Festival 'radius clauses' put to test

LEGAL ENTERTAINMENT

The summer is upon us, and festival season is in full swing. It's only May and big-name festivals have already taken place all over the country, including Ultra and Coachella. Both festivals are known to have attendance in the 10s to 100s of thousands of people. From smaller festivals and shows to the multi-day and multi-weekend festivals, now is the time to dance to your favorite music.

Some people are nose deep into lineups and figuring out the best place to go; others trust the promoters and buy tickets without the release of even one headliner. The lineup is one of the most important aspects of a festival in order to draw enough people to pay for the artists and the rest of the activities the festival has to offer. But how truly important is the lineup?

People often buy tickets to festivals months before there are even rumors swirling about who will be performing. Coachella is known to sell out the following year's show only a couple months after concluding the current year's show. Still, these big festivals fight to protect their brand by backing artists into a corner and locking them into an agreement that restricts their performances outside of the festival.

For years, musicians have scheduled their tours around the well-known industry limitation brought by radius clauses contained in live music performance contracts. These clauses are included to protect and enhance the demand for a specific festival by preventing artists from performing within a certain distance of the festival for a stated time before and after the performance. These clauses are industry standard, and the reasoning behind them understood by all parties. The artist is compensated for their performance and exclusivity of that performance.

Over the past few years, however, the festival industry has grown exponentially -- and with that so too has the scope of radius clauses grown in order to keep demand high. How does this clause affect artists? Consumers? Small venues? Many professionals are starting to ask the same questions as the industry continues to shift from depending on the sale of records to live performances.

Radius clauses limit artists' ability to perform in popular areas -- possibly even their home towns -- forcing artists to carefully craft tours and likely forcing them to exclude desirable areas. A typical radius clause limits an artist's ability to perform for a 100 to 1,300 mile radius around the festival for a three- to six-month period before and after the performance.

If an artist books multiple big festivals, attending one of these expensive festivals may be the only way for a fan to see the artist during that year, preventing many fans from attending a live performance of their favorite musicians. Thirteen hundred miles is a distance most people cannot travel for a show.

Smaller artists don't openly argue against radius clauses in order to have the opportunity to walk the stage at a big-name festival in hopes of becoming a breakthrough performance -- their "big break," so to speak. Major headliners don't have to worry as much since they will be well paid and they already have their following. Smaller venues and festivals are left with lesser-known artists to fill their lineups since many artists are locked into Coachella-like contracts. Some venues within the radius of these festivals have lost money or had to close down because of these restrictions.

So how far is too far, and how long is too long? These questions form the base of the claims in two current lawsuits, one against SFX-React Operating, LLC as a counterclaim, and one against the promoters of Coachella.

In 2016, Eagle Theater Entertainment countersued React for violation of federal antitrust laws due to React's expansive radius clause in all artist contracts. React is the production company that puts on the well-known festival Lollapalooza. In their contract, the artist agrees to a 500-mile radius for up to four months before and after the festival. React filed a motion to dismiss the antitrust counterclaim but the judge denied the motion, demonstrating the potential legitimacy of the claim. The case was getting into discovery as the final pending motion was decided at the end of March, so there will be some time before the substantive claims are decided.

The outcome of the motion to dismiss may assist Soul'd Out Festival in their lawsuit against Coachella, which they filed in April. With a radius of 1,300 miles for a total of six months out of the year, it seems this could support an antitrust claim, given the challenge to Lollapalooza's 500-mile restriction was allowed.

Furthermore, the claims against Coachella are brought under both California and Oregon state law. California is known for its dislike for noncompete clauses. Most are unenforceable unless they are extremely reasonable under the circumstances, and even then California does not allow for large restrictions on people's right to work. A radius clause is a form of a noncompete clause. It will be interesting to see how these radius clauses will be assessed under California law.

The lawsuits are still in the beginning phases of the litigation so there is plenty of time for the parties to settle out of court. Regardless, the order denying the motion 10 dismiss the antitrust claims against React is telling in that these clauses are potentially problematic. Considering the overall limitations placed on these artists and that the overwhelming effect on the market, festivals should not be able to restrict artists' performances as much as they do. Promoters do need to protect their interests, but for some festivals it's unnecessary to require such a broad restriction. Coachella sells out their tickets eight to 10 months before the festival. The radius clause does not affect the outcome of ticket sales. So why should Coachella or Lollapalooza be allowed to monopolize an artist's time in an entire state for half the year?

The pending litigation could have a major impact on these live performance clauses restricting a long-standing industry standard and freeing artists and smaller festivals from such heavy restrictions.