How can a festival make money? It’s a pretty important question that seems to be getting harder to answer.
What worked ten, even five years ago simply doesn’t in the same way today. The ‘build it and they will come’ method is outdated, and while some festivals continue to thrive year-on-year others are falling by the wayside. Punters are increasingly choosing to splurge on seeing a global act headline a festival stage or opt to take the family to a nice and niche local 1,500-person event. Meanwhile, mid-sized festivals are being caught somewhere in the middle.
While festivals may run largely on coffee and vibes and they’re very much a business, and like any business there’s a reason why some festivals thrive while others falter. And it’s Annick Maas’s job to understand why.
Annick is the media and internet equity research analyst at brokerage firm Bernstein. And as an analyst, Annick is very much interested in the numbers. For Annick, who works with CTS Eventim and the 45 or so festivals they operate, her analysis on spending patterns pulls from some of Europe’s biggest festivals, including Germany’s Rock am Ring & Rock im Park to Love Supreme and Junction 2 in the UK. This offers some pretty valuable insight into what works and what doesn’t.
So, what can festivals do to keep going? Here, Annick speaks to us about diversification in the field and how to secure a viable future for your festival.
“What I care about is whether a festival is doing well or not. My analysis says the big festivals are succeeding and so are the small ones, but the middle ones have less potential for growth.
If you think about what is providing you the profits at a festival, it’s sponsorship revenues and VIP trends such as fast lanes and luxury packages. This is where you make the money from, and that’s more likely to happen at bigger festivals than at mid-tier ones.
The more you diversify your revenues beyond tickets to VIP sponsorship, food and beverage, merch and other additions, the more likelihood you have to actually survive. And these extra service can all be sponsored, which is very profitable. If you want have a guarantee for a festival to work, that’s what you do.
Festivals who have big sponsors can still struggle, but the more you diversify into revenue streams which are not weather dependent, it’s more reliable.
In a post-COVID world, what I’m finding through my research is that people aren’t going to less concerts than they were pre-COVID. They’re going to exactly the same amount of concerts, but now people are willing to pay more for it. But you have an intergenerational phase at the moment, which explains some of the dip we’re seeing in mid-tier and mid-priced festivals.
If you look at Gen Z, the generation after the millennials, some don’t have the money to go to festivals. Millennials are now in a generation where they’re starting to settle down and have kids, so they don’t go as many festivals as they used to because they have responsibilities. If you look at how people attend concerts, there are quite a few people who go to multiple shows but most people go once a year. For those people it’s a really important event, and they’re willing to spend more than others.
Something else we’ve seen in times of recession is that when things get tough, people don’t attend five gigs, they attend Oasis because it’s the gig of the summer. From that perspective, if going to one festival is your thing you’re happy to pay everything you need to go to that festival.
Dynamic pricing could solve some some of these issue. It would allow you to take the opportunity at the top, where people are willing to spend money for a live experience, while still allowing people to have access to these concerts or festivals. But that needs to be regulated.
The main point is that there’s still demand for festivals. Beyonce can charge £600 a ticket because there is someone out there willing to pay £600. Even if a primary ticketer sells you a one at £300, the secondary ticketer will still sell it at £600. As long as there is demand, the supply will be there.
For festivals, the costs of running it are much higher than the average attendee can see, so that’s why it’s important for them to have other revenue opportunities that come through.
It’s the same across the concert industry. Costs have increased, which is why these days they try to sell you an Aperol spritz and not a beer because you can take a higher profit margin on it. That helps on top of the ticket. You buy a t-shirt, and that’s great for the organiser because they get a high profit on it. It’s about expanding the opportunity on the things your audience can spend their money on once they’re at the location, because people are willing to spend for the experience.
It’s definitely less accessible for the bottom end, such as for students who have no money to attend any of the concerts. However eventually, the students will become the new people spending money. Then, it depends on how important it is for you to attend a concert. If it’s important for your audience, they will always be there.”
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