Who Says the Music Industry Is Kaput?

It was the fall of 2001, and Jonathan Mayers was stuck. He had built Superfly Presents—the New Orleans-based concert promotion company he ran with three friends—into a local success, staging some 120 shows a year and earning around $1 million. However, Mayers and his partners—Rick Farman, Richard Goodstone, and Kerry Black—were tired of the nightly grind, the razor-thin profit margins, and the battle with industry colossus Clear Channel Communications. They realized there was only so much money to be made staging rock and jazz shows for a few hundred people a night. "We saw there was a ceiling to what we were doing," Mayers says. "We had to take a risk."

That decision led to the founding of the Bonnaroo Music and Arts Festival, a 100-band jamboree that has been the top-grossing music festival in North America for eight years running. This year, from June 10-13, 75,000 fans will make the pilgrimage to a 700-acre farm an hour southeast of Nashville for what observers ranging from Rolling Stone to the concert chronicler Pollstar have called the best music festival in the country.

As live concerts have supplanted album sales as the music industry's chief moneymaker, Bonnaroo (which means "good times" in Creole) has flourished. Ticket prices range from $250 for a general-admission pass to $18,500 for a luxury package that includes an air-conditioned bus, on-stage VIP viewing platforms, and a chauffeured golf cart to shuttle between the two. Meanwhile, the promoters have 16 other profit centers on-site, including concessions, merchandise and, yes, paid showers. Last year the festival grossed around $30 million, approximately $18 million of which came from ticket sales. And since, according to Goodstone, Bonnaroo "funds itself on ticket sales," the other $12 million was profit.

"It's really as modern a music formula as you could have right now," says Ray Waddell, the longtime touring guru for industry publication Billboard. "They're focused on the live experience, but they also branch off into these other directions—licensing, media deals, the Web. They've really broadened the revenue stream."

The first Bonnaroo, held in 2002, featured mostly jam bands and cult acts such as Ben Harper, Jack Johnson, and the Grateful Dead's Phil Lesh. As the festival has grown, it has diversified to encompass an eclectic mix of A-list stars, from Radiohead and Pearl Jam to Metallica and the Beastie Boys. This year's headliners offer something for every demo: Jay-Z and Kings of Leon for the college kids, Stevie Wonder for the boomers, and the Dave Matthews Band for the hacky-sacking base. Bonnaroo also books comedians, including Conan O'Brien this year, and features such amenities as a film tent, gourmet burrito and microbrew stands, and TV banks for watching the NBA finals and, this year, the World Cup.

Daily programming runs from noon until 4 a.m., and an estimated 90 percent of concertgoers stay on-site—either in tents or in one of the fully outfitted RVs provided (for a price) for the camping-averse. "You don't go home at night and turn on CNN or check your e-mail," Farman says. "It's an all-encompassing experience." The goal is to create the kind of communal, anything-goes atmosphere where, say, Bruce Springsteen can play a three-hour headlining set on Saturday night, jam with Phish on Sunday, and in between, stay out until 4 a.m. watching indie-rock band MGMT with his teenage son (all of which happened last year).

"We pay attention to details—that's the business model," Mayers says, sitting on a couch at Superfly's scrappy Manhattan headquarters. The company's aesthetic is college-pad chic: lava lamps, vintage concert posters, jeans, and flip-flops. Scribbled on a dry-erase board is one of their mission statements—"selling authenticity"—while the office Wi-Fi password jokingly recalls rapper Kanye West's diva-like performance at Bonnaroo 2008. (It's "kanyesucks.") The vibe isn't too far removed from Superfly's do-it-yourself early days, when Goodstone once spent a night in jail for posting an illegal concert flier.

Yet the dorm-room atmosphere belies the magnitude of the operation. In addition to Superfly, Bonnaroo is helmed by two other high-powered partners: Ashley Capps, a veteran Knoxville promoter who was instrumental in conceptualizing the festival and securing a site, and Coran Capshaw, a top-shelf talent manager (his clients include Dave Matthews and Tim McGraw) who serves as Bonnaroo's primary financier. Many of the operations team, meanwhile, are veterans of such live-music powerhouses as the Grateful Dead tours and Bill Graham Presents. Together, they plan and manage what, for a weekend, becomes the sixth-largest city in Tennessee.

The casual ethos doesn't mean there isn't a strong commercial instinct. "You've got a captive audience of 80,000 for four days," Waddell says. "That's a hell of a marketing opportunity." Companies like Budweiser, Ford, Canon, and the Cartoon Network shell out top dollar for facetime with Bonnaroo's audience of tastemaking college kids and affluent young professionals. Still, the marketing presence is muted compared with other festivals. There's Bud Light in the VIP tent and Ben & Jerry's new Bonnaroo Buzz flavor in the freezers, but the promoters strive to keep signage to a minimum and have resisted selling naming rights for stages or the festival. "They could do double what they're doing, easy," Waddell says. "But they're real careful about it." It seems to be paying off: In last year's tumbling economy, when high gas prices and tight wallets brought down all other sources of revenue, sponsorships for the festival actually rose.

On the cost side, meanwhile, Bonnaroo is famously thrifty. Organizers keep expenses in-house as much as possible, handling advertising through the newly launched Superfly Marketing Group and ticketing through their own website. As with any festival, the biggest expense is talent: One prominent agent who has booked multiple acts with Bonnaroo over the years estimates that the total cost of this year's bill is around $6 million, with headliners getting $1 million or more each. The economics change, though, the further you go down the bill: Second-tier acts often receive their standard fee or even less, and some lower-rung bands get nothing. They end up playing anyway because of the exposure.

Goodstone recalls that he and his partners would have been thrilled to break even on the first year. (For a startup music festival, three years of losses is the rule of thumb.) They did better than that: Online word of mouth helped sell out the festival in 18 days, and Bonnaroo has been in the black ever since.

Despite their success, attempts at expansion have so far been ill-fated. A New York installment planned for 2003 was canceled at the last minute because of logistical troubles, while the Superfly-produced Vegoose festival, staged in Las Vegas, held on for three rocky years before folding in 2007. The following year the company launched Outside Lands—a sort of Bonnaroo West, held in San Francisco's Golden Gate Park—which turned a profit the first year but has since followed, as Goodstone says euphemistically, "a more traditional festival model" (i.e., it has lost money).

Lately the partners have been thinking locally. Three years ago they bought the Bonnaroo property and started working on capital improvements like electrical installations and a permanent stage. Capps says they hope to use the site for things like sporting events, as well as other festivals. It's still a risky proposition, though. This year alone, two major festivals—Michigan's Rothbury and New Jersey's All Points West Music Arts Festival—shuttered for lack of funds.

For now, Bonnaroo's best hope for growth is monetizing what Farman calls its "curatorial voice"—expanding the Bonnaroo brand to include everything from television programming and mobile-phone apps to ad space on bonnaroo.com. "We haven't settled on a strategy yet," Farman says. "But we're talking about everything."

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