SFX Entertainment: Examining Today’s Biggest Dance Music Company
Chances are, if you’re a fan of dance music in any capacity, you’ve supported Robert F.X. Sillerman’s rapidly-growing profile of companies in one way or another. Bought tracks on Beatport? Experienced a Sensation event? Rubbed shoulders with celebrities at LIV? You’ve interacted with SFX Entertainment.
Sillerman, the conglomerate’s chairman and CEO, decided to re-ignite his company in 2012 with intentions of becoming a key player in the global EDM space after realizing the potential of the genre’s massive boom. Since then they have acquired several major dance music companies and are in control of over 50 music festivals. All of this is giving the 65-year-old a shot at becoming a leading music industry innovator for a second time over — he famously spent $1.2 billion in the 1990s to make SFX Entertainment the largest concert promoter in the U.S. and subsequently sold it to Clear Channel for $4.4 billion in 2000, who in turn parted ways with its concert business five years later, giving birth to Live Nation.
It’s no surprise that Sillerman’s attention was grabbed by the seemingly non-stop growth of dance music. Festivals like Ultra and Tomorrowland are expanding their attendance by the tens of thousands per year, multi-national brands jump at the chance to sponsor said festivals, and high-end audio companies sell high-ticket gear like hotcakes. The electronic music industry was said to be worth over $4.5 billion in 2012-13 by the International Music Summit Report. EDM (or EMC, electronic music culture, as SFXE prefers to call it) is one of the few things that seems to be keeping the attention of millenials across the globe, making it a prime niche for marketers to use to reach the otherwise flighty group of adolescents.
SFXE became a public company last month. Its IPO was 20 million shares at $13 each, garnering the company over $260 million. “SFX has a market value of about $1.05 billion, based on the terms of the offering,” reported Bloomberg. Where does all of this value come from? Just take a look at their roster of assets:
- ID&T (Tomorrowland, TomorrowWorld, Sensation, Mysteryland, Q-Dance, and Decibel)
- Life In Color (Paint parties)
- Disco Donnie Presents (Organizer of 600+ events in North America)
- Miami Marketing Group (LIV, LIV Sun Life Stadium, Story)
- i-Motion (Nature-One, Ruhe-In-Love, MayDay Festival)
- Totem (Stereosonic, Creamfields Australia, Solar Music, and Outrage)
- Made Event (Electric Zoo, Sunday School)
- Beatport (Largest online music store)
- Tunezy (Digital platform for artists to monetize fan experiences)
- Fame House (Digital strategy, social media, and web design and development services)
- Arc90 (Designer and builder of mobile and web applications, services and platforms)
The latter five companies were acquired in the last month alone. “These deals are consistent with our commitment to bring EMC fans around the world more of what they love, 365-days-a-year, and to be world-class in all our areas of focus,” said Sillerman in a company statement. With a profile now encompassing heavyweight event producers and digital entities alike, this is clearer than ever.
Financial analyst John Janedis of UBS explains their support of the company with the thought that SFXE “will 1) benefit from double digit live event organic growth over the next several years as EMC takes greater hold on a global basis, 2) experience gross margin expansion through benefits of scale and efficiencies at live events, as well as the addition of higher margin sponsorship revenue, 3) drive significant sponsorship revenue across its live event and digital platforms, and 4) make accretive acquisitions further expanding its global footprint.” When even the finance guys start to understand the power of dance music, what does that mean for it as a whole?
“It’s great when someone has so much confidence in a part of the music industry that he invests heavily in it and then convinces Wall Street to invest as well,” explains well-respected music business writer Bobby Owsinski in a Forbes article about the company. “Unfortunately that also brings about a self-fulfilling prophecy, meaning that when big money comes into something artistic, the art inevitably gets squeezed out in favor of something safer and therefore deemed more likely to result in a profit (although this rarely seems to happen).” Of course, up until now, Sillerman has only made partnerships with companies whose primary cash flow’s arise from the popular/bubblegum/build-up-and-drop type of dance music – already lacking in artistry if you ask us – but what’s next? Is SFXE going to buy into Ibiza? Amsterdam? Berlin? Is this officially the death of Sunday School?
Only time will tell how much power SFXE generates. It seems the options for its expansion are as plentiful as the tutu and shutter shaded masses which proliferate today’s electronic music scene. As long as Sillerman sticks to that crowd, we’re all for it.