David Lindsay, senior consultant at AMR International, led the research team that worked on the white paper ‘North American Festivals: Routes to Success in an Evolving Market’ which the strategy agency carried out in partnership with events specialist XLIVE and released in November this year.
Commenting on the motivation behind the study, he says: “The festival sector is an industry that is under-reported. We find press coverage on festival cancellation or market trends talking about oversaturation, but we couldn’t find research that drill down into why these issues were happening, and what organisers can do to drive growth.”
The paper revealed four strategies organisers were using to drive long-term growth. Lindsay believes the findings are valid for the festival market as a whole.
Speaking to Access, Lindsay explains how the findings relate to the UK festival market.
Festivalization of events
ARM tends to focus on the B2B side of the events industry; the white paper is its first approach to the festival market.
“We have always looked at exhibitions, conferences, and actually, one of the big trends that we have found in the exhibition space is what we call “festivalization” of the live events,” Lindsay comments. “We have found that organisers are bringing elements of a festival into the exhibition.”
The trend, according to Lindsay, is that trade shows are becoming more experiential. “Adding concerts or musical performances, and even staging the event on innovative locations, is something we see more frequently in the exhibition market and across the corporate event sector as well.”
Lindsay believes that understanding the festival market will help organisers of festivals and exhibitions alike.
The experience is king
The white paper outlines four elements as the key drivers of growth in the festival market:
- Visitor experience: Providing a high quality and differentiated visitor experience is crucial to attracting visitors in a crowded market.
- Visitor numbers: Growing visitor numbers not only drive higher ticket revenues but also increases the festival’s attractiveness to sponsors.
- Sponsorships or grants: Sponsorship provides an additional revenue stream which helps drive the profitability of a festival. Grants can help smaller events remain viable
- Festival investment: Continual investment into the festival experience is key in gaining or maintaining a competitive advantage.
“The festival is an overcrowded market in theUS, and so it is in the UK. One of the key findings of the white paper is the optimisation of the visitor experience,” Lindsay says. “We realised that everything from a revenue perspective falls into that.”
The ability to offer a unique experience puts in motion the other the elements that contribute to driving growth. “When a festival offers an experience that is unique, it attracts visitor numbers and ticket sales are around 50%-80% of the revenue. Once you have the numbers you have a captive audience, and that drives sponsorship revenue as well,” Lindsay explains, adding that having diverse captive audience finances further investments into activities and events that enhance the visitor experience. “It’s a virtuous circle,” he observes.
How do you optimise the visitor experience?
DL: It’s about blurring festivals genre, that’s a big trend at the moment. No longer you have music festivals that are purely one genre. Now a music festival has pop-up Michelin star restaurants, art installation, interactive video game arcade, you have sports events, volleyball tournaments for example, so a huge part of the success of a festival is blurring the experience; making it more multifaceted.
Why is blurring genre important?
DL: Because it does several things. Blurring genres not only enhances the experience on offer from the entertainment perspective but most importantly it allows the organiser to attract a broader customer base. In the context of changing customer trends and newer generations, if you can blur your genres you can attract the next generation of visitors. That’s important for the long-term revenue growth. It also builds customers’ loyalty.
What is the role of technology in driving growth?
DL: Technology can improve the visitor experience. Today organisers have access to wristband technology that improves queueing time. Technology allows organisers to capture data to understand customers’ trends. Technology provides a year-round round platform of visitors data and with that organisers can understand trends and adjust the lineup to what customers want. Technology itself can be monetised and provides a market platform to drive revenue growth which can be put back as an investment for the event.
That is the virtuous circle that the white paper describes…
DL: That’s it. Put on a festival that offers a unique and different experience, and you are going to get the number of visitors that will attract sponsorship funding. Use technology to capture visitors’ data and adapt the lineup and side events accordingly. So, having the visitor experience facilitated by technology and blurring the festival genre is one thing. The other key element is the idea of revenue diversification.
How does the concept of festivalization apply to the festival market?
DL: Festivals are increasingly becoming a marketing platform. The more you blur the event, they wider your target audience builds up for marketing. If not, the organiser would need to find a very specialised niche audience to have a market behind to support it.
Diversify revenue stream
The festival market is polarised. Large organisers like AEG and Live Nation are dominating the market, internationally. Both companies have demonstrated that having clear business strategies bring positive results. Lindsay explains: “AEG and Live Nation are examples of how organisers can diversify their revenue stream. For example, when Live Nation acquired Ticketmaster the organiser was able to get a stream of revenue when a competitor put on an event via ticket fees.”
Do you think the market is inevitably one for large organisers?
DL: The consolidation happened so fast. AEG and Live Nation have acquired a bunch of other festivals in the past, and that has largely slowed down recently. Definitely, there is space for small festivals, and I think you will always have small organisers. The problem is that the market is very volatile and affected by weather shock, security shocks, trend shocks, etc. It is a pretty risky business, and I think smaller organisers can learn a lot from the paper.
What is the primary challenge moving forward?
DL: Headline talent. The artist fee is the largest single cost item for a music festival, by far. Also, the trend is that they ask for the fees to be paid upfront. The problem is that it is hard for organisers to determine the interest (value) of the artist by the time the event takes place. You don’t know the ROI with headline artists because when the show comes up they might have gone down in popularity. The number of headline artist is fairly fixed year-on-year, so it’s a case of demand/supply miss alignment.
What is the next area of the festival market that AMR would like to study?
DL: It would be interesting to see how the definition of a festival will change in the near future. You can’t call a sporting event a festival, but as it happens in trade shows we might see a festivalization of non-festivals. You used to go to a football match and have a hotdog on the stand, now you have a performance beforehand. I think the festivalization of the wider events industry is an interesting next step. I wonder how festival organisers can play a part in that.
Lindsay believes that festival organisers might be able to lend their experience to sporting events, B2B events, and exhibitions. “I think in the future there is more dialogue between B2B and B2C events,” he concludes.
North American Festivals: Routes to Success in an Evolving Market is available as a free download from the AMR website.