Long term political policies, not COVID-19, is the biggest cause for the closure of UK music venues
by Jimmy Mulvihill
April 12th 2020
2 weeks into the UK lockdown put in place to prevent the spread of COVID-19, the Telegraph newspaper reported the news of a “Call to save hundreds of music venues from permanent closure.“ The article continued, ”Music Venue Trust warns that the financial impact of lockdown means more than 500 sites may never reopen when it is lifted.” COVID-19 is an unprecedented event that has affected everything and everyone, so it's no wonder it's been blamed for the potential demise of music venues. They make their money from people attending their concerts in person, and at a time when there are such strict restrictions on people leaving their own home, it's quite logical to connect the cause and the effect of lockdown closing music venues. Yet to do so would not be addressing the real problem. I can see why the reason was given though, even by the people who recognize this. We're at a unique political crossroads where suddenly the consequences of both action and inaction are at their peak, and where problems ignored for years, and the consequences of mistakes have never been punished so quickly. For an industry that has wanted change and action for so long, now is the time to strike while the iron is hot. We currently have a Conservative Chancellor who is happy to pay people to stay at home and not work. Unprecedented. We've been given the time to consider where we are, and a free reign to make dramatic government policy changes on anything COVID-19 related, so throwing music venues in with that does makes sense. Even if the source of the problem is not correct, if it brings about the change that we need in the short term then it is for the greater good. However, in the long term if we falsely attribute this pandemic as the reason why these venues are closing down, then within a few years of the virus receding -whenever that is - we will find ourselves right back to where we started. Let's be honest - this situation has not been caused by COVID-19. It’s a contributory factor, sure, but this pandemic is simply finishing off what has been building for years and that would have happened anyway, albeit much slower. The fact that The Music Venue Trust was founded half a decade before Covid-19 reared it's head, and the progress and support that they have made in that time proves that. This couldn't have happened without there being a strong substance and widespread support for their campaign, and the record of so many music venues closing from 2010-2020, as explored in this Metal Hammer article from November 2019, shows that the process was well on it's way before Covid-19. These music venues were not at risk due to them being an nonviable businesses built on a flawed business plan, or because the people running them couldn’t get enough people in the door. Having to close their business for a few months will have hurt them badly, of course, but that on it’s own shouldn’t have caused any more problems than this unprecedented event has caused any other businesses. Pretty much all traders, no matter their size, have short term insecurities that they need help with. Music venues are no different, yet the scale of the threat that they are under is measured in multiples compared to businesses outside the music industry. Why?
This is a problem 20+ years - not 5 weeks - in the making, caused by the absence of any clarity and common sense in the current regulations, the result being that success can actually act as a threat for many businesses. This is not an oversight, but by design. If someone is fortunate enough to be able to afford to own the actual building that they are based in, then they are able to build and grow their business in the long term with their fate largely in their own hands. If not, then the fate of whether they grow or even survive lies in the hands of their landlord. The live music industry has been split like this for years, and this is what has put 'the renters' at most risk. Most of them could cover all of their running costs just fine, including paying the wages of their staff, owners, the rent of the premises, tax to the government, and all payments owed to creditors. By any other measure that would be regarded as a ‘successful business’, and that’s what most of them are. But the lack of any regulation means that that is not enough.
The "problem" is that they can’t match the short term profits of speculators who see the popularity of areas like Hoxton, Camden Town and Soho (all in London) as opportunities to swoop and buy up the buildings that these very venues are based in, in order to capitalise on the “brand” of the area, forgetting that these venues played a huge role in these areas becoming as attractive and lucrative as they currently are. For years we (Bally Studios) have been banging on about how the precarious tenancy agreements that live music venues and rehearsal studios operate under has put them in such danger, and here we see it shown in it's starkest form. Such contracts gives the building owners the best of both worlds. They can take the rent from music venues that would be hard to get from other businesses whilst the area is down on it's luck, yet they can also kick them out when the area does pick up. It's not a sustainable approach, nor is it the best for the long term of the area, but then it doesn't need to be. The success of the extra revenues of social cleansing (gentrification) is immediate to the landlords and the government in that they can reap the benefits of this "progress", yet the true costs unravel themselves slowly, and fixing them usually become the responsibility of others down the line. In a time when government careers can be short, to them it makes sense to seek the short term rewards, even if they hurt the area in the long term. They'll take the credit for the success, with cleaning up the fallout being a job for their successor to handle. Short-termism is the real downfall of the music industry's decline.
