Making Money with Music Tour or Go Hungry

With album revenues down, the live music business is booming. Yet concert promoters are complaining about greedy artists and shrinking revenues. Many bands, though, barely make enough to stay afloat.

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It's day five and the band is no longer in top form. The guitarist has back pain, the keyboard player has sore thumbs and they all have colds. Beer and energy drinks alternate as the beverages of choice backstage. The band Klee is on tour, and it still has 19 cities to visit in the next six weeks.

"That's nothing compared to last year," says Suzie Kerstgens, Klee's lead singer. The band played 130 concerts last year, giving its all for up to two hours at each appearance, whether in a smaller venue like the eastern Germany city of Zwickau or in the German capital Berlin.

Klee has just released a new album. The reviews have been excellent, sales are going well and the album has climbed into the Top 20. But gone are the days when this kind of success was enough to pay for sports cars and little beachfront houses. To make money these days, musicians are forced to spend more and more time on tour and less time in the recording studio.

The music business has changed fundamentally. In 2003, concert ticket sales brought in 60 percent of revenues in the music market, while record sales accounted for only 40 percent. As recently as the mid-1990s, those numbers were the other way around. What has happened is something aging rock star David Bowie years ago predicted would happen as a result of Internet music exchanges and record piracy. "Music itself is going to become like running water or electricity," he said. "You'd better be prepared for doing a lot of touring because that's really the only unique situation that's going to be left."

The consequences have since become obvious. According to rock star Alanis Morissette's manager, "only 10 percent of artists make money on record sales; the rest go on tour."

Revenues higher this year

Ticket dealer CTS Eventim sells tickets to some 85,000 events a year throughout Europe -- and last year Germany's concert market had an estimated value of just under €3 billion, even with the biggest stars not on tour. Revenues will likely be much higher this year, with concerts by artists ranging from Robbie Williams to Madonna, Depeche Mode to Xavier Nadoo.

Despite occasionally astronomical ticket prices, many concerts sell out within days. Eventim managed to unload more than 80,000 tickets for Madonna's two German concerts within a few hours. "We could easily have sold 3 million tickets the first day," says Eventim CEO Klaus-Peter Schulenberg.

Eventim sold more than 40 million tickets in Europe last year alone. And to ensure itself a constant influx of new concerts, the ticket dealer has purchased shares in leading concert promotion companies, including Marek Lieberberg, FKP Scorpio and Peter Rieger.

The artists who make the most money on tour.
DER SPIEGEL

The artists who make the most money on tour.

Now the company, based in the northern German city of Bremen, also plans to capture a share of the ticket scalpers' market. To coincide with this week's opening of the Popkomm music show, Eventim will launch its new online ticket reselling platform, Fansale. CEO Klaus-Peter Schulenberg estimates that up to 2 million tickets a year will be sold privately through the new site. By charging commissions of up to 25 percent, the company plans to secure a new source of revenue. Eventim's revenues amounted to 256 million last year, a 15 percent increase over 2004 revenues.

But the industry's biggest stars are the ones who are benefiting the most from the live music boom. Indeed, major bands have been earning most of their income at concerts for some time now. U2, for example, earned €122 million last year, according to estimates by Rolling Stone, with fully €110 million of that coming from concerts and merchandising. Despite selling only about half a million albums worldwide, Neil Diamond ranked sixth among the industry's top moneymakers -- thanks to €35 million in revenues from an extended tour. Mariah Carey recorded the US's top-selling album last year, which sold 5 million copies, but didn't go on tour. As a result, she wasn't even ranked among the 30 highest-earning music stars.

Up to €1 million for a concert

This comes as no surprise. Even the most established superstars still collect only five or six euros for each record they sell -- but up to €1 million for a single concert.

As the record companies watch their sales decline, they can only look on with envy as their stars rake in the cash. For some years now, music companies have been pushing for record contracts that would garner them an average of 10 percent of artists' concert proceeds -- but with marginal success. More surprising is the fact that even concert promoters are hardly benefiting from the boom in their own industry. "We make about €7 million on revenues of €100 million -- it's consistent, but not particularly sexy for some," says Marek Lieberberg, whose concert agency made it to seventh place worldwide with more than a million tickets sold in the first half of 2006.

Lieberberg still remembers the good old days when concert promoters were treated with a measure of success. He himself, along with major players Fritz Rau and Peter Rieger, managed to bring bands like The Who and Pink Floyd to Germany. Sometimes, contracts were drafted on napkins.

