The profound disruption of the music business that started with the ipod and reached a recent crescendo with Spotify’s IPO on the New York Stock Exchange, has made right now the best time in history for fans of live music. Today, only a handful of artists have the ability to create large streams of revenue strictly from selling recorded albums ad songs.
Aging rock stars that had grown accustomed to residual income from recurring album sales are faced with the choice of scaling back cushy lifestyles or hitting the road to sell tickets. From stadium tours, huge multi-artist festivals, amphitheatres and arena shows to the club circuit, there have never been more opportunities to see your favorite bands and artists- young and old- performing live. Fans are winning big, not only by enjoying access to essentially every song and album ever recorded for $9.99 a month, but also because artists have only one way to truly get paid- by playing lots of live concerts and shows.
Since Thomas Edison’s invention of the graphophone in the late 1800’s paved the way for recorded classical music to be sold on cylinders in 1903, musicians had a clear path to getting paid for their artistry. As technology evolved from vinyl records to cassette tapes to compact discs, artists enjoyed a very lucrative income by selling albums. The album became an expression of a moment in time with a thoughtful arrangement of songs paired with interesting content- cover artwork and liner notes. With radio airplay priming the pump of discovery, the only way for a fan to study and appreciate the work of their favorite group was to purchase their albums.
Michael Jackson’s Thriller was released in 1982 (on vinyl and cassette) and is the best selling album of all time with over 66 million copies sold worldwide. Timing, as they say, is everything- since the launch of Apple’s ipod in 2001 only one artist has sold more than 20 million albums- Adele has done it twice.
The digital revolution in recorded music has been controversial ever since Napster made it easy to steal/share songs and albums over the internet. The growth of scaled up streaming services like Spotify, Apple Music, Pandora, Tidal and Deezer have made all recorded music more accessible than ever before.
The value proposition for fans with a monthly subscription to get access to every album they can think of for less than $10 is unbelievable. But, artists are harshly under-compensated for their work- making fractions of a cent per stream of a song. On Spotify for example, in 2017 artists were reported to be paid on average $0.0038 per stream. The scale needed to make “rock star” money is mind-boggling- to bring home $1 million in revenue an artist would need over 26 million streams of a song. Not many artists can achieve that scale, so selling concert tickets at $50 each becomes a much better way to make a living.
Today, it is estimated that 90% of an artist’s income comes from performing live.
Had Thriller been available in digital format to be shared, streamed and notpurchased, Michael Jackson would certainly not have waited a year and a half to kick off The Victory Tour which crossed the United States in 1984, and at the time broke all of the records to become the most successful tour in history- 55 shows, over 2 million fans, generating over $125 million ($260 million adjusted for inflation in 2018 dollars).
Impressive numbers for the King of Pop, but to put into context how the business model has shifted, the Victory Tour’s $260 million would only rank 12th out of tours from the last five years.
Tours are getting longer, with more cities and more shows in larger venues, while the cost of tickets continues to rise- the only remedy for artists’ shrinking pay from recorded music. With the proliferation of fan friendly ticket marketplaces bringing transparency and demonstrating fair market value for each individual show, there is a new challenge for artists and promoters- how to price their tickets.
Most artist’s stated goal is to not “gouge” their core fanbase- a noble pursuit, until the transparent market shows them exactly how much money may have been left on the table. Promoters and artists are trying to find the equilibrium of selling out and maximizing profits, often at the expense of the most dedicated fans. A popular way of generating maximum value for the “best seats” is to package them with a VIP experience- a photo opp with the artist and access to VIP clubs and amenities like upscale food and beverage options and private restrooms.
As more and more tours take place, there is an even greater opportunity for venues to invest in amenities that have already created massive value and revenues for sporting events- luxury suites, premium clubs and upgraded experiences.
The sales generated in these premium areas is especially valuable for venues, as it is generally not subject to revenue sharing, like sporting events are in league wide collective bargaining agreements. With this financial incentive combined with the volume of concert tours coming through arenas in particular, there is a real opportunity to re-imagine what a VIP concert experience can be.
Traditionally the best seats for concerts have meant the closest in proximity to the stage, but not everyone wants to be in the chaos of the floor or pit.
Luxury suites in particular offer an experience that is perfect for the fan that wants more space to move around, comfortable seating, a private restroom, dedicated food and beverage just for their group and heightened services- all while still having a great view and fantastic acoustics for the show.
For fans of music, and live music specifically, we are living in the golden age.
While the costs of attending a show have certainly been increasing, the value is improving with premium experiences. As the streaming model continues to mature, there could be more of a balance in how artists get paid, but for the time being, you will find most of them on the road, on long tours playing in a town near you.