When wind or rain imperil lives and property at an outdoor concert, the authorities take notice. When recreational drugs do the same thing, it’s Wall Street that’s reacting. That’s what can be inferred by the cancellation of the last day of the Electric Zoo Festival on New York’s Randall’s Island Sept. 1 after a pair of concertgoers died of alleged drug overdoses. The cancellation was ordered by the city’s outgoing mayor Michael Bloomberg, who’s name is synonymous with the financial markets. He build a fortune worth over $20 billion by leasing specialized computer terminals for his market-data business before he was elected to (or purchased outright, depending on who you talk to) the office of Mayor of New York City.
All of this is important because the fastest-growing chunk of the live music event industry is about to go public. Robert F.X. Sillerman, the media mogul whose SFX Entertainment, acquired by Clear Channel in 2000, is widely regarded as the precursor to über concert promoter and producer Live Nation, has been steadily buying up electronic dance music (EDM) properties around the world.
Sillerman founded CKX, Inc. (now Core
Media Group), which acquired 85 percent of Elvis Presley Enterprises and 100 percent of Simon Fuller’s 19 Entertainment (producer of American Idol). He also purchased the North American division of Holland-based ID&T
Entertainment, the world’s largest dance music concert promoter. ID&T runs a three-day festival in Belgium called Tomorrowland** and Sensation White, an EDM concert series held across Europe that made its U.S. debut at the Barclays Center in Brooklyn last October.
SFX has also acquired several other EDM assets in 2013, including New Orleans-based EDM promoter Donnie Disco Presents and Life in Color, which puts on EDM concerts across the U.S.
Going Public
But what’s about take place is even more remarkable. With EDM as an industry valued at $4.5 billion, Sillerman has announced plans to take his new EDM venture public, with a stated goal to raise $300 million via an IPO to fuel additional EDM producer and festival acquisitions by SFX.*
Weather-related deaths and injuries at concerts and other outdoor events have raised regulators’ eyebrows higher in recent years. Yet incidents involving recreational drugs like the MDMA/Molly that apparently downed two partiers at the Electric Zoo Festival tend to wind up off the front page. A 19-year-old student’s death from an alleged drug overdose at the House of Blues in Boston the same week that the Electric Zoo Festival deaths occurred earned a half-column’s worth of coverage on a local news website, and much of that was dedicated to renewed scrutiny about underage kids inside establishments that serve alcohol. Any death or injury for any reason at a concert is a cause for concern, but when they take place at EDM shows on the eve of Sillerman taking his new electronic dance music empire public, they take on new implications. The New York Times and other financially astute publications have pointed out that deaths like those at the Electric Zoo Festival “have the potential to scare off investors and the corporate sponsors that are eager to reach the genre’s young, affluent and technologically connected fans,” as the Times article put it.
This seems disturbing on the face of it — referring to a death as though it were an “adverse consideration” in a footnote in a prospectus. And it is disturbing, part of a larger and troublesome trend that has seen the entire music business pulled into the natively unethical orbit of the financial industry. And SFX’s play for EDM would pull live music deeper into that fray at a time when it appears that the larger music industry that already deeply enmeshed in the financial markets, most notably Live Nation — the world’s largest concert promoter — which has watched its stock tank over time and its C-level executives bailing on their stock options. Live Nation CEO Michael Rapino, who is being paid over $28 million a year by a company that has never, ever shown a profit, added to his net worth this year by selling $1 million of his stock in the company. Executives at music streaming site Pandora have been doing the same.
Music is looking more and more like a classic pump-and-dump scheme run out of a boiler room in Florida. Among those who could be left holding the bag when this thing plays out to the end are the concert promoters who are at the center of the live music business, and by extension at the core of the live sound business. When you realize that it only took a relative handful of people to collateralize the home mortgage industry and then collapse it, the chaos that publicly traded companies could wreak on live music reaching a similarly devastating result doesn’t see that unrealistic.
On The Other Hand
At the same time, however, SFX’s play could ironically result in a safer concert experience and a more profitable one for investors. SFX has already announced that it is taking steps to improve safety at its shows, such as working with the nonprofit DanceSafe, which helps provide educational information about the dangers of drug use. And the focus on recent drug deaths and injuries associated with EDM shows is prompting the DJ sector to begin to police itself a bit. Witness the Ecstasy PSA DJ released by a group of famous DJs, including Kaskade, Z-Trip, Steve Aoki and others, speaking out about responsible drug education.
By putting its investment concerns about how drugs could affect the profitability of EDM as a financial instrument on the table, the financial industry is also making it easier for the industry to have that conversation with itself and with its fans. And who better to make those anti-drug PSAs than the couple of dozen DJs who possibly stand to do very well as EDM moves onto the ticker? If Black Sabbath could have gotten a piece of Warner Bros. Records in 1975, you can bet Ozzy Osbourne would happily have been doing PSAs about the dangers of cocaine and pot use.
SFX taking EDM out of the rave caves and onto the Big Board could produce some interesting outcomes that will inevitably affect live music and live sound. All I can say is, what’s in your portfolio?
*The NASDAQ price for SFX Entertainment (SFXE), which went public Oct. 9 at $13, was trading near the $9 level in late October.
**TomorrowWorld, debuted Sept. 27-29 in Chattahoochee Hills, GA. The event drew a reported 140,000 attendees. —ed.
Reach Dan Daley at ddaley@fohonline.com.
