Austin's SXSW is studied for it's impact to the regional economy. AngelouEconomics' projections are double that provided by the visitor's bureau.

March 2008

by John Rees, AngelouEconomics Associate Project Manager

Commissioned by executive leadership of the SXSW festivals

Media Highlight

According to the Austin Business Journal: At a press conference at City Hall attended by Mayor Will Wynn, City Council Members Betty Dunkerley and Mike Martinez, and Mike Shea, an executive planner for SXSW, Angelos Angelou, principal and chief economist at AngelouEconomics, emphasized the $110 million figure is a "very conservative" estimate, meaning the figure could be much more. Read the Austin Business Journal item here.

An except from a recent article from the Austin-American Statesman quotes Mayor Will Wynn, whom introduced the AE report as saying, "Cities that are fun are going to do better economically," highlighting SXSW's blend of trade show, professional conclave and entertainment provider. Continue reading the Statesman article here.

The following assessment represents the first attempt to capture the full economic impact of the 2007 South by Southwest Music, Film and Interactive Conferences and Festivals (SXSW) on the City of Austin; previous economic impact studies of SXSW failed to account for the truly unique nature of SXSW.

Only a handful of events in the world can compare to SXSW in the size and range of activities, performers, presenters, and attendees. Two qualities in particular distinguish SXSW from other festivals and professional conferences. Perhaps most importantly, SXSW does not focus on a sole industry or discipline. While SXSW initially started as a music festival and conference, subsequent additions of film and interactive media have become integral components of the event. In 2007, SXSW featured nine days of industry conference activities, six days of trade shows, a five-night music festival featuring over 1,500 artists in more than 70 venues, nine days and nights of film festival with more than 275 screenings in six venues, a three-night free concert series, a three-day poster art show with 150 top artists, and a two-day gaming arcade.

SXSW is also unique in that the event serves as both a conference for industry professionals and a festival for music and film aficionados in the public at large. SXSW hosts many industry oriented lectures and seminars that are not available to the general public. Importantly, this component of SXSW makes the event more than just a festival providing entertainment for the consumer audience. Despite its professional leanings, however, SXSW also includes significant components that allow thousands of people to attend film screenings and live concerts.

In 2007, SXSW was directly and indirectly responsible for injecting approximately $95 million into the Austin economy:

• Operational Output — The direct, indirect, and induced local economic benefit of the year-round operations of SXSW as well as festival-specific expenditures by SXSW and its sponsors. In 2007, the economic impact of SXSW operations totaled nearly $18 million.

• Attendance Expenditures — The direct, indirect, and induced local economic benefit of all attendees of the conference and festival. Attendees include official SXSW badgeholders, primary industry professionals, and wristband holders, festival exhibitors, and single visitors of events such as film screenings and music concerts. In 2007, SXSW attendance expenditures represented over $77 million.

In addition to SXSW expenditures and attendance, the 2007 SXSW economic impact analysis also considers the “soft” economic impacts of the festivals and conferences. Traditional economic impact assessments are often ill equipped to measure the ephemeral qualities of an event; previous economic impact studies of SXSW wholly ignored the subject. While everyone recognizes that worldwide media coverage of SXSW provides significant value to the city of Austin, however, there has never been a formal attempt to quantitatively gauge this value. Despite the methodological limits of such an endeavor, SXSW media coverage clearly creates value for the City of Austin.

Finally, it must be noted that the following economic impact analysis is limited to events officially sanctioned by SXSW. Although SXSWeek attracts private marketers that attempt to co-opt SXSW attendees for their own benefit, such activities do not generate significant additional benefit to the city and are not recognized by this economic impact analysis.

One of the greatest limitations of previous economic impact assessments was the failure to account for SXSW’s permanent presence in the City of Austin. Specifically, the Austin Convention & Visitor’s Bureau’s economic impact model assumes that SXSW is a discrete event. Under this scenario, the total economic impact of SXSW is limited to 10 days of activities. While this model may be appropriate for most festival and professional conferences, SXSW is an Austin-grown enterprise that operates throughout the calendar year. In this respect, SXSW is no different than any other private company doing business in Austin. For example, SXSW maintains a full-time staff of approximately 60 workers. Temporary festival workers in areas such as security and event production represent the equivalent of an additional 40 full-time workers. To fully account for the permanent presence of SXSW within the City of Austin, an operational output analysis was performed as the first component of the total economic impact analysis.

Operational output includes total expenditures by SXSW, in addition to all expenditures made by official sponsors of the festivals and conferences. The economic impacts of expenditures by SXSW and its attendant sponsors are calculated and categorized as direct, indirect, and induced economic impacts. All calculations were made using IMPLAN, an input-output model developed by the University of Minnesota. Inputs included all direct expenditures by SXSW and its sponsors.

Direct economic impacts are limited to directexpenditures into the local economy by SXSW and official sponsors.A direct economic impact attributable to SXSW, for example, might include revenues from a printing company related to the production of festival collateral materials. Indirect effects include increases in sales, income or jobs in industrial sectors that support the direct beneficiaries of SXSW expenditures. A typical indirect impact attributable to SXSW might include the increased revenue of a paper company that supplies products to SXSW’s printing company. Induced effects are the household spending of individuals who experience increased earnings as a result of SXSW. Groceries and other goods and services purchased by a printing company employee with the earnings from SXSW related projects are representative of induced impacts.

Direct expenditures of SXSW and official sponsors total nearly $12 million annually. At $9.5 million, the permanent operations of SXSW represent the great bulk of direct operational impacts. Official SXSW parties and sponsors represent another $2.4 million in direct expenditures. The combined indirect and induced economic impact of SXSW operations is an additional $5.7 million annually. All together, the total economic impact of SXSW operations represents the injection of nearly $18 million into the local economy.

