Media & Entertainment

Funflation in full force

Authored By
Analyst Name Jessica Reif Ehrlich
Analyst Email jessica.reif@bofa.com
Analyst Designation Research Analyst
Analyst Region BofAS
Analyst Phone +1 646 855 2921
Analyst Name Peter Henderson
Analyst Email peter2.henderson@bofa.com
Analyst Designation Research Analyst
Analyst Region BofAS
Analyst Phone +1 646 855 4564
Analyst Name Brent Navon, CFA
Analyst Email brent.navon@bofa.com
Analyst Designation Research Analyst
Analyst Region BofAS
Analyst Phone +1 646 855 3827
Analyst Name David Plaus
Analyst Email david.plaus@bofa.com
Analyst Designation Research Analyst
Analyst Region BofAS
Analyst Phone +1 212 449 4425
Report Details
Industry Overview 13 September 2023 Equity United States Media & Entertainment

Media & Entertainment

Funflation in full force

Authored By
Analyst Name Jessica Reif Ehrlich
Analyst Email jessica.reif@bofa.com
Analyst Designation Research Analyst
Analyst Region BofAS
Analyst Phone +1 646 855 2921
Analyst Name Peter Henderson
Analyst Email peter2.henderson@bofa.com
Analyst Designation Research Analyst
Analyst Region BofAS
Analyst Phone +1 646 855 4564
Analyst Name Brent Navon, CFA
Analyst Email brent.navon@bofa.com
Analyst Designation Research Analyst
Analyst Region BofAS
Analyst Phone +1 646 855 3827
Analyst Name David Plaus
Analyst Email david.plaus@bofa.com
Analyst Designation Research Analyst
Analyst Region BofAS
Analyst Phone +1 212 449 4425
Report Details
Industry Overview 13 September 2023 Equity United States Media & Entertainment
Glossary
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BofA Securities does and seeks to do business with issuers covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

 

 

Key takeaways
  • Live Entertainment is currently the brightest star in the broader Media and Entertainment universe.
  • In our view, there are several sustainable and longer-term key drivers that will fuel solid growth for a number of years.
  • We discuss several public and private companies that participate in the rapid growth in live.

Media & Entertainment

Funflation in full force: stage dive into Live Entertainment

Live Entertainment is currently the brightest star in the broader Media and Entertainment universe. In our view, there are several sustainable and longer-term key drivers that will fuel solid growth for a number of years, namely: (1) continued consumer spending shifts toward services due to favorable demographic trends and the continued rise of the "experience" economy; (2) healthy pricing power given the robust demand and opportunity to better implement dynamic pricing; (3) positive supply and demand trends as artist and event discovery is enhanced by social media and new platforms (e.g. TikTok), while artists are becoming more global and developing markets (e.g. Latam) offer new avenues of fan growth; (4) live is a relatively disruption proof business as virtual methods to generate similar experiences will likely remain incomparable to actual live events; and (5) sponsorship and the advent of experiential marketing. On the risk side, we see the macro environment/consumers' willingness to spend during a potential downturn and regulatory as the two biggest overhangs in the near term.

Not all areas of the chain are created equal

Overall, the live entertainment/concert value chain threads the fine line of making sure talent is compensated for their art while promoters are rewarded for their risk. Certain areas of the chain bear more risks vs. others. Not surprisingly, we believe talent, especially artists that command huge fan bases, will be able to increasingly extract incremental value out of the ecosystem (largely driven by increasing supply and ticket pricing), while venues, which have several independent revenue streams, accrue the most value. Conversely, the Promoter role appears to be the riskiest aspect of the business, with low-single digit margins, sizable upfront capital commitments (e.g. talent guarantees, venue rentals) despite uncertain ticket sales to recoup outlays.

In concert: vertical integration and scale provide benefits

Given the value chain dynamics, it is our view that scale and vertical integration across all aspects of the Live Entertainment ecosystem are means to diversify risk and maximize earnings potential from the live events business. In addition, vertically integrated operators can utilize certain areas of the business as a "hook" to acquire new business opportunities with the ability to recoup these economics elsewhere.

