Decade’s End: Neil Warnock on the challenges ahead
As we enter the new decade, IQ caught up with leaders from the global live music business to reflect upon the development of the industry over the past ten years, as well as looking forward to what we can expect in the 2020s.
In the near future we’ll share the insights of execs including CAA’s Emma Banks, Frontier Touring’s Michael Gudinski, Oak View Group’s Tim Leiweke, AEG’s Jay Marciano and more. In the hot seat, first, though, is Neil Warnock MBE, global head of touring for United Talent Agency, who talks global touring’s ups and downs, the importance of fan experience and his personal decade highlights…
IQ: The role that agents play in artists’ careers has undoubtedly changed over the last ten years. Considering the advent of global touring, and the various new income streams available to artists, how do you see this role evolving?
NW: Global touring is not a new phenomenon. It has been in place one way or another since before Michael Cohl became the promoter of the Rolling Stones. Elvis Presley, although he did not come to Europe, signed a global touring deal.
Global touring has its advantages and disadvantages. I always want my artists to play to their strengths for the promoters they are working with. In confirming global deals, it’s essential that the strength of each promoter in each market is evaluated, not only financially which can be an issue, but also ensuring that venues and marketing are strategically considered so that an artist can be taken forward in their aspirations.
Streaming has become a more sophisticated marketing tool along with all other social elements available to each artist, but essentially these should be viewed as extra add-ons available to artists, and not the be-all and end-all of making touring decisions. Our UTA IQ department is extremely useful when it comes to evaluating the data available to our artists.
In confirming global deals, it’s essential that the strength of each promoter in each market is evaluated
Consolidation has been a constant theme of this decade. Looking ahead, how do you see the balance between the industry’s key corporations and the remaining independent players?
Consolidation in the industry is interesting. When we see labels, agencies, managers consolidate, it also throws up a number of independents. My view is that it’s great to have both.
Consolidated companies give managers what they want but some managers like to have an independent view over the lives and professional status of an artist.
What more could the constituent parts of the music industry be doing to deliver a better proposition to both artists and fans?
The constituent parts of the music business being live, recording, publishing, merchandise, branding – all these elements should be fused together by good management and we should all work together so that our artists are getting the best service from each area. Unfortunately, it doesn’t always happen.
Topics such as inclusion, diversity and mental health are commonly discussed these days. How is the live business shaping up compared to other sectors?
The fact that these topics are out in the open and are being discussed is fantastic and we are now seeing that the industry is working hard to continue to drive awareness to these areas.
Consolidated companies give managers what they want, but some managers like to have an independent view
UTA is a company that believes that diversity and inclusion are fundamental to our success as a business. This year we launched our employee-led, company-funded Employee Inclusion Groups (UTA Proud, Unity, Wellness and Women’s Interest). Two of our last three board appointments, Blair Kohan and Tracey Jacobs, have been women, and we are the first major talent agency ever to name a woman, Lyndsay Harding, as our CFO.
Looking ahead, what do you perceive will be the biggest challenges for the live music sector in the 2020s?
In my opinion, the touring outlook for artists is looking good. The challenges are to ensure artists give value for money to customers, and to ensure that the fan experience is outstanding so that a customer will want to come back and see that artist for another show.
What are your own personal highlights from the last decade?
I have many highlights from over the years, but from the last decade I would have to say the highlight that jumps immediately to mind is Dolly Parton live at Glastonbury in 2014.
Additionally, the tremendous steps that Nordoff Robbins have made as a charity and on a personal note, being awarded an MBE was tremendous for myself and my family.
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Opportunities in consolidation
Last year saw more than 30 million people attend music festivals in the UK. With market value forecast to rise as high as £3.5 billion by 2020, the sector presents a phenomenal opportunity for owners, promoters and investors.
The number of events has increased from 496 in 2007 to 1,070 in 2016 – one particularly welcome result of the rise is the corresponding increase in merger and acquisition (M&A) activity. As we enter 2017 festival season, we are likely to see an increase in the number of deals being done, led by buyers with a series of objectives in mind, the first being consolidation.
