Will Superfans Pay More for Premium Experiences at Concerts? Live Nation Is Betting On It
Written by djfrosty on February 23, 2024
If 2023 was the year of Taylor Swift, 2024 could be the year of the superfan.
While Swift’s The Eras Tour proved that music fans are willing to spend large sums and travel far to see their favorite artist, for years promoters have improved their revenues by selling premium experiences to concerts and festivals. Whether it’s dynamically priced seats close to the stage, VIP access or a revamped cocktail offering, there are more options for fans willing to pay more to enjoy the sights, sounds and hospitality of live music. Expect an even greater emphasis on this in the new year.
The focus on superfans isn’t confined to live music. The CEOs of Universal Music Group and Warner Music Group both started the year by highlighting a desire to better serve superfans. In the recent past, that may have meant NFTs and newfangled web3 offerings. Today, superfans buy multiple copies of albums (both LP and CD) and merchandise, often directly from the artist’s web store. Streaming services could soon be getting into the game, too, by offering “superfan clubs,” Spotify CEO Daniel Ek suggested in a Jan. 24 open letter.
But live music has a unique ability to upcharge for premium experiences — and add to companies’ bottom lines in the process. Tickets for superstar acts have proven to have remarkably resistant to price increases. In 2023, the average price of a Taylor Swift concert ticket on Stubhub was nearly $1,100. Drake, Morgan Wallen and Beyonce prices averaged about $450, $390 and $324, respectively.
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Emphasis on superfans makes sense in an era of higher priced primary tickets that capture value that would otherwise go the secondary market. Artists are increasingly willing to charge more up front rather than lose money to re-sellers. Still, the typical secondary ticket is still almost twice the price of a primary ticket, Live Nation president and COO Joe Berchtold said during the company’s earnings call on Thursday. Currently, about 9% of Live Nation’s amphitheater business comes from premium offerings such as VIP boxes, added president and CEO Michael Rapino. He thinks that should be 30% to 35% instead. To get those numbers, Live Nation is upgrading the concert experience.
This year, Live Nation plans to spend $300 million of its $540 million of capital expenditures on revenue-generating projects. The top four projects — including Foro Sol in Mexico City and Northwell Health at Jones Beach on Long Island — will account for $150 million of the $300 million. The other half includes several projects in the tens of millions of dollars such as VIP clubs, viewing decks, rock boxes and new bar designs, said Berchtold. Those “tactical improvements,” as he called them, can produce a return on investment in the 40–50% range.
Putting more emphasis on revenue-generating enhancements will boost the bottom line in 2024. Following a stadium-heavy touring slate in 2023, Live Nation will put more tours in owned and operated amphitheaters and arenas that allow the company to capture fan spending on parking and hospitality. Stadium shows have higher average ticket prices, Rapino explained, but amphitheater and arena shows produce higher per-person spending. In other words, the venues are smaller but have better margins for the promoter. As a result, Live Nation expects higher adjusted operating income in the second and third quarters. “We’re going to have a fabulous year,” said Rapino.
Dynamic pricing — seats closer to the stage are priced far above seats further away — is just getting started outside of the United States and presents “a great growth opportunity” as it expands from Europe to South America and Australia, said Rapino. There’s room for growth in the United States, too, as dynamic pricing extends beyond the top artists and into amphitheaters and other concerts. “We still think that’s a multi-year opportunity to continue to grow our top line plus [our] bottom line,” he said.
The price-conscious fan isn’t forgotten as concerts increasingly cater to big spenders. Live Nation offers a lawn pass for amphitheaters called Lawnie Pass — the 2024 edition costs $239 each and offers lawn admission to multiple shows at select amphitheaters — and sold an unlimited pass for select clubs called Club Pass in 2022. And company executives have repeatedly stated that a benefit of dynamic pricing is that higher prices for in-demand seats allow for lower prices for seats further from the stage.
But from live music to music streaming, companies are searching for ways to beef up their margins. As such, expect the market to continue segmenting into higher-value and lower-value fans.