Avoid the ‘Free’ Trap and Make Money with Online Live Events

One of the concerns that some people in the live entertainment and arts business have with online live events is the fear that they are devaluing the product somehow or that they are getting customers used to the idea of getting this content without paying for it.

This is sometimes called “the free trap.” The idea is that once somebody gets to stream an opera or a concert for free, they're never going to want to pay for it again.

The formula for avoiding this is pretty simple: create a great show and charge people for it

Let's talk about an industry that did fall into the “free” trap: the recording business. Before 1999, most record label revenue came from CD sales. To be brutally honest, the industry relied on selling CDs for 15 to 20 dollars. Music fans might have one or two songs they loved, but could only get them by paying for a whole CD. It was crummy for consumers but extremely lucrative for the labels. Then in 1999, Napster appeared. Suddenly, music lovers could get their favorite songs without having to pay for a whole album. The music industry could have capitalized on this, creating something like Spotify or iTunes. Instead, they fought it and lost. Eventually, the music business shifted to concerts as the main revenue source, but it was a painful transition and a huge missed opportunity.

I believe the future of live performances once we’re past COVID-19 is still very bright, but there's another new form emerging now and it’s online live events.

Avoiding the free trap has everything to do with embracing this new model. Luckily, it’s very, very simple: produce a great show intended for an online audience and charge people for it.

You can’t succeed in this industry without producing a great show. That’s a given and you know how to do it. Online or not, people want quality and won't settle for anything mediocre or half-baked. Impromptu Zoom jam sessions from the sofa are fine as an occasional engagement tool, but they won’t bring in a paying audience. If you take online events seriously and produce great work, a paying audience will show up for you. We’ve already seen it. Enterprising artists have put together shows that fans eagerly paid anywhere from 10 to 100 dollars to watch. Some shows have even grossed five figures and netted more than half of that.

Here’s a way to think about the difference between the in-person and online event business models. In both cases, there are three things to consider:

  • How many people will watch
  • How much those people will pay
  • How much it costs to deliver the show to them

With in-person events, The number of people watching is LOW, the amount they pay is HIGH and the costs to do the show are HIGH.

With online events, flip that. The number of people watching is HIGH, the amount they pay is LOW, and the costs to do the show are LOW.

Both formulas can and do work, but you have to adjust your thinking. What should you charge for an online event? If it’s professionally done, I’d start at $15, but that’s a minimum. Price signals value, so if you’re going to make a mistake, make it on the high side. And then deliver a show that’s worth it!

And remember: it’s a volume game. Sell a LOT of tickets. Because why not? There’s no fire code for online events, no max capacity. You don’t even have to put out folding chairs in the mezzanine if you sell too many.

So do online events create a free trap for live entertainment? I don’t think so. In fact, I’d say online events create a new profit engine for live entertainment as long as you adjust your thinking to the new model.

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