This is what is being played out now. By itself the impact of COVID-19 could be weathered over time, but along with the other factors, it's no wonder that the outlook is now so bleak. In the long term challenges can be overcome. Even if a music venue/rehearsal studios were out of action for 6 months, if the UK Government were able to contribute even 50% of their costs in that time (which is very modest, considering that they've actually said that they will cover 80% of income for the first 3 months, with further commitments thereafter), then that would cost any business about 3 months turnover, (50% of 6 months turnover) or 25% of one years turnover. At the same time the UK government would contribute to the staff wages and offset their rent and business rates, and the owners could still receive an income from the government support that is being offered. Sure, at this time there’s less income, but much of that income was also going out the door in costs anyway, and so long as the government honours their promise to meet these costs then their staff won’t need to be paid by the owners. Whilst the effect would be felt, it need not be terminal, especially considering that attendances of gigs could well be much higher than usual once the lockdown is lifted, with the extra revenue that this could bring in. There's nothing like being confined to your home for 8 weeks to make paying £6 to see 5 bands on a Tuesday night seem like a great idea.
Although it would affect different businesses differently, the likely overall effect could see establishments suffer a 15%-20% cut in profits for 2020, so long as the government carries out the support that they have announced. A bad year, for sure, but we’re living in a time when the UK Government is well aware that they need to help prevent the bottom of the economy falling out, where interest rates are at an all time low, and where people are becoming starved of the very thing that these music venues provide - the ability for us to connect with people, in person. The biggest selling point that venues have is more acutely in the forefront of people’s mind than at any other time in history, and it grows with every week that the lockdown continues. Any losses made in 2020 will surely be mitigated by extra income in 2021 or whenever life returns to “normal”, and the realization from the government of the contribution that these businesses make to the UK economy will hopefully be the catalyst to provide stability to the industry in the future. The relative short term harm will (hopefully) end, with the added benefit of a long term reminder of how vital these establishments are, which should transform their fortunes.
That is the biggest problem – getting through the short term. It’s only worth going through the short term struggle if there’s a long term to look forward to, and that’s not guaranteed by any means, but that’s not COVID-19’s fault. It’s the Government’s fault. If businesses knew that they had protected long term rental agreements in place, like the ones that are common in Germany and Austria, where they knew that they have the security of having a predictable rent for the next 10-20 years, and where they knew that they had the opportunity to repay any money that they need to borrow to get through this tough period, then they could do it, or at least have the option of doing it.
This is not an option for most small music venues, who find it hard to borrow money to get through the short term and give themselves a fighting chance of survival because of the insecurity that comes with not knowing if;
a) they’re going to be shut down from noise complaints due to the obscure guidelines that are in place, thus depriving them of the ability for the business to continue to operate, and make the repayments. b) if the business does stay open and thrives, and the landlord of the building sees how well the club is doing and so either raises the rent, knowing that they don’t really have any other option but to pay, or worse, they evict them at the end of their short lease, with no reason given, hoping that they can profit themselves from the hard work that they've put into establishing the venues name, which the landlord will inherit.
As the current law stands they can do this, and their gain is the UK economy’s loss in that it both deprives the UK economy of someone with the skills needed to build and maintain that success, and that it also disincentivizes skilled people from investing the time needed to create success in the industry, lest their success be taken away from them. This creates an economy without hope, where the few that could rise from the ashes could be punished for doing so, and that is what the current legislation - or more accurately the lack of it - is causing. It's easy to think, "so long as the blame is being put on the coronavirus, and whilst the government is happy to write blank cheques to solve problems, even if COVID-19 is not to blame, why not get whatever positives we can from the current situation?" For two reasons. Firstly, it's not needed. This lockdown has brought into focus the societal impact of jobs that were undervalued in the past, and the value that they bring to us, not least music venues. If ever there was a time to focus on the impact that music venues can have on society as a whole, the huge benefits to mental health that they bring to hundreds of thousands of people each week, and where investments should be made in the future, this is it. There are also 190,000 people working in the music industry, and the whole economy is hemorrhaging jobs at the moment, so we don't need more bargaining chips than we already have. The focus should be on long term economic stability. Secondly, and more importantly, if the blame is laid on this pandemic then it gives the government an easy way out in the future. Once the virus passes, the debt that has been incurred during this period can be paid off, and the matter is closed without the cause problem being addressed. By all means, we can accept the money the government may be happy to throw at the music industry to get through these times - to not do so would be stupid - not least because we'll need whatever we can get, but long term change can't come about without addressing the real problem. We're in a time when people are re-assessing things to such a level that now is the time to identify and target what has been holding us back for years. There's never been a better time to face tough realities head on, and to put the work in now to provide for a better future.
