The live entertainment industry is broad and encompasses (i)the various content providers , (ii) event promoters, who can be promoters of shows, (iii) the operators of venues and parking service, (iv) the operators of food, beverages and promotional products and (v) operators of the marketing of tickets to the final audience.
The final audience is represented by people who may have different socio-demographic characteristics and preferences, depending on the type of content offered.
The entertainment industry promotes a wide variety of events, and the main segments of live entertainment are musical, theatrical, art exhibitions and sporting events.
The Live Entertainment Industry Structure
Content providers can be subdivided into three components: (i) artist managers; (ii) the agents who represent and negotiate on behalf of the artists, charging the artists commissions on the various revenues originated and (iii) the artists themselves. Event promoters can perform different functions each with specific value drivers:
Promotion of Events: responsible for the organization and promotion of the event, have as driver of value the result of the sale of tickets against costs of promotion and hiring of the artist;
Ticketing operation: responsible for the administration of ticket sales that may include internet marketing, points of sale, ticket offices, among others. The main sources of revenue of this activity are convenience and delivery fees, as well as commissions charged on the price of tickets;
Commercialization of food, beverages and merchandising: generates value for the live entertainment industry through the commercialization of food, beverage and merchandising services during the events;
V-operation and parking services: operationalization of venues, including lighting, sound and video systems. Economic result of the activity is a function of rental and parking revenues deducted from associated costs and expenses;
Sponsorship Sale: exposure of the brand of partners in the entire value chain of the live entertainment sector and may have one or more sponsors in one or more links of the chain. Currently there are many companies that associate their brands with musical, sporting, cultural and, more recently, socio-environmental responsibility events. The result of this activity is extremely important for the feasibility of a given event, and sometimes the decision to hire an event is determined by the possibility of association with a sponsor. The sponsorship recipe can be present in the promotion of events, in the marketing of food, beverages and merchandising and in the operation of venues and parking.
Streaming via streaming platforms or television channels: the popularization of streaming platforms, as well as the increased offer of live music festivals enable the transmission of content through specialized platforms or television channels, which pay for broadcast rights.
The entertainment market in general is quite expressive and has been showing high growth rates since 2000. According to PwC data, in 2021, total global revenue from the media and entertainment market reached about $2.34 trillion, with a CAGR forecast for 2026 of 4.6% compared to 2021, with global live music revenue estimated to exceed pre-pandemic levels in 2024. The forecast for 2026 is that it will reach $2.93 trillion of total global revenue.
Entertainment Market Dynamics
The dynamics of the entertainment market in South America is different from the dynamics of developed countries. In general, the largest companies in developed markets, such as Live Nation and AEG Live have an economic scale that allows them to trade content and produce it without the need for partnerships with other promoters. In developing markets, both local and international content providers do not have the scale and/or physical structure to promote their own content and thus seek to form partnerships with local event promoters, who have proven execution capacity and financial capacity, in order to enable quality events with a viable economic scale.
These partnerships allow content providers to access markets with high return potential and local event promoters to gain access to quality content that, in general, has pent-up demand in their markets.
Most entertainment companies operate venues in large populous cities, being able to attract a large volume of spectators. Public investment can also influence the location of these companies, such as cities that want to improve the knowledge of the arts and cultural life of their population can financially encourage the creation or change of lease of a company.
In a report published by IBISWorld (“Promoters of Performing Arts, Sports and Similar Events with Facilities in the US”), it is estimated that most of the users in the area of live entertainment are families, and in the United States this participation corresponds to 90% and most have a computer with internet access, channel representing two-thirds of ticket sales in that country. Consumers vary considerably in terms of age and characteristics, as the industry promotes a wide variety of events. For example, consumers attending sports events are generally male and younger than consumers who attend art-related events.
Main Segments of the Live Entertainment Industry
The live entertainment sector is mainly formed by the following segments: (i) musical performances; (ii) family and theatrical shows; and (iii) art exhibitions.
The world market of live entertainment has significant numbers, and in2019, considering only the 16 largest promoters of events, were sold about 95 million tickets, according to a ranking published by Pollstar. The years 2020 and 2021, due to the impacts caused by the restrictions imposed by governments on the promotion of events to combat the effects of the COVID-19 pandemic, were atypical years for the sector.
Pollstar Ranking – World’s top promoters by number of tickets sold (millions) in 2019
The musical show segment includes its promotion and/or production. Often, to start live shows or tours, artists directly hire agents to represent them for a certain period. We contactpromoters, who will hire him or directly with the artist to promote the shows. Artistas are paid by their people in a number of ways and may include in the payment methods guarantees of fixed amounts and / or a percentage of ticket sales, or even a percentage of profits. In addition, promoters can reimburse rtistasfor production expenses such as sound and lighting.
In recent years, there has been a significant change in the way musical artists get their revenues. The main sources of revenue in the music industry are touring, media sales and royalties.
There is a trend of increased revenue via touring at the expense of revenue via music marketing. In 2004, total revenue from selling music in media represented about five times the total revenue from touring, and in 2009, this ratio dropped to less than twice. In 2011, the tours came to represent a higher volume of revenue, with approximately 10% more than the sale of recorded songs, which increased to 31% in 2011and currently, the tours represent a revenue 45% higher than that of recorded music, since artists were pressured to increase the number of live performances, in order to compensate for the decrease in revenues from the sale of songs. This trend is related to the greater ease of obtaining and listening to the songs of your favorite artists through the internet and streaming, for example.
