by : Business, December 2013

SFX and EDM’s Corporatization

SFX and EDM’s Corporatization

SFX Entertainment (SFXE), the live music company owned by Robert Sillerman, launched an IPO recently, offering shares at $11 to $13 for $260 million. This implied a company valuation of about $1.05 billion. Poor timing caused the price of the stock to fall to $9 by November, but the flotation was a first tying the EDM market to a large pool of institutional and individual investors1. (Editor’s Note: Please refer to our cover article for more information on SFX’s IPO).

SFX

SFX Entertainment has had a storied history in the music industry. Robert FX Sillerman, a business icon whose involvement in music entertainment stretches back decades, started the company in 1997.2 Sillerman then set out to purchase as many heavy weight concert promoters as possible, and in quick succession bought Delsener/Slater Enterprises, Don Law’s Black Stone Entertainment, Bill Graham Presents, and The Next Adventure. Clear Channel Communications then acquired the company paying a handsome price and kept Sillerman aboard (initially, his new equity stake and operational duties were a matter of speculation).

Starting in June 2012, the soaring success of EDM music seems to have revived Sillerman’s animal spirits and the SFX brand–thus the current IPO. SFX has negotiated deals for about $1 billion with approximately fifty companies, including Disco Productions, i-Motion, Life in Color, and ID&T.3  The vision is wide. Sillerman does not intend to limit acquisitions to just America, but is reaching out as well to promoters, concert organizers, and entertainment companies across the world, with the greatest focus being placed on Europe. SFX Entertainment also plans on buying the platforms that bring EDM fans together, such as Beatport, which is the premier online music store for EDM.

Sillerman, who helped boost Clear Channel, is vying with Live Nation, a spin-off of Clear Channel and the most prominent concert promoter in America, to get a competitive edge on the EDM market. In the last few months, for instance, Live Nation has picked up Cream Holdings and Hard Events4, as well as establishing a partnership with Insomniac Events, the company that produces the well-known “Electric Daisy Carnival” festivals around America.

Despite strong competition, Sillerman’s business is fundamentally different to that of Live Nation, a mature ticketing and concert promotion business whose focus is wide reaching. By narrowing its scope, SFX Entertainment will likely integrate EDM festival events faster and reach out swiftly to the genre’s organizations and businesses.5

Still, the future looks uncertain for SFX. EDM has to overcome its status as yet another trendy fad. For now, it has had success in propagating itself across mainstream music tastes. A cursory look at Billboard’s Hot 100 reveals dozens of songs that incorporate EDM influences. EDM festivals and concerts across the world have sold out within minutes of tickets being made available to the public. In addition, EDM producers have been invited into studio sessions with prominent Top 40 artists, and radio stations across the country have broadcast such collaborations.  The genre has gained notoriety too for a pervasive drug culture that caused death, leading to several event shutdowns. Understandably, this has turned sponsors off.

EDM’s Challenge

Reactions to SFX Entertainment among EDM fans have been mixed.

Ethically, DJ RAP approves: “I don’t see SFX as a threat at all to the EDM scene or my career; [it is] still a men’s club [and] I hope Sillerman will be more open-minded and supportive of new female talent”6. DJ Whitney Fierce, instead, sees a more efficient business model for EDM, suggesting a better vertical integration between live music promoters and recorded music vendors (presumably because of the large scale investment of SFX).

However, other artists find that SFX Entertainment will damage EDM in the long run. Many believe that the inclusion of Wall Street and corporate profit mongers will tarnish the quality of dance music to come, even though they welcome corporate investment in the genre. Undeniably, SFX will be accountable to shareholders and as such the company may be less willing to take creative risks and promote cutting edge dance.7

DJ Cat NYC, who recently started her own record label and has performed with many of the industry’s most prominent artists, gives the perspective of many an indie artist: “Any time a major company gets involved in art on such a massive level [it] destroys what the dance music community is all about and will most definitely make it more difficult for young entrepreneurs who love EDM culture to put on their own events and promote new artists.”

Overall, it is clear that EDM is confronting a new paradigm. The old underground model of growth will continue to be exploited and the ethos of the medium will begin to reflect big money. The practitioners of the form can expect a better livelihood perhaps and fans will be offered more choice. But commoditization will bring its own challenges, not least of which will be making the genre much more universally appealing than it was ever intended to be.

By Christian Florez

 

Endnotes

1. Stock Quote for SFX Entertainment. (2013, November 24). Retrieved from MSN Money: http://investing.money.msn.com/investments/stock-price?symbol=SFXE&ocid=qbeb

2. History of SFX Entertainment, Inc. (n.d.). Retrieved from Funding Universe: http://www.fundinguniverse.com/company-histories/sfx-entertainment-inc-history/

3. Sisario, B. (2012, June 5). A Concert Mogul is Betting on Electronic Dance Music. Retrieved from New York Times: http://www.nytimes.com/2012/06/06/business/media/mogul-to-increase-bets-on-electronic-dance-music.html

4. Live Nation’s New Groove: Electronic Dance Music and Scalped Tickets. (2013, August 9). Retrieved from Bloomberg Businessweek: http://www.businessweek.com/articles/2013-08-09/live-nation-jumps-on-electronic-dance-music-scalped-tickets

5. Mason, K. (2013, August 9). EDM’s Dead, Long Live… EMC? SFX’s IPO Looms Large While the Industry Sells Out. Retrieved from Billboard: http://www.billboard.com/biz/articles/news/branding/5657763/edms-dead-long-live-emc-sfxs-ipo-looms-large-while-the-industry?page=0%2C0

6. Maguire, C. (2013, July 16). Abstrakt: (Responses to) Robert Sillerman’s SFX plans to change the landscape of EDM. Retrieved from AltSounds: http://hangout.altsounds.com/features/160327-abstrakt-responses-robert-sillermans-sfx-plans-change.html#R5fWzCg37H5wJsKl.99

7. Owsinski, B. (2013, October 17). Why the SFX IPO is Bad for EDM. Retrieved from Forbes: http://www.forbes.com/sites/bobbyowsinski/2013/10/17/why-the-sfx-ipo-is-bad-for-edm/

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Comments

  1. We were just talking about how we want to target more females and encouraging them to become DJ’s. The EDM scene has been domintaed by males but we are starting to see a few females make a name for themselves.

  2. True Story says:

    “Poor timing caused the price of the stock to fall to $9 by November, but….”

    That’s the point of an IPO. Go public at full valuation or above, price drops, then later buy back shares at the cheaper price. Pocket difference.

  3. ‘DM’ has already become a slightly detested term in some ways, but there is no denying the popularity of electronic dance music.

    It’s like a culmination of house, modern ‘progressive’ house, big room house etc

    I do think EDM has helped the economy… anything from having festivals take place everywhere (especially in the US), to learning how to DJ or music production itself…

    Thanks for the interesting read Christian…

    Dan

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