Nowadays artists' contracts with promoters can run up to 400 pages, with everything specified down to the tiniest detail, including the font to be used on posters. "Practically all the decisions are being made from abroad, down to the exact locations of posters in (the mid-sized northern German city of) Gelsenkirchen," says Lieberberg.

Lieberberg, incensed over the meddling and controlling behavior of international superstars and their agents, says that "even the Bulgarian government bureaucracy is flexible by comparison." The consequence for German promoters like Lieberberg: "We now have very little influence over their success or failure."

They have even less influence over prices. "They have no sense of shame," says Lieberberg. Until the mid-1990s, 100 Deutschmarks (about $50) was about the highest price most artists would charge for their concert tickets. Anyone who chose to exceed that limit either had to be of Rolling Stones caliber or willing to perform to half-empty stadiums. Today stars like Robbie Williams won't go below €70, and the price of a Madonna ticket can range up to €192. Even moderately successful groups like the Pussycat Dolls refuse to even set foot on the stage for anything less than €45 a ticket.

Greater financial risk

Instead of hiring in-country promoters to market their tour stops in return for giving up a share of their revenues, many major bands are now marketing their tours themselves. Though this means assuming greater financial risk, it also gives the bands direct access to all revenues -- and control over ticket prices. The national promoters are only hired to organize and stage the actual concerts. Lieberberg, for example, was paid all of $50,000 for a Madonna concert.

But German promoters have a trick or two up their sleeves. One is something known in the industry as "English costs," a system whereby German promoters charge the international stars' agents, most of whom are headquartered in London, inflated event costs. "They usually have a file filled with a completely separate set of invoices where everything costs more than it really does," says an industry insider.

Even when international stars hire German companies to promote and organize their concerts, the German companies earn far less than they used to -- and assume much greater risk. Bands are now demanding enormous, guaranteed advances that are not dependent on ticket sales. The Rolling Stones, for example, wanted guaranteed sales in the two-digit millions for their last German tour.

Meanwhile, advances of half a million euros per concert have become standard for many well-known groups. Although the promoter stands to earn an initial share of 15 to 30 percent of ticket sales, it's also up to the promoter to ensure that enough tickets are sold in the first place to pay the band.

This arrangement doesn't always work, even with major stars. Last year Paul McCartney was scheduled to perform at Germany's Schalke Stadium, which holds an audience of about 60,000, a capacity that was reflected in his fee. But when only about 10,000 tickets were sold, the promoter found himself on the verge of bankruptcy. Only at the last minute did the former Beatle agree to move the performance to a much smaller venue.

Music festivals -- more enjoyable and profitable for promoters -- are a different story altogether. Lieberberg, for example, has been organizing the classic "Rock am Ring" festival at Germany's Nürburgring racetrack for 20 years, and launched his "Rock im Park" event in Nuremberg a few years ago.

"Really nice of Nena"

But there is one respect in which the festivals no longer differ from tours. "Most artists," says Lieberberg, "are getting more and more greedy." The stars performing at this year's "Rock am Ring" earned a combined fee of €4.1 million. Three years ago they were earning half as much.

A successful German band can now charge €50,000 to €100,000 to appear at a festival. An international star commands a quarter million while the headliner takes home a million euros. However, the musicians' expenses are not included in their fees. Bands that show up with four truckloads of equipment and a 20-man crew often end up with little in the way of income.

Even in a year that features tours by major artists from Robbie Williams to Depeche Mode, the biggest superstars make up only a fraction of total ticket sales. "They don't account for more than 5 to 10 percent of our sales," says ticket dealer Schulenberg. The ones that do bring in the revenues are bands like Klee, whose extensive tours and fan communities are more characteristic of the market -- and are barely able to make ends meet. "If we end up with an audience of only 300 people one night, we go home with less in our pockets than the lighting guy," says keyboard player Sten Servaes.

Last year Klee discovered what it feels like to play the biggest venues and arenas, when German pop legend Nena personally chose the band to open for her on her tour. But far from making money on the deal, Klee in fact ended up not getting paid at all. Major stars usually charge hefty fees to up-and-coming bands for the privilege of the media exposure performing with them brings with it -- fees upwards of €10,000 per event. "But we didn't have to pay anything," says Klee guitarist Tom Deininger. "That was really nice of Nena."

Translated from the German by Christopher Sultan

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