CMU Trends Digital Live Business

Trends: The growth and float of SFX (A Free Read)

By | Published on Wednesday 15 January 2014

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SFX

We expected the big live business news story of 2013 to be the sale of the Anschutz Entertainment Group, one of the world’s most powerful venue operators and the second biggest concert promoter, which was put up for sale by owner Anschutz Inc in September 2012.

But then, in March, AEG was taken off the market and it was business as usual it seemed. Though there were changes at the top, most notably the somewhat sudden departure of CEO Tim Leiweke in March, and the also sudden exit of Randy Phillips, boss of the AEG concerts business, in November.

THE GROWTH OF SFX v2
In the end, it was an upstart in the live space that generated the most interest in the last twleve months: SFX, the latest business venture from entertainment industry veteran Robert FX Sillerman, whose original SFX company formed the foundations of what is now Live Nation, AEG’s main competitor.

Sillerman launched the new SFX in 2012, announcing from the start that this company would seek to capitalise on the relatively recent (in the US at least) commercial rise of the dance music genre, or EDM (‘Electronic Dance Music’) as Sillerman liked to call it, or EMC (‘Electronic Music Culture’) as has become the term-du-jour of late.

Since launching his latest business, Sillerman has led a prolific acquisition spree, making numerous EDM event promoters millionaires overnight (concurrent interest in this domain by both AEG and Live Nation have helped said promoters create bidding wars).

Although most of the deals have been with festival promoters in the EDM space, the SFX company also now owns dance-focused download store Beatport, European ticketing firm Paylogic and a few other tech businesses.

THE SFX INITIAL PUBLIC OFFERING
Such rapid growth doesn’t come cheaply, and so this year Sillerman floated his new company, selling a slice of the business on the NASDAQ stock exchange in New York in October.

Which means that, while Live Nation, AEG and the major labels have all increased their EDM interests in recent years, we now have a major dance music business directly trading on a stock exchange, which gives us a neat way to assess what potential Wall Street sees in the EDM genre and clubbing culture.

Since flotation SFX’s share price has been wobbly but not woeful. The October IPO raised $260 million and valued the new SFX business at over $1 billion.

UK AMBITIONS?
SFX’s various acquisitions have increased the company’s global reach, though it is yet to buy it’s way into the British market. Assuming the UK is on the agenda, it will be interesting to see if any deals bring SFX here in 2014.

With Creamfields now part of Live Nation, possible other UK targets for SFX might be the Gatecrasher company, which restructured in 2013 after a ‘pre-packed administration’; the Global Gathering business, currently co-owned by Live Nation and MAMA; prolific EDM group AEI Media; or even some kind of alliance with Ministry Of Sound.

2013 AT BEATPORT
In a year when pretty much every SFX announcement was about acquisition-based expansion, in November the company had to respond to its first bit of down-sizing, at digital music firm Beatport, bought by Sillerman for a reported $50 million in February.

Beatport’s new owner seemingly wanted to focus on the digital company’s core download store business, and to wind down other spin-off services.

Meanwhile, an initial assumption that SFX might make use of Beatport’s tech development team for other ventures, safeguarding their future, was scuppered when Sillerman’s group bought tech agency Arc90. The result was the axing of about 26 roles and the closure of Beatport’s San Francisco office.

SFX said: “This refocus on maximising Beatport as the definitive site for everything related to electronic music is indicative of our commitment to igniting the simmering revolution of this astounding movement, electronic music culture”.



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