The resurrected SFX Entertainment -- a placeholder name for now while the consumer brand is being developed -- was announced in June with the acquisition of Disco Donnie Presents, a promotion company specializing in Middle America shows and events, for a reported $2 million. In August, SFX added Live in Color, a Florida-based promoter of co-ed paintball parties (formerly known as Dayglow Productions) for an unknown amount. But that's just the beginning. According to Sillerman, letters of intent have been sent to 18 additional EDM entities ranging from promoters to ticketing agencies to venues. All in, Sillerman says he expects to lay out a total of $1 billion on more than 50 companies, which together will create not only the biggest EDM conglomerate ever, but also the first in a scene long defined by independent promoters collecting cover charges at the door.
"I know nothing about EDM," Sillerman admits from his Manhattan office suite, which looks out over a bustling Broadway. "I really don't. Of course, I've listened to it and I understand its appeal. It's borderless, it's free, it's energetic, it's a party, it's a party in your mind-and I understand that.
"But I sit in the meetings, to the extent that they are [meetings]. I meet the people whose places we're buying. And I haven't a fucking clue what they do or what they're talking about. Not a clue. And I love it. I just love it."
Sillerman has been here before. In 1978, he saw a potential opportunity in the local radio market and began buying up local stations throughout the country with on-air legend Bruce "Cousin Brucie" Morrow. He bought out Morrow in 1984, telling Billboard at the time that he was moving away from station operation and into investing. In 1992, he founded SFX Broadcasting and bought 120 radio stations under its name -- and in 1996, he bought New York concert promoter Delsener Slater Enterprises as well. In 1997, he sold SFX to Capstar Broadcasting for $2.1 billion and spun off the live business into SFX Entertainment with the proceeds from the SFX Broadcasting deal. One of the top promoters in the country with an expansive vision, SFX Entertainment shelled out $1.5 billion to acquire a network of 58 additional properties: venues, artist management companies and nearly every major U.S. concert promoter -- reportedly for can't-refuse offers, well above their perceived values. In 2000, Sillerman sold SFX Entertainment to Clear Channel for $4.4 billion. Five years later, Clear Channel spun SFX into Live Nation.
But Sillerman wasn't done. Far from it. After selling SFX to Clear Channel, Sillerman co-produced his friend Mel Brooks' 2001 Broadway mega-hit "The Producers." In 2004, he established CKX, buying up such legendary assets as a majority stake in Elvis Presley Enterprises with a 90-year lease on Graceland, the rights to Muhammad Ali's name and likeness and Simon Fuller's 19 Entertainment ("American Idol"). In 2010, Sillerman resigned as CEO of CKX, intending to buy it outright -- a bid he ultimately lost to investment firm Apollo Global Management, which renamed the company Core Media Group. Sillerman remained as the company's largest shareholder. That same year, he founded his first pure technology play, Function(x), which was renamed Viggle earlier this year.
Now, the 64-year-old Bronx native has turned his attention to EDM, arguably the most explosive new music space this side of K-pop and one he admits he knows nothing about. Fuck off, indeed.
With events like Ultra Music Festival (UMF) and Electric Daisy Carnival (EDC) drawing hundreds of thousands of 16- to 24-year-olds to all manner of open spaces and acts with quirky Nordic names largely unknown beyond the dance underground selling out iconic live venues in a matter of minutes (Swedish House Mafia at Madison Square Garden, Avicii at Radio City Music Hall, Tiesto at Home Depot Center), Sillerman isn't the only heavy hitter eying the EDM space. Indeed, major players including Live Nation, AEG and even supermarket mogul turned venture capitalist Ron Burkle (SoundCloud, SeatGeek) have all come calling in the past 18 months.
The only problem? At barely 30 years old as a subculture, and a fraction of that as a viable, scalable business, EDM is a live market in its infancy, and no one knows exactly how much money is at stake.
