The multimillion-dollar debt that forced the Pemberton Music Festival into bankruptcy was aggravated by high production costs, intense competition and the low Canadian dollar, says Ernst & Young.
According to the Vancouver-based accountancy firm, the festival’s revenue to date was $8.22 million, while budgeted expenses were $22 million.
“The Pemberton Music Festival has been significantly impacted since 2015 by a weakening Canadian dollar relative to the U.S. dollar as many of its entertainment costs are denominated in U.S. dollars,” said Ernst & Young in a fact sheet.
“In addition, the Pemberton Music Festival experienced increasing difficulty in sourcing talent for the 2017 festival due to a limited number of artists touring in 2017.”
After running its first event in 2008, the Pemberton Music Festival took a hiatus from 2009 to 2013 before resuming in 2014. It was scheduled this year to take place July 13-16, but on May 18 the company filed for bankruptcy through Ernst & Young.
Producing a music festival is costly and complicated, notes an official with the Vancouver Folk Music Festival, a long-running competitor set to take place in mid-July.
The folk festival’s electricity bill alone will be roughly $70,000, fencing will cost nearly $30,000 and supplying portable toilets throughout the event will cost another $25,000, said Linda Tanaka, the folk festival’s artistic managing director.
“It’s like building a city for three or four days, and the costs are just out of this world.”
Perhaps the bigger issue for the Pemberton Music Festival was the low Canadian dollar, which made it more expensive to secure its lineup of international artists like Chance the Rapper and Muse, who are paid in U.S. dollars.
The Vancouver Folk Music Festival is celebrating its 40th anniversary this year. Approximately 38,000 ticket holders are expected to attend the event.
Tanaka said the key to its longevity is consistency and a dependable fan base.
“The festival is kind of ingrained into the community,” she said. “It’s been here for a long time; it’s part of the whole Vancouver scene.”
While the Pemberton Music Festival faces bankruptcy, Ernst & Young said its customers also suffered a large financial hit because there will be no automatic refunds for the event. Unless the ticket was paid by credit card, getting a refund will be difficult. Customers will need to file a proof-of-claim form as an unsecured creditor.
According to an Office of the Superintendent of Bankruptcy Canada (OSBC) statement-of-affairs document, the cancelled festival has liabilities of $16.7 million, which includes $8.2 million owed to ticket holders for this year’s event.
“I am concerned about the impact on people who bought tickets – that should be the first concern,” said Jonathan Simkin, president of 604 Records Inc., a Vancouver-based independent record company whose artists include Carly Rae Jepsen.
“This reflects on the music industry as a whole, and the history of the music business is rife with examples of how the industry creates enemies of its own customers. I don’t know the details of what happened, but I know there will be a lot of pissed-off fans out there, and that hurts all of us.”
Last year, the Squamish Valley Music Festival was cancelled due to production issues and weakened buying power for big-name artists.
In 2015, its lineup included Drake and British singer Sam Smith.
The OSBC lists 130 secured and unsecured companies and business people that are owed money following the festival’s collapse.
It notes that $13,170,523 is owed over 120 claims to 119 unsecured creditors, while there are 10 claims totalling $3,574,200 for two secured creditors – 1644609 Alberta Ltd. and Janspec Holdings Ltd. – both of which have addresses in Vancouver. •
– With files from Cathryn
Atkinson, Pique Newsmagazine
