The corporatisation of the live music industry to form a series of vertically aligned international conglomerates has attracted the attention of a growing number of private equity (PE) and capital investment groups, all, it seems, subscribers to the notion of perpetual sector growth.
Against a post-pandemic background of challenging global market conditions – high inflation and growing interest rates; slowing economic growth; and violent geopolitical disputes – the sector seemingly operates in contradiction to one of the basic rules of economics i.e. that as the cost of living goes up, discretionary spending goes down.
As PwC asserted in its Global Entertainment & Media Outlook 2023-2027 report, “Going out is in again.” Indeed, their expectation is that global live music and cultural events will surpass 2019 revenues in 2024 and that by 2027, live experience revenues will be growing at 9.6% CAGR (compound annual growth rate).
The Bank of America in its report, Media & Entertainment. Funflation in full force, concurred that “live entertainment is the brightest star” and identified several sustainable drivers for sector growth. These included: a continued trend for consumer expenditure on experiences; greater utilisation of dynamic pricing; the willingness of artists to service the expansion of new international touring markets; and, that IRL events might enjoy growth, rather than harmful disruption, when it comes to the adoption of digital technologies.
The PE perspective
PE investments are made in the belief that they will lead to a profitable return, rather than any abstract concerns such as great art or a vibrant and diverse live music ecosystem.
Within live music, the margins enabling growth and, thus, higher company valuations are harder to achieve purely via cost management – especially when talent is able to extract a premium – although the process of vertical integration permits the retention of margins across the various operational levels of events: production, promotion, staging, retail, and marketing.
In short, the PE strategy is to increase the volume of events by extending the territorial reach, improving the physical environment where events occur, and by then extracting more from audiences via value-add bundles, packages, and surge-pricing.
“Is the marriage between private equity and live entertainment too big to fail?”
Cause and effect
The consolidation of the live entertainment sector by a diminishing number of ever larger congloms has therefore been both a cause and effect of the influx of new capital.
In particular, within live music, there is a relatively small number of organisations that collectively increasingly dominate the sector. A strategic growth focus of these investment and/or debt-fuelled groups has been to deepen vertical ownership structures whilst broadening international networks.
The resultant opaque aggregation of majority-owned, supply-side-orientated subsidiaries serves to ring-fence these congloms against disruptive entrants with their new business models, emerging technologies, or those seeking the ‘democratisation’ of the sector by placing the consumer first or at least central to their thinking.
The live entertainment sector has long professed its love for the consumer, just so long as they continue to purchase ever-more expensive tickets for events months in advance and with little or no right to refund or exchange.
As a result of the corporatisation of live, it increasingly resembles a monopsony – a form of capitalism where there is a limited number of buyers for talent, venue diaries, event production, etc. – and that concentrated power is then able to set prices to maximise profits while being less subject to competitive constraints. Given that background, is the marriage between private equity and live entertainment too big to fail?
Crisis, what crisis?
Some believe that the PE playbook for wealth generation is faltering, with average buyout performance now on a downward trend.
And after the economic impact of layers of (vertical) consolidation and (horizontal) aggregation, the squeezing of costs, and the surge-pricing of audiences, to whom can PE-owned live music congloms sell as part of their exit strategies? Arguably, only other PE-backed entities have the means to undertake such large-scale acquisitions, and so the concentration of ownership within the sector will inevitably continue.
But hey, it’s only rock & roll.
Tim Chambers is a ticketing advisor, consultant, and non-executive for various live entertainment operators
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A capital investment
Ticketing guru Tim Chambers opines that the marriage between private equity and live entertainment has become too big to fail
28 Mar 2024
The corporatisation of the live music industry to form a series of vertically aligned international conglomerates has attracted the attention of a growing number of private equity (PE) and capital investment groups, all, it seems, subscribers to the notion of perpetual sector growth.
Against a post-pandemic background of challenging global market conditions – high inflation and growing interest rates; slowing economic growth; and violent geopolitical disputes – the sector seemingly operates in contradiction to one of the basic rules of economics i.e. that as the cost of living goes up, discretionary spending goes down.
As PwC asserted in its Global Entertainment & Media Outlook 2023-2027 report, “Going out is in again.” Indeed, their expectation is that global live music and cultural events will surpass 2019 revenues in 2024 and that by 2027, live experience revenues will be growing at 9.6% CAGR (compound annual growth rate).
The Bank of America in its report, Media & Entertainment. Funflation in full force, concurred that “live entertainment is the brightest star” and identified several sustainable drivers for sector growth. These included: a continued trend for consumer expenditure on experiences; greater utilisation of dynamic pricing; the willingness of artists to service the expansion of new international touring markets; and, that IRL events might enjoy growth, rather than harmful disruption, when it comes to the adoption of digital technologies.
The PE perspective
PE investments are made in the belief that they will lead to a profitable return, rather than any abstract concerns such as great art or a vibrant and diverse live music ecosystem.
Within live music, the margins enabling growth and, thus, higher company valuations are harder to achieve purely via cost management – especially when talent is able to extract a premium – although the process of vertical integration permits the retention of margins across the various operational levels of events: production, promotion, staging, retail, and marketing.
In short, the PE strategy is to increase the volume of events by extending the territorial reach, improving the physical environment where events occur, and by then extracting more from audiences via value-add bundles, packages, and surge-pricing.
Cause and effect
The consolidation of the live entertainment sector by a diminishing number of ever larger congloms has therefore been both a cause and effect of the influx of new capital.
In particular, within live music, there is a relatively small number of organisations that collectively increasingly dominate the sector. A strategic growth focus of these investment and/or debt-fuelled groups has been to deepen vertical ownership structures whilst broadening international networks.
The resultant opaque aggregation of majority-owned, supply-side-orientated subsidiaries serves to ring-fence these congloms against disruptive entrants with their new business models, emerging technologies, or those seeking the ‘democratisation’ of the sector by placing the consumer first or at least central to their thinking.
The live entertainment sector has long professed its love for the consumer, just so long as they continue to purchase ever-more expensive tickets for events months in advance and with little or no right to refund or exchange.
As a result of the corporatisation of live, it increasingly resembles a monopsony – a form of capitalism where there is a limited number of buyers for talent, venue diaries, event production, etc. – and that concentrated power is then able to set prices to maximise profits while being less subject to competitive constraints. Given that background, is the marriage between private equity and live entertainment too big to fail?
Crisis, what crisis?
Some believe that the PE playbook for wealth generation is faltering, with average buyout performance now on a downward trend.
And after the economic impact of layers of (vertical) consolidation and (horizontal) aggregation, the squeezing of costs, and the surge-pricing of audiences, to whom can PE-owned live music congloms sell as part of their exit strategies? Arguably, only other PE-backed entities have the means to undertake such large-scale acquisitions, and so the concentration of ownership within the sector will inevitably continue.
But hey, it’s only rock & roll.
Tim Chambers is a ticketing advisor, consultant, and non-executive for various live entertainment operators
Get more stories like this in your inbox by signing up for IQ Index, IQ’s free email digest of essential live music industry news.