Jay Marciano doesn’t do many interviews.
In typical times, there’s little need: Up until March 2020, AEG Presents – which Marciano heads up as CEO & Chairman – was a steadily growing global company in a steadily growing global segment of the music biz.
Since then, of course, we’ve been far from typical times. As a result, MBW has a heck of a lot to ask Marciano about, including: (i) Live music’s strong comeback post-Covid; (ii) The impact of streaming on the next generation of live talent; (iii) Whether the concerts business will be recession-proof; (iv) The future impact of inflation on the business; and (v) AEG’s increasing investment in international expansion.
Happily, Marciano, one of the modern music industry’s most modest and straight-talking – not to mention successful – Chief Executives granted us an audience to do just that.
The world’s largest private live music promoter – and second only to Live Nation overall – AEG Presents is the owner of huge festivals like Coachella (attendance: 125,000 per day, over two weekends), the New Orleans Jazz & Heritage Festival, and the UK’s British Summer Time (BST), which this year hosted the likes of Adele, Elton John, Pearl Jam, and the Rolling Stones.
In addition to its festival business, AEG is also the owner of multiple global venues including the Crypto.com arena in Los Angeles, The O2 Arena in London, and the Mercedes-Benz Arena in Berlin, amongst many others. And as a concert promoter, right now, the firm is working tours for superstars ranging from BLACKPINK to Bryan Adams, Elton John, Luke Combs, and Stromae.
The topline signs for the live industry in 2022 are good: AEG rival Live Nation (a publicly-traded company) recently stated that 44 million tickets were sold to its shows in Q3 2022, more than any other quarter in its history. Over in the UK, the 2023 Glastonbury Festival – yet to name a single headliner – recently sold out in less than an hour.
Speaking of good signs for the business, it’s worth mentioning that AEG is promoting that Taylor Swift tour (though not handling its much-discussed ticketing sales, which go through Ticketmaster).
The scale of AEG and Swift’s success there – and the signal that gives us about live music demand even during a tumultuous economic period – shouldn’t be underestimated.
Swift sold 2.4 million tickets; according to Ticketmaster, the volume of traffic to her on-sale suggested enough demand for Swift to play 900 stadium shows – the equivalent of “a stadium show every single night for the next 2.5 years.” (The below interview with Jay Marciano took place before Taylor Swift’s much-discussed dates were announced – and before those much-discussed tickets went on sale).
Unlike publicly-traded Live Nation, AEG Presents (part of Philip Anschutz’s AEG group) doesn’t publicly publish its financials. But if we briefly bounce back to pre-Covid times, its scale becomes clear: According to Pollstar data, AEG Presents’ worldwide shows grossed $1.4 billion from ticket sales in 2019. The firm’s shows sold 14.8 million tickets that year, up by more than 3 million on its tally in the prior 12 months.
So how will AEG – and the wider concert business – fare when 2022 shakes out? Jay Marciano had an answer for that – and plenty more – when we sat down together…
Anyone that tells you they know what’s going on is probably using the benefit of their experience in the last 24 hours. Ask them that question in seven days, they might answer differently!
Our experience tells us it’s hard to ignore consumer sentiment, period. And consumer sentiment right now is like a yo-yo.
I’ve always felt that concert ticket sales are very much the canary in the coal mine: We know, probably before many people, how consumers are feeling. When we’re selling really well, it means consumers feel really good about going out. When people begin to pull back, maybe it’s because they’re feeling a little less secure about their own financial situation.
“It’s not a surprise to me that only the really hot artists and shows are guaranteed to sell.”
Events that went on sale in that initial period post-Covid had all the benefits of the euphoria of opening up the market. Everything was selling: You and I could sell a concert out!
As we started to move into summer 2022, we had to look at the supply side: There were too many shows, and too many choices. Combine that with a little bit of that pullback on consumer sentiment, and it’s not a surprise to me that only the really hot artists and shows are guaranteed to sell – anything else closer to the margins is going to find things more difficult.
It’s important for me to start by laying out my long-term view of macro dynamics that are working very favorably for the live business.
The accelerated adoption of international music plus the benefits of streaming mean that audiences have more access to more artists and genres of music today than ever. And that’s great. It’s great for our clubs and theater business, it’s great for our festival business, and it creates all kinds of opportunities.
“It’s difficult to ignore the economic signs – and in this business, you ignore those signs at your peril.”
But in the near term, it’s difficult to ignore the economic signs – and in this business, you ignore those signs at your peril. There’s an old saying that everyone’s a genius in a bull market. We came out of the pandemic into a bull market, and everyone looked smart. Now it takes a really strong operator to navigate what we’re probably going to experience over the next 12 months.
