Within the last week, two major American music festivals—the EDM-centric Ultra Music Festival in Miami and the sprawling industry gathering SXSW in Austin—have been canceled due to public health concerns about the COVID-19 virus. Coachella, the Indio, Calif., standard-bearer for festival culture in the U.S., has been postponed from its usual April date until October. And many other live music events have also been affected. Whether or not even more cancellations and postponements occur going forward, the virus has already taken a major toll on the festival industry.

Festival cancellations happen for plenty of reasons, and have financial repercussions for everyone involved: artists, fans, staffers, vendors, and the festival organizers themselves. Last year alone, before the global coronavirus outbreak, at least a dozen music festivals threw in the towel, led by the calamitous Woodstock 50. What happens afterward and who gets paid depends on a few factors, including insurance coverage (or lack thereof) for festivals and artists, and whether the cancellation was voluntary or government-mandated. But the most important factors are the specifics of the deals between promoters and artists. “The short answer is: What does the contract say?” notes concert insurance veteran Peter Tempkins, whose festival clients have included Warped Tour and Bonnaroo.

Those contracts aren’t typically made public, making it difficult to specifically assess whether any particular artist will be paid for any particular canceled or postponed festival appearance. In the case of Woodstock 50, all performers were compensated in full, thanks to a contract specifying advance payment into an escrow that would be released regardless of whether the concert actually happened, according to a Variety report. But the situation for coronavirus-related cancellations may be different, especially if a local or state government effectively bans an event from taking place, as in the case of SXSW and Ultra, which were shut down in response to mandates from the Austin and Miami mayors.

Force Majeure

Tim Epstein, a sports and entertainment lawyer whose festival clients include Pitchfork, Life Is Beautiful, and Riot Fest, explains that government-mandated festival shutdowns may trigger “force majeure,” a contract provision that lets people off the hook for their obligations under the deal if there are certain unforeseeable circumstances, such as a natural disaster. Epstein believes that most coronavirus-related festival cancellations will happen under similar government-ordered force majeure conditions.

“What happens is that the parties are basically returned to their position pre-contract—with an exception being compensation for work performed to that point, for reimbursement of expenses incurred at that point,” Epstein says. “Most of the work is going to be taking place at the time of the event. And so most of the contracts for that work will not require performance because of the force majeure event, nor will it require a payment for the performance that did not occur.” In other words, artists and vendors wouldn’t be paid except for work or expenses from before the festival was canceled.

Insurance for Festivals and Artists

Next up is whether the festival bought an event cancellation insurance policy. But to be covered for communicable diseases, event organizers would need to pay extra for that specific protection from their insurance provider. And in recent weeks, insurers have generally stopped offering insurance coverage for COVID-19 whatsoever. SXSW recently acknowledged that despite having insurance for event cancellation due to terrorism, weather, injury, and other perils, it wasn’t covered for viruses and pandemics. Lacking insurance, a festival’s organizers may incur expenses out-of-pocket for things like staffing and marketing, even if its payments to performers are covered under force majeure.