Converging Freakonomics: Why Live’s ‘Great Return’ Faces A Slew of Economic Challenges

Frederic J. BROWN / AFP / Getty Images – Gas Pump Sticker Shock:
High gas prices helped put the U.S.’ annual inflation rate in November 2021 at 6.8%, the highest since June 1982. Here, a downtown L.A. gas station sells a gallon of gas for over $6 on Dec. 10, 2021.

Last week, Pollstar chronicled and quantified 2021’s “Great Return” for its year-end issue. It was led by a strong Q4 which saw increases in revenues, ticket sales and average ticket prices. If these touring indices remained constant throughout next year, Pollstar projected 2022 would be a banner year for the live industry, surpassing even 2019’s record-setting numbers. While that forecast portends well for next year, the gauntlet of economic challenges currently facing this industry – including inflation, labor shortages, supply chain challenges, increased insurance rates and congestion –could very well undermine any net gains.

“Clearly, the confluence of events, the unintended consequences of COVID, it’s just never happened before,” says Bill Zysblat, founder of RZO and a veteran business manager whose clients include The Rolling Stones, U2, Lady Gaga, Sting, Steely Dan, David Byrne, Shania Twain, Luis Miguel and the estates of John Lennon and David Bowie. “Of course we’ve had inflation, of course we’ve had recessions where ticket sales were down, we’ve had every piece of this before, but I don’t think we’ve ever had them all combined at one time. Trying to figure out how to keep our bottom line intact is the hardest part.”

The bottom line’s most insidious and likely challenging component is inflation, which according to the U.S. Bureau of Labor Statistics accelerated to 6.8% in November, its highest rate since June 1982. It also marked the ninth consecutive month inflation surpassed the Fed’s 2% target. The underlying pressure, the Bureau said, was “broad-based, with energy costs recording the biggest gain (33.3% vs. 30% in October), namely gasoline (58.1% vs 49.6%).” Seventy-five dollars to fill a car tank once or twice a week, as it can run in California, or $750 or more for a tour bus, is a big hit and impacts every sector of the economy.

– Tour manager Bill Reeves
who is also the co-founder of Roadies Of Color United

“What I’ve noticed, and I’m sure everybody notices, is the increased costs of everything,” says veteran tour and production manager Bill Reeves, who has worked tours with Prince, Anita Baker, Maxwell, D’Angelo and Anthony Hamilton. “I’m currently booking buses for a tour in the spring and the average bus rental now is $700 to $750 a day whereas it used to be $450 to $500 a day – that’s a pretty significant jump.”

And one industry source says he expects those prices to rise well over $800 by summer.

“I haven’t had the experience of insurance rate fluctuation due to inflation because it hasn’t really ever come up in my [insurance] career,” says Paul Bassman, a managing director at Higginbotham who has been an insurance broker in live entertainment for 16 years. “It stands to reason since insurance companies are in the business of making money and if inflation is making prices rise and making everything more expensive, they’re going to raise rates accordingly to at least match the rate of inflation.”

Zysblat, however, says he’s yet to see an increase in tour costs, for good reason. “Anyone who was touring the fourth quarter of ‘19 or the first quarter of ‘20 and was planning on touring after that had their contracts in place,” he says. “And those just kept getting rolled over. So, for the most part, if you had a tour planned you probably aren’t paying a fuel surcharge to any of these companies, for example, because your existing contract is still in place.”

The veteran business manager cites several tours he worked on this year, including The Rolling Stones (2021’s top-grossing tour), Steely Dan, Sting and Lady Gaga, which he says did well. “We haven’t really seen the added expenses yet,” Zysblat says. “I think next year we’re going to see the big increases when the contracts have no longer rolled over. And same thing for ticket prices. Many of the major tours didn’t refund tickets and just postponed dates, so they’re clearly not raising their prices.”