That’s why, given where the economy is going into 2023, I’m not judging our company’s performance on quantity. I want us to be a little bit more selective.
It’s made music discovery borderless. Maybe for the first time in the history of pop music, it doesn’t matter which language you’re singing in.
Five years ago, the idea that BTS and Bad Bunny were going to be the two biggest stadium shows in North America would have been an absurd thought. But now, through discovery, fans are willing to take on music from around the world.
“Maybe for the first time in the history of pop music, it doesn’t matter which language you’re singing in.”
Coachella, because it’s always been the most adventurous festival when it comes to booking and always wants to get there first, has always been at the forefront of giving a big platform to the next wave of artists from around the globe. So at a festival of 125,000 people, at least 50,000 people will go watch them and be open to something new.
That goes both ways, too: Justin Bieber sold out five stadiums in Japan, that would not have happened five years ago. And I think we’ll see more and more of that.
Yes, and our clubs and theater business is very healthy. A club that did 100 shows a year in 2012 is now doing 180 shows a year. That’s a direct result of there being more talent available. It’s a great byproduct of streaming.
Our clubs and theaters business is a steady, relatively low-risk and dependable side of what we do. It’s also beneficial for spotting new talent that we think could take the next step and play on the B stage of one of our festivals…that kind of thing.
“The quoted stat, years ago, was that the average concert-goer goes to 1-point-something shows a year. In our experience, at the clubs and theaters level [today]… it’s more like eight times a year.”
Interestingly, clubs and theaters used to be a break-even business. Now it’s become profitable because our venues have become better and we’ve made investments to improve both the artist and audience experience.
What’s also new is the frequency with which fans are going to shows: The quoted stat, years ago, was that the average concert-goer goes to 1-point-something shows a year. In our experience, at the clubs and theaters level [today], where the audience is primarily 22 to 32-year-olds, it’s more like eight times a year.
A young artist that’s on the road today is seeing all of their costs going up – their tour bus, staff, sound engineer, lighting engineer, hotels… and as a result some artists can’t even afford to go on tour.
That in itself would necessarily dictate that ticket prices have to go up. What used to be a $20 ticket is probably going to be a $25 ticket, because everyone’s costs have increased.
I’d agree with that. Traditionally, there wasn’t a lot of glory on the label side of the business in working on an artist who had already released their five biggest albums.
When you work at a label, that ‘genius of discovery’ is part of [your] reason for being there: ‘I signed this artist, I discovered this artist, I made this artist.’ And of course the people who are successful at doing that are rewarded the most.
“Traditionally, there wasn’t a lot of glory on the label side of the business in working on an artist who had already released their five biggest albums.”
There’s a little bit of that in the concert business, but less so.
When I sit there at a show after doing this for all these years, can I make a pretty quick decision about how far a [young] artist is going to go in their career? Not always. But I can make a pretty informed guess, just based on having seen thousands and thousands of shows. I can sense pretty quickly if an artist is connecting with the audience.
We experience artists where the fans are. This isn’t a knock on the labels, but we have access to different data points [than they do], and our data is a bit more active. We always ask ourselves: are fans in love with the song, or are they in love with the artist? You can have a great song that people love, but that doesn’t necessarily mean they’re willing to go out and spend 100 pounds or 100 dollars to see the artist perform live.
The longevity of a live fan base is what we’re interested in. That’s what helps so many artists continue to pay their bills long after a label’s frontline marketing of their music wanes.
“The longevity of a live fan base… helps so many artists continue to pay their bills long after a label’s frontline marketing of their music wanes.”
The record business and the concerts business are definitely closer than they once were – you only have to see the number of record industry folk who come to Coachella and British Summer Time to know that! But there still seems to be a distance between the two parts of the business.
We both need each other for the ecosystem of this industry to function at its best: we need strong labels, and we need strong promoters. Frankly, I wish we were a little closer to the labels on the live side of the business. It would be to everyone’s benefit.
When we’re at Coachella, I talk to a lot of label people over the course of those two weekends. And they all say, ‘Next time, our marketing plan should be more integrated with the Coachella performance.’ And I start to think, “Well, when you’re having those marketing meetings, you never call us and say: ‘We have something we’d like to do with this artist.’” I’ve never gotten that call!
Our company reflects who our owner is. He’s an owner that expects our company to be the gold standard. He is patient when he makes an investment. You have to be patient and visionary to make a bet on something that wasn’t so obvious at the time – the O2 Arena is a perfect example – that ends up looking very obvious today.
