Survival of the Fittest
Festivals and Economy Crisis
by Jeroen Mourik
Some industries are hit harder than others during times of recession. Although we may not like it, it seems that most festivals and events are or soon will be affected.
Of course your vulnerability very much depends on how your festival is financed. Festivals that heavily rely on ticket sales need to ask themselves if their target group has less buying power as a result of the economic situation. If, for example, you are dependent on ticket sales by students, you might not need to worry, since students don’t seem to be hit by this recession.
Chances are that when you are heavily relying on sponsorship and have to renew your contracts for next year’s festival, that you may find yourself hitting closed doors. “Sponsors that cut their budgets are making a big mistake…”, says Sylvia Allen an internationally renowned sponsorship specialist in our industry.
“… there have been three different studies since 1979 that discuss how companies fare when they cut marketing during a downturn or recession. The three are McGraw-Hill (1979-1980), Bain and Co. (1990-1991) and McKinsey and Co. (2000-2001). All three discovered that companies and organizations that cut their marketing and sales budgets during an economic downturn came out of the recession with not only reduced market share but had to double their marketing efforts to come back to where they were! Conversely, companies that continued their marketing efforts came out of that economic climate with increased market share. This is really common sense but sometimes it needs to be reinforced through research.” Sylvia Allen continues.
Festivals that heavily rely on contributions from their government may also face budget cuts. I recently was informed about a city council in Belgium that scrapped a few festivals and events from their calendar, due to lack of funds. Yet another city council, in the USA, was considering budget cuts, despite the fact that they had plenty of allocated funds. They simple felt it was inappropriate to splash out as usual on their civic events.
Yet, if we remember that most festivals and public events are an important impulse to the (local) economy, you would expect the opposite. Whilst banks and important large companies are being saved by governments, many festivals generating millions of cash for their communities deserve the same treatment.
Most festivals face rising production costs. However, cutting budgets is challenging as the audiences are getting more and more demanding and competition is fierce.Even if you are still selling out and have your sponsorships in place, you might run into difficulty. All you need is an important supplier that is crippled by the recession and you have a problem.
Another example is the effect the economy has on currency exchange rates. Recently concert promoters in Australia had to cancel large tours and gigs by international artists, simply because the exchange rate between the buyer’s currency and the seller made it no longer viable.
Whatever your position, the recent dramatic changes might demand some adjustments in your strategic management. It is therefore advisable to revisit your event’s SWOT-analyses and anticipate different scenarios as well as perhaps cash in on the current situation.
