SXSW 2014 might have been the most controversial year in the festival’s 27 year history—but who cares about any of that right now, because a new report this week explains that it was also the most economically impactful event the festival’s ever seen by a wide country mile. The impact of SXSW 2014 on the city of Austin’s economy was revealed this week, following a study commissioned by the festival by Greyhill Advisors, to be a staggering $315 million, nearly $100 million more than the previous year.
A 50% spike over the already full-to-bursting 2013 edition of SXSW is a hard figure to fully comprehend. To put it in perspective, SXSW Interactive director Hugh Forrest told the Austin Business Journal that the figure is roughly 65% of the impact that a city like New Orleans sees from hosting the Super Bowl. It’s nearly a third of the net impact that the 2012 Olympics had on London. And, as the report is keen to point out, those events are fleeting: the Super Bowl isn’t in New Orleans every year, and the Olympics move on pretty quickly, too. SXSW happens in Austin every year, which means that both the economic impact and the cultural cachet that the festival brings to the city are permanent fixtures.
All of that sounds great, but it also all comes from a press release issued by the festival, touting a study commissioned by the festival. So given the massive, unprecedented spike in SXSW’s economic impact, there are some questions worth asking: Namely, is this figure legit? How did the economic impact of SXSW jump by almost 50% over 2013, which wasn’t exactly a small year for the festival? And is there any chance this rate of growth is sustainable?
The answer to the first question is “almost certainly.” $315 million in economic impact isn’t an unlikely figure at all. The impact of SXSW trickles down throughout the entire Austin economy—waiters make a typical month’s wages in a week; normally sleepy cab drivers can work round the clock; starving theater artists can rake in thousands by dragging their old Bernina sewing machines out to make costumes for whatever sponsored event needs silly costumes; restaurants near the Austin Convention Center can charge a massive premium to close their doors and become the Chips Ahoy House or something for four days; pedicab drivers can make enough to pay for an entire year’s worth of tattoos on a good weekend; local taquerias, pizza places, and BBQ joints can basically just keep cranking out the catering tickets for 11 straight days; anybody who knows how to set up a PA can probably find normally-scarce work at a venue; videographers who have to otherwise hustle for wedding work can find their phones ringing as Samsung asks them to shoot a pop-up performance by Justin Timberlake or whoever; etc, etc, etc.
So if the pedicab driver has full pockets after SXSW because she spent eleven days in March hauling badge-wearing tourists around, that’s considered by the report to be a “direct impact,” while the money she spends at the local bike shop to keep her pedal-powered operation in good running order during the festival is “indirect impact.” If, after the festival, she decides to use the extra money she’s made to finish the sleeve on her left arm, the money she pays to her tattoo artist is measured by the report as “induced impact,” or the money that starts floating around the Austin economy because SXSW brought more money to town. By combining all of those numbers, the Greyhill report gets to the $315 million figure.
That’s all interesting, but it doesn’t explain the jump of almost 50% over 2013. But it’s not really a jump—SXSW probably didn’t bring in an extra $95 million in 2014 over 2013. What it did do was find a way to track impact that had previously been hard to calculate.
Officially sponsored, but free-to-the-public events, have been a part of the SXSW ecosystem for a long time (non-official free-to-the-public events have, too, but they’re not considered as part of this report), but the festival hasn’t had a great way to track the impact of those things. For SXSW 2014, however, the festival introduced the SXSWeek Guest Pass, which was a hoop that Austinites and visitors without paid credentials jumped through to attend events like the SXSW Gaming Expo, the Outdoor Stage at Butler Park (which brought big-name headliners to Austinites for free), as well as the Flatstock poster ehibit, the Music Gear Expo, the Renegade Craft Fair, the Digital Creative Job Market, etc, etc. That extra hoop allowed the festival to track attendance at those events by people who didn’t pay the festival for the privilege of attending, and they were able to track the 150,000 Austinites and visitors who picked up SXSWeek Guest Passes. That’s a big number, obviously, and by the time all of those people pay for parking, grab lunch at a food trailer, have a couple beers, and fill up the tank to do it all again tomorrow, the direct/indirect/induced impact of that 150,000 people adds up. The report estimates the impact of the Guest Pass holders (called “participants,” rather than “attendees,” by the study) to be worth over $56.9 million. The events that these people are attending aren’t new, but the tracking of their participation is, which is a way of saying that somewhere in the neighborhood of $56 million of the $95 million spike in impact for the festival is probably not actually new money to the festival—it’s just that the previous years didn’t have a way to track that money.
All of this is a fancy way of saying that the nearly 50% spike in impact we saw between 2013’s $218.3 million and 2014’s $315.3 million is probably not sustainable, because it’s not actually a spike. Economy watchers checking out the 2015 numbers aren’t likely to see the impact figure for next year’s festival hit $415 million, because the study won’t be tracking people who had previously slipped through the cracks.
There are still loads of questions worth asking about SXSW, and what it means to—and costs—Austin each year, both economically and culturally. But, say, the bickering between the Austin paper owned by the festival and the Austin paper critical of the festival over who should pay for what certainly takes on a different tenor when the $315 million economic impact is factored in. A potential $755,000 from the city in fee waivers for SXSW is a lot of money, but as long as SXSW can point to that $315.3 million impact figure, it sure looks like small potatoes.