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Is The Live Nation Merch Cut Elimination Too Good To Be True?

From Bad Omens frontman Noah Sebastian to DIY bands all over the country, many have been vocal about venues taking merch cuts. Fans have also expressed this displeasure as they want their hard-earned dollars to go directly to the artist. In the past week, Live Nation has announced it will eliminate merch cuts, but is this a "too good to be true" situation? Follow below as we take a deep dive to look into what this means and the potential fallout from these actions. You can read the whole article about the program here.

"On The Road Again" Live Nation Banner, Courtesy of Live Nation

First, let's take a look at how many live music venues Live Nation owns. According to the company's 2022 Annual Report, Live Nation owns 338 venues globally, with 238 of those in North America (US & Canada). Many Live Nation venues in the US operate under the House of Blues, The Fillmore, or Brooklyn Bowl names. Live Nation is in the business of entertainment so it's not surprising that they generated $13.5 BILLION dollars in 2022 on concerts alone, which is more than 80% of total revenue for the company. Digging further into the 2022 Annual Report, this is broken down into three categories: Promotor, Venue Operator, and Festival Promotor. Surprisingly, there is zero mention of merch cuts as a part of revenue generation for the company.

There are eight different categories of venues Live Nation operates under, where theater sized venues make up the most of their portfolio at 32%:

  1. Stadiums- 30,000+ seats

  2. Amphitheaters- outdoor venues with 5,000-30,000 seats

  3. Arenas- indoor venues with 5,000-20,000 seats

  4. Theaters- 1,000-6,500 seats

  5. Clubs- >1,000 seats, typically full fixed seating

  6. Restaurants & Music Halls- 1,000-2,000 guests (i.e. House of Blues & Brooklyn Bowl)

  7. Festival Sites- 10,000-100,000 fans, single or multi-day concert events

  8. Other Venues- venues not typically used for live music

So what does this mean in terms of merch cuts. Are all 338 venues eliminating merch cuts indefinitely? Sadly, that is not the case. A closer look into the On The Road Again program created with Willie Nelson shows that only club-level venues will receive the $1,500 incentive and zero merch cuts, or what they refer to as merchandise selling fees. The $1,500 is for all headlining and support artists, and is per show, as a way to help cover gas and other traveling expenses. This is in addition to their nightly performance compensation. Also. an important item to note is that it's just until the end of the year.

While this all looks amazing on the surface, there have been questions about if it actually is. It only includes 77 venues in North America, making up roughly 32% of total venues in this area. It spans roughly 24 states and Canada with the majority of the venues located in California (14 venues), Texas (eight venues), Canada (seven venues), and Pennsylvania (five venues). Furthermore, the majority of tours through the end of the year have been booked for months, limiting the scope this program could reach.

Unsurprisingly, X (formerly Twitter) has been abuzz with what this actually means for artists now and in the future. Some of this chatter has been about the impact it has on independent promotors and/or venues. Ryan Joseph Kirby, lead vocalist of Fit For A King, posted that bands don't care about cards. They just don't want merch cuts, period. He also stated that there are many independent promotors who have never taken a merch cut to begin with while some do and it's not as cut-and-dry as we imagine.

Another user re-posted about Noah Kahan tickets being over $700 for two tickets, and that's how bands are getting the $1,500 gas cards. For reference, Live Nation owns Ticketmaster, who is notorious for charging astronomical ticket prices under the guise of "platinum" pricing as well as fees that are almost 1/2 of what the total ticket price is. We'll leave that debate for another day, though.

There's also been backlash from the National Independent Venue Association (NIVA), which states this initiative will hurt independent venues by squeezing them out of the market. They've even issued a statement against it that can be read here. To be clear, there are thousands of live entertainment venues across the US and Canada, so 77 seems like a drop in the bucket to this. I think NIVA is missing the entire point in that artists don't want merch cuts from ANY venue, regardless of the size.

Some venues charge up to 25% of total merch sales, which is often how bands make the majority of their money on the road. And for what? A tiny spot in the venue where, if they're lucky, a table will be provided. The bands load in, set up, and load up themselves with zero assistance from venue staff. In addition, bands are bringing people into the venue that will likely purchase drinks and, if available, food. I would wager venues wouldn't take too kindly that artists are requiring a percentage of those sales. I mean, it seems like fair trade to me.

Based on my perusal of posts, the money being paid out to artists is $750 in cash, along with three $250 Shell gas cards. I certainly wouldn't turn it down, but I do wonder: WHY is just Shell? Is there benefit to Live Nation by using that company that won't hurt their bottom line but make it appear to be a good deal?

One thing I do agree with the NIVA on is that it's a calculated move on Live Nation's part. With a lion's share portion of market share in the industry, they can certainly afford a publicity stunt like this. In addition, I'll be interested to see:

  1. how they account of these costs on their financials (operating expenses, "donations", etc.) and

  2. what impact it'll have to their bottom line.

I'm hoping that there's a bit more transparency in the 2023 shareholders report on how much revenue merch cuts generated the company as well as the overall expense of the program.

Personally, I would prefer to see a completely end to merch cuts across all venues and all companies. If ending merch cuts puts you out of business, maybe you should rethink your business plan because, in mine and many others' opinion, merch cuts suck and this money belongs to the artists. Only time will tell if this indicates the beginning of the end for this practice, or if we'll all continue to scream into the void about how evil they are.

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