Several significant deals have completed in recent months, including Live Nation’s acquisition of MAMA Group, Parklife and Isle of Wight Festival, Universal’s acquisition of an equity stake in jazz festival Love Supreme and several acquisitions by Global Entertainment, including Y Not, Rewind and, most recently, Victorious Festival and Hideout Festival. These deals are testament to festival owners who built enviable concepts that attract the crowds year in, year out.
Growth in the festival portfolios of the larger players provides them with increased opportunity to secure talent on exclusive live music deals, along with benefitting from income synergies through other related activities, such as ticketing and corporate sponsorship. Acquisitions also allow cost savings across a portfolio through both knowledge sharing and ability to drive economies of scale, reducing overall expenses.
There is also, of course, the desire to have the next must-have asset, with some events attracting a premium based on their brand alone.
Buyers are interested not only in festivals which provide consistently high-quality experiences for its attendees, but fundamentally their ability to generate profits
To date, we’ve seen the majority of M&A and consolidation activity from the larger corporate live music stalwarts. However, where there is money to be made and sizeable festival empires to grow, private equity investment can’t be far behind, joining some of the venture capitalists seeking to benefit from these positive market trends.
With M&A activity and consolidation changing the dynamics within the market, owners and promoters must ensure that their events continue to innovate and compete successfully.
The most crucial challenge is securing the all-important talent. Securing popular artists remains a fundamental principle in delivering successful live music festivals, but consolidation in the sector has resulted in larger groups requesting that artists sign up to their portfolio of festivals and tours exclusively. Conversely, the devolution of recorded music means that artists are relying to a greater extent on festivals and live music to make their money – a dynamic that has helped to encourage the proliferation of events. Promoters will need to work harder and faster to secure the desired artists and negotiate favourable terms for both parties.
This aspect of consolidation doesn’t affect the entire market. Independent festivals will continue to thrive, given that they aren’t competing head on for major festival artists but are instead booking specialist artists in a particular genre, benefitting from a different set of pull factors for consumers – namely atmosphere, experience and exclusivity. The same applies for secondary touring markets: the trend towards live music has seen artists seeking alternative ways to reach new fans, dictating the rise in live music in regional non-mainstream locations and festivals, such as, for example, the Manchester International Festival.
As the sector continues to perform well and expand further, we expect M&A activity to increase in accordance. Owners and promoters would be sensible to ensure that their brand is fit for the future, and in a strong position to capitalise on potential interest, whether from a competitor or private equity or venture capital investment, being mindful of core valuation drivers that, combined, see that festival assets are sold for a strategic premium.
With M&A activity and consolidation changing the dynamics within the market, owners and promoters must ensure that their events continue to innovate and compete successfully
The first is the delivery of profitability over a consistent period – buyers are interested not only in festivals which provide consistently high-quality experiences for its attendees, but fundamentally their ability to generate profits. From a potential buyer’s perspective, the best performing festivals will be delivering consistent year-on-year growth in both revenues and profits. Profit margin is crucial, and shouldn’t be ignored in favour of focusing on revenue and attendee growth. Even from the early days, as the festival grows, decisions should be taken to drive profitability, not just increase attendee numbers. Where possible, the security of revenue and/or profit should also be safeguarded through relevant and appropriate insurance.
This isn’t to say that demonstrating year-on-year growth in attendees isn’t important; merely not the sole requirement. Being able to demonstrate and plot historic growth and potential future growth will be of huge interest to prospective bidders. Festival owners should try to plan ahead if capacity constraints are going to restrict this growth – it may mean relocating at the appropriate time, or expanding through additional dates at existing sites.
Last but not least is the ability to provide timely production of quality management information. How did ticket sales compare to the same period the previous year? What is the average per-head spend on F&B and how does this vary for each day of the festival? What percentage of paying adults purchased merchandise and how does this compare to the previous year? Having access to this information not only protects value during a sales process, but drives it upwards by providing the buyer with confidence that targets can be achieved.
By delivering on these core points, owners and promoters can ensure that – whether looking for investment or open to a sale – they’re as well-equipped as possible to deal with the challenges and opportunities in 2017 and beyond.
James Fieldhouse is corporate finance director at accountancy and business advisory firm BDO.