The Significance of Radius Clauses

As physical record sales have declined and streaming has become more popular than ever before, we are seeing a big spike in the live music industry. More specifically, we have seen a large increase in the amount of music festivals in the United States. Music festivals often contain radius clauses which limit where an artist can play outside of that given market. With the growing popularity of major music festivals, the impact large radius clauses are having on local promoters in major cities should be reviewed.

Ever since Woodstock, festivals have changed the way in which music is experienced. More recently, festivals have become something that is part of the American culture, as well as a phenomenon that has dominated the music industry. In 2014, there were more than 60 festivals in the United States alone. One of the many reasons that new music festivals are arising is due to the great potential for concert promoters to make large profits.

Research by Rian Bosse points out that while streaming sites like Spotify and illegal downloads have deflated album sales, they have helped drive the reemergence of festivals. Coachella, arguably the most profitable festival in the United States, is part of a rapid buildup in stationary music festivals across the country, which is reflective of the growth of the live music scene since the millennium. As Chris Parker reports in The Economics of Music Festivals: Who’s Getting Rich, Who’s Going Broke, from 1999 – 2009, album sales have dropped 50%, while concert sales have filled up 40% of that gap. In that same time period, live music revenues went from $1.5 billion to 4.6 billion. In 2015, the total revenue for live music and concerts was $4.3 billion compared to $7 billion in total music revenues, with more than half being digital online marketing comapnies.  As album sales have dropped, festivals have become one of the most profitable areas of the music business (Bain 2017).

Radius Clauses

With so much money potentially at stake for these giant music festivals, promoters are looking for ways to insure their investment with the artists that they are booking. Bain notes that a common component of major festival contracts is radius clauses. The radius clause puts restrictions on how long the artist must wait before returning to the same market and how many miles outside of that marketing they must go in order to play another show within that time frame. Some festivals are more extreme than others, saying artists are not even allowed to announce another shows until the festival is sold out. Tom Windish is quoted saying, “festivals want to be as exclusive as possible,” which is why Coachella puts a limited time ban on artists performing in Southern California (Walters 2012). Walters argues that as songs and albums become more freely available on the Internet, bands rely more heavily on money from touring.

However, the concept of the radius clause is not new. Knopper (2014) points out that since some of the major festivals like Lollapalooza stay on top of their radius clauses, agencies such as William Morris Endeavor have had to create an entirely new department devoted to making bands’ deals with festivals and managing their touring routes. Gwee (2016) addressed the fact that the radius clause for Lollapalooza for example, prohibits artists from performing 300 miles around Chicago, 6 months before the festival and 3 months after. These limitations can negatively impact smaller bands who are not getting paid as much and cannot afford to drive past the radius clause in order to perform. Despite this, many bands will not complain for fear of not being booked at major festivals.

These radius clauses are not set in stone as the language in contracts is often negotiable and can often be worked out; however, the larger the artist, the more restraining the clause may be. The proximity and the size of the show as well as the perceived effect that it will have on the festival’s overall outcome will ultimately determine if the radius clause can be broken or not.

Local Promoters

In reviewing the literature, there are numerous articles that discuss the potential effects of what these major music festivals could additionally have on local promoters. As Parker (2013) points out, this can turn into a real ‘David and Goliath’ situation. Independent promoters are going to have a hard time competing with festivals that are run by AEG and Live Nation, who can use their other festivals and club gigs as leverage. Similarly, Bain (2017) addresses the fact that the politics of radius clauses have evolved with the consolidation of music festivals, as Live Nation and AEG have purchased several of the small local promoters. She argues that these consolidations make it feasible to offer artists multiple festivals over the course of the touring season and make it impossible for other promoters to book them.

Enough local promoters have voiced their opinion on this potential artist monopoly, and in 2010, the attorney general’s office investigated Lollapalooza on antitrust grounds. R. Scott Hillers looks at how local music venues are affected by exclusive contracts. He argues that music venues face two possible competitive outcomes from the emergence of these festivals: firstly, the presence of music festivals will diminish the ability of smaller music firms to attract enough popular bands to fill their schedule, leading to closure or entry deterrence. Secondly, he argues that festivals create local demand for the bands and various genres of music involved, leading to a wider base of artists and genres that could be hired.