When we were nosing the London area looking for an arena site, we said, ‘what about out there at the Millennium Dome?’ Everybody laughed at us. They all said, ‘Nobody goes to East London. It’s a white elephant!’
“You can only take those bets when you have an owner that’s focused – someone who doesn’t need to make a dollar today, but instead wants to create value in the long term.”
It was the same thing in Berlin. Everybody thought we were crazy to build where we did. Same thing in Los Angeles; we went downtown at a time when nobody wanted to go downtown.
My point is you can only take those bets when you have an owner that’s focused – someone who doesn’t need to make a dollar today, but instead wants to create value in the long term. That’s who Phil Anschutz is.
It’s had no impact on us as concert promoters, because that money isn’t money from our table – it’s the artist’s. I think over time wisdom has prevailed: the labels don’t have the ability to execute the rights that they’ve acquired in a 360 deal. And many of them have sort of moved on from it. The really experienced lawyers that are negotiating record deals these days are successful in eliminating them.
I understand where that thinking started from the labels’ perspective, especially given the financial straits the labels were in at that time: ‘We’re spending all this money and all this time to build an artist’s brand.’ And then they looked at what was happening on the live side thinking, we’re not participating - how do we get more of that?
“Streaming is a high-margin business to the labels, and we’re a big gross, low-margin industry, because – as it should be – the artists are making 90% of the revenue.”
But that was before the big streaming checks started to roll in. And the money coming in from streaming is so big that the money that they’re going to make off of selling a T-shirt looks de minimis.
The big difference between the two businesses: streaming is a high-margin business to the labels, and we’re a big gross, low-margin industry, because – as it should be – the artists are making 90% of the revenue. So when I hear labels complaining that they’re only getting 70% of the revenue from the streaming companies… well, you can guess what I think about that!
The US market accepted secondary ticketing much more readily than other places, like the UK and Europe. That’s because it was originally driven by sports: Season ticketholders couldn’t make it to every home game in the NBA or NFL each season, so they needed a marketplace. Sometimes those tickets sold for under face value, sometimes they sold for face value, and sometimes they sold for more than face value.
Then, by the time the music business woke up to the fact that there was a robust secondary market for its tickets, it was too late. Artists were afraid of being called out, or for seeming “off-brand”, for charging what their tickets were really worth in an open marketplace. So they’d put a third-row ticket on sale for $100 that would then sell for $500 on the secondary market.
“we’ve got to move that money away from the secondaries and back onto the table…”
We as concert promoters didn’t love the secondary market, and our artists’ didn’t want to be involved. So we stayed away from it. Instead, hundreds of millions of dollars were invested by the banking industry to create a secondary [music ticketing] market. All of that money spent in the secondary market didn’t make it to any of the rightsholders; including the promoter and the venue, but most importantly, the artist.
Now artists [increasingly] understand that they were letting all these third-parties profit off their shows, so they’re working with the ticketing companies and promoters to unlock a concert’s gross with ‘dynamic pricing’. The fact is, we just moved that 30%-plus increase in a box office you would see on a secondary ticketing site back into the hands of the ‘rightsholders’.
Yes, we can argue about who among those ‘rightsholders’ gets what. But we’ve got to move that money away from the secondaries and back onto the table to enable us to do that.
The biggest segment of growth will be international. You’re going to see us become more aggressive in Asia and South America, and potentially a few more offices will be opening in Europe as well.
I would point to our relationship with Frontier Touring in Australia as a recent example of that. In 2019 we announced a JV in which we acquired 50% of the company. Then, following the unfortunate passing of Michael [Gudinski, founder of Frontier and Australian music business icon who died in 2021], we purchased another 30%, with Matt Gudinski owning the remainder.
We believe in Matt, we believe in the entire team that came together to run the business after Michael’s passing, and we believe in both the history and the future of Frontier.
“Global expansion and ticketing – you’ll see some real evidence of that [from AEG] over the next 12 to 24 months.”
We’ve also really made our own global touring deals a priority. Our Global Touring team is spearheading that and I expect we will have more artists partnering with us through that sector of the company.
The other area of focus is ticketing our own shows. Historically, we’ve made the bet on an artist, done all the marketing for the shows, agreed on a contract with a venue… and then turned our ticketing – our point of contact with the consumer – over to a third party. We are acutely aware that the whole relationship with the consumer orbits around the sale of the ticket, and we are going to make that relationship even more of a priority.
So, global expansion and ticketing – you’ll see some real evidence of that over the next 12 to 24 months. More than anything, after the past two years, I’m just excited to be talking about the future of the business again.Music Business Worldwide
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