The Economics Of Events (aka: Why Canada Doesn’t Matter) [EDITORIAL]

Posted by Pure Phunk on Apr 9, 2012 in editorial | 8 comments

There are a lot of great events coming up over the next few months, and during my overly excessive time on the internet I constantly come across party fans listing their dream lists of acts they’d like to see. Naturally, those lists are packed with the biggest names in the business right now and they all want to see them play, in many cases, at the same event. The new reality in today’s scene: Don’t hold your breath. Canada doesn’t matter.

A lot of people forget that the music business is a business and one of the basic fundamentals of business is supply and demand. Recently, the popularity of Electronic Dance Music (EDM) has increased to it’s highest point in over a decade. Many people see this as a good thing… and it is… but from an event production standpoint promoters in Canada are going to find it very difficult to get the artists you want to see at their regular weekend shows. Before I get into that, let me give you some perspective…

A few years ago I worked for a company who’s parent company was a large, multinational corporation. The North American head office was in Minnesota, MN. Our office in Toronto was very productive and highly profitable, yet we found ourselves struggling to get the support we needed from our parent company. Many times we’d find ourselves getting shorted on supplies and support material and our complaints often went unanswered. One day while at a conference with some of the ‘higher up’s’ from the Minnesota head office, I asked them why we were seemingly neglected. We’d all had a few drinks (which helped with the courage to ask that question) and because of that I got the truth:

“Canada doesn’t really matter.”

Being a bit of a patriot I instantly took offense, but he went on to back up his statement. I remember it clear as day: “Look,” he said, “in the grand scheme of things, Canada is just a line item on our sales reports. That report reads: California, Canada, Colarado, etc… Let’s face it, there’s more people in the state of California then there is in ALL of Canada! You live in the biggest city in this giant country, and it’s a fraction of the size of New York, or Chicago… and there’s only 2 other major cities in Canada and they’re even smaller!”

He was right.

So, when you look at those artists that you want to play at your local club/bar/house party/festival/etc, chances are that it’s not going to happen for any number of reasons… most likely of all being that they were booked instead to play a bigger city or a bigger event for more money. And it really is all about the money.

That being said, don’t go hating on those artists for chasing the money. It’s not them, it’s their management. In a recent post on this blog, we showed you a mini-documentary on (now 3 time Grammy award winning) Skrillex where it showed that despite playing the mega parties, he’ll often show up at an after party or another event and play some more. He loves what he does, and he does it… but it’s managements job to make sure that he gets the most out of his appearances. He’s in HUGE demand, and there’s limited supply (unless they figure out human cloning ASAP).

So think about it… you want Skrillex to play at your 1000 person event in Canada, when there’s 10,000 – 100,000 person events happening elsewhere in the world that also want him. Where would you go? Would you play for $1000 when someone else somewhere else will pay you $10,000?  Doesn’t matter how much he loves your town, more people = more revenue = higher fees = more money for him.

Rumour has it that all the A-List, ‘In Demand’ names this year are charging in and around $250,000 to play once at a weekend event during peak time ‘festival season’. Guys like Skrillex, Deadmau5, Swedish House Mafia, David Guetta, all the people that ‘regular people’ have heard of, therefore are more popular, or ‘in demand’. So… if that’s the case, let’s do some math:

Assuming your local ‘big club’ holds 2000 people, for the promoter to break even on the performance fee alone, $250,000/2000 = $125 ticket price, assuming you sell out… but wait! That fee doesn’t include hotel costs, flights for his entourage, meals, and all the other expenses that come with throwing an event.

People often think that if something happened before, it could happen again… today… like nothing has changed. “Yo, Deadmau5 played at Footwork once…” Yeah, years ago, and he’s gone on to play at the Rogers Centre to 20,000 people… so don’t expect to see him in your local 200 person spot any time soon.

The bottom line is that Europe and parts of the U.S. have giant festivals happening more and more often. As much as people thought they’d never use it outside of high school, math will answer your questions.

Ultra Music Festival 2012:
Attendance: 165,000
Ticket Price (averaged): $189
Potential Revenue: $31,000,000

Glastonbury 2011:
Attendance: 150,000
Ticket Price (averaged): $309
Potential Revenue: $46,350,000

WEMF 2011:
Attendance: 5,000
Ticket Price (averaged): $200
Potential Revenue: $1,000,000

See a difference?

So with that answered, the question becomes: Why can’t Canada have a big festival like the one’s in the States? Simple Answer: We don’t have the people to make it worthwhile.

Like I said before, Canada, despite being big in size is small in population. To compare with hard numbers:

• Population of California: 37,300,000
• Population of New York State: 19,400,000
• Population of ALL of Canada: 34,278,400

There are more people in one US State then there is in our entire country.

OK, so the next argument I usually here is: ‘Well, the Greater Toronto Area has, like, 3,000,000 people! Surely we can get 10% of those people to come out to an event!‘ Mega company Virgin poured millions of marketing dollars into Virgin Fest in 2009, only to have it flop so bad they cancelled all future events in the city. Sure, nearly 20,000 came out to the Deadmau5 show at the Roger Centre last fall, but that was a ‘concert’… something that normal people could get their heads around. Do you think all those people would go to a 3-day camping thing? Or even a 2 day daytime thing? Possible? Yes. Probable? No.

The Deadmau5 ‘concert’ was special. It was the first time for EDM in the Skydome, the first stadium show in his ‘hometown’. It was special. There was a lot of hype over it. People that didn’t even like Deadmau5 went to see the show to be a part of it and be a part of history. Can Toronto do that again? On the Regular? We’ll see.

Electronic Nation (the EDM wing of Live Nation headed up by Destiny Events’ visionary Ryan Kruger) is doing not 1, but 2 outdoor festivals in downtown Toronto this summer. Digital Dreams, a 2 day event taking place at Ontario Place on Canada Day weekend, will be the ultimate test as to whether or not Toronto can sustain large scale EDM events.

What I hope to see happen is that all the people that are already excited for Digital Dreams will talk their friends into going. Then, after the event succeeds, the hype generated afterward will make others want to go to the next one and things will grow from there. The responsibility falls primarily on the partygoers that want events like this to happen. There are obviously promoters willing to take the risk and throw the events, but it’s the partygoers that want these events to happen that need to spread the word and attend them to make the events worthwhile for those promoters to continue. Only then will we be able to even remotely compete and get the big names that everyone wants to see in todays market for the prices their management are asking.

Then maybe, just maybe… Canada will matter.