentrations and monopolies are not laws of nature—they’re created by human beings.
The year that touched off the great transformation of the international concert business was 1996—the year in which the “Telecommunications Act” was passed in the USA. This neoliberal piece of legislation, devised by Milton Friedman and his “Chicago Boys”, provided for so-called media cross-ownerships. For the first time in US history, it was made legal for corporations to simultaneously own multiple television stations and an unlimited number of radio stations as well as newspapers, ad agencies, and concert promoters. The previously fragmented concert business found itself subject to a gigantic process of concentration. While there were still 50 large media companies in the USA in 1983, that number had dropped to just five by 2005. Hardly any corporation profited from the new law as greatly as did the small, San Antonio, Texas-based radio station owner Clear Channel Communications. Beginning in 1996, Clear Channel invested over US$ 30 billion to eventually acquire over 1,200 radio stations across the USA—as well as leading concert agencies (such as SFX Entertainment, previously owned by the above-mentioned Michael Cohl), promoters, and venues. In 2005, Clear Channel was forced to spin off its concert business due to competition issues—and this spin-off, known as Live Nation, is now the largest concert promoter in the world.
In 2017, Live Nation promoted around 30,000 concerts in 40 countries for which it sold 500 million tickets; it runs 222 venues worldwide, and it either owns or holds controlling interests in several of the most important tour promoters and festivals—not just in the USA, but also in Europe. Live Nation manages over 500 artists and bands worldwide, including U2 and Madonna. Its global expansion project was financed by massive losses: between 2005 and 2012, Live Nation lost a total of US$ 951 million (US$ 239 million of which was in 2008 alone).
Let’s take a look at Live Nation’s key financial figures for 2017:
- Its concert business posted an operating loss of US$ 93.59 million.
- The business area of “Sponsoring & Advertising” made profits of US$ 251.49 million (from revenue of just US$ 445.15 million!).
- In the area of “Ticketing”, a US$ 90.9 million profit was made (though, here, one might as well also count the US$ 110 million that Live Nation held in reserve for a legal conflict).
These figures permit some interesting conclusions: Live Nation’s actual concert business makes huge losses, which is due not least to the overblown fees this company pays artists to sign with them—it’s not uncommon for these fees to exceed 100 percent of an artist’s ticket revenue, which of course sounds absurd but actually does “pay off” when one considers that the concert business makes its real profits from ticketing and sponsoring.
2017 saw the world’s third-largest concert promoter and second-largest seller of tickets, CTS Eventim, report revenues of over € 1 billion for the first time in its corporate history, with an operating income of € 201.63 (around US$ 234 million). Viewed purely in a business sense, CTS Eventim is something like a typically German countermodel to Live Nation. It prefers to do its business in the black and practices a sort of Protestant capitalism, as Max Weber would’ve put it: acquisitions are financed not by gigantic losses, as in the case of Live Nation, but by legitimate profits—for which reason this corporate group’s growth is proceeding more slowly. Nonetheless, the basic principle is similar: they live from running concert arenas (including the Lanxess Arena in Köln, the Waldbühne in Berlin, and the Eventim Apollo in London) and festivals—and the fact that criticism arose this year in Great Britain regarding the fact that Live Nation dominates over 25 percent of that country’s festivals with 5,000+ visitors is something that would earn but a weary smile from the German concert industry: in Germany, CTS Eventim companies now control more than 70 percent of the large rock and pop festivals.
But above all, CTS Eventim makes its money in ticketing: while this corporation’s concert business earned only € 25.5 million in 2017, its operating income from ticketing stood at € 178.6 million (with revenue of € 418.4 million!). It’s the ticketing, stupid!
This has to do with several factors: first of all, ticket sellers—in contrast to concert promoters—have zero entrepreneurial risk; their business is purely commission-based. But even more importantly, this is an Internet story! The gross margin for Internet sales is a staggering 58% (in contrast to 12.2% in the concert business; figures from 2015), which of course has to do mainly with drastically overblown ticket fees—in 2015, for example, CTS Eventim sold AC/DC tickets at a ticket price of € 80 with advance booking fees of € 21.55 and between € 19.90 and € 29.90 in “prime service costs” and “premium shipping including processing fee”, which represents a total mark-up of over 50%. This modern form of robber barony provides shareholders with profits at the expense of music fans who have no alternative and are forced to pay overblown fees when they purchase tickets.
This much is clear: the worldwide market dominance of the big concert conglomerates is causing massive problems. For one thing, these industry giants pose a massive threat to cultural diversity—after all, has one ever heard of Live Nation, CTS Eventim, or AEG supporting and pushing unknown bands or paying attention to musical genres far removed from the mainstream and quick success? Of course not. But that’s where cultural diversity begins. And shareholders are interested in neither culture nor sustainability; all they want is to see these corporations make a profit.
The oligopoly that these corporations have set up by way of horizontal and vertical integration hurts musicians because the agents, the tour promoters, and above the all local event promoters (who play an important role in building up artists) will eventually have been eliminated, with the local promoters being degraded to merely “going through the motions” as the business model where everything (management, agency, actual event promotion) comes from a single provider prevails—to the benefit of corporate profits, but to the detriment of the artists’ careers. After all, a situation benefiting musicians would see a larger pool of capable people fighting for them and a greater number of people with ideas and visions helping them in terms of career-building!
The name of the game must therefore be to break up the oligopolies, above all via stricter antitrust legislation and enhanced consumer protections. It’s precisely in the cultural sphere that oligopolies and monopolies are especially ominous. Music, literature, art, and all other forms of culture are as important to human life as the air that we breathe, the water that we drink, or the love that we live. So we need to protect culture against co-optation by large multinational corporations in order to prevent the creation of a monoculture, instead preserving the cultural diversity to which pop culture has contributed in such a wonderful way since its beginnings!
You can read a detailed report on the 9th Vienna Music Business Research Days at musicbusinessresearch.wordpress.com