EDM After The Drop: What A Wounded Corporate Giant Means For Dance Music Culture : The Record Do the struggles at SFX Entertainment reflect the challenges of turning the dance-music experience into big business? Or is it something bigger?

EDM After The Drop: What A Wounded Corporate Giant Means For Dance Music Culture

Festivalgoers at TomorrowWorld Electronic Music Festival in 2013. Christopher Polk/Getty Images hide caption

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Christopher Polk/Getty Images

Festivalgoers at TomorrowWorld Electronic Music Festival in 2013.

Christopher Polk/Getty Images

Mud has a way of capturing the popular memory of a music festival. After stormy weather hit this year's massive TomorrowWorld, an electronic dance music gathering held in Chattahoochee Hills, Georgia on September 25-27, images circulated online of self-identified festival goers sleeping, stranded, on the soggy ground. Organizers of the event, which last year drew 160,000 people, ultimately closed off the final day to anyone not among the estimated 40,000 on-site campers.

TomorrowWorld has promised refunds, and a festival spokesperson told NPR in a statement, "The safety of our attendees is our top priority." But the public-relations disaster came at a curious time for the fest's parent company, SFX Entertainment, and the world of EDM as a whole.

On October 14, SFX faces a self-imposed deadline for considering offers to buy all or part of the EDM-focused conglomerate. SFX's D-Day arrives after multiple postponements, and after its colorful chief executive, the veteran radio and live music impresario Robert F.X. Sillerman, scrapped an offer to buy the roughly 60% of the business he didn't already own. The backdrop is a precipitous fall in SFX's market value, from more than $1 billion when it went public in October 2013 to around $70 million as of October 5. With so much money in flux, what happens to SFX can't help but reflect on the broader culture of dance music, which goes back more than four decades, to the worlds of rave, techno, house and disco. In 2015, that mud is big business.

Robert F.X. Sillerman, CEO of SFX. Robin Marchant/Getty Images hide caption

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Robin Marchant/Getty Images

Sillerman, in a nearly 40-minute interview with NPR just hours before the photos from Georgia began surfacing, acknowledged his business failings while describing his attraction to EDM culture as sociological more than aesthetic. "There are things I've done terribly and I deserve to be faulted for them," the 67-year-old Bronx native says from a home in the Hamptons, his voice raspy following successful tongue cancer treatment in 2001. Of EDM's young fans and any connection they might feel with the scene that existed before them, he tells NPR: "I don't think they want to discover the past. I think they want to invent the future."

The genesis of SFX was a little bit of both. In 2000, Sillerman sold the first version of SFX Entertainment, a patchwork of live-music companies that is now Live Nation Entertainment, to Clear Channel for $4.4 billion. He founded the current SFX in 2012 with a plan to spend $1 billion buying up EDM businesses. In effect, he was looking to repeat his past deal-making success with the music he now saw as the future. Among SFX's high-profile acquisitions have been the European festival promoters ID&T, American festivals such as New York's Electric Zoo and the genre's top digital-music retailer, Beatport.

SFX positioned itself as the face of EDM but never laid claim to the tradition that gave rise to it. "From a personal point of view, I've always loved to dance, but that's not why we got into this," Sillerman says. "The appeal was pure and simply to be attached to a generational movement."

Nor does Sillerman profess to bring anything new to the culture. "If there was a contribution we've made, it's to make it easier for fans and DJs and producers around the world to access it."

But despite SFX's partnerships with established promoters, the company's connection to the culture it markets is subject to debate. "That genre is evolving," says a former SFX executive who asked not to be named, citing obligations to a current employer. "When I was at SFX, we didn't tell the proper story about the culture and the evolution of the actual genre. It's ever-changing. We used it as a static point in time, and that's not what that genre's about."

A weakened SFX, then, doesn't necessarily mean weakness for the hodgepodge of styles that might be loosely lumped together as EDM.

In fact, few acts today stand with one foot in SFX's world and another in the underground, says Marea Stamper, who DJs and produces music as the Black Madonna and works as a creative director and talent buyer at Chicago club Smart Bar. "It's like comparing Kiss to the Clash," she observes. "They're just not related."

Electronic dance music actually has multiple cultures running in parallel, and none are going away any time soon, says Philip Sherburne, a contributing editor at Pitchfork (and former Beatport news blog editor). That's not to say mainstream culture hasn't changed. Sherburne traces a shift to around 2008, when longtime club-goers who followed dance-music traditions gave way to a younger, bigger crop of fans that were learning about the music through modern channels.

Avicii performs during the KROQ Weenie Roast at Verizon Wireless Music Center on May 31, 2014 in Irvine, California. Christopher Polk/Getty Images hide caption

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Avicii performs during the KROQ Weenie Roast at Verizon Wireless Music Center on May 31, 2014 in Irvine, California.

