Live entertainment: a profitable but risky business for a musician

Indeed, Taylor Swift criticised Apple for its initial decision to not pay musicians during the trial period of their new streaming service – a definite sign of the times.

That same week, we’ve also seen the world’s biggest and most iconic festival take place – Glastonbury. In the UK alone, independent music festivals are now worth an estimated £1billion to the economy, something bands and musicians have been keen to capitalise on for income.

As live music and festivals continue to grow in popularity and profitability, so too does the amount of money being invested. However, as with any live event, there is always the possibility that things may not go to plan. The most recent example being the Foo Fighters regretfully announcing that they were cancelling as Glastonbury’s headline act, due to Dave Grohl’s broken leg.

This is by no means a solitary incident; there are hundreds of reasons why bands and artists may have to cancel a worldwide tour or live performance. Sore throats, hurricanes, ash clouds, civil unrest and terrorist threats have all been to blame in the past. So, when the unexpected happens, who needs to be covered, what do they need to be insured for and how do you calculate the level of protection needed?

The right type of insurance

Not everyone involved in the festival or tour will take out their own policies but those most likely to are the band, manager, promoter, agent, merchandising companies, the venue and even travel organisers. Each of these key players will have invested in the performance or sold tickets ahead of it taking place. As with any insurance policy, the principle is to put the policyholder in the same position that they would have been in if the loss had not occurred.

In order to mitigate the repercussions of last-minute cancellations, they need to protect themselves with cancellation and non-appearance insurance. It is a highly specialised area because it’s so difficult to legislate and such an important part of touring these days.

Therefore, all policies are taken on a case-by-case basis because there is so much money riding on the events and no two artists or events are ever the same. It’s also sometimes not possible to insure for the total gross revenue of a major global tour as there is limited capacity depending on the risk – the biggest grossing tour of all time grossed over $700m.

The risk factors

To provide the right cover we first need to identify the risk, which is more challenging for some artists than others. Although it is not an exact science, there are certain factors that are critical to determining the level of risk and insurability.

For example, we will look at medical records and the artist’s cancellation and non-appearance history, as well as evaluating the physical risks of the environment they will be performing in and the political tensions of the country. These elements could be reflected in the cost of the insurance or certain terms will need to be met before progressing.

It’s amazing what you find by closely examining such factors. By looking at the loss history of a band we worked with and comparing it against the set they were playing, we were able to identify that one particular song was putting a huge strain on the singer’s vocal cords causing inflammation, which led to laryngitis. In turn, this meant that the band had to cancel every other performance. Once we had highlighted the correlation between the two factors, they simply changed the set and there was no longer an issue, meaning tickets didn’t have to be refunded and the band, fans and all key industry players were kept happy.

There is now so much money riding on global tours and music festivals that the risks are too big for those operating in the live entertainment industry to ignore. We’ve worked with the most expensive tours in the world and last year we arranged insurance for 14 of the top 20 highest-grossing tours.

Despite the potential for so many elements to swerve off course, whilst insurance can’t change what’s happened, it can help to ease the financial outcome when the unexpected does happen. As a famous promoter once remarked, “I’ve got two balls and neither of them are crystal….”

John Silcock is the CEO of entertainment insurance provider Robertson Taylor.

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