Worth noting are the increasing financial advantages of residencies like Sting and Gaga in Vegas or, on a smaller scale, LCD Soundsystem’s 20-show stint at Brooklyn Steel and Robert Glasper’s 33 shows at the Blue Note. These significantly cut down on travel, production, hotels and other expenses. “Residencies have always been better from an expense profile point of view,” Zysblat says.

Another economic impediment are labor shortages, which are belied by relatively low unemployment. According to the Bureau of Labor Statistics, unemployment in November was 4.2%, which is relatively low and edging closer to the 3.5% unemployment we saw in Feb. 2020. At the same time, the pandemic gave rise to career changes and/or an unwillingness to work for lower wages.

“There’s a worker shortage in America and that certainly bled into our little corner of the world,” says Reeves. “Places that have strong unions are not a problem; places that are right to work or don’t have a strong union, they’re having difficulty finding people to build trusses and unload trucks and do what you need local crews to do. That’s an issue.”

“A colleague was just out for a couple of months,” Reeves continues, “and he was running into situations where there weren’t the proper amount of workers and stagehands for the call. In one instance, in Texas, he was calling for 32 guys and got 15.” Reeves also mentions J. Cole’s tour, which postponed dates after reportedly having issues with staffing local crews for its production.

Reeves also believes labor shortages will soon ease. “The worker shortage will slowly become a non-issue,” he says, “because people living on unemployment and stimulus checks, etc., will eventually have to go back to work. Concurrently, though, pay is generally rising because there is a shortage. We will see a sort of a leveling off over the next few months where employers are going to have to offer more money to get workers. Eventually, it’ll be enough money that workers will start coming back.”

– Double-Double, Animal Style:
With unemployment falling, a shrinking labor market, career changes coinciding with the return of the live industry, many tours, venues, production companies, bus companies, concessionaires and others face labor shortages. This In-N-Out franchise in Brea, Calif., in September 2021 offered starting pay at $17-$20.50 an hour. (Jeff Gritchen / MediaNews Group/Orange County Register/ Getty Images)

An additional cost for the foreseeable future is COVID mitigation, with some tours hiring COVID directors, a role which becomes essential in the absence of COVID insurance, which

Bassman says still doesn’t exist, and the exorbitant costs of a canceled show. Many predict that some of these added expenses will be put on fans with increased ticket prices, which could impact attendance. While pent-up demand is still relatively high, the question is, with massive number of tours slated to go out, can all these seats possibly get filled?

“I’m just wondering at what point does the the ticket buyer say, ‘I’m just going to stay home because I don’t want to spend $250-$300 to go see so-and-so,’” says Reeves. “‘Yeah, no thanks, I have plenty of other options for my entertainment dollar. I got 14 different streaming channels, YouTube, all this other stuff and I only have to pay $8 or $9 a month.’ Obviously watching something on Netflix isn’t the same experience as being in the room with the musicians while they’re making music. I just question as to how much we can keep pushing off on the consumer to keep the bottom line for the artists and promoters so high.”

With that said, lower attendances and higher costs could result in lower artist guarantees as well as cuts in what promoters make and manager and agent commissions, which can range from 2.5% to 10%. Venues, too, which charge rental fees and partake in a percentage of merch sales, may have to cut their rates, though they have leverage with open dates for 2022 at a premium. With the added expenses, for sure, something has to give, whether it’s increased ticket prices, a recalibrating of how revenues are distributed or a combination. Encouraging news is that touring stakeholders are in constant communication and understand the need to equitably adjust fees in these demanding times as necessary. “I am not as pessimistic,” Zysblat says. “In hard dollars, if we see our expenses go up say 3% or 4% on a tour, yeah, it’s a hit, but it’s not devastating.”

A panel at Pollstar’s Production Live! conference on Feb. 7 entitled “How Do Fuel Prices, Labor Shortages, and Supply Chain Issues Affect Our Business (And What Can We Do About It?)” will discuss this issue in depth. Register here.