economy
According to Live Nation CEO Michael Rapino during the company’s earnings call on Thursday (May 1), every chief executive is being asked the same question this earnings season: Are you feeling a consumer pullback?
It’s a reasonable query given the worsening state of the economy. U.S. gross domestic product decreased at an annual rate of 0.3%, the U.S. Bureau of Economic Analysis announced on Tuesday (April 30). And on Thursday, news broke that U.S. joblessness claims for the week ended April 26 surged beyond expectations. Earlier in April, the University of Michigan reported that its consumer sentiment score fell to 57.0 in March, down from 71.8 in November. That puts the closely watched measure on par with scores during the 2009 fallout of the U.S. housing crisis and in August 2011, as consumers feared a stalled recovery.
But on Friday (May 2), a reprieve from the bad news arrived in the form of a better-than-expected jobs report. And judging from comments during this week’s earnings calls, many music companies remain confident that their businesses will weather whatever storms develop in 2025.
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“We haven’t felt [a pullback] at all yet,” Rapino said. Whether it’s a festival on-sale, a new tour or a standalone concert, Live Nation has seen “complete sell-through” and “strong demand” that surpasses 2024’s record numbers, he added: “So, we haven’t seen a consumer pullback in any genre, club, theater, stadium [or] amphitheater.”
To see how Live Nation fared during the last recession, you’d have to go back to 2009. The U.S. housing crisis had shaken the economy and GDP shrank 2.0% that year, but Live Nation’s revenue increased 2.3%. Then, as the economy rebounded in 2010, the company’s revenue jumped 21.1% in 2011.
Of course, live music took a nosedive during the pandemic, but the drop-off in 2020 and 2021 was caused by a decrease in the supply of concerts, not a dip in demand for live music. When artists returned to touring, fans showed up in record numbers.
Some parts of the economy can be trusted to stumble during a downturn. Case in point: U.S. advertising revenue fell 14.6% in 2009 and dipped 5.4% in 2020. Brands are quick to cut their ad spending when they anticipate a pending sales decline. For example, car dealerships frequently advertise on TV and radio, but cut back as auto sales fell 17.6% in 2009 and 20.3% in 2020.
A decline in advertising is harmful to some parts of the music business. Radio companies have struggled with weak ad revenues in recent years, and their stock prices have taken a beating. Through Friday, iHeartMedia’s stock price is down 50% year to date, and Cumulus Media, which de-listed from the Nasdaq today, has lost 82%.
But music is a “counter-cyclical” business, meaning it doesn’t follow larger economic trends, and the popularity of subscriptions has helped insulate the music industry from economic woes. It’s widely believed that consumers simply won’t part with their favorite music service. In fact, $11.99 for a month from Spotify or Apple Music, although a few dollars higher than two years ago, is considered by top music executives to be underpriced.
During Spotify’s earnings call on Tuesday, CEO Daniel Ek said “engagement remains high, retention is strong” and the ad-supported free tier gives users a way to remain at Spotify “even when things feel more uncertain” — not that Ek is uncertain about the company’s future. “I don’t see anything in our business right now that gives me any pause for concern,” he said flatly.
Universal Music Group (UMG) is on the same page as Ek. CEO Lucian Grainge attempted to ease investors’ concerns by explaining that he has witnessed music weather numerous recessions. “Music has always proven to be incredibly resilient,” he said during an earnings call on Tuesday. “It’s low cost, high engagement and obviously a unique form of entertainment.” In addition, added chief digital officer Michael Nash, UMG’s licensing agreements include minimum guarantees that provide “very significant protection against digital revenue downside risk this year.”
There’s always a chance that unforeseen events or a particular confluence of factors will ruin music’s winning streak. With subscription prices rising, a possible “superfan” subscription tier on the horizon, ticketing prices not getting any cheaper and tariffs increasing the costs of music merchandise, consumers may reach a breaking point. MIDiA Research’s Mark Mulligan argued this week that superfans are being “pushed to the limit” and concertgoers don’t have an unlimited ability to absorb higher ticket prices.
So far, however, the evidence suggests music fans’ spending is continuing unabated. Live Nation says its various metrics — ticket sales, deferred revenue for future concerts — point to another “historic” year in 2025. Rapino added that the company’s clubs and theaters haven’t reported a decrease in on-site spending. Part of that could be that Live Nation carefully curates an array of food and beverage options that maximize per-head revenue. But a more likely explanation is that people need entertainment now more than ever.
The Red Rocks Amphitheater in Morrison, Colorado has long been a must-play venue for touring artists and a top destination for music fans thanks to its natural beauty and geologically driven acoustics. Now, a recent economic impact report commissioned by Denver Arts and Venues [DAV], which owns and operates Red Rocks on behalf of the city of Denver, quantifies the financial power of the red sandstone venue first opened in 1941, estimating that the 9,525-capacity amphitheater is responsible for generating $717 million annually in the Denver metro area and the state of Colorado.
The first-ever economic impact study of Red Rocks Amphitheatre’s role in local economies, by BBC Research & Consulting (BBC), evaluated data from the 2022 Red Rocks concert season in hopes of quantifying the ripple effects of dollars spent in the region by fans, tourists and crews who bring shows to the 83-year-old venue’s iconic stage.
“Red Rocks is the most amazing concert venue in the world,” said Denver Mayor Mike Johnston in a statement. “This study proves what Denverites have known for years: Red Rocks, and Denver’s creative community, are powerful economic and cultural forces for our city.”
The report found that Red Rocks was responsible for 7,300 full- and part-time jobs last year, generating $216 million in payroll in the Denver metro area and an additional $6 million statewide. Last year, Red Rocks clocked in $186 million in ticket sales from an attendance of 1,747,465 at 217 ticketed events — an increase of nearly 300% from 75 events just a decade ago.
“From performers and stagehands to box office staff and maintenance crews, 1.5 million Red Rocks fans means a big boost for the local concert industry,” said Tad Bowman, venue manager at Red Rocks. “There will be 400 people working on-site each show, but there are literally thousands of jobs across the region supported by what happens at Red Rocks.”
The report found that 30 percent of fans, on an average night, travel to Red Rocks from from outside the Denver Metro Area, with the top visitor markets being Chicago, New York/New Jersey, Los Angeles, Dallas-Ft. Worth, Minneapolis-St. Paul and San Francisco.
Last year, Red Rocks recorded almost $40 million in gross concessions revenue and is the top on-premise location in the United States for sales of White Claw Hard. Overall, the venue sells more than 1 million malted beverages annually, including more than 400,000 seltzers.
“Every Coke or Coors sold has a long line of people who’ve gotten that beverage into a fan’s hands,” said Brian Kitts, who oversees Red Rocks’ corporate partnerships and marketing.
For its part, the city-owned venue spends $8.5 million on annual maintenance and notes that money spent at Red Rocks supports government and city arts and cultural programs, including $6 million in tax revenue to the city of Denver as well as money spent to enhance venue security and fan experience.
“The study makes it clear that regular re-investment back into the venues managed by DAV are crucial in ensuring Red Rocks is and continues to be a destination for visitors and an important piece of Colorado’s economic puzzle for years to come,” added Bowman.
More information, including the full study, can be found at RedRocksOnline.com/Impact.
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