Step into the arena: Buy MSGE and EDR

There are several public and private companies that participate in the rapid growth in live.  Most direct, is publicly traded Live Nation as they are actively involved in most if not all aspects of the Live Event ecosystem.  AEG (private) is the most direct competitor to Live Nation. More indirectly, we believe talent agencies and managers such as CAA, UTA, The Azoff Company and WME (of parent co EDR) are also significant participants as representatives of top music stars who are generating significant touring income.  Similarly, music labels and DSPs such as WMG and Spotify (among others) will also benefit from increased streaming engagement and album sales as popularity for their artists grow and touring increases fandom.  Finally, venue operators such as MSGE/Sphere facilitate increasing supply for live events in desirable locations and can capture multiple revenue streams (e.g., rental fees, F&B, VIP Experiences, Merch, etc.).

 

 

Media & Entertainment

Media & Entertainment: Mr. Brightside

The Media and Entertainment (M&E) industry has been under significant secular pressure for many years with cyclical concerns also developing more recently due to the pandemic and its aftermath. The video ecosystem is undergoing an enormous transformation as distribution methods evolve, which is having downstream impacts on broadcasters, general entertainment cable networks, regional sports networks, and the broader studio and film businesses. While the industry is attempting to transform itself, there have been significant challenges to creating direct-to-consumer streaming platforms due to sizable start-up costs as well as lower profitability vs. traditional linear offerings. With video economics shifting, other issues have arisen, including the current writer's and actor's strikes. Similarly, many aspects of the music industry have been pressured as old business models were transformed and replaced with less profitable distribution. Recorded music sales have only recently surpassed previous peaks, which were established in 1999. However, one area in the Media and Entertainment universe that remains resilient is Live Entertainment.  We believe several of the underlying supply and demand drivers will power growth in the coming years and will continue to be an area of relative outperformance vs. other segments of the M&E industry.

Live Nation is the largest participant in the concert industry, which has several underlying supply and demand drivers.  Live Nation is one of the largest promoters in the world, owns one of the largest ticketing platforms (TicketMaster), and has increasingly expanded their venue ownership in the US and around the globe.   Live Nation's scale and vertical integration enables them to compete very effectively in the market on price as the company owns several parts of the chain, mitigating risk by managing several live events for several artists across several geographies. Absent any slowdown in consumer spending on live events and negative regulatory actions we believe there are several revenue and earnings drivers for the live concert business over the next several years.

Under our coverage universe, companies that have exposure to live music events (both directly and indirectly) include: IHRT, EDR, WMG, SPOT and MSGE.  EDR via their WME talent agent business represents several of the largest music artists around the globe.  To the extent live touring remains robust they stand to benefit from overall increases in earnings from talent, which could partially offset the headwinds within their TV/Movie rep business from the various strikes.

For WMG and the broader music labels strength in touring increases fan engagement with their artists which ultimately drives increased merchandising sales, digital streaming revenues and album sales of these artists.  Spotify has a virtuous cycle with the concert business as fan engagement drives their MAUs but also leads to music discovery of new artists which ultimately drives concert attendance.  This concert attendance reinforces overall consumer engagement with music which keeps users on music streaming platforms.

MSGE offers an opportunity to own a growth-oriented, pure-play live entertainment company with a strong set of venues in the #1 concert market in the world.

Show is just getting started

The Live Entertainment industry has been one of the most robust growth engines of the music industry over the past 20+ years. While, unsurprisingly, live events were dramatically impaired by COVID-19, consumer demand for Live Entertainment has come roaring back since exiting the pandemic. Driven by the pent-up demand for experiences, consumers have flocked in droves toward live events and concerts. In addition, the proliferation of streaming along with new social media platforms (e.g. TikTok) has accelerated artist discovery and have provided new mediums for artists to grow their fan bases globally.

