Are you sure?

Man behind Sziget tracks the trends

Károly Gerendai, co-founder and current owner of the Sziget Festival, created the biggest musical event in the region and used it to launch an entertainment empire. Gerendai (pictured, center, flanked by the Hungarian President János Áder and Gerendai’s business partner Norbert Lobenwein) talks exclusively with the BBJ about future plans for his flagship festival on Óbuda Island.

Sziget Festival budget in 2015

Total: HUF 4.7 billion (HUF 3.65 billion in 2014)

Programs: HUF 2.115 billion

Infrastructural developments: HUF 130 million

Improving user experience, service: HUF 100 million (approx.)

Advertisement tax: HUF 30 million (approx. HUF 55 million for all Sziget Kft. events)

Extra spending on National Ambulance Service: HUF 28 million

Additional cost arising from changes in law regarding security guards minimum wage: HUF 20 million

Following a series of festivals with dropping revenues and declining visitor numbers, last year’s Sziget posted a good profit and hit new visitor records. Given these trends, what are you expecting as you plan for the 2015 festival?

It is a question of how unique that instant was – whether it was the result of better programs or our moving the date of the event a week later. More responsible thinking would probably suggest that we wait and see how this year’s festival works out and decide on future developments only afterwards. However, precisely because the previous years did not see progressive growth – in fact, the number of visitors declined – and we had to postpone several developments, after last year’s success, I told my colleagues to dare to dive, increase the budget significantly and accomplish what we could not afford earlier.

So you are not playing it safe?

I firmly believe Sziget Festival’s success in 2014 was not just sheer luck, but instead the result of previous developments that had ripened. I am convinced that last year was a trendsetter in the Sziget Festival’s life.

What improvements can you now afford to finance?

Some of them are infrastructural ones we have been struggling with for years. We had three hectares of forest land in a poor and unusable state restored, resolved water drainage issues in the most problematic areas, had the electricity network assessed and made road network repairs. There are innumerable programs that give the Sziget Festival authenticity, from circus acts to fine arts to opera and classical music, and the budget for those we froze years ago. We simply could not increase spending in those areas; sometimes we even had to cut it. This year, though, we have increased their budget by 25%.

What about spending more on star performers?

Last year it accounted for somewhat more than one-third of the festival’s overall budget. Stars costing more are a global trend, so this year we calculated at more than 45%. International festivals spend more than half of their budget on star performers, but they usually have less additional programs. Sziget Festival’s programs are far more colorful than those of other European, U.K. or U.S. festivals. Half of our budget covers program costs, 70% of which goes on performers. We have increased the remaining 30% as well as the spending on performers. We upped last year’s HUF 3.65 billion overall budget to HUF 4.7 bln in 2015, but after last year’s 45% increase we haven’t modified marketing costs much.

Have you been targeting new countries with your marketing this season?

We are running campaigns in roughly the same number of countries we did previously, though we have shifted the emphasis on some more than others. For example, we are focusing more on Spain and Australia, and spending a bit more on the U.K. – in countries where we see more untapped potential. These, however, are not huge bumps in spending: We dedicated a €12,000 marketing budget this year for Australia, where previously this item came from our local partner’s ticket revenues. Traditionally, we have the strongest markets in the West.

It has been on my agenda for some time to focus more on Russia and Ukraine. The political and economic situation now prevents us from growing there considerably. I still believe it makes sense to ramp up marketing in the East, and to count on these markets, as there is much potential in them. I have just looked at ticket sales figures and, compared to the same period of last year, the number of tickets sold in Russia and Ukraine has grown, which tells me it is worth expending more effort there.

Are you featuring more Eastern performers in the line-up?

We have invited many performers from CEE in the past few years. Part of Sziget Festival’s uniqueness for a Western visitor comes not only from its colorful programs, but also from the fact that here they see performers they wouldn’t see at a Western European festival. A Dutch person is less likely to come here only to listen to the same music they can get at home. It is more the programs built around concerts that attract them. It strikes me, too, that someone from Australia would travel here. Somehow, we managed to get people to think of the Sziget Festival as an experience you won’t get elsewhere, so they are willing to travel thousands of kilometers to attend. Fortunately, Budapest is becoming ever trendier with its spas, ruin pubs, etc. – we of course mention these traits in our communications.

Are you also trying to expand your presence in the East?

Given the political situation in Ukraine and Turkey, the countries we held negotiations with, these attempts have come to a halt. We tried to organize an event in Vienna knowing the market was already saturated, and we failed. In Croatia, during our lengthy search for partners, locals launched festivals that have grown so popular we stopped looking.

Have you ever considered buying up established festivals abroad?

We don’t rule out this option, but acquisitions are not a priority right now – maybe in three or five years’ time. Two years ago, even our Hungarian presence was shaky, now we can take a break after last year’s results, so we would rather develop here.

How do sponsors react to a loss-making festival?

Sponsors are less sensitive to that: They may see a slight drop in sales, but they still sell a lot. Depending on the sector, there is more competition among, for example, beer makers. In other segments, like banking or the car industry, sponsorship is dependent on a relevant product they wish to advertise. Sponsorship revenues constitute about 12% of Sziget Festival’s 2015 budget. I assume sponsorship money in the Hungarian events market doesn’t exceed HUF 2 bln per year. Since our three main festivals receive slightly more than HUF 1 bln of this, we cannot really expect to raise more.

Why did Sziget Festival receive funding from the state last year?

For many years, we hadn’t applied for funding: We were proud to be able to operate relying on our sources. Unfortunately, we had become loss making by 2013 and decided to ask for help from those who benefit from festivals, namely the state. We asked for money to run an even more effective international campaign, as this results in additional revenues, guest nights, etc. for the state as well. The subsidy accounted for 2.7% of the 2014 budget – just enough to cover more developments. We will apply again this year to cover some of the extra spending we have to bear due to changes in the law. People tend to forget that, in Hungary, half of the budget of all festivals and 25-30% of those of bigger festivals are financed by public money. Some were still astounded by our 2.7%. Sziget Festival has been featured in the ten best global festivals for many years. Yet when it comes to our budget, we are not even among the first 25.

Is it more difficult to run a festival today than it was ten years ago?

Competition is tougher for performers. There are fewer bands that can fill stadiums, and at the same time ever more organizers try to invite/secure them. The number of festivals has been growing constantly for years: Between 2002 and 2012 it has quintupled, while the number of visitors and performers has remained the same. As everyone wants to get the same performers, they keep increasing the fees they offer. Ever since the record industry crashed, bands have tried to live off festivals and live performance fees, so the bidding actually comes in handy for them.

Unfortunately, Japanese and other European festivals have rearranged their calendars again. Last year we moved Sziget Festival to avoid overlapping with overseas events and to adjust it to European ones when bands are in Europe. It can be that there is hardly anyone who is free this week, and their fees are higher if they travel to Europe only for this event. A week later we could have come up with a different line-up.

With such a large-scale event, can you set trends or cultivate tastes?

If you feature new performers in a trendy and well-liked environment, visitors will take them as trendy. But you shouldn’t go overboard with it. Some people question why we don’t feature only the newest, and trendiest acts. They don’t understand that you need established, mainstream bands to attract the masses. Many festival organizers come here to borrow ideas from us, and we also incorporate best practices from other festivals. But again, you have to be careful with that. If you want to be a trendsetter, you can’t afford to follow the others only. You have to take risks by always adding elements visitors haven’t seen elsewhere.