In his latest Coffee Break Briefing, Malcolm Niekirk looked at the sort of issues that an insolvency professional may have to deal with when advising a distressed music festival. He discusses the realisable assets that may be found in a music festival, the dependencies and the insolvency options.
Music Festivals as businesses
Music festivals, for the most part, are single-event businesses; and there are generally three main roles for the key people involved in organising festivals.
- The curator – Sets the general atmosphere of the events, through their vision and contacts in the music business.
- The landowner – The site provider is likely to be critical.
- The project manager – Executes the curator’s vision by managing the project timetable and sourcing the key support services.
Insolvency professionals will need to establish which roles are undertaken by the festival owner and which are brought in externally.
What does a typical festival timeline look like?
An example of a simplified timeline might be:
- This summer’s festival takes place
- Site clearance
- Early-bird ticket sales
- Provisional bookings (this is likely to continue through the year)
- Ticket sales
- Contracting
- Site preparation
- Next summer’s festival
There are perhaps several trigger points at which the festival will have to commit to certain obligations, that will cost the festival money, regardless of whether it actually takes place. For example, at the contracting stage, the contractors may need a commitment from the festival by a certain date so that they can apply to the local authority in time for any notices required for traffic regulation orders (such as road closure).
When advising a festival, you will need to know what the trigger points are, how soon they are and whether any critical points have been missed; these factors will affect the options that you have.
Ticket sales
One potential issue that can arise with ticket sales is that, if the event does not go ahead the consumer will be entitled to a refund (due to their statutory protection).
This means that credit card companies and ticket agencies will want to protect themselves against the financial risk of cancellation.
Many ticket agencies do this by holding the money from ticket sales in a trust account, and releasing it only after the festival has ended.
So, as an insolvency professional advising a distressed festival, you will need to find out what the arrangements are for the ticket sales that have already taken place, what they are for future ticket sales and what the risks are.
What risks do festivals have as a business?
- The weather – Hope and pray for sunny skies!
- Disorganisation – there’s a lot to go wrong, project managers need to be competent
- Compliance – complying with licensing conditions is a must to ensure festivals take place; and on top of that, festivals may have social distancing regulations to adhere to.
- Reliance of third parties – single-event festivals are heavily dependent upon outside contractors for the essential services
- Over-supplied market – There is a lot of competition, a festival may not be able to sell enough tickets to be viable
What realisable assets do festivals have?
Revenue may come from:
- Ticket sales
- Bars
- Concessions (food, other traders)
- Parking
- Merchandise
- Sponsorships
- Bands (smaller bands may pay for the opportunity to feature at large festivals)
- ‘Glampers’
The buyer is likely to want:
- The licence (under the Licensing Act 2003)
- The curator’s contacts
- The project manager’s contacts, and planning records
- The landowner’s licence
- The festival’s name
- Cherry-picked contracts (e.g. with the ticket agency and other key suppliers)
- Any key people they may want to take on, either as employees or contractors
This is a long and comprehensive blog, please click here to read the full artice.