This backdrop has supported supply and demand tailwinds which all appear to be sustainable over the next several years. We view several of these intermediate to longer term drivers as sustainable and believe this sub-segment of the music industry should continue to outperform driven by: 1) Consumer spending shifts toward services and away from goods, 2) demographic shift in preferences toward experiences among the younger millennial and Gen Z population - which are also becoming more important elements of the workforce with increasing incomes and wealth as a result, and 3) the intersection between social media and music which is driving artist and event discovery, and also helping to drive demand by enabling experience sharing.

Exhibit 1: The live music value chain

The live entertainment ecosystem has several constituencies

The live value music chain consists of multiple participants, including: the artist, who is the content source and approves event pricing; the manager/agent, who manages all aspects of artist career, incl. touring;  booking agents contract w/promoters in locality of venue; helps set event pricing; the promoter, who contracts for venue, sets event pricing w/artist, arranges for local production services (e.g. stage, set, sound) and markets the event; the sponsor, which leverages event to promote brand by contracting for venue, on-line, artist and/or cross-platform exposure; the venue operator which provides event space and services such as concessions, parking, security, ushers and ticket takers; ticketers, which Distributes tickets via online, call centers and sales outlets; provides tech. to venues for on-site sales; facilitates ticket resale in secondary market and finally the store front which is the initial fan contact point for ticketing  sales, online merch., fan clubs, artist discovery and social media integration; enables online traffic monetization via advertising sales

Source: BofA Global Research

BofA GLOBAL RESEARCH

 

Money on my Mind-The value chain

In Exhibits 2-7 (beginning on page 6), we break down the various components of the economic chain within Live Entertainment. Robust demand for live experiences has expanded the opportunity to generate favorable economics throughout the live entertainment/concert value chain. However, certain aspects of the value chain clearly bear more risk vs. others and the overall costs for producing these events have increased considerably in recent years. Ultimately, as we consider the value chain economics, all the key constituents need to thread the fine line of ensuring talent is compensated for their services while promoters are rewarded for their risk. For this reason, we believe scale and vertical integration across the value chain can be advantageous as a means to distribute/withstand risks from individual shows and recoup economics from certain areas (e.g. Promoter) from more profitable ones (e.g. Ticketing). Notably, Live Nation has scale and breadth across all areas of the value chain.

 

We caveat that there are several permutations, combinations, and structures to how concert deals can be constructed along with several assumptions ranging from venue size, ticket price, merchandise sales etc. Our intention was to create industry average type of events across Clubs, Amphitheaters, Festivals and Arenas and not include outliers such as Taylor Swift's current Eras Tour. Our key conclusions are:

  1. Vertical integration and scale are competitive advantages: The live events business is highly competitive and requires significant start-up costs/infrastructure (e.g. investments to build venues, relationships across ecosystem, etc.) along with well capitalized balance sheets to fund working capital requirements of production. For this reason, scale is a critical competitive advantage as larger providers can diversify their risks. If Live Nation has one or two shows that are not successful, the company has the balance sheet and other presumably profitable events that can cushion this blow. On the other hand, smaller promoters may not have the frequency of shows to recoup one big loss nor the balance sheet to withstand a failed event production. Along these lines, vertical integration across the value chain is another means to enhance competitive positioning. This enables larger providers to offer more competitive pricing and even utilize certain business segments as loss-leaders with the knowledge they can recoup these economics elsewhere in the value chain. We believe the combination of scale and vertical integration are the key moats that Live Nation has built over the last several decades which has enabled them to assemble such a strong competitive position in the market.
  2. Promoter business is most risky part of the chain. In our view, the Promoter business has the most challenged business model in this chain. Under what we deem to be favorable outcomes in the scenarios below, Promoter margins are only in the single digit range (in Festivals they are higher as we assume Promoters also own the Venue). With costs of concert productions escalating along with artist demands to retain and extract ever larger shares of the economics, we anticipate this part of the value chain to remain under the most pressure.
  3. Venues are highly profitable but require huge start-up costs. Our analysis highlights the reasons venue owners are eager to host live events. There is a tremendous opportunity to generate rental income, VIP/Suites revenue along with generating Food & Beverage, Merchandise, Sponsorship and Parking revenues for each event hosted at their venue. For perspective, we estimate an arena can earn nearly $400k for hosting a typical event. However, we acknowledge there are significant sunk/fixed costs and capital costs entailed with acquiring the land and building venues. We don't capture those elements in this analysis, which obviously biases the economic favorability toward already constructed venues.
  4. Talent is the key beneficiary of ticket price increases and dynamic pricing. "Funflation" and ticket price increases have been drivers of the Live Event industry exiting the pandemic. We estimate the overwhelming majority of income from these ticket price increases accrues to the Artist. Artists primarily earn their income from ticket sales and to the extent they can increase this pool of dollars it will most greatly impact their earnings. Similarly, and what we expect to be an additional driver in the coming years, dynamic pricing will be another tailwind to ticket pricing growth (as artists do not participate in the secondary ticket market) and will continue to drive an increased wallet share of economics toward the Artists.

