Sunday, 12 August 2012

How music festivals make you rich

Besides the Olympics, one of the biggest public events in Europe this weekend is the Sziget Festival, with a live Youtube broadcast and 385,000 visitors last year, generating a whopping 10,000,000 € income for the organisers – but does it make the organisers rich? Discover the inner workings of festival organising, and get answers to your questions.

Picture from pitchfork.com
 According to Wikipedia, there are about 650 yearly music festivals worldwide, organised in more than 60 countries. However, that leaves many questions unanswered – how do organisers gain income? What costs do they have to endure? And finally – can you actually get rich while organising a music festival?

Income


Despite the huge range of activities which can be found on a music festival – besides the gigs, there are vendors, performances, sponsor booths – the sources of income can be divided into three basic categories: Ticket sales, vendor profit shares, and sponsor contributions. Using the case study of Sziget, Hungary's biggest and the world's 9th biggest music festival, take a look at how festival income is made up.

Tickets, 75%

Three quarters of the income of an established festival come from ticket and season ticket sales, essentially determining the profitability of a festival. However, huge income can only be expected if the festival is already known – Sziget run losses in five consecutive years before turning a profit.

Sponsor contributions, 15%

Music festivals are an excellent way for both domestic and multinational companies to advertise their services, usually gaining profit themselves in the process. Sponsors of Sziget in recent years included Pepsi, McDonald's, AXE, OTP Bank, and the most-read Hungarian newspapers besides many more.

Profit shares, 10%

Every year, there is are a huge number of local entrepreneurs serving the thirsty and hungry, and the organisers gain their share from every transaction. Despite decreasing sponsor contributions, the rate of these shares are actually increasing, suggesting an in turn increased profitability of the local salesmen.

Expenses


The causes of expenses are much more varied, and due to the fact that newspapers like to talk more about gains than losses, they are not as easily traceable. Here is the list, consisting of five principal elements: artist's fees, taxes, landscaping, marketing and else.

Artist's fees, 33%

The price of seeing the Hollywood music industry's rich and famous live on stage is not negligible – one of the main reasons while Sziget failed to run profit in 2011 was the huge cost of the first-day Prince gig, failing to attain a large enough audience.

Taxes, around 27%

The Hungarian VAT is 27% - compared to the median European VAT rate of 20%. This greatly reduces the profitability of the festival, not to mention the land use fee payed to the Budapest city council.

Landscaping costs, 18%

Building stages, providing water, sanitation, electric current and fencing off tent areas in the middle of the capital, then demolishing it all, cleaning up and restoring the original landscape is no easy, and certainly not a cheap task. The fact that one fifth of costs is involved demonstrates this.

Marketing, 8%

To gain visitors, people need to know about the festival and it's performers first – hence the need for marketing, which involves a 42% share of domestic and 58% share of foreign advertisement.

Miscellaneous, 14%

There are many other expenditures involved in organising a festival – discounts for various museums and events around the city, petrol costs for both the organisers' own vehicles and tourist transport buses, and many more.

The road to riches


So considering all this, is it worth organising a music festival in terms of profit? The answer is, yes – but like many investments, it involves great risks and a relatively low return. This year's Sziget festival is scheduled to make around a 350,000 profit – which, when divided by the total involved amount of money, 10,000,000 €, makes for a bare 3% return. You'd perhaps be better off buying government bonds – but then again, the main point of music festivals is the entertainment.

So grab your dancing shoes, and head off for the local music festival – or ask us in comments about the correlation between festival length and profits, and else.

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