Higher Costs Will Impact Acts, Venues and Promoters

By David Farrell

On the surface, the live music sector is booming, but event promoters are cautious about the future as covid debt repayments come due, and operational costs keep rising.

Worrisome too is that these increased costs will surely push ticket prices higher, begging the question–at what point do general concert ticket prices outprice the market for them?

On the bright side, reports from outdoor concert and festival businesses have CMLA president Erin Benjamin feeling upbeat. For most in CLMA’s strong-and-long membership list of event promoters, festivals, and live music businesses and organizations, 2023 has been “a remarkable year.”

“Anecdotally I’m hearing things like food and beverage as well as merch sales are up which is great, and fans are voting with their feet and obviously happy to be back,” Benjamin says. “But we remain cautious, especially where covid-related debt and inflation are concerned. Financing costs have gone up, it’s still a challenge for some to find affordable insurance and the cost of doing business is going to remain high.

“If we continue to go in a direction where everything becomes increasingly more expensive, there will be a ripple effect that includes a potential rise in ticket prices,” she said. “What impact will that have on artists, on fans, and what impact does that have in the broader sense of being able to afford to continue doing business?”

This said, Benjamin says she’s optimistic things will continue to go in the right direction. “We have to manage these challenges together - the sector, industry and government, on all levels.”

One of the most pressing issues for CLMA members is the Dec. 31 deadline for repaying CEBA- the Canada Emergency Business Account which delivered over $49B to more than 890K small businesses during the pandemic. So far, Finance Minister Chrystia Freeland is standing firm on end-of-year repayment deadlines as various organizations continue to urge Ottawa to extend the repayment deadlines by at least another year.

There’s also a lobbying effort to increase the forgivable portion of the CEBA loan to $30K (or 50 percent) if fully repaid before Dec. 31, 2024, and maintaining the current forgivable portion of $20K (or 33.3 percent) if fully repaid by December 31, 2025; and, Modifying the RRRF and HASCAP loans in a similar fashion to allow more time and flexibility in repayment terms.

Worrisome too is the federal government’s plan to slash its annual budget by $15.4B over the next five years which includes a three percent reduction in spending for all federal departments–and that could affect a lot of entertainment businesses that rely on grants to market and promote themselves internationally.

Beyond this, there are clear signs of change afoot in the concert industry. Taylor Swift, Drake, Beyoncé, Harry Styles, Billy Joel, Elvis Costello, and Phish have gone the residency route playing multiple shows in a single city, and then there's the growing list of Las Vegas residencies that have gone mainstream these days. The trigger for residencies or multiple single-city show dates is belt-tightening.

Escalating transportation, labour, insurance, production and venue costs are forcing acts and promoters to rethink how they do business on the road. Anecdotal sources suggest food, accommodation and transportation costs have as much as doubled since pre-pandemic times.

Demand for simple stuff like porta potties is being maxed out, as too temp labour (electricians, carpenters, riggers).

Urban gentrification and municipal taxes are pushing the limits on many small clubs known for promoting emerging acts. If it’s not the landlord, it’s the taxman, and then it’s the bailiff.

High finance costs affect every link in the chain, from the artist planning a tour to all the cogs in the wheel including management companies, venue operators, and festival organizers.

Accrued debt from the lockdown burdened by high financing costs sap revenue sheets of companies large and small. Add to this high insurance costs and high taxes make for an unsavoury recipe that governments (federal, provincial and municipal) must be willing to address.

The burden of debt and inflationary costs will likely see attrition in the indie concert promoter sphere, giving Live Nation even more clout in the concert market.

Concert halls hosting a thousand to 2,500 people are becoming de rigeur­–expensive to run and necessarily needing marquee talent to keep the doors open. The acts know this and want more.

There's also the fact that there is a shrinking list of acts that can guarantee large venue sell-outs. Also, many acts are now trying to claw back big losses in income during the covid years and are doing so by charging more for their services. Add to the dwindling inventory the growing rank of top-draw acts now in their late 60s and 70s who want to work less and yet earn the same income, so they too want more from the gate.

Acoustic tours are an answer to pruning tour costs, with acts as diverse as John Mayer to (believe it or not) Gary Numan going this route. A growing number of Canadian hat artists have also opted to go the intimate route with acoustic tours post-covid, including Tim Hicks, Dean Brody, Paul Brandt and Terri Clark. It’s a trend that is likely to increase in popularity.

Another route ageing stars will choose is fewer concert dates with more top-dollar corporate engagements. It's a growing business that both TFA and the Paquin Agency have been pursuing for some time. Mind, premium paying shows aren't just for the top draw acts. For example, Niagara Falls, ON trio XPrime openly advertises itself as the ultimate party/cover band willing to do private functions such as weddings and private parties. The pursuit helps offset the cost of pursuing a more creative streak playing as James Blonde.

There's also a new multi-million dollar music tourism industry that's grown in the past few years offering the wealthy all the luxuries they are accustomed to within the confines of festival grounds set in exotic locations.

The impact on fans' discretionary dollars going to big-ticket artists will undoubtedly result in fewer dollars available to support developing and mid-sized acts. This combined with higher touring costs will have an impact on smaller halls, clubs and a sustainable economy for many artists.

The list of troublesome issues is seemingly endless, but for now, the show must go on as if everything is hunky-dory. And who knows, maybe it will be!

A few notable facts:

Statista music events data for Canada projects revenue in the sector will reach US$900M or C$1.3B with an annual growth rate of 3.18%. Average revenue per user has grown from $103.50 in 2019 to $136.40 this year, according to the statistics firm.

Statistics Canada Culture, Arts Entertainment report (released in Aug.) shows promoters and presenters enjoyed the highest revenue increases in its survey of entertainment industries, with the sector posting a 146 percent year-on-year increase last year.

According to CAPACOA, the live performance sector accounted for 72,000 jobs in 2022. In 2019, revenues from admissions to live performing arts performances in Canada totalled $3.8B

Live Nation reported gross profit for the 12 months ending June 30, 2023, of US$4.923B, a 48.18% increase over 2022. Topping that, a record-setting 2023 Q1 that posted $3.1B revenue — up 73% over Q1, 2022. No such figures are available for the Canadian division.