With the recent posting of Live Nation’s 2023 financial statement by the US Securities and Exchange Commission, the overall economic performance of live music has recovered from the massive losses due to COVID.
But that’s only part of the story. Although Live Nation is one of the largest, if not the largest, live performance businesses, even its business is the story of a few major artists creating the bulk of its revenue and profit.
What about smaller venues both within and outside the Live Nation ecosystem?
The remaining mid-size and small venues have recovered to their unsustainable pre-COVID levels.
We used Artificial Intelligence to analyze the foundational issues surrounding the seemingly never-ending lack of profit for the two parties involved in live music outside the top 5% of the industry: artists and venues.
Here’s our analysis.
Music Industry | Inflation
During COVID, inflation in many vital sectors dramatically increased. This led to increases in wages.
COVID accelerated the Great Resignation, particularly in the service and medical industries. The bottom line is that people in these industries did their own personal profit and loss statements and concluded that they weren’t making a living wage and were unlikely to ever do so. As a result, many people left the industry.
In the US, the service industry includes those who work at live music venues or venues that feature live music as part of their services, including restaurants and bars.
Like the US housing market, a lack of workers gave the remaining workers a once-in-a-lifetime opportunity to demand better pay. This resulted in venues entering the unfamiliar competitive race to retain workers or closing.
Many venues did, in fact, close. Those that didn’t saw their operating costs dramatically increase. With so few people willing to venture out to venues during COVID, venue’s inability to pass on their higher operating costs in the form of higher ticket, beverage, and food prices forced another group of venues to close.
With the reduction in venues and more people attending live events beginning in 2022, basic economics would indicate that venues should now have the leverage to increase their prices to at least cover their higher operating costs.
Live Nation | Financial Performance
In the case of Live Nation, that’s exactly what happened. In 2018 (pre-COVID), the average ticket price at a Live Nation event was US$22. As of the end of 2023, Live Nation’s average ticket price was US$37, which was an inflation rate of 8.8%. That resulted in their Operating Income per attendee increasing from US$2.94 to US$7.31.
During that same period, their Net Income (Common Stockholder) per attendee increased from US$0.65 to US$3.86. This meant that their Net Income Margin (Common Stockholder) was now 2.5%, up from 0.6%.
That 0.6% is a significant number.
Music Industry | Financial Performance
In the UK, an organization called the Music Venue Alliance posted its first comprehensive annual report (PDF file). The report lists an average Profit Margin of 0.5% for the 835 Grassroots Music Venues (GMVs) located in the UK–comparable to Live Nation’s pre-COVID Net Income Margin (Common Stockholder).
Due to its size, Live Nation has been able to increase its revenue to cover higher expenses and increase its overall profitability, while small venues have not.
Music Industry | Competition
In 2023, Live Nation held 137 events per day. In the UK, the Music Venue Alliance estimates that its 835 venues held substantially more events per day than Live Nation.
This leads us to one of two fundamental issues with the overall live music industry: far too many events chasing too few people.
Why isn’t the live music event audience increasing? For the same reason that other live events’ attendance is either stagnant or decreasing: convenience.
Live events’ primary competition is entertainment available at low cost or no cost on your phone, gaming system, or home entertainment system. It’s very difficult to compete with convenience coupled with low cost.
Music Industry | The Future
With the advent of technology, including easy-to-use Artificial Intelligence, immersive entertainment, and Neuralink, audience participation in live events will continue to decline as a percentage of the total available market.
However, the live entertainment for-profit business model hasn’t been realistic for decades. It made sense for approximately four decades (1960-1990), but with the advent of entertainment readily available on physical media or through the internet, those days are over.
Live Nation is praised for increasing its Net Margin (Common Stockholders) to 2.5%. In most other industries, this would be considered a failed business model.
The overall live entertainment business model for mid-size and small venues is now resetting to where it was for centuries: a few wealthy patrons supporting the arts or free events by volunteer artists.
Note: The “wealthy patron” model includes supporting the arts through taxation.
Beyonce, Taylor Swift, and similar A-list artists will continue to perform profitably in destination venues located in places like Las Vegas, Dubai, and Tawaiin. Small venues supported by the “wealith patron” model will continue, but these will be the exception.
The future of entertainment will continue to move toward the virtual world because most people prefer convenience coupled with low cost.
Artists | The Future
For artists, several notable ones, including Grimes, have already embraced Artificial Intelligence technology. Others have moved live shows to YouTube. The merging of these technologies with immersive entertainment is inevitable.