Attendance at all sanctioned SXSW events totaled 126,900 in 2007. Official badge holders for the conferences and festivals numbered exceeded 21,000 and included all Platinum, Gold, Film, Interactive, Music, and Student registrants. Although 1,500 artists officially played the SXSW music festival, over 7,300 musicians attended and participated. Wristband holders for the music festival accounted for an additional 7,600 attendees. Based on crowd estimates, attendance for film screenings, the Town Lake Stage concert series, the Flatstock poster convention, and the Screenburn interactive video arcade totaled 87,000. Finally, an estimated 4,000 additional visitors spent time in Austin due to SXSW festivals and conferences. Collateral attendance includes individuals such as band managers, spouses of official registrants, and trade show booth workers.

The attendance economic impact, like the operational output includes direct, indirect, and induced economic impacts. Direct economic impacts are limited to direct expenditures into the local economy by all attendees and exhibitors. A direct economic impact attributable to SXSW attendee, for example, includes expenditures on hotels, restaurants, bars, and retailers. Indirect impacts might include increased revenues of producersand wholesalers who provide beverages and foods toAustin clubs and restaurants. Induced effects remain similar to those of the operational output model, including goodsand services purchased by a bartender with the tips garnered from SXSW visitors.

The attendance economic impact, like the operational output includes direct, indirect, and induced economic impacts. Direct economic impacts are limited to direct expenditures into the local economy by all attendees and exhibitors. A direct economic impact attributable to SXSW attendee, for example, includes expenditures on hotels, restaurants, bars, and retailers. Indirect impacts might include increased revenues of producers and wholesalers who provide beverages and foods to Austin clubs and restaurants. Induced effects remain similar to those of the operational output model, including goods and services purchased by a bartender with the tips garnered from SXSW visitors.

General attendance expenditures include the aggregated totals of all SXSW related visitor spending in Austin during the festivals and conferences. Separate attendance lengths and daily expenditure estimates were calculated for each category of visitor, including badge holders, musicians, collateral attendees, and visitors to events such as the Town Lake Stage concert series, Flatstock, and Screenburn. Over the 10 days of the SXSW festivals and conferences, visitors poured more than $50 million into the local economy. An additional $27 million in indirect and induced economic impacts can be attributed to SXSW attendees. The combined impact of SXSW attendee expenditures to Austin is over $77 million.

Placing a concrete quantitative value on publicity is beyond the scope of traditional economic impact studies. While positive publicity does benefit a community, the impact has not yet been proven to translate into direct local investment. In this regard, any value created by media coverage must be accounted for outside the framework of direct, indirect, and induced impacts.

The economic importance of Austin’s reputation as a haven for film, technology, and most notably music, partially fueled by the presence of SXSW, cannot be easily dismissed. Economists at Brown and Harvard, for example, have recently suggested that a rising demand for urban amenities such a music concerts is associated with a growing number of educated workers within central cities. SXSW itself has certainly contributed to Austin’s relatively recent ascendancy as one of the country’s most attractive cities for the widely heralded "creative class"—the forward-thinking, high-earning demographic aggressively recruited as residents, employees, and customers. Thanks to SXSW-related media exposure, millions of creative professionals throughout the world read articles and watch television segments promoting life in Austin.

Without spending a dollar on advertising or marketing, Austin and the surrounding area reap great benefits from the positive coverage of SXSW by newspapers, magazines, television stations, and radio stations around the world. Although SXSW and Austin receive significant free media exposure, such coverage does have a value. SXSW is all the more powerful because it contributes to a coherent message about Austin.

Although the branding benefits to Austin remain difficult to calculate, the efforts of other cities in promoting their communities provide potential benchmarks.

In 2005, Atlanta announced a $14 million marketing campaign to market the city as a place to live and do business. Since its inception, Brand Atlanta has garnered more than 450 million advertising and public relations impressions. Impressions are defined as the count of a delivered basic advertising unit from an ad distribution point. The number of media impressions created by a newspaper story on SXSW, for example, would be represented by the paper’s circulation. This year alone, SXSW achieved 180 million broadcast, print, and online impressions. In an era where consumers are increasingly resistant to obvious paid placement, such media coverage as enjoyed by SXSW is even more valuable precisely because it was provided without charge. Despite large public investments, for example, Atlanta’s branding tagline, “Every Day is an Opening Day” has far less resonance than Austin’s official slogan. Austin remains “The Live Music Capital of the World” because it is continually authenticated through events such as SXSW.

Due to the lack of prevailing economic development models, combined with insufficient tracking of SXSW media mentions in 2007, attempts to properly quantify the value of SXSW related media coverage invariably suffer from methodological limitations. Despite such formal difficulties, media activity touting SXSW was analyzed and assessed across three categories: entertainment broadcasts, news coverage, and sponsor advertising. The combined value of SXSW media coverage in 2007 totaled $12.8 million.

Using wholesale advertisement rates, the approximate value of entertainment broadcasts on satellite television totaled $7.2 million. To determine the value of print media coverage, a sample of more than 150 SXSW articles was analyzed to determine average length. Representative word counts were then converted into physical page dimensions. Next, a weighted average advertising rate based on a review of dozens of publications was applied to the 350 discrete newspaper, magazine, and wire service articles regarding SXSW. Such media exposure was subsequently estimated at $1.2 million. Advertising outside of Austin by official SXSW sponsors in 2007, including 256 ads in 122 publications, represented an additional $4.4 in expenditures. Media coverage not accounted for in this examination includes more than 120 blogs and websites, radio coverage, and foreign TV broadcasts. The preceding calculations, though imprecise, represent an important first attempt to properly quantify the fiscal impact SXSW's "buzz" factor generates for the city of Austin.