Managing Disputes Between Music Festival Organising Directors and Financial Investors.

Music festival entities can be financially lucrative but also operate in a high-risk environment where they rarely hold cash to invest in future events, relying heavily on external financial help. This balance of risk and reward can be attractive to investors, but when they disagree with those running the events it can lead to disputes which need to be carefully managed.

Festival organising entities are usually operated by creatively minded individuals where their vision for an event can make it unique and successful. The financial control and management of these entities can be poor despite a great creative vision. External investors are often sold on the creative vison of a festival with potentially high returns; however, festivals do not operate like a standard corporate business. With immovable live event dates the financial pressure on the festival entity can cause friction with external investors.

External Investments for Festival Entities.
Smaller and medium sized music festivals operate with a creative and flexible mindset where financial controls take a lower priority to the creative vision. With rising production costs and artists fees it is becoming increasingly challenging for independent festival entities to remain self-funding. Attracting external investors with the promise of great returns can bring in much needed funding, however part of the investment conditions can bring a more corporate mindset with tighter financial controls. This approach can often collide with the counter-culture roots of a music festival leading to disputes.

Common Disagreements.
Investors are keen to see comprehensive cash flow forecasts and accurate financial planning which they may monitor on a daily basis. The flexible and creative approach of festival organisers can see increased and unexpected spend on elaborate stage designs, elevated production technology and top tier artist curation, immediately causing an overspend against planned budgets. This budget creep can be viewed by investors as reckless spending, especially if no explanation is forthcoming. If large value contracts require approval by investors who disagree with the amount it can cause delays and planning bottlenecks. If there is a significant lag in tickets sales investors may withhold agreed staged funding until a satisfactory number have been sold causing friction with organisers who may not have accurately forecast the ticket sales date spreads.

Advance Dispute Prevention Agreements.
The festival organising entity will have had to make a pitch to potential investors, and it is at this stage that a framework for working together can be formulated. A formal documented agreement on working practices and decision-making procedures will need to be agreed once the investment has been finalised in principle. Agreements should state who has responsibility for operational and financial decisions where stated thresholds will be common. A proposed expenditure over a certain value could require counter authorisation by the investors, for example. These budget deviations are common, so it is vital that full processes and procedures are documented at the investment agreement stage. The framework agreement may also document how any disagreements or disputes should be managed, perhaps with an independent third party, for example.

Handling Critical Timing Disputes.
Most music festival planning phases operate on a critical path where delays in anything can have a severe impact on other key aspects of the festival implementation. If a dispute occurs during this phase a robust emergency protocol needs to be used to resolve the issue without it impacting on the event live dates. An independent mediator experienced in festival production cycles, as detailed in the Advance Dispute Prevention Agreement, can sometimes help to prevent a total operational freeze. If investor funds are being transferred in tranches it may be prudent for these to sit in an escrow account where capital injections are made according to critical path deliverables which prevents organisers from overspending without oversight and stops investors from freezing funds. The investment contract agreements can include processes for rapid response mediation which can help to resolve disputes quickly without either party resorting to legal action.

Exit Strategies for Both Parties.
Not all investment agreements are perfect and if the festival organisers and external investors have never worked together before and solid agreements are not formalised from the outset the relationship can quickly break down. In many cases of investment funds coming into a festival entity the investors will want some control over the business, usually with a formal share purchase along with voting rights. This investment through share purchase is a common methodology for external investors and usually comes with pre-agreed clauses that allow either party to name a price at which they will either buy out the other’s shares or sell their own. This provides a realistic valuation for both parties. In some cases, a creative director or founder may walk away from the festival entity but retain the licensing, brand or festival concept. This allows the investors to recruit a new team to keep the production process live but with ongoing financial payments for licensing, for example. Whatever exit strategy is employed by either party a carefully managed public statement can ensure that the festival continues with an explanation of the reasons behind the separation.

For festival organisers planning their next event using a software management platform like Festival Pro gives them all the functionality they need manage every aspect of their event logistics. The guys who are responsible for this software have been in the front line of event management for many years and the features are built from that experience and are performance artists themselves. The Festival Pro platform is easy to use and has comprehensive features with specific modules for managing artists, contractors, venues/stages, vendors, volunteers, sponsors, guestlists, ticketing, site planning, cashless payments and contactless ordering.

Image by Antoni Shkraba via pexels

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