The information is spread across business sectors that don't communicate, or is simply not reported, or worse, never collected. ("What promoter declares what cash they made? You're crazy," one major-market event producer says.) Giant festivals, like EDC and UMF, can make $30 million or more in a weekend. Midsize, multi-artist tours, perhaps $3 million-4 million in a month. (Identity Festival reportedly sold about 140,000 tickets last year, at ticket prices starting around $25.) According to Forbes, Tiesto pulls in $22 million a year, through a combination of gigs, tours and sponsorships all over the world. Add in music sales, or media opportunities -- like, say, ad-revenue share to a giant YouTube channel like label Ultra Music's -- and the number gets even harder to pin down.
"But it's going to be easier to figure out once Sillerman's involved," one promoter says. "When Live Nation does a concert, they say what they made. He'll have to demand the same thing."
"He's really smart, obviously," the promoter adds. "Is it good for this business? That's the other question. His track record sort of speaks for itself. He bought up everything and sort of made a whole that was greater than the sum of its parts. How much is Disco Donnie worth? Not much. But 50 of them? What do you do as a promoter if these guys are going to band together and have real power? How do you compete? He'll be the only game in town. A lot of guys in this business who have been toiling for a long time, they'll take the bait."
If he had it to do over again, James "Disco Donnie" Estopinal Jr., 42, might have worn a different shirt. Instead, on June 6, the day he announced the sale of Disco Donnie Presents to Sillerman (a sale that effectively relaunched SFX) during the EDMBiz Conference in Las Vegas, Estopinal sported a navy blue T-shirt that read "Have you hugged your lawyer today?"
It was meant to be funny. A smiling and glib jab fitting Estopinal's personality and image. But talk of lawyers, buyouts and billionaire financiers are so contrary to the EDM ethic -- the rave code of peace, love, unity and respect -- that his joke went over like a fat rat. "I understand everybody's concerns," Estopinal says. "I really weighed it out. I didn't want to do something that was bad for the world. But the way that everything was growing, I couldn't keep up anymore. I needed some kind of financial support."
For years, the EDM live scene was all about the experience, not the business. Or at least that's how it positioned itself. Events, for the most part, weren't ticketed. They were driven by a walk-up cover charge, and as recently as 2010, the best attendance estimate might have come from a security guard with a clicker at the door. As excitement for EDM artists has increased, though, so has the prevalence of presale hard tickets. Today, acts like Deadmau5, Skrillex and Avicii can sell out midsize rooms in seconds; so can fresher names like Porter Robinson, Thomas Gold and Alesso. But shows like Deadmau5's massive, LED-lit cube and Skrillex's motion-controlled, 3-D-mapped cell have set the production bar high. Fans expect a sensory onslaught, which can cost into the millions to design, produce and tour. Add ballooning DJ fees, and the economics quickly become as fuzzy as the scene.
"People think we're rich because of the events, but it's far from the truth," says Pasquale Rotella, founder of Insomniac Events, which produces EDC, as well as other festivals and club dates. "We actually come very close to losing money, and all our events nearly sell out. It's crazy to have that be the situation when we're doing so well."
The genre's first attempts at artist-driven, large-venue tours -- not one-offs or festivals -- have had even dodgier results. Avicii and Afrojack, popular acts that were virtually unknown two years ago, were recently forced to cancel several dates of their AEG-backed summer routes when ticket sales fell far below estimates. Within the industry, there was a sense that they had jumped the gun, skipping too many steps between a 1,500-capacity nightclub and a 5,000-capacity concert hall.
And that's where Sillerman could come in. By buying up promoters who are currently running the low- to mid-level EDM touring business -- not overstretching into the big-room Live Nation territory -- he's staking a claim to a segment of the industry that, while volatile, could thrive, even if EDM doesn't sustain its current level of popularity. It could be a solid business, but whether it's solid enough to recoup a $1 billion investment remains to be seen.
"When you make a judgment, you're never 100% sure," Sillerman says of his interest in Estopinal and Disco Donnie Presents. "But I checked off all the boxes: Smart kid, energetic, ambitious, likable, operating in an area -- EDM, of course -- I didn't understand. Could I have been wrong? Sure. Could I still be wrong? Less likely, but, sure."
