The Coachella Valley Music and Arts Festival is one of the largest musical gatherings in the country, attracting tens of thousands of fans every single year. Featuring acts ranging from hip hop artists to electronic performers, Coachella attracts an eclectic crowd.
During uncertain economic times, festivals like Coachella and the Electric Daisy Carnival continuously enjoy large volumes of attendees. Perhaps the concerts are mechanisms for people to escape the harsh reality of the outside world, alleviating daily stresses for a single weekend. Regardless of the human psychology involved, Coachella continues to be a successful venture for its sponsors in 2012.
As guest passes are running low, many traders are not going to enjoy the music festival this year for various reasons. That does not mean, however, that traders will have to sit back and not benefit at all. Not only will videos eventually surface of the major Coachella acts, but traders might be able to physically profit from the event and its sponsors.
Sony CorporationSony SNE is an entertainment conglomerate that supports musical acts heavily via multiple record labels. The most famous labels that Sony owns include Epic Records, RCA Records, Roc Nation, and Columbia Records. Collectively, these record labels support hundreds of artists, including Kelly Clarkson, Jay-Z, J. Cole, and The Fray.
While Coachella tends to feature many smaller artists, the headlining acts are typically renowned across the world. Many years, Sony has represented much of the talent at Coachella. For example, Jay-Z was the primary headliner in 2010. Regardless of how many Sony artists are performing this year, it seems likely that the company's line-up will garner sufficient publicity to boost sales.
Sony's revenues have been fairly stagnant over the last several years. While much of its earnings are derived from its technology products like televisions and computers, Sony Entertainment could be a larger revenue driver in the future. If Sony were able to cultivate several blockbuster artists, the Entertainment division could experience impressive growth over the long-term.
Limelight NetworksIt is more important today than it has ever been for artists to find distributors who can actively and efficiently market their work. One company that appears to fit this category is Limelight Networks LLNW. LimeLight is a small-cap company that delivers content including music, video, and software in the quickest possible manner via the internet.
Like other services, LimeLight networks provides on-demand music and video along with content management services. It also takes its services a step further by providing content on mobile devices as well as cloud storage spaces. If these services were available when the Beatles were popular, they may have been even more popular than they were.
Investors need to understand that the media industry is saturated with competitors, so not every company can be perfect. LimeLight networks offers many products and services, but has somehow not been financially successful in the last couple years. While there is promise in the future, investors may have some questions about an investment right now. Perhaps the company could sacrifice some of its offerings to focus on its most profitable services. It may also benefit from reducing salaries or headcount. Ultimately, these sorts of services my have been beneficial in the past for bands like the Beatles, but it has to quickly adapt for the future of content sharing.
The Bottom Line:The Coachella Valley Music and Arts Festival is an amalgamation of musical styles and performers, bringing together tens of thousands of people for a single weekend every year. As with many large, popular events, the sponsors tend to be very profitable. By selling products and merchandise directly, companies gain lucrative short-term revenues. Companies also have the opportunity to market their artists and gain exposure, eventually increasing long-term sales.
Coachella could be the catalyst for small companies like Limelight Networks. It could also help boost conglomerates like Sony by diversifying their businesses. At any rate, Coachella is one of the few things in the world that truly benefits everyone involved: the artists, the attendees, the sponsors, and even you.
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Bullish View:
Traders who believe that Coachella will be a major success might want to consider the following trades:
- Long the aforementioned companies. Those that are direct sponsors will gain short-term and long-term revenues.
- Diversified technology companies like Sony may not benefit as greatly as those who directly work in the music industry, so finding niche companies could be helpful.
- Companies that target indie and small-time artists may be the biggest benefactors, because many of these festivals are saturated with small-time artists and only feature a handful of musical heavyweights.
Traders who believe that Coachella will not be profitable may consider the following positions:
- Short companies that only focus on the music industry. This industry may be downsizing as talent becomes harder to identify.
- As the overall economic situation becomes worse, tech companies may be hit especially hard and may not be able to sponsor as many concerts.
- Short these companies if you believe that less people will go to the festival this year. This is a distinct possibility as the economy becomes worse.
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