Ironically enough it is now the government who is most exposed to the precarious situation that these small music venues and other businesses within the music industry have been put in. Most owners of small venues, recording and rehearsal studios do not own their own premises, not least because banks understand how hollow the laws that protect them are, and so won’t lend them the money. Would you lend to a business that needs large up front investment, that also could be closed down due to a single noise complaint at any time? Exactly, me neither. If steps had been taken years ago to strengthen the law that would give music venues greater protections, it would have allowed them either secure safe tenancy agreements, or even to later on buy their own premises. In turn, they could have not only invested the money needed to soundproof them better, but also to ward off the threat of someone coming in and evicting them, which would provide them, and in turn the UK economy with much greater security. They also could have been paying off their own mortgage for the last 10+ years, instead of paying off someone elses, which would have given them a financial buffer to fall back on. It's easier to dig your heels in when you've got a big 'money cushion' to sit on - it's another thing altogether when you've been clinging on for years just to stay in business, as many businesses at this end of the market have done so. If we're at the start of a marathon, most music venues are at the starting line with cramp and blisters from years of fighting to stay in business. The lack of regulations that would have allowed small businesses to build up a secure asset means that not only will they need much more attention and support as a result, but that many of them will also now have nothing to lose, since they have no assets within the business. They may also be much less willing to invest the efforts needed to build up the business, (for fear of the rug being pulled from under them) which would mean less income for the government in taxation. As a result, for the government the input needed is therefore, increased, and the potential reward is reduced. These small businesses currently need the government’s help as they have no other choice, and the behavior of Wetherspoons, Sports Direct and Virgin Atlantic in the last month has also shown the government that putting too much emphasis on big business will likely leave you exposed in the future, since they have the power to make demands that small businesses couldn't. The bigger the business, the more they can squeeze the government, whilst the smaller businesses can’t stand on their own two feet without financial backing, yet financial backing has been scared off by the ambiguity in the law. The government is now being forced to step in to clean up the mess that their policies have caused. If they had empowered small businesses over the last few years then there would be less need for them to rescue them now. Here at Bally Studios we’ve paid about £275,000 of rent in the last 15 years, on top of other fixed and variable running costs. If we had been able to partly pay off a mortgage at the same time we could now be using the equity we had built up to borrow the money needed to get through this. Instead we’re now having to go to the government cap-in-hand to ask them for help. Despite paying off 6 loans in the past, and always ahead of schedule, and despite the business being able to pay the wages to help sustain multiple people living in one of the most expensive cities in the world, we’re still seen as too high risk for any investment. No matter how good our current trading is, it could come to an immediate stop at any time, due to the lack of regulations. The UK Government now has to step in where the private sector is too scared to, but they’re not giving out money because they want to. Instead they know that there are so many business in such a precarious state that without immediate intervention many of them will fall through the cracks. The effect on the UK economy will be unimaginable.
The more secure and stable a business is, the better they can ride this thing out and the less they’ll need to depend on the government to bail them out, and for years we’ve been asking for action to be taken to create the stability that businesses like us need to be able to stand on our own two feet. For years we were ignored. Now the Chancellor is looking at spending a minimum of £350,000,000.000 to dig the UK's way out of this hole, much of which will go to help small businesses that have no means to help themselves. Taking action 10 years ago to give businesses such as ours stability and security wouldn’t have stopped a pandemic hitting us, but at the very least it would have allowed us to mitigate the biggest effects of it ourselves, with the collaboration of a bank. As small companies grow they can take on more staff, providing us with a better pool of talent to draw from, and more 'hands to the pump' at this time. Small incremental action could have been taken, but it wasn’t. We’re not asking for charity, we’re asking for a structure where we can become self sufficient, and where we can use the success of our business to stand on our own two feet when the going gets tough. For that we need a plan were we have predictability, where we can borrow money in confidence safe in the knowledge where we understand as and when we can pay that money back, and where we understand the scale of the challenge ahead of us. That is not what we have at present. Once this pandemic is over taking such action should be the first priority, to ensure that the next time that such an event hits us, such drastic intervention is not needed. Of course, at the moment the focus needs to be on helping people who are directly and indirectly affected by COVID-19, but in the long term the government will need extra income from taxation for the NHS, people will need secure employment, and the public will need to meet each other again. Making sure that small businesses are secure, will be rewarded for their growth, and that the people who create success are given a chance to move that success onto the next level will go a long way to achieving this.