The Market for EDM

The EDM industry was estimated at ~$4.5 billion according to CNN in 2012 (18). The genre hasn’t always been popular or profitable but as EDM has grown in popularity it has drawn interest from investors (6).

One particularly profitable area is festivals, with tickets generally starting at $30 (20). In fact, Rob Sillerman, the CEO of SFX Entertainment – what is now essentially a monopoly of the EDM industry – built his business model around festivals. SFX was started in 2012 by Sillerman, who amassed a fortune in radio before entering the live music space, in order to capitalize on the booming live event and festival sector of the EDM market. SFX has successfully rolled-up festivals and consolidated the industry. They promote major festivals like Electric Zoo, Mysteryland and Tomorrowland. SFX also owns Beatport, a platform for DJs and EDM fans through which you can stream EDM music. Today the company is valued at ~490 million (37).

Nevertheless, despite SFX’s success in consolidating the industry, they have posted losses recently and after going public two years ago, are looking to become private. While poor business is telling of the entire music industry, the publicity crises SFX has been having are also reminiscent of the social stigma issue EDM has faced since its rave days. In 2014, Sillerman put the company under media scrutiny after photos emerged of him online exiting an airplane naked and he then proceeded to curse at journalists on a press conference call (37).

Despite some issues related to its “colorful” CEO’s behavior, and also some drug related incidents at festivals it owns, according to its mission statement, SFX tries to promote EDM as a “global generational movement driven by a rapidly developing community of avid followers among the millennial generation”(38).

The Recording Industry Association of America shows that music sales have dropped to 8.3 billion dollars in 2009 from a whomping 14.6 billion in 1999 (32) In With the music business as a whole struggling, many companies are looking at the massive growth within EDM as a potential source of new revenues (31). Besides festivals, one potential revenue stream is sampling. While the genre currently promotes free sampling and remixing, the industry might crack down and try to charge fees (potentially exorbitant) to artists who want to sample or remix content under their copyright. This would be similar to a trend in the 1980s where record labels cracked down on sampling within hip-hop music, making the genre profitable (6).

The EDM market is paving the way for the rest of the music industry. Traditionally, EDM music has been consumed as singles. Of course, the trend towards singles in other genres like pop is also related to itunes and the sale of digital music. However, at the heart of EDM has always been the methodology of “a track at a time” (36). Artists would “throw a lot of stuff at the wall and see what sticks” (36) which is a methodology that has made its way into pop music changing the way both dance and pop music are consumed and sold (36).

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s