Fyre Was Bad. For the Concert Industry, This One Could Be Worse.

2017-06-01 18:40:02

 

Fyre Was Bad. For the Concert Industry, This One Could Be Worse.

For the concert industry, the disastrous failure of the Fyre Festival in the Bahamas was an outlier — a sad spectacle, but an isolated one.

But the collapse of another event, the Pemberton Music Festival in the mountains of Canada, has put the business on edge, with veteran talent agents and promoters warning that it could have wide implications for the booming festival market.

Pemberton, planned for July 13 to 16 with acts including Chance the Rapper, Muse and A Tribe Called Quest, was abruptly canceled on May 18, when the two companies behind it declared bankruptcy. In a break from standard practice, ticket holders were not offered refunds, but were instead told that they could “file a proof of claim form as an unsecured creditor.”

Music executives are now aghast over the failure to provide refunds and the maneuvering of investors in the weeks before the festival fell apart. Marc Geiger, the head of music at William Morris Endeavor and an outspoken voice in the business, called Pemberton’s collapse “a fraud and a scam” that could have a domino effect on the industry, hurting smaller promoters the most.

“This could be the symbolic end for independently promoted festivals,” he said.

Pemberton, held in a picturesque spot about 100 miles north of Vancouver, British Columbia, was a typical entry into the frothy festival business. It was revived in 2014 by Huka Entertainment, a well-known independent promoter, after an earlier iteration failed. According to bankruptcy filings, the festival lost money for three years, and sold 18,000 tickets in 2017, down from 38,000 last year.

After the cancellation, fans took to social media to vent and mock using the hashtag #PembyFest. The complaints were not quite the supernova that followed the dissolution of the Fyre Festival, when planeloads of millennials arrived to find a ramshackle site that was far from the luxurious beach paradise they had been sold.

But the collapse of both Fyre and Pemberton has once again focused the industry’s attention on what has become a perennial question: Has the ever-expanding festival market hit its peak? High-profile failures like Pemberton and Fyre — which is now facing numerous lawsuits from ticket buyers and others — could erode consumer confidence, Mr. Geiger said.

Then there is simply natural competition, as more festivals are added to the calendar.

“Well-produced and curated events at a site the public loves will continue to do well,” said Gary Bongiovanni, the editor of the trade publication Pollstar. “But too many events mean the best will survive and the weak will wither.”

World-famous events like Coachella began as risky endeavors undertaken by small promoters. If the credit markets for festivals grow too tight, there may be no room for such innovation, said Sam Hunt, an agent with Paradigm Talent Agency whose artists Major Lazer and Run the Jewels had both been booked for Pemberton.

“This industry thrives on a variety of creative individuals doing things in new and creative ways,” Mr. Hunt said. “If they become more constrained, everybody loses.”

Mr. Geiger reserves a special ire for Pemberton’s investors, among them several wealthy Canadians with no background in the music business. As secured creditors, they now stand a better chance of getting their money back than the fans who paid $275 a ticket. One investor, Amanda Girling, is also chief executive of a company that owns the land on which the festival was held, and which is for sale for $12.5 million.

In filings, the two entities that controlled the festival — Pemberton Music Festival Limited Partnership and 1115666 B.C. Ltd. — declared $5 million in assets and $12.5 million in liabilities, with ticket holders listed as having an unsecured claim of $6 million. The first meeting of creditors is scheduled for June 6 in Vancouver.

Further muddying the Pemberton situation are questions of control, with Mr. Geiger and others accusing the organizers of swapping shell companies for the investors’ benefit. In April, the investors created 1115666 B.C. and made it general partner of Pemberton Music Festival Limited Partnership, which controlled the festival.

William E. J. Skelly, a lawyer for the investors, said in an email that the new company was created to give the directors “greater management control and transparency” over the event’s finances.

Less than a month later, the investors resigned as directors of the newly formed company and, the very next day, declared both companies bankrupt.

“The fact that somebody decided to stick it to the consumer, not deliver any product, and say they are protected by bankruptcy, is hideous,” Mr. Geiger said.

Funds from ticket sales are often held by ticketing companies in case an event is canceled, but smaller promoters may depend on advances to pay expenses. Pemberton’s ticketing company, Ticketfly, paid the festival operators each week, Mr. Skelly said. Ticketfly declined to comment.

Mr. Geiger likened this process to the easy availability of credit before the housing crisis, and said the fallout from Pemberton meant that the financing arrangements behind festivals will most likely be tightened. Ticketing companies will be reluctant to pay advances, and artists will demand more money upfront, he said. If that happens, the only companies that could meet the multimillion-dollar capital requirements to stage a large event would be corporate players like Live Nation and AEG.

“It may be an advantage for the bigger guys,” said Peter Shapiro, an independent promoter behind Brooklyn Bowl and the Lockn’ festival in Virginia. “But for the new guys starting out, it’s going to be a much more difficult environment.”

Some longtime players in the concert industry see these developments as a consequence of the growing corporatization of the business. That process began in the 1990s and has gone through another wave lately, with small promoters bought out by Live Nation and AEG. In this landscape, independents are finding it harder and harder to compete.

“What we’re witnessing now is a result of what’s been going on now for more than 10 years with the consolidation of the music industry,” said John Scher, a veteran promoter in New York and New Jersey.

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