The process of revenue growth in physical media began with the emergence of the first sharing platforms, especially Napster, and intensified with the search of new generations for increasingly intense experiences at the expense of the purchase of material goods. The chart below shows the evolution of the United States market from 1950 to 2015, clearly demonstrating the trend of transition from physical to live and digital media:
Evolution of the United States music industry by revenue type (1950-2021)
Source: RIAA (Recording Industry Association of America) and Pollstar
In 2019, for the group of artists such as KISS, The Rolling Stones, Justin Timberlake, Elton John and Billy Joel, the revenue from touring accounted for most of its total revenue between touring and selling albums in the U.S., as illustrated in the chart below:
Billboard Ranking – Breakdown of artists’ earnings in the U.S. in 2019
The segment of musical shows has grown in Brazil in recent years. Companies invest in alternative ways to reach the consumer, such as the brand experience, where an interaction is made between a brand and the public, creating a bond and customer loyalty. For this reason, companies have an interest in continually investing in musical shows as a form of brand marketing.
Main South America venues:
|São Paulo||UnimedHall, Espaço das Américas, Tom Brasil, Cine Joia, Vila Country e Audio|
|Rio de Janeiro||KM de Vantagens Hall, Circo Voador, Jeunesse Arena, Vivo Rio e Fundição Progresso|
|Brasília||Centro de Convenções Ulysses Guimarães e Ginasio Nilson Nelson|
|Curitiba||Live Curitiba, Teatro Positivo e Teatro Guaira|
|Salvador||Bahia Café Hall, Museu do Ritmo e Concha Acústica|
|Belo Horizonte||ExpoMinas, Km de Vantagens Hall and Mega Space|
|Recife||Classic Hall, Baile Perfumado e Centro de Convenções de Pernambuco|
|Porto Alegre||Bar Opinião, Auditorio Araujo Vianna, Bourbon Shopping Country e Pepsi On Stage|
|Buenos Aires||Teatro Opera, Luna Park, Estadio Obras Sanitarias, Teatro Lola Menbrives e Gran Rex|
|Santiago||Movistar Arena e Teatro Caupolican|
Theatre Shows and Family Entertainment
Theatrical performances consist of productions of existing musicals, dramatic works, and the development of new works. Music producers first acquire the rights to produce them for about three to three years, and must pay royalties for their use. The producers are reimbursed for the sale of tickets, hiring of staff, disclosure and payment of a security to the producers, which will be reimbursed along with the expenses incurred with the sale of tickets. Since musicals require large investments of time and money compared to dramatic productions, they are generally more inclined to become touring.
In North America, revenue stemming from Broadway productions has shown average annual growth of about 6% over the past ten years, as shown in the chart below:
Total Revenue – Broadway Productions in North America (US$ million)
CAGR 09-19: 6.01%
Source: Broadway League
Due to the impacts of the COVID-19 pandemic in the 2019-20, 2020-21 and 2021-22 seasons, data comparability is impaired.
In Brazil, musical productions are mostly international and target the family. The theatrical show segment has gained momentum with these great foreign productions that are brought to the country, such as Wicked, Change of Habit, The Lion King, Les Misérables, The Phantom of the Opera, Beauty and the Beast, Miss Saigon, Chicago, The Addams Family and Mamma Mia!.
Due to the expansion of this segment, the number of theater houses has increased, and existing ones have undergone renovations to accommodate international shows and to serve an audience that has become increasingly demanding.
Main Theaters in South America:
|São Paulo||Teatro Renault, Teatro Cetip, Teatro Net, Teatro Municipal de São Paulo, Teatro Alfa, Teatro Procópio Ferreira, Teatro Sérgio Cardoso, Teatro Bradesco, Teatro FAAP, Teatro da Universidade Católica de São Paulo (TUCA), Teatro das Artes e Teatro Shopping Frei Caneca|
|Rio de Janeiro||Teatro Carlos Gomes, Teatro do Leblon, Teatro Oi Casagrande, Cidade das Artes – Grande Sala, Teatro Municipal do Rio de Janeiro, Teatro Vanucci, Teatro Dos Quatro e Teatro Clara Nunes|
|Brasília||Teatro Nacional Cláudio Santoro|
|Curitiba||Teatro Guairá, Ópera de Arame, Teatro do Sesc, Teatro HSBC e Teatro Positivo|
|Salvador||Teatro Castro Alves|
|Belo Horizonte||Minascentro e Palácio das Artes|
|Porto Alegre||Auditório Araújo Vianna, Teatro Sesi – Porto Alegre e Teatro do Bourbon Country|
|Buenos Aires||Teatro Opera, Teatro Maipo, Teatro Nacional Cervantes, Teatro Colon, Gran Rex, Teatro Coliseo|
(i) Industry Overview in South America and Growth Opportunities
In 2020, in the South American market, considering the countries we have presence: Brazil, Argentina and Chile, the number of inhabitants totaled 276.9 million with a total GDP of US$ 2.08 trillion, representing a great potential for the entertainment industry.
In South America, the entertainment market in general has shown even stronger growth than the average growth of other countries. In Brazil, between 2017 and PwC’s projection (19th Global Entertainment and Media Survey 2018-2022) for 2022, total revenue from dollar media and entertainmentis 5.3%, from US$ 49 billion in 2017 to US$ 53 billion in 2022 . In Argentina, total revenue from media and entertainment is projected at US$11.8 billion in 2021 (CAGR 2016-2021 = 5.9%).
(ii) Conditions of Competition in the markets
Competitive Scenario and Barriers to Entry into the Entertainment Sector
The South American live entertainment market is quite fragmented in relation to the number of competitors in each activity/phase of the event, but relatively consolidated from the point of view of companies that have mastery of quality content and main venues. For example, we believe that there is no other company with a fully integrated, verticalized business model and the volume of quality content we have. Thus, each stage of the artistic/cultural show (promotion, production, ticket sales management, venues exploration, food and beverage sales, etc.) encompasses different niche competitors in each country.