The appeal and impact of music festivals cannot be denied. Information from Nielsen Music reveals that 32 million people go to at least one music festival every year. In a case study that took place from June 17-28, 2016, by MusicWatch, Inc. on behalf of Eventbrite, it was found that nearly 40% of festival attendees said they went to more music festivals in 2016 compared to 2015, and over half plan to attend even more festivals in 2017. This case study also brings forth some very interesting statistics, including that one out of every five festival attendees spends more on music festival tickets in a year than the other four attendees combined.

These studies show that the demand for music festivals is healthy and flourishing. In order to meet the growing demand, there are even more festivals than ever before, which in turn makes them competitive with their radius clauses. Alas, as Danton (2016) points out, we may have reached our peak in the festival trend. He argues that music festivals no longer have distinct identities, and sites that were once genre specific now blur many, if not all of the genres together. Furthermore, he adds that we have already seen signs of the tipping point as numerous festivals have cancelled.

Closing Thoughts

Do major music festivals with extensive radius clauses have negative effects on local promoters in major cities?  In this question, there are two variables: the measured affects upon local concert promoters and the radius clause put in place by major festivals. In Part Two of this Article, which will be in the next edition of the Music Business Journal, the impact expanded radius clauses have on local concert promoters will be examined.  Are local venues closing and promoters being put out of business, or are they able to survive? What strategies or new practices are being put into place in order to maintain a competitive edge for both local concert promoters and festival promoters? What would be the effects if the radius clause was removed entirely? We will delve deeper into answering these questions in the next issue.

Works Cited

Bain, Katie. “How the Music Industry Uses a Pervasive Secret Weapon to Keep Bands From Freely Touring.” LA WEEKLY, April 18, 2017. http://www.laweekly.com/music/how-music-festival-promoters-use-radius-clauses-to-keep-bands-from-freely-touring-8140333.

Bosse, Rian. “Entertaining Business: The Impact Of Music Festivals.” The Donald W. Reynolds National Center for Business Journalism, June 29, 2015. http://businessjournalism.org/2015/06/entertaining-business-the-economic-impact-of-music-festivals/.

Danton, Eric. “Have We Reached Peak Festival.” PASTE, March 31, 2016. https://www.pastemagazine.com/articles/2016/03/have-we-reached-peak-festival.html.

“FOR MUSIC FANS, THE SUMMER IS ALL A STAGE.” Nielsen, April 14, 2015. http://www.nielsen.com/us/en/insights/news/2015/for-music-fans-the-summer-is-all-a-stage.html.

Gwee, Karen. “Music Festivals and the Pursuit of Exclusivity Promoters, Venues, and Talent Buyers on How Radius Clauses Really Work.” Consequence of Sound, September 16, 2016. https://consequenceofsound.net/2016/09/music-festivals-and-the-pursuit-of-exclusivity/.

“Hardcore Festies: The Driving Force Behind Today’s Growth in  Music Festivals.” Eventbrite (blog), June 17, 2016. https://www.eventbrite.com/blog/academy/hardcore-festies-most-valuable-fan-driving-todays-growth-in-music-festivals/.

Hiller, R. Scott. “Exclusive Dealing and Its Effects: The Impact of Large Music Festivals on Local Music Venues.” Review of Industrial Organization 45, no. 2 (September 2014): 153–75.

Knopper, Steve. “Attorney General Investigates Lollapalooza Local Promoters Struggle with ‘Radius Clauses’ Preventing Acts from Playing Competing Shows.” Rolling Stone, June 25, 2010. http://www.rollingstone.com/music/news/attorney-general-investigates-lollapalooza-20100625.

Knopper, Steve. “How Coachella, Bonnaroo and More Festivals Revamped the Music Industry.” Rolling Stone, May 13, 2014. http://www.rollingstone.com/music/news/how-coachella-bonnaroo-and-more-festivals-revamped-the-music-industry-20140513.

Parker, Chris. “The Economics of Music Festivals: Who’s Getting Rich, Who’s Going Broke?” Http://www.laweekly.com/music/the-economics-of-music-festivals-whos-getting-rich-whos-going-broke-4167927. LA WEEKLY, April 2013.

Walters, Amy. “Marooned In L.A. For A Week, Coachella Bands Make Do.” the record MUSIC NEWS FROM NPR, April 24, 2012. http://www.npr.org/sections/therecord/2012/04/26/151060151/marooned-in-l-a-for-a-week-coachella-bands-make-do.

By Jeff Apruzzses

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