By Jim McCarthy Sep 24, 2010 6 comments

Check Your Alignment

A few weeks ago, someone asked me what was going to happen with the concert business.  Clearly, with a lot of artists out on the road and many of them having lukewarm (and I’m being generous there) demand, something had to give.  Sure, prices will (and did) come down, but structurally, that doesn’t change the industry.  It’s still badly misaligned.

So what had to happen seems to be happening, at least at Live Nation, and that’s that acts are going to get paid less to perform.  To me, this is nothing more than rationalizing what had been an irrational part of the live entertainment market, where musicians got guarantees that weren’t based on sales of tickets.  That meant that  often venues were taking all the risk, and in many cases actually needed sell-outs just to make a little money on a show, while the acts (often tired old warhorses like…well, I won’t name any.  I think you can figure it out) walked away with big, profitable checks even if the venue was half-empty.

The way it should work is this: everybody makes money based on the financial performance of the show.  Simple, but elegant.  If there’s an act with more guaranteed drawing power, that act gets a bigger cut because the risk is reduced, but everybody takes risk.  All incentives in the concert segment need to be aligned, and without performance-based compensation for everyone, they’re just not.

If no one gets paid (or gets paid much) unless the show is a 1. a draw, 2. priced right, and 3. gets good word of mouth, concerts will get healthy again.  Without an incentive structure like that, the segment could go into perma-recession.

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