Thinking through the concert economics

In Exhibits 2 & 3 on the following page, we summarize the hypothetical flow of funds for a typical event by venue. For the purposes of our analysis, we have included clubs, amphitheaters, festivals, and arenas and only contemplate the incremental economics associated with a new event. Assuming a 90% sellout rate we estimate the net margin from a live event can range from 35% for a club up to 48% for an amphitheater. This is driven by average ticket prices ranging from ~$70/ticket at clubs up to ~$134/ticket at arenas. Other notable drivers include ancillary per caps which range from $20 at clubs and reach to over $50 at festivals and arenas. Margins are largely captured by venue and the ticketer, while the promoter generally experiences low-single digit margins.

We estimate that the box office drives most of the total event revenue, accounting for between 50% to 67% of total revenues. Ancillary revenue streams, such as food and beverage and merchandising, can account for between 20% to ~35% of the overall revenue for an event. Festivals have a significantly larger sponsorship component than other events due to nature of the events (e.g. massive audience, larger event spaces, multiple simultaneous acts, etc.).

 

 Exhibit 2: Illustrative total value chain economic summary

Value Chain Economics for Clubs, Amphitheaters, Festivals and Arenas

For an accessible version Merrill clients call 800-637-7455; Merrill Edge Self-Directed clients call 877-653-4732

Value Chain Economics

 

Venue Type

 

 

 

 

 

 

 

 

Key Assumptions

 

 

Club

Amp2

Festival3

Arena

Capacity

 

 

 

1,000

10,000

50,000

12,000

Avg. Ticket Price

 

 

$69.50

$56.90

$111.00

$133.75

Sellout %

 

 

 

90%

90%

90%

90%

 

 

 

 

 

 

 

 

Total Event Proceeds

 

 

 

 

 

+ Gross Box Office (G.B.O.)

$60,674

$496,737

$4,845,150

$1,401,165

+ Ticket & Related Fees

 

$12,008

$114,931

$685,927

$206,870

+ Ancillaries

 

 

$18,512

$361,200

$2,370,375

$568,890

+ Sponsorship

 

 

$0

$20,000

$1,000,000

$40,000

= TOTAL Event

 

 

$91,193

$992,868

$8,901,452

$2,216,925

 

 

 

 

 

 

 

 

Event NET To Value Chain

Club

Amp2

Festival3

Arena

+ Artist

 

 

$12,467

$104,373

$748,706

$323,193

+ Manager/Agent

$4,363

$35,481

$262,047

$102,182

+ Promoter1

$2,797

$22,022

$1,506,951

$68,082

+ Sponsor4

$0

$0

$0

$0

+ Venue

 

$8,742

$276,523

$473,738

$386,801

+ Ticketer

 

$3,848

$35,902

$235,145

$61,844

= TOTAL Event NET

$32,217

$474,300

$3,226,587

$942,102

 

 

 

 

 

 

NET Margin %

 

 

 

 

 

 

+ Artist

 

 

30%

30%

30%

30%

+ Manager/Agent

35%

35%

35%

35%

+ Promoter1

5%

4%

20%

5%

+ Sponsor4

0%

0%

0%

0%

+ Venue

 

31%

62%

56%

59%

+ Ticketer

 

50%

50%

50%

50%

= TOTAL Event NET

35%

48%

36%

42%

 

 

 

 

 

 

Share Of Event NET

 

 

 

 

 

 

+ Artist

 

 

39%

22%

23%

34%

+ Manager/Agent

14%

7%

8%

11%

+ Promoter1

9%

5%

47%

7%

+ Sponsor4

0%

0%

0%

0%

+ Venue

 

27%

58%

15%

41%

+ Ticketer

 

12%

8%

7%

7%

= TOTAL Event NET

100%

100%

100%

100%

 

 

 

 

 

 

Other Stats

 

 

 

 

 

 

Artist Talent Fee - % Of G.B.O.

