ENTERTAINMENT

Virgin Fest Stiffed by WME’s Refusal to Return $6M Artist Deposits

The first year festival was going to be a major payday for breakout star Lizzo.

A $6 million battle is brewing between Virgin Fest and WME over deposits paid to Lizzo, Ellie Goulding, Kali Uchis and others who had agreed to perform at the inaugural Los Angeles festival originally scheduled for this weekend (June 6-7) before the coronavirus pandemic forced its indefinite postponement.

In December, Virgin owner Richard Branson announced the inaugural festival in a wild rooftop stunt atop Banc of California Stadium. Virgin Fest was to be a celebration of inclusivity where “All Are Welcome” but on May 8, organizers were notified by Mayor Eric Garcetti that the event would “not be allowed as originally planned” due to a statewide stay-at-home order.

When Virgin Fest executives Charles Ciongoli and Jason Felts reached out to talent agencies to request they return deposits paid to book artists, all but one obliged. While CAA, UTA and Paradigm all wired back the funds, representatives at WME declined Virgin Fest’s request to return $6 million the agency was holding for most of the artists scheduled to play. Of that total, Lizzo was to receive $4 million to $5 million in a blockbuster deal negotiated by her agent Matthew Morgan, and the Grammy-winning superstar had planned to use a portion of the proceeds for a high profile charitable effort.

Now that payday seems unlikely and highlights how the COVID-19 pandemic has affected the careers of the music industry’s next generation of headliners. Besides the mega payday for Virgin Fest, Lizzo was booked to headline Bonnaroo, Outside Lands, Montreal’s Osheaga festival and New Orleans Jazz Fest. Instead of netting the likely $10 to $15 million she would have received from the four festivals, Lizzo’s live career has been sidelined by COVID-19 just as her earnings were about to skyrocket. (Billboard reached out to a representative for Lizzo for comment and did not receive a response by press time.)

Even worse, the money is likely sitting in an account set up by her business manager, meaning she can see it but can’t touch it. Because Virgin Fest is a new event, WME required organizers to pay 100% of artist fees in advance, days before the lineup was announced. While it’s standard practice for talent agencies to return the deposit if an event is canceled due to force majeure — essentially an unforeseen event beyond one’s control  — some contracts do include provisions that require payment even if a force majeure event leads to cancellation.

Virgin Fest does not appear to be one of those festivals. According to a clause included in an email from Virgin to WME and obtained by Billboard, Virgin Fest’s force majeure language seems fairly standard with language that says “in the event of cancellation due to force majeure” the “producer shall return any deposit previously received.”

In this context, a producer is an LLC or holding company set up by an artist manager to hold deposits until an artist performs at the promoter’s concert or festival. If there is a force majeure event or a dispute with the promoter, the trust account holds the funds until the disagreement is resolved. Typically the promoter and the artist negotiate and settle the dispute, but if it does go to court, the agency can be named as a defendant even though they’re not a signatory to the performance contract. It’s not uncommon for agencies to be sued for tortious interference in breach of contract lawsuits against their artists.

So far, no major agency has faced that type of lawsuit in the COVID-19 era, despite more than 100,000 events and concerts being canceled or postponed. A source tells Billboard that WME had pushed for Virgin Fest to postpone Lizzo’s headline performance until the 2021 festival, which would have allowed Lizzo to continue to hold the huge payday in her trust account. But because of scheduling issues, Virgin Fest was unable to immediately secure new dates at Banc of California Stadium. Fans who bought tickets had a choice — refunds or hold tickets for 2021. Lizzo was not offered that choice — not knowing when the new event would take place or how many tickets the “Juice” singer could sell in 2021, Virgin Fest organizers declined to postpone her performance to 2021 and pushed to get their money back.

“All other artists and every other agency have returned deposit money, except WME,” Ciongoli wrote in a June 1 to Josh Kurfirst, a partner and global head of festivals at WME. “Virgin is also aware of some of the subject Artists returning deposits to other promoters for other festival performances cancelled due to Covid-19. Dismissing these circumstances along with the plain language of the performance agreements is short-sighted, not to mention not legally sound.”

Officials with WME released a statement to Billboard, noting that its “clients are contractually entitled to the money already paid to them, plain and simple. We have stated our position numerous times to Virgin Fest, and attempted to work with them to find an impactful way forward in today’s climate despite our clients’ clear contractual rights, and especially considering that our clients booked these engagements in large part due to the charitable component, only to be met with hostile threats.”

Those threats appear to be in reaction to alleged threats from the agency. According to Ciongoli’s letter, an executive at WME told Virgin Fest that the fight over the deposit “will have a significant and enduring impact on Virgin Fest’s relationship with WME and its talent.”

“We cannot imagine that your Artists (or the management of your clients) are aware of such threats being levied against Virgin,” Ciongoli wrote. “Now those parties are aware. We hope to work with each of the artists in the future, and that you cease your efforts to ensure the opposite.”

Complicating the fight is Virgin Fest and WME’s strange history of working together. Before launching Virgin Fest, Felts produced Kaaboo festival in San Diego. Last year Virgin Fest purchased Kaaboo from owner Bryan Gordon, who almost had to cancel the 2019 festival because of a failure to pay key vendors including some of the artists on the lineup, some of which were represented by WME. Just 48 hours before the festival was to open, Virgin Fest acquired Kaaboo and transferred millions in payments to WME and other agencies, narrowly avoid cancelation. Gordon is now facing multiple lawsuits for his disastrous five-year run in the festival business, including a challenge by his ex-wife who says Gordon allegedly stole $20 million from the former couple’s settlement account.

“In a lot of ways, it seems like the talent agencies are making Felts pay for the sins of Bryan Gordon,” one source tells Billboard.

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