The summer music festival economy, explained

This weekend, thousands of flower-crowned, shorts-wearing music fans will flock to California's desert to watch some of the best bands in the world play.

Coachella, which costs roughly $400 minimum to attend, is one of the biggest summer music festivals in the nation. With its two weekends and celebrity-packed grounds, it'll kick off the summer music festival season with a bang. It will also make a huge chunk of money for the music industry.

Throughout the summer, the same bands (mostly) will tour around the country, performing at festivals that resemble Coachella in almost every way — but cater to each crowd differently:

Bonnaroo (June 11–14 in Manchester, Tennessee) has a 40-foot waterslide this year. Lollapalooza (July 31–August 2 in Chicago) has a kid-friendly area, and Coachella has a dozen VIP-only areas. But music festivals haven't always been such a huge ordeal.

What is a music festival?

A music festival is a giant outdoor concert where people listen to dozens of bands in rapid succession, usually while drinking, on an annual basis. The earliest festival is Coachella, which takes place in April; festival season runs into the fall. Sometimes the festivals are based on genres, or only feature local artists. But most of the giant money-makers feature every artist from Drake to Nine Inch Nails.

Dionne Warwick performs at the Newport Jazz Festival in 1968. (New York Daily News Archive/Getty)

When did music festivals start?

For decades, music festivals were stoned, nudist, and often dangerous affairs. Though many music festivals existed throughout the 1950s and earlier, the first music festival as we know it today (three days, outside, on fairgrounds with huge names) was the Monterey International Pop and Fantasy Fair in 1967. After that came the Newport Pop Festival in 1968 followed by Newport Jazz, which in 1969 fused together not only jazz but soul and rock. On the verge of the 1970s, Woodstock and Altamont came on the scene. Much of the nostalgia, fashion, and atmosphere that dominates music festivals today stems from those early events.

"In the ’70s and ’80s, festivals were the realm of pirates and crazy people, but as time went on in the late ’90s and 2000s the rest of the corporate world has caught up and now it’s just business," Jon Stone, executive director of One Reel, the producer of Bumbershoot in Seattle, told Fortune.

For most of the '80s and '90s, music festivals remained passé, and were places that attracted mostly druggies and hippies.

Performing for a large group of fans is a more lucrative way to tour, and until festivals became such a staple, that's exactly what big American bands did —they toured the country and performed in amphitheaters. Festivals couldn't offer them any of the cash output or fan base to be worth their time. "When we first did Bonnaroo, the conventional wisdom was that this was not a good idea. We were met with some combination of horror, amusement and disbelief," Ashley Capps, a cofounder of Bonnaroo, told Wondering Sound.

But in the early 2000s, that changed.

For the first time in history, people had access to infinite music all the time. Suddenly they didn't have five bands they wanted to see live—they had 50, and music festivals could fill that desire by putting 70 bands together in one weekend.

2014 Coachella Valley Music And Arts Festival, weekend two, day three. (Chelsea Lauren/Getty)

What are the biggest music festivals?

The music festival season gets its first preview in March with the industry's biggest professional event, South by Southwest. But SXSW is its own animal, and has expanded to include tech and film. The real start of the summer music festival season is this weekend with Coachella, can cost almost $1,000 for VIP. Many of those VIPs, since the festival is near LA, are some of Hollywood's best partiers. The Kardashians always make an appearance, and there are many young, fun celebrities in attendance.

After Coachella, there's Washington state's Sasquatch in late May. In June, New York hosts the Governor's Ball and Tennessee holds Bonnaroo. In July, Chicago starts Lollapalooza. In August, it's San Fransisco's Outside Lands. By the time Austin hosts Austin City Limits in October, the season is winding down. And that's just a few of the heavy hitters. In recent years, music festivals have popped up everywhere. Gulf Shores, Alabama, created a festival where bands perform on a stage in the water and fans can float in inner tubes to listen to their favorite bands. Live Nation alone puts on almost 20 music festivals a year, and there are more than 100 prominent festivals happening in 2015. North America has more 800 festivals in total.

Are music festivals a good place to hear music?

Not at all. Music festivals are a terrible place to judge a performance. Since bands are performing outside, they often have to deal with excruciatingly hot or rainy weather. Lesser-known bands who have to play afternoon sets often have to battle blinding sun and scorching heat. Because most festivals take place in warmer seasons, sometimes bands even play through rain, mud, and sunburns in the same weekend.

Music festivals are the mixtape of concerts

Not only are bands facing an extra element of difficulty, but the venue itself makes the consumption of their performances more difficult to enjoy. Most concert venues are set up to relay sound to listeners in the best form. They have stable speaker systems and multiple sound checks, and are in insulated venues so that sound doesn't bounce off of the walls and create a dissonance for listeners. Outside, not only does sound bounce and travel, it intermixes so that if you stand in some areas, you can hear the music playing on several stages at once. It makes you feel like you're a part of something big, but it also dilutes the sound each of those artists is creating.

So music festivals are kind of the mixtape of concerts. You don't go to a music festival to hear one great performance. You go to hear 30 good ones. The benefit of a music festival (especially a good one) is that there are enough bands that you can hop around during sets and hear dozens of bands in one weekend. They are a great place to discover new voices you love. Sometimes the best set you'll see all weekend will be the one that comes on before the band you waited hours to see.

Kanye West performs at Outside Lands. (FilmMagic/Getty)

What impact do they have on popular culture?

Music festivals, with the exception of Woodstock, don't have huge ramifications on popular culture. They don't have a political agenda or plan to change the world. They're just pure entertainment.

One place where music festivals have really taken over, though, is popular fashion. As Nicola Fumo wrote for Racked:

Spence also reports a steady growth in the festival business over the seven years she's worked at ASOS. "It’s almost like the new twentysomething’s holiday destination," she says. "They save up to go to festivals. It's a massive trend and with our customer, one that's really important. In the UK, we’ve got one of our big festivals coming up, Glastonbury, and Kanye West is going to headline. It shows just how mainstream and accessible those festivals are."

The amount of money made by music festivals makes it a lucrative place for other companies, including fashion brands such as Free People and ASOS, to profit, which in turn spurs the music festival industry into greater and greater prosperity. Shopping at H&M when everything on the floor is a crop top made of rope might not make you buy a ticket to Coachella or Lollapalooza, but it might make a shopper consider going to a music festival closer by.

What kind of impact do music festivals have on the industry?

Music festivals of any kind are a great financial investment for the music industry.

They make millions and millions of dollars in ticket sales alone. In 2012, Coachella broke the all-time ticket sales record selling 579,000 tickets worth more than $78 million dollars total. That's up from $17 million in 2007. And that's just on tickets. That doesn't count the ludicrous amount of money festivals can make on advertisements and sponsorships. "When people think of great music and the brands that enable it, we want them to think of Budweiser," Paul Chibe, Vice President of US Marketing at Anheuser-Busch told Fortune in 2013.

The very next weekend after Coachella in 2012, the same venue held a country music festival called Stagecoach with headliners like Eric Church, Luke Bryan, and Florida Georgia Line. It grossed $18 million. The music industry has completely changed since 2001. Now we watch music videos on YouTube, we stream our favorite songs, and we see our favorite bands in the middle of a field with thousands of our closest friends.

Where the industry has struggled to make music money off of the actual product, they have found a huge source of revenue in live performances.

Update: This article has been updated to clarify that music festivals did exist before the Monterey International Pop and Fantasy Fair in 1967, though that's often considered the first big modern music festival.

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