Today, the master plan for the future of the new SFX isn't in a file folder on Sillerman's desk. Instead, it's sketched in Estopinal's inky black scrawl, in a slightly malformed, spiral-bound notebook that, the promoter says, "got rained on." The plan is an alien spaceship of a chart, with blocks devoted to Disco Donnie Presents and "OTHER PROMOTERS FESTIVALS" funneling into "NEW FESTIVALS" and tendrils of ancillary entities, including "Publicity," "Clubs," "Clothing" and "Label."
Estopinal says that he took the chart to other potential investors before meeting Sillerman in New York in January, after being introduced through mutual contact and former boxing promoter Shelly Finkel.
"This wasn't Bob saying, 'Oh, I like dance music,'" Estopinal says. "This was my plan. [Indie promoters have] been carrying the boat up the hill with a chain, no water, just pulling all these years. And once everybody became successful, all of a sudden all of these other entities came in and wanted a piece. This was actually a move to protect all those people from that."
A Louisiana native, Estopinal graduated from Louisiana State University in 1994 with an accounting degree and planned to enter the field, but got seduced by the New Orleans party scene instead. Through the years, he became something of a folk hero on the American rave scene, promoting parties throughout the Southeast and Midwest as Disco Donnie, a name taken as a tribute of sorts to his DJ father, James Sr., who went by Disco Jim. Disco Donnie's manic parties at the State Palace in New Orleans in the late '90s are the stuff of legend. "People would come from 18 states," he says.
"I grew up in the Southeast, and Disco Donnie's events were legendary in a region that was starving for fresh new music," says Stephanie LaFera, manager of Kaskade and other EDM artists. "They influenced a generation of dance music fans."
Sillerman has relied on the market intelligence and relationships of others before: Delsener Slater Enterprises was his first purchase under the original SFX, and partners Ron Delsener and Mitch Slater gave Sillerman valuable introductions to the other companies he would soon snap up, including Sunshine Promotions and Pace Concerts. Bruce Morrow helped light the way to SFX Broadcasting. And radio was also his father's business. In fact, the elder Sillerman might have had even more of an influence. (In 1955, Billboard described Michael Sillerman as "one of the few truly creative sales executives in broadcasting" for his work as the founder of Keystone Broadcasting System, "by which independent stations throughout the country became linked into a transcription network, bringing them national revenue hitherto unattainable.")
"He gave me a tutorial in what he had been doing," Sillerman says of his first meeting with Estopinal. "And I said, 'So fundamentally you're a combination bookie, loan shark, promoter and cheerleader.' And he said, 'You've got it.'"
"At the end of the meeting, [Sillerman] said, 'I'm in. Do you want to do this?'" Estopinal says. "I said, 'Yes.' He said, 'Shake my hand. That's our deal. I want you to hit the ground running.' And I shook his hand."
A month after he announced his deal with Sillerman, Estopinal partnered with Eventbrite, an independent online self-service ticketing platform, which could eventually fulfill SFX's need for a lower-cost ticketing solution than Live Nation's Ticketmaster. No one will confirm, but it seems logical that Eventbrite would be on Sillerman's not-so-short-list. Soggy notebook or not, Sillerman is following Estopinal's lead.
As for the other major players in the edm space, venture capitalist Burkle's plans remain unknown beyond a few exploratory meetings (rumor is that he's in talks with Amy Thomson, former Swedish House Mafia manager, and her ATM Artists group), and AEG has been silent since Avicii and Afrojack's summer troubles. Live Nation, on the other hand, has been busy: It put its own Identity Festival tour back on the road for a second year, delivered on Kaskade (considered the only successful single-artist, large-venue EDM tour of the summer, with stops including an 18,000-capacity sellout at Los Angeles' Staples Center) and backed the first shows in America by Dutch mega-party Sensation, coming this October to Brooklyn's new Barclays Center.
At the EDMBiz Conference in June, Live Nation CEO Michael Rapino said the company's EDM strategy was to "acquire or hire," a policy he'd recently put into practice, acquiring venerable U.K. festival brand Cream Holdings (Creamfields) and appointing its co-founder Steve Barton president of the newly formed Live Nation Electronic division in May. Live Nation added Los Angeles-based Hard Events in June, and Hard founder Gary Richards says he went with Live Nation -- after speaking with "other parties" -- because of Barton. "He's a guy I really respect," Richards says of Barton. "A solid leader in this music from the beginning. I want to work with him and help carry out his vision."
