Deconsolidation: The Next Business Cycle

– John Maynard Keynes, British Economist (1883-1946)

It was all going gangbusters, the last decade in the live business, now rightfully termed a “Golden Age.” Coming out of “The Great Recession” of 2007-8, this industry roared back to unprecedented record-breaking glorious heights of growth by every available metric. And throughout much of it, consolidation was the coin of the realm.

Average show grosses on Pollstar’s Top 100 Worldwide Tours chart between 2010 and 2019 were up 87% from roughly $674,000 to an estimated $1.26 million. Total gross was up 57% from $3.2 billion to some $5.1 billion, average tickets sold per show were up 36% from 9,585 to some 12,994 and the average ticket price grew 38% from $70.33 to $96.86. 

The smaller and mid-level music agencies were especially rife: Paradigm, in the 2010s, acquired AM Only, Coda, The Windish Agency, Dale Morris Touring and X-Ray Touring; United Talent Agency picked up The Agency Group, Greater Talent Network and Circle Talent Group; and ICM just last March recently nabbed Primary Talent International.

This while the leading music agencies grew with infusions of private equity, aggressive A&R and strategic recruiting. The William Morris Agency began the decade having just merged with Endeavor in 2009 and then added IMG to its holding in 2014 and along the way received substantial investment from Silver Lake Partners. WME received a $200 million investment in 2012 and another $500 million in 2014 when it purchased IMG, the sports and marketing company for $2.4 billion. The company went on to buy UFC for $4 billion, and would pick up the Miss Universe Organization, the PBR and more. TPG Capital, which bought a 35% minority stake in CAA in 2010 for $165 million, upped it to 53% in 2014 for an additional $225 million. Over the past decade CAA similarly grew with aggressive and strategic recruitment of agents and artists.

On the promoter side, Live Nation in the 2010s was on something of an acquisition rampage, which its higher profile pick-ups and/or partnerships, including: festivals C3 Presents (Lollapalooza, Austin City Limits) Insomniac Presents (Electric Daisy), Bonnaroo, BottleRock and Voodoo Festival as well as promoters Frank Productions, Spaceland Presents and Mercury East all while House of Blues/Fillmore went on a building spree. AEG, meanwhile expanded its flagship festival Coachella to two weekends, nabbed Bowery Presents and Delaware’s Firefly Music Festival, partnered with MGM Resorts International to build the T-Mobile Arena and bought SMG, greatly expanding its facilities division. And both companies moved aggressively into global markets.  

“In 2008, Ticketmaster sold 141 million tickets worth $8.9 billion, and the company also owns a controlling interest in Front Line Management [with] more than 200 clients,” The New York Times wrote on the day of the DOJ’s approval. “Live Nation, the world’s largest concert promoter, owns or operates about 120 theaters.” The combined company, to be called Live Nation Entertainment, would have an estimated $6 billion in annual revenue.” Fast forward to the end of the decade and the company’s annual revenue in 2019 was up 45% from the estimated figure to $8.7 billion with some 73 million fans attending 26,000 concerts. 

Business cycles, however, are like pendulums, swinging between prosperity and stagnation.  Though it should be noted, that in macro terms over the last 35 years the U.S. Dow Jones has grown precipitously seeing yearly average growth of 11.9% with fits of drop-offs – which unfortunately, for the time being, is where we find ourselves with COVID. 

When Live Nation released its Q2 earnings in early August, it made headlines for a 98% drop from a year ago, with reported revenues of $74.1 million, down from Q2 2019’s revenue of 3.15 billion. For too many companies, including all of the aforementioned corporations, this crisis has unfortunately meant furloughs, layoffs and/or salary reductions. 

Even as this issue was closing, Live Nation and UTA announced further reductions. All of its fuel for deconsolidation as quality live business executives explore their options and, in a business filled with entrepreneurship, consider launching independent businesses.

This week’s Pollstar cover story chronicles the launch just this week of TBA, a new independent music agency formed by five former Paradigm agents who were “temporarily laid-off” in March. These quality agents – Marshall Betts, Avery McTaggart, Amy Davidman, Devin Landau and Ryan Craven – whose impressive roster includes Chvrches, The War on Drugs and Courtney Barnett, Tune-Yards, Guided by Voices, Beirut, Hot Chip,  Caribou, Cut Copy and Jose Gonzalez  among others — all came up in the era of consolidation. Starting out in independent agencies, including Fata, Kork, Pinnacle, The Agency Group, High Road and others before all ending up at The Windish Agency, which was fully acquired by Paradigm in 2017. 

“We all kind of rode the wave of consolidation all the way into Paradigm,” TBA partner Betts explained. “We had all started in smaller agencies which eventually either got bought or acquired. … Obviously, after they acquired the Windish Agency, then bought other agencies and became what it is today. I think fundamentally at its core TBA is essentially comprised of people that have an independent mentality and a strong desire to grow and contend with corporate large agencies and develop artists at the very highest level.” 

Which is similar to the independent spirit you see with Artist Group International’s Dennis Arfa, who in this issue explains how his deal with John Jackson’s K2 Agency, announced earlier this month, came together. “There aren’t many agents who own a business,” says Arfa, whose had his own business for more than 30  years. “It’s a different animal. And it’s a different understanding of the world when you’re running a business as opposed to being a paid employee. There’s a different level of responsibility to the whole game. But if you can be one of those people, it just gives you great experience that strengthens your own bandwidth in terms of knowledge and managing your affairs. Here’s the idea of being a successful businessman: If your expenses are one penny, make two pennies –  that’s the beginning of being successful.”

And that, in today’s economy, will not be easy. Still, it is encouraging to see so many in the live industry doing what has possibly become the most over-used term of this strange epoch: “Pivot.”  In a Q&A with Tom Windish, of the aforementioned Windish Agency, the trailblazing entrepreneur discussed his new record label, Wilder Records, after his 18-month-old son, which was underway before the pandemic; and a weekly live- streaming series called Home School partnering with KCRW’s School Night series and Bandsintown. 

Jonathan Shank, in this week’s Qs With, discusses Terrapin Station Entertainment, a management and tour production company announced earlier this month started after 10 years at Red Light Management. The roster includes Scarypoolparty, Maddie Poppe, Victoria Justice, Laura Marano and Sam Tsui.  While he is immensely grateful for his time at Red Light, he said his impetus for striking out on his own was “really wanting to keep our team together and our artists together and continue to empower everybody to find their own path.” 

Last week, on the film TV side, reports surfaced that CAA agent Peter Micelli launched a new management and production company, with agents from WME and UTA. And in July, Live Nation New York President Anthony Makes exited and opened his own independent concert promotion company Brooklyn Made. This, while one of our industry’s favorite parlor games since late June is guessing what the great Marc Geiger, former WME partner and Worldwide Head of Music, will do next. 

In the coming months, one can expect more startups, partnerships and other manifestations of deconsolidation as our industry makes its way through these unprecedented and strange times. Many of those will get traction in the marketplace and as thins turn around, it will be off to the races. With this, keep in mind a few other wise words from John Maynard Keynes:  “Ideas shape the course of history”.