Christopher Polk/Getty Images

Sherburne agrees with Stamper's comparison between SFX-scale acts and vintage pop-metal bands. "Just sonically, Avicii or mainstream EDM sounds to me like Van Halen's 'Jump,'" Sherburne says. "It's the same synthesizers; it's the same pleasure centers. You could say that Alesso is Bon Jovi. Bon Jovi took metal or hard rock and aimed it squarely at a very mainstream, middle-American public. That's exactly the same thing: These artists have taken what was once a subculture and redesigned it along a pop format. I don't know the economics of hair metal, but it seems to me pretty clear that [with EDM] we're in the era of the Wingers and the Whitesnakes."

Fittingly, the neon and glow-stick set has climbed up the pop charts. In July, "Where Are Ü Now," a tender electronic-pop ballad by Jack Ü, the joint venture of producers Diplo and Skrillex, and featuring Justin Bieber on vocals, cracked the top 10 of Billboard's Hot 100. The New York Times documented the making of the song in a video, rebutting the idea of EDM-pop as just empty calories.

Ali Shirazinia, who won a Grammy in 2002 with progressive-house duo Deep Dish and now performs minimal house and techno as Dubfire, has seen EDM from various sides, finding value in each.

"I don't have time for nostalgia or boohooing about the way things used to be," Shirazinia tells NPR in an emailed statement. "What defines me as a DJ is being steeped in the tradition of the art form, and I am grateful and very fortunate to have had that education. It makes me a more skilled, fully formed DJ. But it is not essential."

If dance music has avoided artistic bankruptcy, SFX recently raised concerns it might be headed toward the more traditional kind.

On August 10, SFX reported that despite a 48% rise in second-quarter revenue, it lost a net $48 million. Four days later, the company revealed Sillerman was rescinding his offer to take it private, reopening the bidding until October 2. SFX said it had received an unnamed "indication of interest at a price lower than the $5.25 per share offered by Sillerman."

On September 17, the company announced $90 million in new financing. Rich Tullo, director of research at the financial services organization Albert Fried & Company, tells NPR the financing "takes bankruptcy off the table." Ratings agency Moody's called the move "credit positive" and SFX poised to stay afloat. Yet on October 1, SFX once again postponed the cut-off for bids, saying offers to buy all or part of the company would now be due October 14.

Speaking before the extension, Sillerman told NPR he plans to submit a revised bid, without further details. Asked whether he plans to sell a part of the business, such as Beatport, he says: "No," though he immediately adds, "I know that whenever I've made a definitive statement like that it always turns out not to be true ... but we've been pretty careful assembling only parts of the business that genuinely make sense."

The realm of quarterly earnings reports and corporate mergers is absurdly far removed from the early days of raving in the United States.

Drew Daniel, a member of experimental electronic duo Matmos who also records as Soft Pink Truth, remembers his experience with dance-music subculture began at free, illegal parties — the type that would be powered with a generator under a freeway overpass.

"There were always limits and doubts that I had about the utopian ambitions of the rave era, but there was still a feeling that raving could mean cutting ties to business as usual," Daniel says. "It's epitomized in that kind of hilarious gatefold drawing inside one of those early Prodigy LPs."

The artwork for the 1994 album Music for the Jilted Generation shows a long-haired raver cutting a bridge that connects the toxic, heavily policed city to an idyllic meadow.

"That exemplifies this idea that radical forms of dance music could also lead to radical forms of creating community," Daniel says. "There's always been a spectrum, so I don't want to say there used to be a good thing and now there's a terrible thing — that's overly simplified."

SFX confronts different sorts of battles. A class-action lawsuit claims Sillerman's buyout offer was a "sham process." Another suit, which a federal court judge in Los Angeles ruled may proceed, is from three men who allege they co-founded SFX with Sillerman. Asked about the cases, Sillerman tells NPR, "Without being disrespectful, look at the people who filed them."

SFX-owned Beatport came under fire in early August, when it told some artists and labels via email that their royalties were "trapped" in connection with Sillerman's buy-out deal proposal. Within a week, Beatport reversed course and issued a contrite statement. "I did not pound the table," acknowledges Sillerman. "I should have and I finally did."

SFX has a reputation as particularly business-minded even in the realm of corporate EDM.

Jason Huvaere and Sam Fotias, co-founders of Paxahau, the production and promotion team behind Detroit's Movement Electronic Music Festival, differentiate SFX from Live Nation, which signed deals with the likes of Los Angeles promoters Insomniac and HARD.

"When SFX came in, they had promoters lined up down the block because they were openly selling it as a financial gain," Huvaere recalls. "That was the big pitch. I got a text once that said, 'Do you like money,' question mark."

