The string of cancellations and reschedulings comes at a busy time for the live-music industry, with tons of concerts and major artists jockeying for slots at arenas and stadiums. Venues, meanwhile, are trying to make up for lost time during the pandemic by selling food, drinks and other concessions.

When a huge star cancels a show—or an entire tour—it’s costly for everybody, from the artists who are paying for crews, to the venues who might have a night with empty seats to the nearby bars, restaurants and hotels that serve concertgoers. But how much does it cost them exactly?

Live-music executives say it’s difficult to generalize about the financial fallout from cancellations because artists, concert promoters and venues vary considerably both in the details of their deals and whether they have insurance or not.

Here’s what happens when artists cancel:

First, Rescheduling Is a Headache

Most canceled shows get rescheduled—but finding new dates to stage a big concert can be hard and expensive. Large venues like arenas and stadiums book shows many months or longer in advance and have to juggle music concerts with sports games.

While rescheduling a show for a future date mitigates the financial impact, it doesn’t make up for the fact that a bustling venue packed most of the week had a night when nothing happened.

Perhaps the single most important factor is timing—is the artist canceling a day, a week or six months in advance? If the show is scrapped in the immediate run-up to show time, when production setup has commenced—or even worse, when roadies are literally setting up the stage—the consequences can be painful. Generally speaking, a sudden cancellation could mean an arena loses out on roughly $500,000 in revenue, according to some estimates. For music’s largest shows—stadium events—a dark night could mean the venue misses out on up to $1 million or more.

Extra Advertising Costs and Fees

The business of big shows starts with promoters—very often, industry titans Live Nation Entertainment and AEG Presents—for whom this year’s cancellations and postponements are par for the course, executives say.

In July, Madonna postponed the first leg of her arena tour after being hospitalized suddenly for a bacterial infection. That same month, Atlanta rapper Lil Baby cut seven dates from his touring itinerary. In the past few weeks, Bruce Springsteen and Aerosmith have both postponed their 2023 shows due to health issues.

“Occasionally things come up and shows need to be rescheduled,” a spokeswoman for Live Nation says. “That’s just part of the business.”

Concert promoters assume the financial risk of staging events by paying artists, renting venues and marketing events. When an artist cancels, they’re stuck with any marketing and production costs incurred pre-show—the biggest often being advertising. If the cancellation occurs well in advance, the impact might be minimal. And if the show gets rescheduled, initial costs can be considered part of the expenses for the rescheduled show.

Still, these rescheduled dates mean even more marketing, and more costs. In addition, the promoter is often on the hook for paying a substantial rental fee (or at least a kill fee) to the venue for the original show even though it didn’t take place. Sometimes rescheduling immediately isn’t possible. If there’s no show, the promoter loses any revenue it was contractually obligated to as part of its deal.

In the U.S., it’s less common for promoters to buy event-cancellation insurance compared to in Europe, possibly due to cost, says Paul Bassman, managing director and entertainment-practice leader at insurance brokerage Higginbotham. But in cases where the promoter has paid the artist a hefty upfront advance, they’ll often require the artist to buy insurance and include the promoter in the policy such that the promoter is made whole in the event of a covered cancellation claim.

The Biggest Problem: Opportunity Costs

Music venues are a different story from promoters. They end up losing the potential profits from food and beverage sales, parking, concessions such as merchandise and ticket fees. Major venues typically don’t obtain insurance because what they’re losing isn’t money they’ve paid (such as a promoter’s payment to an artist) but cash they could have made.

Like the promoters, venues will recover their lost revenue if the arena or stadium show gets rescheduled for a little later. But it’s often very difficult for venues to find a replacement artist for the night that’s now standing empty. “In most cases, in my experience, when an act cancels, the venue gets stuck with a hole in their calendar that is not fillable,” says Mike Luba, president of Forest Hills Stadium, a 13,000-capacity outdoor venue in Queens, New York. “It’s a bummer.”

In a bad scenario—say, an empty stadium with a capacity of 50,000 to 60,000 or more, where a cancellation occurred relatively late—stadium “losses could be up to a million dollars,” says Jarred Arfa, executive vice president and head of global music at Independent Artist Group, which represents artists such as Billy Joel and Metallica. Unfilled arenas, meanwhile, could see losses of $300,000 to $600,000, Arfa says.

The Devil Is In the Details

If the venue gets to keep the promoter’s rental fee, its losses are mainly things like foregone beverage and parking revenue. However, sometimes venues have willingly accepted a lower rental fee at the outset in exchange for a lucrative cut of the show’s ticket revenue, thereby sharing in the spoils. That means the venue has a share of the main action—ticket sales—and much more to lose when the show doesn’t happen.

Other variables that could affect losses include whether the venue handles its own concessions or not, and if the venue was getting a major cut of the artist’s merchandise sales.

Insurance Helps—Except When It Doesn’t

Unlike venues, many arena and stadium-level artists buy event-cancellation/non-appearance insurance. These policies typically cover 75% to 85% of the “guarantee” or fee the promoter was paying the artist, Bassman says. The standard cost of such policies is about 3% of the amount insured—but this rate fluctuates depending on the artist.

Bassman says many top artists he works with want extensive coverage, so that if the tour goes down, they’re covered for their expected income, along with expenses, crew-related outlays and payments to supporting production companies. Others opt for cheaper policies that cover just expenses and not expected income.

But insurance policies exclude certain things—an unexpected lack of ticket sales, for example, or Covid-19 infections, industry executives say.

Which means artists that cancel due to Covid-19 infections aren’t covered and have to eat their expenses and lost income. As a result, Covid-19, while less disruptive now than in 2020 and 2021, continues to make touring financially risky for smaller and medium-sized artists who already barely profit on tours.

“When a show is canceled,” Forest Hills Stadium’s Luba says, “it’s generally just varying shades of bad.”

Write to Neil Shah at [email protected]