Conversations around how profitable the festival industry is, and certain festivals in particular, has been ongoing for some time. Yesterday the Las Vegas business publication, Review Journal, took a look at the financials of the Life is Beautiful (LIB) festival. It included a quote I provided business columnist Alan Snel on the commonality of festivals operating in the red, so to speak, in their first three to five years of existance. Life is Beautiful is no different.
When people arrive at the gate, see the expansive mini cities before their eyes, the focus is solely on the aural and visual experience. As it should be.
But when you shift your mindset to what goes on behind the scenes, that’s a whole new world. A world that costs million and millions of dollars to produce, thousands of hours, and hundreds of staff on site as the core team orchestrates the massive production.
Technology companies can operate in the red for five years, sometimes more, and no one seems to blink an eye, because their investors and the industry understands that every dollar generated goes right back into the company to grow and improve. Festivals also embrace that reinvestment strategy. They have to in order to stay competitive and even compete with their own success, consistently coming up with new ideas and better ways to operate year over year.
So it’s no shock that Life is Beautiful and numerous other festivals are operating in the red – currently – and that festivals like Electronic Daisy Carnival in Las Vegas, who lost $3 million dollars their first year out BECAUSE of those reinvestments, CAN go on to be very profitable.
Vendors selling to the festival industry know very well what a tight budget ship is run by promoters and festival organizations. Any line item added to that budget will only happen if that added investment can take the operation to the next level or is required to grow the operations.
One example is investment in IT and wireless infrastructures, a service that has become a must-have over the last ten years and a utility similar to power and lighting. Or the adoption of new technologies, like moving from a credit card and cash system for food and beverage (F&B) payments to investing in the costs associated with a cashless payment system, which provides for more secure transactions and a reduction in theft. Reduced wait times for fans is a bonus, as is the increased F&B sales, sometimes as much as 30%, is generated as a result festivalgoers being able to tap their wristbands and go on way seconds later.
Add to the budget the increasing cost for talent booking fees as competition for popular acts has grown. The traditional core costs have also steadily increased: crowd management and event security, security and traffic management by local authorities, marketing and advertising campaigns, health and safety, insurance, permits and fees, toilettes and showers, food and beverage stalls, massive decor structures, staging, sound, waste management, and the list goes on.
Justin Weniger is Life Is Beautiful’s chief executive. He is also the co-owner of Wendoh Media with business partner Ryan Doherty. Wendoh came together with LIB founder Rehan Choudhry a year ago to invest for 50 percent stake in ownership. Wendoh as a digital media and events management company operates Vegas Seven and SpyOnVegas publications, Nightinerary event platform, and Corner Bar Management (a group of downtown Las Vegas spots, including Commonwealth, Park on Fremont, BLVD. Cocktail Company, Whist Stove and Spirits, Due & Proper, and Aleluminati). LIB also drew in Tony Hsieh, Zappos CEO and founder of Downtown Project, and Insomniac founder and CEO Pasquale Rotella as investors.
Weniger stated to the Review Journal,”We are looking at it as an investment and not as a loss. It’s a substantial investment.”
Having attended Life is Beautiful last year, that substantial investment was very visible. The LIB experience took over the streets of downtown Las Vegas. Empty parking lots were transformed into art exhibitions or stages where performers sang and danced all day. Every-day buildings became art hotels or cultural and learning programs. Large stage productions, rivaling that of EDC, featured world-renowned DJs, indie bands and legends in the music industry, including Duran Duran and Stevie Wonder.
Festivals are no small feat. When the party is over for the year, the core team recovers for a few days, then goes back to work on the books for the next month along with the other wrap tasks, and may take a short break. And then it’s back to work to make it all happen all over again with the consistent question, “How can we make it even better this year?”
Russell Ward, owner of The Confluence Group, a creative agency in Los Angeles, knows the festival space well, having provided a myriad of digital creative services to the likes of Coachella, Lightening in a Bottle, C3 Presents, and AEG, along with major brands Pepsi and Target. “There’s no muscle memory in the first years, or nostalgia, so you have to overspend to capture their fancy,” said Ward to the Review Journal.
Do you remember dancing underneath the lights?
As I’ve gotten to know the unique individuals that make festivals a reality, the reason they get into this business isn’t about the money, although yes, it’s a major factor to ensuring it thrives and is a sustainable business. As important is the investment in community, in the gathering of people and producing experiences that those people will alway remember.
According to the Review Journals’ piece, Life Is Beautiful attracted 24,075 out-of-town visitors with total attendance of 87,200. These numbers align with the growing consumer spending trend as more people are traveling to festivals as destinations. Music is their holiday with their friends and family.
That love of festivals, music and community is what drives their producers to do what they do. It reminds me of a scene in “Groove,” a feature film on the 90s rave culture back in San Francisco, which I am grateful to have experienced first hand. The protagonist promoter, Ernie, has been through hell and high water to make this warehouse party happen. His friend Guy finally turns to him and has to ask, “Why do you do this to yourself? Don’t even get paid, risk getting arrested, for what?”
“You don’t know?” Ernie replies.
“No,” answers Guy.
“The nod. Happens to me at least once every party. Some guy comes up to me and says ‘Thank you for making this happen… I needed this. This really meant something to me.’ And they nod… and I nod back.”
Guy doesn’t get it. Scoffs a bit. “…That’s it?”
Ernie, “That’s it.”