The Economics of Music Festivals : Planet Money Music festivals like Coachella and Lollapalooza have gotten a lot more expensive, and the reasons behind that increase can tell us a lot about how the economy is changing.
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The Economics of Music Festivals

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The Economics of Music Festivals

The Economics of Music Festivals

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(SOUNDBITE OF ARIANA GRANDE SONG, "SEVEN RINGS")

CARDIFF GARCIA, HOST:

Summertime is also music festival season. And if headlining music festivals were a competition, one of this year's big winners would undoubtedly be Ariana Grande.

DANIELLE KURTZLEBEN, BYLINE: So Ariana Grande has a few fans on THE INDICATOR team, as I've learned.

GARCIA: Shout-out intern Emily Lang - yes.

KURTZLEBEN: This year, Ariana Grande - she headlined both Lollapalooza in Chicago and Coachella in Indio, Calif., and she was paid $8 million for the Coachella performance. And speaking of making lots of money...

GARCIA: Hey-o (ph).

KURTZLEBEN: At both festivals, she played her hit song "Seven Rings," which is about having lots of money.

(SOUNDBITE OF SONG, "SEVEN RINGS")

ARIANA GRANDE: (Singing) I want it. I got it. I want it. I got it. I want it.

GARCIA: Yeah. Ariana's entire playlist was actually almost the same at both Coachella and Lollapalooza, and that big payout of $8 million - that's also not uncommon for the stars who perform. See. The biggest music festivals have become pretty similar in a lot of ways, and throughout the last few decades, they have also become more popular, attracting bigger crowds. And this year, there are going to be about a hundred music festivals in the U.S. That's almost two festivals every single week.

KURTZLEBEN: And their production standards have improved. They're not like those gross, old photos you see of Woodstock, where there wasn't any water. There's a lot of mud. There are no bathrooms. And more than anything, festivals have gotten a lot more expensive. And these are the results of economic pressures that don't apply just to music festivals but to the whole economy. I'm Danielle Kurtzleben.

KURTZLEBEN: And I'm Cardiff Garcia. Today on THE INDICATOR FROM PLANET MONEY - the economic pressures driving the evolution of the music festival and why it matters for all of us. That is coming up right after the break and after a little more Ariana.

(SOUNDBITE OF SONG, "SEVEN RINGS")

GRANDE: (Singing) Whoever said money can't solve your problems must not have had enough money to solve them.

KURTZLEBEN: So for two days of performing at Coachella this year, Ariana Grande was paid $8 million. And yeah, she is a huge star, and she earned it. But according to Shira Pinson, $8 million is still a lot more than what the biggest stars used to get paid for performing at the biggest festivals.

SHIRA PINSON: So we looked at Jimi Hendrix at Woodstock, which is exactly 50 years ago. And he was paid the equivalent of $125,000 in today's money, which is 64 times less...

GARCIA: Yeah.

PINSON: ...Than what Ariana Grande was paid.

GARCIA: Shira is a director for Economist Films, which makes videos for The Economist magazine. And she recently reported on music festivals and made this great video about what she found, and it's what gave us the idea for this episode of THE INDICATOR. Shira says there's a reason that musicians are paid so much money for their appearances at music festivals, and it's that the business model of the music industry overall has changed.

PINSON: Up until 1999, when kind of Napster burst on the scene, people used to buy, you know, CDs and cassettes and vinyls. And now we kind of stopped doing that, and so the only way the music industry can survive is by going on tours.

KURTZLEBEN: Because streaming music through services like Spotify has become so popular, people just don't pay for albums or songs the way they used to. I know I don't. I don't know about you, Cardiff, but...

GARCIA: Yeah, no.

KURTZLEBEN: No. And so these live events like concerts and big music festivals - they've become a bigger part of the way musicians earn their money. Hearing a song played on Spotify has become almost like marketing for when the recording artist does go on tour. And the rise of streaming, along with other innovations like YouTube or even the ability to pirate music - those have also made it easy for a song to be distributed instantly throughout the whole world and then heard by fans pretty much for free.

GARCIA: Yeah. So the biggest songs now reach more people, and so people also end up listening to basically the same songs. And the musicians who make these songs have way more fans, and therefore, they can charge more for their live events. That has led to something called the superstar effect in music in which the very biggest stars take home a bigger and bigger share of the overall money that's made by musicians. Here's an amazing statistic from the late economist Alan Krueger. In the year 2017, the top 0.1% of all musicians - that's one out of a thousand - these musicians were responsible for more than half of all album sales.

KURTZLEBEN: And the superstar effect also matters for live events like concerts and festivals. Here's one more incredible statistic from Krueger. Sixty percent of all the money made at concerts goes to the top 1% of recording artists.