68%

60%

55%

71%

 

 

 

 

 

 

 

 

Source: BofA Global Research

Notes:

1. Assumes Promoter is Festival Owner

2. Assumes larger amphitheater

3. Assumes 1 day of Festival

4, Sponsorship proceeds allocated to Artist, Promoter and Venue

BofA GLOBAL RESEARCH

 

 

Exhibit 3: Illustrative total event economic revenue build-up

Gross box office receipts account for over 50% of total revenue

For an accessible version Merrill clients call 800-637-7455; Merrill Edge Self-Directed clients call 877-653-4732

 Total Event Economics

 

Venue Type

 

 

 

 

 

 

 

 

1. Gross Box Office

 

Club2

Amp3

Festival6

Arena

Capacity

 

 

 

1,000

10,000

50,000

12,000

Seats Available For Sale

 

970

9,700

48,500

11,640

x Sellout %

 

 

90%

90%

90%

90%

= Tickets Sold

 

 

873

8,730

43,650

10,476

x Avg. Ticket Face Value1

 

$69.50

$56.90

$111.00

$133.75

= Gross Box Office

 

 

$60,674

$496,737

$4,845,150

$1,401,165

 

 

 

 

 

 

 

 

2. Ticket & Related Fees

 

 

 

 

+ Avg. Ticket Fee

 

 

$10.30

$9.61

$12.61

$13.82

x Tickets Purch. @ Ticketer

742

7,421

37,103

8,905

= Convenience/Proc. Fees

 

$7,643

$71,281

$467,677

$123,062

+ Facility Fee/Ticket

 

 

$5.00

$5.00

$5.00

$8.00

x Tickets Sold

 

 

873

8,730

43,650

10,476

= Facility Fees

 

 

$4,365

$43,650

$218,250

$83,808

 

 

 

 

 

 

 

 

3. Ancillary Spending

 

 

 

 

 

+ Parking/Cap

 

 

$3.00

$10.00

$10.00

$10.00

+ F&B/Cap4

 

 

$12.50

$17.50

$20.00

$20.00

+ Merchandise/Cap4

 

 

$5.00

$7.50

$15.00

$15.00

+ Single Event/Premium Suites5

$0.00

$5.00

$7.50

$7.50

= TOTAL Ancillary/Cap

 

$20.50

$40.00

$52.50

$52.50

x Attendance

 

 

903

9,030

45,150

10,836

= Ancillary Proceeds

 

 

$18,512

$361,200

$2,370,375

$568,890

 

 

 

 

 

 

 

 

4. Sponsorship6

 

 

 

 

 

 

+ Artist Deal

 

 

$0

$15,000

$0

$30,000

+ Promoter/Venue Deals

 

$0

$5,000

$1,000,000

$10,000

= Sponsorship/Other

 

 

$0

$20,000

$1,000,000

$40,000

 

 

 

 

 

 

 

 

Total Event Economics

 

 

 

 

 

+ Gross Box Office (G.B.O)

$60,674

$496,737

$4,845,150

$1,401,165

+ Ticket & Related Fees

 

$12,008

$114,931

$685,927

$206,870

+ Ancillary Spending

 

 

$18,512

$361,200

$2,370,375

$568,890

+ Sponsorship/Other

 

 

$0

$20,000

$1,000,000

$40,000

= TOTAL Event

 

 

$91,193

$992,868

$8,901,452

$2,216,925

- Direct Operating Cost

 

$58,976

$518,568

$5,674,865

$1,274,823

= TOTAL Event NET

 

