Synergy.
That’s the direction you can expect from Beatport and SFX Entertainment. And the speech above from the film In Good Company more or less fits. (The plot of that 2004 movie even includes an acquisition by a conglomerate.)
Basically, SFX may have solved the problem of how to make money in the streaming business – by making its money elsewhere. Or, it seems that’s the plan.
Here’s the problem: music streaming has razor-thin margins versus sales. The artists and labels eek out fairly small bits of change, generally. They can blame the streaming services, but with those services having to pay off server bills, development, support, and all the royalties for the music themselves, there’s not much left in the way of profit in their end, either.
Enter SFX Entertainment, the media conglomerate that bought out Beatport. As reported by sources at the Wall Street Journal, SFX’s Beatport will in 2015 launch a free, ad-support streaming service. The paid service as you know it – recently redesigned as Beatport Pro – will apparently live on with the Pro name. (You can also read the details at DJ Tech Tools, since the WSJ is behind a paywall.)
So, what does this have to do with synergy? Everything.
SFX describes their own business as the “end-to-end” experience of dance music.
Let’s review. First, there are SFX’s recent acquisitions, each going to Beatport:
There’s Listn, the music history / sharing service, which Beatport just acquired. Of all of the stuff in the SFX empire, this is the most interesting – it share what you’re listening to across service with your friends. Unfortunately, for those of you on the long tail of music, it gets sort of less interesting after the acquisition – because then the founders start talking about streaming exclusivity, and we’re back to big label deals again.
Hostess.fm tells you what DJs are playing at clubs, though – right now they’re pretty scattered, and podcasts/radio shows are mixed in with clubs.
But the bigger picture is really to do with SFX. You can watch it in a film with lots of fits pumping, DJs in front of massive festival crowds, and tanned raver ladies baring skin, and … hexagons. So many hexagons. (It looks a bit like the film you watched at the local cineplex in the 90s that told you to buy popcorn and Coke and turn off your pagers and rent the theater for your next corporate event.)
The tagline: SFX is “a global platform for Electronic Music Culture.” And by culture, we’re talking the ‘c’ word – content. Namely, content integration:
We view EMC as a global generational movement driven by a rapidly developing community of avid followers among the millennial generation. Our mission is to enable this movement by providing our fans with the best possible live experiences, music discovery, online content and connectivity with other fans and events.
If it seems like all of this comes from a corporate boardroom with its DNA derived from a combination of media giant like Clear Channel and Ticketmaster and financial giants like Goldman Sachs, that’s because … it did.
But that’s not so important as the combination of services:
1. The biggest festivals. Tomorrowland, Sensation, Awakenings, Electric Zoo, and so on. And the world’s biggest paint party, too.
2. Clubs, promoters, bookers. Not just Miami – big booking outfits are consolidated internationally, particularly in North and South America.
3. Agencies. Digital integration from the mobile app to the visuals onstage are handled by
Beatport is important, too. Instead of DJs being the customers, suddenly millions of casual listeners are. It’s the millions of people surfing Beatport just to hear the songs – and the millions more who don’t know Beatport but do attend SFX festivals.
But that’s critical. Because I think if you’re a label or artist who doesn’t appeal to that festival crowd, the question is whether your output is now marginal to Beatport’s business model.
Now, if someone from Beatport would like to argue otherwise, I’d be glad to hear it. But to me, even iTunes or Amazon or Spotify benefits more from the long tail because they aren’t also booking the artists whose downloads they’re selling, or trying to assemble music that appeals to particular advertisers.
Don’t get me wrong: it’s too soon too judge, really. We have to see which labels are included in streaming, and whether Beatport Pro is disrupted by the addition of streaming.
Also, it’s unfair, perhaps, to blame the shift to streaming on Beatport. Labels and producers in general, as I’ve written before, have cause for concern as far as the DJ market for downloads, now that streaming is already a feature of DJ apps (look at Spotify in Algoriddim djay).
But from a business perspective, the questions are these:
1. Do you lose out if you’re not on the maintage? Will labels and artists outside the SFX festival economy remain important to Beatport, or will they be eclipsed? (Indeed, will the buyers and streamers on Beatport start to self-select based on that economy, if this SFX synergy becomes successful?)
2. Do ravers want their own Spotify? Will people buying festival tickets at SFX events want to listen to streaming music with ads?
3. And will advertisers follow? Will those people listening make a lucrative advertising market? (It didn’t work for Spotify, but SFX has an ace in the hole – a more targeted audience of young people brands will want, the folks at the festivals. And then they have an agency to sell to them…
4. Who will go “Pro?” Will any of those people buy downloads – of music or Beatport sample packs?
I’ll be the first to say: I don’t know. I don’t know that a new streaming service is even going to be popular.
I’m biased. I believe in investing in DJs and producers. But this has been a theme of 2014 – whether that market is really a good fit for publicly-traded companies or rapid growth. And now Beatport, as part of SFX, is publicly traded.
But for people making less-mainstream music, there’s a clear divide evolving. Will a company like SFX approach the long tail – figuring out what experimental music is played at an underground club, or selling an indie label – or will they just go after the big numbers at the top? Because right now, as far as the direction of SFX and looking at their businesses, I’d bet on the latter.
Meanwhile, if you’re afraid that this means dance music isn’t “underground” any more, its CEO wants you to know, “If you or anyone can ever find an example of someone from SFX telling them how much to charge for a bottle of Cristal at LIV, I’ll give you my shares of SFX.”
Phew. Because you know the underground is safe so long the Cristal bottle service doesn’t have to answer to middle management. (How someone at SFX hasn’t edited this off Wikipedia, I’m not sure, but there it is!)
This guy – I don’t know your name. Are you psyched?