There's money in the mud at rock festivals

'The costs of staging open-air concerts are scary to say the least ... It can be ruinous for all involved'

Most under-50s have a rock-festival story. From Jimi Hendrix on the Isle Wight to the present day, mud, dodgy loos, drugs, sex and rock'n'roll have become legendary. But festivals are no longer about hippies gathering in a field for a day or two of loving and listening. They are big business.

The summer festival season is dominated by a handful of big firms, with Mean Fiddler the biggest. The listed music specialist has three core divisions, but is probably best known for festivals: this weekend's Reading and its sister festival at Leeds, a 30 per cent stake in Glastonbury (which will rise to 40 per cent by 2005), the Irish-themed Fleadh and dance extravaganza homelands. Chairman and founder Vince Power remains coy about how much money they generate, conceding only that festivals "make money but also lose money, just like any other business". In June, however, Mean Fiddler reported full-year turnover of £39m (it also went further into the red but mainly due to a business-wide shake-up which saw it sell off its loss-making bars and restaurants arm).

Certainly, the money does not come rolling in straight away. Mean Fiddler launched Leeds six years ago and that, according to Mr Power, took "at least three years to make money". Mean Fiddler also cancelled Fleadh this year after failing to find a suitable headline act to pull in the customers and make the event profitable.

Others can face difficulties as popularity rises, bringing its own problems. Glastonbury 2002 donated more than £1m to good causes, in keeping with its hippy roots, but the event had earlier struggled with surging demand and security problems, and in February 2002 called in Mean Fiddler to help run it. As Ian Huffam, an agent at live music agency HelterSkelter, warns: "The costs of staging open-air concerts are scary to say the least. A good return is possible if all the variables add up. If they don't, it can be ruinous for all involved."

Get your niche right, however, and the rewards are there for the taking, even at an early stage. Media group Clear Channel launched the two-day rock festival Download at Donington Park this year after deciding the genre was enjoying a resurgence. It appears the company was right: Download - which featured Marilyn Manson and Iron Maiden and was named event of the year last week by readers of rock mag Kerrang! - broke even in its début year. The show had overheads of about £3m, with two-day tickets priced at £70 - camping and parking extra - and one-day passes at £39. With 45,000 visitors on Saturday and 38,000 on Sunday, the arithmetic is not hard. To bolster demand, the group deliberately set the ticket prices slightly below that of most other events. Reading, for example, would have set you back £100 for a two-day pass.

It is not just ticket sales that make the money. Sponsorship is part and parcel of festivals and no one does it quite like V, whose 2003 event last weekend featured Coldplay, Moloko and Feeder. The event is promoted by Metropolis Music and SJM Concerts in conjunction with Virgin Mobile. The brand has been involved from the start: in 1996-2000, Virgin Cola was the sponsor, before being replaced by Virgin Mobile.

Steve Rogan, Virgin Mobile sponsorship manager, refuses to say how much the group spends on the event, but says: "It makes perfect sense for us and I don't think it costs a lot when you compare it to other forms of sponsorship, such as Formula One and football. It's an effective way of reaching a hard-to-reach audience. It's easy to get wrong, but the rewards are there."

That sponsors are flocking to attach their names to festivals is an indication of how much things have changed. "Festivals now offer a more varied type of music and are more family friendly. They are more a few days out rather than trudging around in the mud with disgusting toilets," says Mark Anselm, a vice-president at corporate finance firm LongAcre Partners. "They also have mainstream bands now, so they are getting more popular."

Mr Huffam, who worked on Robbie Williams's recent tour, agrees: "Festival attendances have been growing over the past 10 years. There seems to be a collective need to gather in large fields and listen to multi-band bills."

In other words, festivals have become just another thing to do in summer. It is a win-win situation. The fans pay and in return get an (almost) civilised camping trip and a chance to see favourite bands. The bands get paid "handsomely", according to one industry insider, and can, in the space of a few weeks, play to millions of fans - or consumers, depending on how you look at these things. Sponsors get a captive audience and the kudos of being associated with something as right-on as a rock festival.

And the promoters? Get it right and they are singing all the way to the bank. Cynical it might be, but there is a bright note to all this anti-hippy, capitalist behaviour. As Mr Anselm points out, it might just be the saviour of music: "It's all doom and gloom at the moment, with sales of recorded music down because of piracy. But the reality is that people are still listening to music and you can't pirate a festival."