Deloitte predicts that in 2011 the live music sector, with festival organizers at the forefront, will singly or jointly start expanding their talent creation and nurturing roles that until now have been largely left to music labels’ Artist and Repertoire (A&R) divisions. The live sector will identify, invest in, develop and commercialize the next generation of stadium-filling artists, using a variety of approaches, from talent contests at festivals to dedicated facilities for nurturing new talent. All aspects of the live music sector may get involved: venue owners, concert promoters, television production companies, ticket sales agencies and even some established recording artists.

The recorded music industry has traditionally built a pipeline of up-and-coming music acts through their A&R divisions. In 2010, the industry spent almost $5 billion on development and promotion of all acts, with about half going to foster new talent¹. However, after a decade of declining sales, the labels’ A&R spending is shrinking both in absolute dollars and as a percentage of sales. In some countries, A&R investment as a percentage of revenues is down about 25 percent since 2006².

By contrast, the first decade of this millennium has been particularly prosperous for the live music industry. Revenues rose steadily and even fared relatively well during the recent recession³. However, the decade ahead looks to be more challenging, perhaps due to the ongoing decline in A&R investment by the labels.

There are two cyclical factors that could soften live music revenues in 2011 and beyond, forcing the live sector to pick up some of the slack in terms of identifying and commercializing new acts.

One factor is the vintage of the current highest grossing live acts. Some of the last decade’s biggest draws appear to be approaching the twilight of their touring careers. In 2011 the lead singers for eight of the 20 highest grossing live acts in the US from 2000-2009 will be 60 or older. Only one of the top 20, Rascall Flatts, released its first album this century (in 2000). Through 2009, Rascall Flatts grossed $222 million from touring. The other 19 acts, the majority of which rose to prominence on the back of single and album sales (and the associated promotional activity) grossed a cumulative $6 billion in ticket sales during the last decade: the sexagenarians alone brought in more than $2.5 billion (see Figure 1).

Figure 1: share of revenues generated by the top 20 grossing music live acts in the US from 2000-2009, by age of artist / lead singer in 2011.

Source: Deloitte Deloitte Touche Tohamtsu Limited, 2010, based on live tour data from Pollstar⁴; ages of lead singers from various websites

A second factor is the economy, particularly in industrialized countries. Stubborn unemployment, increases in value added tax, and an austerity-focused public sector might keep consumer confidence low and concert attendance down⁵. In fact, a weak economy might have been one of the key factors behind the 17 percent decline in the US live market in the first half of 2010⁶.

While record companies will always exist, they might be unable or unwilling to handle their previous level of investment in new acts. If so, another part of the industry might need to take up the slack of identifying and publicizing new talent to a point where fans are willing to pay $100 or more a ticket to see them perform. The live music industry will need to build this new role into its long-term business model.

The role of festivals in A&R is likely to increase as they rely most heavily on musicians to sell their tickets. This differs from an arena or stadium whose major motivation is to book any act that can fill up its seats, including, for example, stand-up comedians whose staging costs are generally far lower.

Television’s role in identifying new talent may start taking an increased focus on acts that are great recording acts but are even better at touring.

Bottom Line

As festivals start become more involved in nurturing talent, one of the promotional activities they are likely to take on is the release of new albums and singles (and all of the marketing activity that goes with it). This is likely to remain the principle way to raise awareness of bands and their latest outputs; for many fans, seeing a number one single performed live is likely to remain a key selling point⁷.

The live music industry might want to co-invest in the A&R process with companies outside of the music sector that wish to use music to promote their products. Given society’s seemingly limitless affection for music, most vertical sectors — from fashion to mobile phones to automobiles — would likely value an association with music. Live music businesses could tap these brands to help pay for part of the talent development process, such as the funding of recording studios⁸.

The record companies’ traditional A&R process was very effective, but also very resource intensive. In today’s environment where music fans seem to value a live experience more than a recording, the live music industry might be in a better position to identify top talent — specifically, the talent that can really deliver on stage.

The various players in the live music industry must recognize their common need for an ongoing pipeline of new acts to replace the existing big draws — and they must take combined action. Over the next few years, label-sourced A&R is likely to decline by roughly $500 million per year globally. It seems reasonable to assume that the live music industry — or other source of funding — will need to step in to prevent the well from running dry.

¹To provide context of the scale of investment that can go into promoting a new release, Taylor Swift’s October 2010 release, “Speak Now”, which sold a million copies in its first week on release, was backed by a two-year long marketing campaign. Source: Taylor Swift Album Is a Sales Triumph, New York Times, 3 November 2010: http://www.nytimes.com/2010/11/04/arts/music/04country.html

²New report shows how much record companies are “investing in music”, Music Industry Report Press Release, 10 March 2010: http://musicindustryreport.org/?p=17865

³Live music boom drives off recording blues, Financial Times, 20 August 2010: http://www.ft.com/cms/s/0/c8ff8d50-ac85-11df-8582-00144feabdc0.html

⁴INSERT SOURCE FROM POLLSTAR.

⁵See attached for a discussion on the potential impact of a rise in value added tax on the live music sector. Source: Budget threatens ticket price hike as global live music biz sags, Beehivecity.com, 17 June 2010: http://www.beehivecity.com/politics/budget-threatens-ticket-price-hike-as-global-live-music-biz-sags191049/

⁶One other factor cited for the performance of the US box office was the concentration of events within the same few months. Source: Live Biz Hit By Summer Slump, Cancellations , Billboard.biz, 16 June 2010: http://www.billboard.biz/bbbiz/content_display/industry/e3ic9efda4c1138e1a1d77221cc685b20ae

⁷One reason attributed to lacklustre demand for some US touring acts was the lack of recent album or single releases. Source: Live Biz Hit By Summer Slump, Cancellations , Billboard.biz, 16 June 2010: http://www.billboard.biz/bbbiz/content_display/industry/e3ic9efda4c1138e1a1d77221cc685b20ae

⁸For example, Converse has set up a community-based recording studio in Brooklyn, New York. See: We are opening a community-based recording studio in Brooklyn. For real., Converse, 5 October 2010: http://play.converse.com/play/blog/?p=2809