Crowd Funding Festivals: The Ultimate Ticket Up-Sell?

crowd funding festival

Festivals are very unique business use cases within the event industry. We look at an unusual alternative for financing production costs - Crowd funding. This new way of thinking about raising capital is directly applicable to all festivals of any size.

Why do we blog this? As a leading provider of ticketing software for venues and events, ThunderTix is privy to new and alternative ways to produce events that you may not be aware of. When we see an emerging trend or successful execution on a new idea, we relish the chance to participate in the conversion.

The Ultimate Ticket Up-Sell?

Recently, Alasdair Byers interviewed Graeme Merifield, owner of the Wychwood Festival, in Gloucestershire, UK to discuss the business of festivals. Specifically the production costs of a festival and the methods of raising capital.

For those not familiar with Wychwood it is a popular, family friendly music festival held every year in May since 2005. More than just live music concerts, Wychwood has overnight camping, food vendors, craft workshops, comedy, a children's literature tent, and a silent disco.

During the interview, Merifield reveals his plans to crowd fund the 2013 edition of the Wychwood Festival in a radical break from years past. The festival has traditionally sought production costs from the sources one would expect, banks and private investors. The practice of borrowing money to fund an event is still a very valid practice, but when confronted with increased borrowing costs or withering investor commitments, one must think outside the box. So-called crowd funding a festival is just about as out-of-the-box as one can get.

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Crowd funding, as defined by Wikipedia, is the collective effort of individuals who network and pool their resources, usually via the Internet, to support efforts initiated by other people or organizations.

When asked why crowd funding is being put into place, Merrifield said:

We looked at how we ran business, and the events we already do. We now have a bigger picture with new directors onboard and therefore we want to expand on the events we do...We still run Wychwood unheeded anyway. So it's not a case of needing to raise spare money its a case of trying to see if there's scope for expansion sooner rather than later. It really comes down to raising money for manpower. We are a very lean operation, and I'm the only full time person working.

Wychwood festival's approach to crowd funding is to offer the investment as part of attendance(!) in what may be considered the ultimate ticket up-sell. Multi-day festival tickets are often a hundred dollars or more, with that price being all inclusive and containing several amenities like camping spots or food and beverage.

Building on what festival attendees are already accustomed to, the investment made is basically a lifetime ticket good for all future editions of the music festival, with the possibility of a small return. In a brilliant description of this new ticket/micro-investment, Merrified calls it a "lifestyle product"

It's a lifestyle product and so far we've seen that a lot of the people buying the shares are the same people that buy earlybird tickets before a line-up is announced. As the business expands there will hopefully be a return but it's also an opportunity for investors to get cheap tickets for friends which helps us with ticket sales and if they bring other businesses or sponsorship the festival they can also get commission so it's really about finding the people who are most passionate about our event and what we do and other investors who like the idea of this kind of lifestyle.

Toward the end of the interview Byers cut to the chase and asked point blank "What advice would you give individuals looking to start a festival?" to which Merifield responded: Think very carefully, as it is a saturated market. Start small and manage your expectations. Many of the festivals that have gone wrong this year, have gone wrong from the costs. If you can manage risk, you'll progress.

The Emperor’s New Clothes

Crowd funding is not without its critics, and the news headlines from earlier this year support the need of a counterpoint being mentioned. Wychwood is the first to crowd fund a festival, but independent musicians, comedians and tens of thousands of entrepreneurs have been using crowd funding for quite some time - with various rates of success.

One of the most authoritative voices against crowd funding is music industry expert John Robb. In his 'The case against crowd-funding' Robb make some very strong points about the down sides to the new trend in raising money. His fervor starts

Trying to figure out why I’m not into them, here’s what I’ve come up with: The emperor’s new clothes...I’m convinced almost any artist with a moderate fan-base can crowd-fund just as easily, with less commitment, more control and a greater overall ROI (return on investment), just by having conversations with the right people. What is it about these formal frameworks that let the artist off the hook of asking personally for support, when it’s usually the exact same people who end up contributing anyway?

Robb is speaking of independent musicians in this context, but the doubt he casts may apply to crowd funding of festivals, or any event for that matter.

My biggest, most esoteric dissent speaks to broader issues about fundraising campaigns in general. These platforms rely on everyone turning a blind eye to a truth: that a very few devoted followers will fund almost everything. When artists draw resource from their audience, a very select core number of individual funders (relatively wealthy and truly devoted) will underwrite the whole ballgame. This is already true of the wider music industry: If we started analyzing the tiny contingency of people propping up our entire business, we’d be aghast.

For transparency, we must disclose a recent ThunderTix tweet that questioned some of the crowd funding results. On Twitter, we expressed concern about a rumor Amanda Palmer wasn't paying her musicians after raising over a million dollars using crowd funding. Our concern wasn't meant to be disparaging, it was to find out more information within our social graph of ticket industry experts. But before the conversation even got started, Palmer's husband, writer Neil Gaiman, gave us a definitive answer:

Crowd funding is still a brand new phenomenon and the bugs are still being worked out. Critics and supporters alike acknowledge it is still far too early to say if it is a practical method for underwriting any endeavor.

As it is so new, the move for festivals and one-time events seeking production cost underwriting may be to not go "all in" like the musicians cited by Robb, but to consider a partial use of crowd funding as part of a ticket package up-sell.

Double Down on Diversity

Wychwood calls their top-tier ticket purchase, that functions as a financial investment in the festival business, a "lifestyle product". Any festival already offering a tiered ticket practice could, in theory, insert crowd funding at the very, very top tier, above all others. A festival could call it a "ticket for life" like Graeme Merifield, or the popular nomenclatures used by non-profits may be re-purposed to convey how special this new dynamic is. An annual festival offering a ticket package that touts the buyer as "Friend of the Festivals Forever" or "Platinum Participant" may be a good way to test the waters of crowd funding. Of course all the traditional underwriting from banks can still be utilized, with the crowd funding being just one more arrow in the quiver.

The business of festivals will continue to be a challenge, crowd funding will not solve everything all at once. Diversifying costs amortizing them over longer and longer time lines, substituting in-house services with third parties are still areas that need constant attention.

One aspect of the business of festivals, ticketing software, is not a challenge - as long as you are using ThunderTix. Our technology istailor made for festivals and one-time events, and we do not charge any per-ticket fees of our own. We are confident that any festival using ThunderTix will see immediate short term benefits as well as a long term reduction in costs and improved bottom line.

What do you think? Can festivals make use of crowd funding just like Amanda Palmer? Or should big events stick to what they already know and ignore this new trend? Let us know in the comments below!