SFX Entertainment Execs Outline EDM Market Opportunity
NEW YORK – Always-outspoken SFX Entertainment chairman and CEO Robert Sillerman brought some laughs and entertainment to the 41st Annual UBS Global Media and Communications Conference as he outlined the electronic dance music (EDM) market opportunity Tuesday afternoon.
"Electronic music is [the] music of choice for the millennial audience," which is connected and wired, he said. He showed a slide highlighting that out of the world's population of 7 billion, 3.6 billion are under the age of 30, and 2 billion are millenials.
SFX CFO Richard Rosenstein told the conference that the EDM space is believed to be a $4.5 billion market worldwide, with most money coming from live events and recorded music, plus some sponsorship tied to events.
He cited further acquisitions, improvements to existing operations and incremental revenue growth opportunities as engines for financial improvements.
With SFX having about a 10 percent share of the $4.5 billion market and others mostly at less than $100 million, the sector remains "absolutely fragmented," Sillerman said.
Live events have grown in Europe and can continue to see growth there, with business also expected to expand in Asia, Latin America and the U.S., he said. Rosenstein said that the biggest U.S. EDM events have seen 40 percent compound annual growth rates in recent years, which he argued "speaks to an underserved market."
Latin America and Asia currently account for 25 percent of attendance at SFX, which could go to 50 percent of attendance and revenue, according to Rosenstein.
He also cited growing sponsorship and marketer awareness as a key business opportunity. A slide mentioned financial services, retail, radio, broadcast, music, software and hardware companies as possible new sponsors.
Sillerman chime in on the sponsorship issue, putting on a top hat that he pulled out from under the table. "Let's see what's in the hat," he said to the crowd. "Hello," he said into the hat.
He went on to explain that he had on a recent earnings conference call said that 11 possible deals with an 80 percent likelihood of happing were currently in discussion stages. He said that this figure had grown to 12, with a couple of them now at a likelihood of 90 percent-plus.
Touting the success of such live events as Tomorrowland and Rock in Rio, the SFX executives said they see the chance to grow existing events by spreading their mostly fixed costs across added days. The main costs are production and DJ and performer costs.
"I am not suggesting we can drive down talent cost," Rosenstein said. But booking multiple events can help lock in talent, he said. And staging requires steel, with SFX now getting that steel for the entire year for a price of less than 15 days of rental, "because we have so many events," he explained.
Asked about reported earnings of $10 million-$15 million for star DJs, Sillerman said: "They do earn that, but they earn it by performing live lots of dates." He added: "I want the DJs to make more and to play more" have them share in the possible upside.