GARCIA: Yeah, and that's another way of saying, essentially, that the superstar effect has led to more inequality within the music industry but not just the music industry. Economists often say the superstar effect is also happening throughout the whole economy, and it leads to just a few companies totally dominating their sectors and leaving every other company way behind. So, like, think of Facebook. It's free and easy to sign up for. And people around the world have liked it, so it ended up with about 2 1/2 billion users while most other social networks just never reach anything like that kind of scale. The vast majority of the benefits went to just one company.

KURTZLEBEN: And as this applies to music festivals, superstar musicians having all those fans also means they can play more shows and more festivals, Shira says.

PINSON: So all of a sudden, Ariana Grande kind of - or whoever it is - kind of rules the summer, you know? And they go from one festival to another. And what happens is that, basically, festivals have become very, very same-y (ph).

GARCIA: Yeah.

PINSON: So...

GARCIA: Very same-y...

PINSON: You don't have - yeah, very same-y. You don't have, like, a variety. It's very mainstream-y (ph). So if you're interested in kind of, like, a fringey (ph) act or kind of, like, an act that is not very well-known, you're less likely to find them in the mainstream festivals.

GARCIA: Yeah.

KURTZLEBEN: So those big same-y, mainstream-y festivals are also now attracting huge audiences. Back in 1999, about 25,000 people attended Coachella. That was its first year. In 2017, Shira says, 250,000 people attended.

GARCIA: Yeah. And of course, paying the stars more money to perform at the festivals means you can also charge more for tickets, and tickets - they have gotten way more expensive. In 1999, Coachella's first year, tickets were 50 bucks. And if those tickets had just kept pace with the overall inflation in the U.S. economy, they would now cost about $77. But instead, tickets to Coachella this year were $429.

KURTZLEBEN: (Laughter).

GARCIA: Yeah, it's a lot. It's a lot. That's an appropriate response, Danielle.

KURTZLEBEN: So over roughly the last decade, two companies, Live Nation and AEG, have taken over a bigger share of the biggest music festivals. They've bought out the smaller festivals, and they did this because it lets them spread out the risk of hosting these massive events. So if one festival gets rained out or one of the headline acts can't make it at the last minute, at least these companies still make a lot of money from the other festivals they run.

GARCIA: Yeah, but the sameyness (ph) of these festivals and their expensiveness have generated kind of an interesting response from smaller, independent festivals that are not owned by these big companies. These smaller festivals cannot compete with all the corporate money, and they definitely cannot afford the big stars. What they can do is offer a totally different experience, Shira says. They can get weird - kind of experimental.

PINSON: One excellent example is Boomtown, which we went to. And Boomtown has shifted from being just a music festival to being, like, an immersive experience.

KURTZLEBEN: Boomtown is a festival near the southern coast of England, and the festival sets up a huge makeshift town. And it populates it with hundreds of actors playing out different scenarios as inhabitants of the town.

GARCIA: What are the actors doing?

PINSON: Well, I think you have to go and see for yourself (laughter).

GARCIA: Oh, OK.

KURTZLEBEN: Sounds mysterious...

GARCIA: Yeah, I know.

KURTZLEBEN: ...Maybe even foreboding.

GARCIA: Kind of sounds fun.

KURTZLEBEN: But that overall immersive, mysterious experience seems to really matter to the people who attend. The Economist asked people at Boomtown whether they cared more about the experience or about the music, and, well...

(SOUNDBITE OF MONTAGE)

UNIDENTIFIED PERSON #1: (Vocalizing).

UNIDENTIFIED PERSON #2: A lineup will drag me in. But when I'm here, sometimes, I don't even see any music.

UNIDENTIFIED PERSON #3: I'll be honest. I don't know any of the freaking music.

UNIDENTIFIED PERSON #4: It's nothing to do with the music. It's all atmosphere.

GARCIA: So which kind of festival you'll like more depends on what you're looking for, but whether it's the biggest festivals with their star headliners or these quirky, independent festivals, it is worth asking whether the current popularity of music festivals is sustainable or whether it's a fad and might start to fade, kind of like those obstacle course races that anybody loved a few years ago like the Tough Mudder.

KURTZLEBEN: Did you do one of those?

GARCIA: Yeah, I did one of those.

KURTZLEBEN: (Laughter).

GARCIA: They were a little bro-y (ph). For her part, Shira is betting that music festivals, at least, are here to stay.

PINSON: And that's for two main reasons. First, as you were saying, music has been around forever. Any kind of, like - it hits us on a very deep level, deep emotional level. But also, festivals have been around forever. I mean, forever and ever, we got together in our villages and towns and celebrated things, and it always is a tribal need.

(SOUNDBITE OF MUSIC)

GARCIA: This episode of THE INDICATOR was produced by Emily Lang, fact-checked by Rachel Cohn. And THE INDICATOR is a production of NPR.

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