 

$32,217

$474,300

$3,226,587

$942,102

Margin %

 

 

 

35%

48%

36%

42%

 

 

 

 

 

 

 

 

Source: BofA Global Research

Notes:

1. Based on imputed average ticket price from the top 10 venues by venue type in 2022,

as ranked by Billboard

2. For Clubs Parking/Cap more skewed toward Facility Maintenance fees vs. on-site parking

3. For Amps assumes blend of parking fees and Facility Maintenance fees

4. Assumes net for F&B and Merch that is remitted to venue

5. Premium VIP Experiences are distributed across entire attendance base even if only applicable to a small % of attendees

6. Assumes Festival sponsorship at $20/fan

BofA GLOBAL RESEARCH

 

 

 

Promoters: Livin' on a Prayer

Concert promoters are the constituents in the live event chain that pay artists to perform. These promoters can range from single individuals to multibillion dollar public corporations that encourage artists to perform at clubs, arenas, performing art centers, festivals, and stadiums (among others). For the purposes of our analysis, we assume promoters utilize the revenue from ticket sales to cover costs of acquiring talent, securing a venue and other costs of producing a concert.

Generally, the promoter pays an act an agreed upon price to perform at a venue on a certain date. The promoter then is highly incentivized to promote this event to generate interest and ticket sales to cover these costs. The fee paid to the artist is either in the form of a fixed guarantee or a % of net box office (typically split 90% to artist and 10% to promoter). By nature of guaranteeing a fee for talent along with assuming several of the costs to put the show together (e.g. venue rental fee etc.), the promoter business is a risky part of the chain. Net net, we estimate a promoter earns a low single digit margin on the average event. Given how narrow a margin this is, we would not be surprised if promoters lose money on several events if demand is not as strong as anticipated.

For this reason, promoters typically like to diversify their risks by organizing multi-city tours, where success in certain cities can cushion underperforming cities or promote several acts as a means to distribute their risks across several artists. Alternatively, promoters (e.g. Live Nation), expand their offerings across the value chain utilizing the promoter business as a "hook" to attract business and then use their scale across other business (e.g. ticketing) as a means to recoup these economics.

 

Exhibit 4: Illustrative economic build up for promoters

We estimate promoter margins are in the low-mid single digit range

For an accessible version Merrill clients call 800-637-7455; Merrill Edge Self-Directed clients call 877-653-4732

 NET To Promoter

Venue Type

 

 

 

 

 

 

 

 

Income Derivation

 

 

Club

Amp

Festival1

Arena

1. Event G.B.O

 

 

$60,674

$496,737

$4,845,150

$1,401,165

2. F&B Share

 

 

$0

$0

$903,000

$0

3. Sponsorship

 

 

$0

$3,750

$1,000,000

$0

4. Other

 

 

 

$0

$0

$869,156

$0

TOTAL Income

 

 

$60,674

$500,487

$7,617,306

$1,401,165

 

 

 

 

 

 

 

 

Expense Derivation

 

 

 

 

 

1. Talent Fees

 

 

$41,556

$298,563

$2,665,000

$991,049

2. Credit Card Fees

 

 

$1,820

$14,902

$145,355

$42,035

3. Local Production Costs

 

$5,000

$60,000

$2,000,000

$125,000

4. Event Advertising

 

 

$2,000

$30,000

$1,000,000

$75,000

5. Venue Rental

 

 

$7,500

$75,000

$300,000

$100,000

6. Other Expense

 

 

$0

$0

$361,200

$0

TOTAL Expense

 

 

$57,876

$478,465

$6,110,355

$1,333,083

 

 

 

 

 

 

 

 

NET To Promoter

 

 

$2,797

$22,022

$1,506,951

$68,082

Margin %

 

 

 

5%

4%

20%

5%

 

 

 

 

 

 

 

 

Source: BofA Global Research

Notes:

1. Assumes Promoter as Festival owner leases land and retains all F&B, Parking, Merch.

Share and Ticketing Rebate proceeds

BofA GLOBAL RESEARCH

 