Shirazinia, aka Dubfire, concurs, "Everyone had a price, and Sillerman took advantage of that."

Meanwhile, some indicators for the EDM business are less glowing than they once were.

The global EDM business took in $6.2 billion in revenue in 2014, according to the latest IMS Business Report, growing at a 12% pace compared with 37% in 2013.

TomorrowWorld Electronic Music Festival in September 2013. Christopher Polk/Getty Images hide caption

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Christopher Polk/Getty Images

TomorrowWorld Electronic Music Festival in September 2013.

Christopher Polk/Getty Images

More anecdotally, the EDM-themed Zac Efron vehicle We Are Your Friends opened August 28 for a first-weekend gross of only $1.8 million, one of the worst ever for a wide-release movie.

And though a slimmed-down iteration of SFX-owned Electric Zoo boasted attendance of 80,000 over Labor Day weekend, the company canceled its planned September 25-26 One Tribe Festival, set to take place outside Los Angeles, citing disappointing sales. Add to that the debacle at TomorrowWorld, which the local authorities have pledged to investigate. The review process will probably start this week, Chattahoochee Hills Mayor Tom Reed says in an email to NPR, "We've been focused on first getting everybody out safely, and then cleanup."

Another risk factor for SFX in particular and EDM in general is its perceived link with drug use. SFX acquired Electric Zoo in November 2013, just two months after the deaths of two fans and hospitalizations of three others led the event on New York City's Randall's Island to close a day early.

The correlation between EDM and health problems is overstated, suggests Albert & Fried's Tullo. "Where the industry needs to be vigilant is making sure there's proper emergency medical attention and security at these festivals to keep everybody safe," he says.

Because the EDM business is tailored toward the idea of taking part in an experience rather than watching a performance, it doesn't necessarily lend itself to the kind of growth needed for SFX to be profitable. "Scaling an experience is difficult to do," says Brandon Clark, an entertainment lawyer at McKee, Voorhees & Sease who has handled A&R for a small EDM imprint. "That's almost in the DNA of the experience."

As Sillerman explains it, his business strategy for SFX is rooted in sociological theory about the millennial generation. In the rock era, he says, with the dawn of singers writing their own songs, "What you had was a seismic shift where music became an expression and not a reflection." But "the digital generation," born in the '90s, "decided to not reflect but to interpret," which they did through creating "digital music."

"We know that the generation today, thankfully, likes to make up its own mind. They don't make decisions based on movie reviews or restaurant reviews. It's peer to peer.

"If you've been to an electronic music festival, you'll see 50,000 kids smiling, dancing, each one telling their own story and interpreting what it means, not being told what they're listening to. When you think of peer to peer and you think of digital and the freedom that that gives, the cultural impact of the music is unstoppable. And it's why Justin Bieber and everyone else are asking in, not the other way around."

The gravitational pull of a once-$1 billion company is inherently wide. Still, there seems to be broad agreement that dance music's parallel cultures can find a way to coexist.

"Dance music will always happen and even have mainstream popularity," says Smart Bar's Stamper. "It's just not going to look the way [SFX] thought."

The arrival of big money players hasn't hurt "the underground culture," says Paxahau's Fotias. "It's almost done more to bring more people to it."

Daniel, of Soft Pink Truth and Matmos, says, "There are still plenty of ways that this music can circulate where it's not tethered to money, whether it's a SoundCloud culture of people making and sharing weird forms, or whether it's house parties that are literally house parties, where you aren't paying to get in the door."

He's careful to note that how much money changes hands doesn't correlate neatly with the quality of music. But doing events above a certain scale often leads to "increasingly cumbersome and increasingly compromised relationships, and the result is something vulgar and crappy," Daniel says with a laugh.

Paxahua's Huvaere says he can't take issue with any publicly traded company for seeing an opportunity in the growing dance-music space, though his own business has remained independent. "He's almost just part of nature," Huvaere says of Sillerman. In other words, where there's a chance to make money, someone will take it; whatever can't be valued in dollar terms is practically beside the point.

It's easy to see a disconnect between SFX and the extant culture of dance music. More immediately relevant than any cultural changes embodied by the EDM generation, though, might be the commercial ones. And by any account, SFX has made mistakes of management.

The former SFX executive contacted by NPR says the company was concentrating on increasingly outmoded ways of marketing. "[There's] a business shift that goes along with that generational shift," the executive says. "You don't centralize the sponsorship anymore. You do more native advertising now. There are just fundamental ways of monetizing the business — [SFX] are not building the business around that."

All signs point to plenty more years ahead for electronic music that people dance to. And it's too soon to count out SFX, though the company may take on a different form. If and when the results of the bidding process emerge with the October 14 deadline, the future of Sillerman's empire — and the living, breathing culture that continues to progress in its shadow — may soon become clearer than Georgia mud.