Russia’s Touring Industry Suffers Under Weight of Financial Issues

As Russia’s economy sinks deeper into recession and the ruble keeps falling against the US dollar and the Euro, the country’s touring industry is set to shrink, with promoters focused on lower-tier artists likely to be hit especially hard. Russia’s touring industry grew from $960 million in 2009 to estimated $1.3 billion in 2014, according to PricewaterhouseCoopers, but the growth may not continue for much longer.

For years, Russia was a lucrative market for many touring Western artists, eager to come here to play headline shows, sets at festivals across the country or even secret gigs at private parties thrown by local tycoons.

However, as the political climate changed in the last few years, some foreign musicians began having doubts about coming to Russia.

The Pussy Riot affair, crackdowns on non-governmental organizations and the gay community and, finally, the annexation of Ukraine’s Crimea peninsula last March, which substantially soured relations between Russia and the West, prompted the likes of the Black Keys, Pulp and Mark Knopfler, to publicly refuse to perform in Russia.

Promoters say there are many others who don’t want to publicize their reluctance to come to Russia.

But even those who do come are unlikely to bring the promoters the kind of profits they enjoyed until very recently.

Plummeting oil prices coupled with Western sanctions slapped on Russia over Crimea and subsequent support for pro-Russian separatists in East Ukraine, began to be very noticeable a few months ago, when the Russian currency entered a downward spiral. Since early 2014, the ruble has lost 50 percent of its value and is trading at 66 rubles for a US dollar as opposed to 33 rubles for a dollar in January 2014.

Russia’s economy is predicted to shrink this year, for the first time since 2009, while the ruble is expected to continue its fall. Making matters even worse, Standard & Poor’s has downgraded Russia’s credit rating to junk for the first time in a decade.

And, as artists’ fees are nominated in US dollars or Euros and tickets are sold for rubles, promoters are faced with a dilemma. They could fully pass their extra costs caused by ruble devaluation onto fans by dramatically hiking ticket prices and risk poor sales, or reasonably raise ticket prices and agree to smaller profit margins. Most promoters go for the second option.

So far, ticket prices have gone up by 20 to 25 percent, Dmitry Zaretsky, general director of the promoter PopFarm, tells Billboard, adding that if the increase were bigger, “tickets would just stop selling.”

Eduard Ratinikov, head of the promoter TCI, agrees. “We are forced to raise prices by up to 30 percent, which, against the overall negative economic background, is leading to poor sales,” he says.

Top artists coming to Russia are likely to have a fan base numerous enough so that tickets for their shows will be sold regardless of how high the prices are.

For instance, tickets for Metallica’s upcoming show at St Petersburg’s SKK on Aug. 25, 2015 have gone up from 800 rubles ($12.2 at the current exchange rate) to 5,000 rubles ($76.2), says Tatyana Vasilyeva, a spokesperson for PMI Group.

But those who don’t have that many Russian fans are unlikely to make it to Russia as bringing them here would be too risky for promoters.

“The number of higher-risk projects and those with a potentially lower profit margin is set to decline,” says Zaretsky, adding that the total number of shows by foreign touring artists is likely to decline as a result.

On a more optimistic note, Vasilyeva says that the situation could give a boost to local artists, whose shows are now going to be much cheaper to stage than those by Western artists.

Source: Billboard