The economics of local live music

The economics of local live music

Published: 2010

It’s very difficult to run a live music venue and since the start of the credit crunch, hundreds have closed.

Making a profit from live music is, at the small scale end of the market very difficult. At the top end  of the market, companies are making huge profits from live music. In fact, the overall value of ticket sales for live music has overtaken that for the sale of recorded music (for the first time ever.)

It is the ticket buying public that funds live music venues. It is what fans pay at the door that keeps these small venues open. Its is often thought that small venues make their money from bar sales. This is not the case. In most venues, the bar sales budget is kept separate from the operation of the music side.

The music side of the venue has to pay for sound engineers wages, entertainment licensing, performing rights fees, publicity and promotion, cleaning, repairs, electricity, business rates, insurance, door staff and all the work of booking in bands to play at the venue.

In the bar side of things, they have to pay for drinks stocks (often in too small quantities to be able to offer good prices), licensing, health and safety, bar staff wages and cellerage costs.

If the venue makes a profit at all, it has to plough some of this back into the business to fund surpluses at the bank.  Venues go through good times and bad times and its in the bad times that good operating reserves are needed, particularly in these times when overdrafts are available than they used to be.

Demand for live music tickets can be very variable; it can for example be affected by the weather. A long spell or wet or very cold weather can affect ticket sales. The public can be very volatile in their consumption of leisure; people that used to enjoy going out to see a band might now decide to buy a video or CD to watch or listen to at home. In the local area, attendance will depend on the supply of bands that people want to go and see. If the local area has a constant supply of new bands, this will fuel ticket demand. Once a crowd has heard all the bands in its local area, their interest in seeing them regularly might wane. We might also argue that the musical and artistic quality of local bands and artists is a factor driving demand. Where there are high quality bands and acts, people will feel motivated to go out and pay to see them. Even if the venues are not of a high standard, people will put up with this, to see they bands they want to support. However, poor standard venues will see people coming down for one or two gigs but no wanting to get back there regularly over a period of time, if they facilities are dismal.

The public is getting used to increasing standards in the leisure industry, in bars, restaurants, cinemas, shops, cafes, theatres and clubs. Big companies have invested a great deal of money in making these venues attractive. They want to give customers a really good experience when they go out to spend their income on leisure. Sadly the small live music venues can compete with this. the public are getting used to clean, well lit, well decorated venues that are fitted out attractively and staffed by people who are properly trained.

Perhaps this is why they feel so let down when they go to small live venues that are grubby, dimly lit, staffed by untrained students who have to work for a pittance and offer poor value for money. Our small live venues are well below the standards we are used to in the rest of the leisure industry.

Why is this?  Other leisure venues tend to be run by large national chains, big companies that have money to invest in their outlets.  Pubs and bars tend to change hands quite frequently and at eash change of owner, they tend to get revamped and modernised. By comparison, small live music venues tend to be privately owned and do not change hands that often. Most of them operate on a shoe-string and have insufficient turnover to be able to invest in refits and upgrades to their facilities.

One other factor can affect ticket sales at the permanent live music venues.  This is the supply of free music gigs in the local area. Pubs that have falling takings, particularly mid-week, often start to put on bands, knowing that this will bring people into the pub. Bands can fill an empty pub, if only on one mid week date. they don’t charge on the door because this would put off the small number of regulars who do venue out on that night. But the down side of all this free music is that the bands don’t get paid either. The more bands that go and play for free in pubs, just to get a performance opportunity, the less ticket revenue goes into the live music venues. Why pay £5 to see a band at a venue when you can see them for free at a pub the week after?

Free gigs offer some bands the chance to play in a new venue, perhaps to some new people who otherwise would not hear them and in some circumstances they might think this worth the odd free gig now and again.  But if there is a systematic programme of free gigs, going on regularly, with bands who also play in ticketed venues, everyone looses. There is nothing wrong with a few bands putting on a charity funding raising event where they all play for free. But if they are out playing free entry gigs week after week, that serves to lessen the demand for tickets at the venues. It undermines the venues and the bands that could otherwise make a little money out of ticket sales.

Its all about seeing the bigger picture. Permanent live music venues play a key role in live music; they are hard to keep going and they depend on tick sales.  If a live music venue were to say “we will stop hiring bands to play here that play free gigs in our local pubs”, it would be harsh but it would also be realistic. If the permanent live music venues were all to close down, then bands would have no where else to play other than free gigs in local pubs. I think that would be a great loss to the quality of live music in a town.