We’ve seen this situation happen before when the camera spawned a new type of artist compared to traditional portrait painters; artists who use the latest technology to their advantage today will be part of tomorrow’s successful creative teams.
Can Artificial Intelligence Make Live Music Performances Profitable?
For well-known acts, AI isn’t a requirement for success.
But, for mid-size and small-size venues, particularly those in the US, a combination of which acts are featured, and the use of AI is the way forward.
Type of Acts: We’ve seen this change for over a decade–The Tribute Band and DJs. In discussing the concept with booking agents, they frequently state, off the record, that tribute bands are more profitable for them than even larger “B-level” original acts. The reason is simple: Most people want a guarantee that they’re going to have a good time when they go out for an evening of entertainment.
DJs guarantee a good time and substantially lower costs for both the venue and the DJ, making their performances good for both businesses.
While tribute bands are more expensive than DJs because of the number of people involved, for entertainment venues that prefer live music, it’s much easier for the venue to sell out a timeless Fleetwood Mac tribute band like Silver Springs for between $10 and $60 per ticket than take the risk on an unknown original act.
Note for unknown original artists: There is a solution that we’ll cover later in this article.
Where does Artificial Intelligence come into play?
- For venues and artists: Find your audience so you can advertise to them.
- Combine AI with robotics and replace as much staff as possible. This is already being done in restaurants, and it’s starting to be a successful strategy for two reasons:
- The total cost per hour is lower.
- Although the industry has had to raise their pay for humans, the reality is that for most people, working at a venue has rarely resulted in a living wage–one of the reasons why so many people are reluctant to return to their old jobs after COVID. While COVID motivated the mass loss of workers in low-paying service jobs, high turnover is nothing new for venues. Historically, for many traditional performance art-related venues, most of the “staff” have been and remain volunteers who trade their time to see the show for “free.”
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Can Artificial Intelligence Make Live Music Performances Profitable for Unknown Artists?
If you ask most people who work at music labels or Venture Capital (VC) companies, those traditional financial organizations are only beneficial when you don’t need them.
The way to avoid needing them is to build an engaged audience—one that will pay US$25 to US$60 to enthusiastically see you perform live.
Three things are needed:
- Good quality songs.
- This used to be entirely in your hands as artists. But today, you have AI in the form of Suno and other AI programs to write and record music for you.
- Here’s the strategy:
- Pick a genre you know has an audience that loves to see live performances (e.g., country, Christian music, heavy metal rock).
- Have the AI generate a dozen songs for you in the genre of your choice and either post them for free on sites including SoundCloud or re-track them with real musicians and distribute them through regular music outlets (e.g., Amazon, Apple, etc.). The goal is to test them, just like Motown tested songs but with a wider scope, to determine which songs are hit songs with your desired audience.
- Feeling queasy at the thought of having someone or something else write your music for you? For most of popular music’s history, there have been writers and performers. It’s rare for a successful artist to do both. Music from the 1900s, Motown music, to the latest hit songs are often written by teams of people–usually teams that don’t include the performing artist.
- Determine who your ideal audience is from a demographic and psychographic perspective.
- Use AI for research. Example prompts for an AI like ChatGPT:
- Identify the top 10 keywords associated with the psychographics of people who enjoy hearing live country music.
- What are the demographics, including geography, for the people you identified above [referring to your psychographic inquiry]?
- Use AI for research. Example prompts for an AI like ChatGPT:
- Build an online relationship with your ideal audience.
- Build yourself or have an AI code for a simple website and host it through an inexpensive hosting company. Or, hire a human to do it for you.
- Important note: Your website’s purpose is to be the clearinghouse for everything related to your music and to convince people to sign up for your E-mail newsletter. These are the only two groups of data that you’ll own outright. More on this below.
- Select up to three social media platforms to post and respond to comments weekly. Base your selection on the psychographics and demographics of your audience.
- Important note, part 2: Any social media platform can kick you off with zero notice at their whim, and the chances of reinstatement are exceptionally low. That’s why getting your audience to use your website and E-mail newsletter as a primary means of communication is essential. These two communication avenues can’t easily be taken away from you.
- Build yourself or have an AI code for a simple website and host it through an inexpensive hosting company. Or, hire a human to do it for you.
Is it a lot of work?
Yes, but it’s one of the few paths open for you to succeed. And you have history on your side: Even during the best times for major artists, high-performance artists (for example, James Brown) are tireless self-promoters.
For more information about how our work in Applied Artificial Intelligence can help you, please contact us HERE.
For more information about how our work in Applied Artificial Intelligence can help you, please contact us HERE.