Talent: Take the money and run

The most important business contract in a concert is the deal between the artist and promoter. Without it, nothing else exists. This deal is usually negotiated between the artist's agent and the promoter which is typically called the Performance Agreement. There are many components to this agreement, but for the purposes of our analysis the main areas we focused on include the: 1) total guarantee amount or overall fee structure and 2) the merchandising rate (or % of merch that is retained by the artist) along with the main expenses born by the Artist. Notably, many artist deals include net box office after consideration is made for rental fees, event advertising and local production. We assume artists retain 90% after these expenses for clubs, amps, and arenas while festivals retain 100% (due to unique attributes of a Festival).

As shown in Exhibit 5, the most important drivers for an artist's economics, are box office, a function of ticket prices and tickets sold, merchandise sales and any sponsorship income. Depending on the structure of the deal there are also significant expenses borne by the talent for live shows. In total, we estimate operating costs from arenas that are passed on to the promoters/artists are typically around $200k in addition to the overall rental fee for the venue itself (if artist deals are structured as a % of net gross box office (GBO) these expenses are deducted from ticket sales prior to allocating their % share). In addition to specific event related expenses, an artist will also pay their representation and other expenses which include a manager fee, a booking agent fee, a business manager fee and costs for production/travel. Specifically, a booking agent can be described as a talent agent who finds the work for creative artists, a business manager oversees the finances for the artist's tour, while the manager acts as a close advisor helping manage an artist's career.

 

Exhibit 5: Illustrative economic buildup of artists

We project artists maintain ~30% net margin on their revenues from a concert

For an accessible version Merrill clients call 800-637-7455; Merrill Edge Self-Directed clients call 877-653-4732

 NET To Artist

Venue Type

 

 

 

 

 

 

 

 

Income Derivation

 

 

Club

Amp

Festival2

Arena

1. Talent Fee

 

 

 

 

 

 

--> A. Fixed Guarantee

 

$30,000

$248,000

$2,665,000

$701,000

 

 

 

 

 

 

 

 

+ G.B.O

 

 

 

$60,674

$496,737

$4,845,150

$1,401,165

- Venue Rental

 

 

$7,500

$75,000

$300,000

$100,000

- Event Advertising

 

 

$2,000

$30,000

$1,000,000

$75,000

- Local Production

 

 

$5,000

$60,000

$2,000,000

$125,000

= Net Box Office

 

 

$46,174

$331,737

$1,545,150

$1,101,165

x Net Box Office % Deal

 

90%

90%

100%

90%

--> B. % Deal1

 

 

$41,556

$298,563

$1,545,150

$991,049

MAX Fee (Either Fixed or % Deal)

 

 

 

$41,556

$298,563

$2,665,000

$991,049

 

 

 

 

 

 

 

 

2. Merchandise Income3

 

 

 

 

 

Merchandise/Cap

 

 

$0.00

$5.00

$7.50

$7.50

x Attendance

 

 

903

9,030

45,150

10,836

= Merch. Gross

 

 

$0

$45,150

$338,625

$81,270

x Artist Royalty Rate

 

 

85%

83%

25%

80%

= Merch. Income

 

 

$0

$37,249

$84,656

$65,016

x Venue Share

 

 

15%

18%

75%

20%

= Venue Share Of Merch.

 

$0

$7,901

$253,969

$16,254

 

 

 

 

 

 

 

 

3. Sponsorship Income

 

$0

$15,000

$0

$30,000

TOTAL Income

 

 

$41,556

$342,911

$2,495,688

$1,069,811

 

 

 

 

 

 

 

 

Expense Derivation

 

 

 

 

 

1. Manager Fee4

 

 

 

 

 

 

TOTAL Artist Income

 

 

$41,556

$342,911

$2,495,688

$1,069,811

x Commission Rate

 

 

15%

15%

15%

15%

= Manager Fee

 

 

$6,233

$51,437

$374,353

$160,472

 

 

 

 

 

 

 

 

2. Booking Agent Fee4

 

 

 

 

 

TOTAL Artist Income

 

 

$41,556

$342,911