With Barton and Richards, as well as in-house guys like Live Nation New York president Jason Miller, who brought Sensation to the United States and produced Deadmau5's record-breaking six-night sold-out stint at Roseland in 2011, Live Nation has the benefit of housing some of the best talent in the space. But for the self-made EDM stalwart who may be less accepting of a corporate hierarchy, or even an office culture, Sillerman cuts an aspirational figure.
He's unapologetic. He controls his own money -- lots of it. (In 2005, he ranked No. 375 on the Forbes 400 list of the richest Americans, with a net worth of $975 million.) He welcomes and accepts risk. He doesn't answer to potentially moralistic shareholders. He directs anyone who might question his methods to "fuck off." But he also has no interest in telling any of his acquisitions what to do or how to do it. For EDM, Sillerman might be more Dark Knight than Grim Reaper.
Still, the plans of Live Nation and the new SFX are decidedly different. Bold-faced names or not, two or so pickups is a far cry from 50. Sillerman wants increased power -- including stronger appeal to potential sponsors -- through sheer scale, the path he followed with the original SFX. In fact, many attribute higher ticket prices and intrusive corporate branding at live music events, including in venue names (SFX's run was once dubbed "an epidemic of renaming"), to this SFX hallmark.
"I'm always interested in quality," Sillerman says, "but quantity permits certain things. Live Nation, it's a terrific company. They bought some things in this space. Other people will. I suspect that at the end of the day, we'll probably be partners with more than all of them put together. So is that an arms race? Maybe."
In the meantime, Sillerman plans to help SFX's individual entities improve their offerings by giving them access to his significant liquid cash. For instance, he just green-lighted Live in Color's purchase of a portable LED screen, a big-ticket item it had previously been renting.
"We had a conversation, which took about 10 minutes," he says. "I don't want you to get the impression that we're drunken sailors, because it's hundreds of thousands of dollars. But it was pretty simple. There's only one thing that I can contribute to this business specifically. I have no idea whether it makes sense to buy an LED display. But I will know when somebody says they need one, whether they really believe it."
Granting an accouterment the price of a house to a crew of people who spent the majority of the year getting chased off college campuses is a risky business. (Last year, Live in Color events at Penn State, the University of Maine and elsewhere led to dozens being hospitalized, due to everything from overindulgence to slipping on paint.) But Sillerman remains unfazed. An avid reader and student of sociology, he sees EDM as a definition of a generation: a "cohort group," as he calls it, of the young -- a similar motivation of his involvement with Viggle. (Could Viggle's proprietary technology form the back-end to some sort of content-rich, EDM event check-in app? Why not?) And to him, at least, that makes it more powerful than just a music genre, and his new company more meaningful than just a conglomerate.
"This is simplistically about those kinds of entertainment entities that serve a generation that was born wired and connected, and has an insatiable appetite to stay connected," he says. "This is a tsunami. It's not a tsunami that you want to harness. There are some people that may try to do that and they'll fail. It's a tsunami that you want to let run its course and be a part of it."
Thus far, the promoters who have sold are exhaling loudly. "I feel a million times better," Estopinal says. "It's opened up my mind again to where I get back to the creative process instead of worrying about money all the time."
"Trying to fight the world by myself was tough and tiring," Hard's Richards says. "Now that I'm in there working with [Live Nation], we're integrating really well. There are a lot of things they are really good at -- contracts, taxes, insurances, a lot of the business side stuff that wasn't my specialty. I like doing the artists and the marketing." Richards says that Live Nation is actively helping him expand internationally as well.
But the debate of digging in versus selling out is still running hot throughout the industry, and the aggressive interest is forcing some hands. In August, Ultra Music and UMF -- two powerful EDM entities formerly at odds, despite their similar names -- joined forces in a move intended to help preserve their sovereignty.
"We are a very proud independent organization and it is critical that we stay true to the music and close to the roots of the culture that we have grown with over the last 15 years," UMF co-founder/CEO Russell Faibisch said in a press release. "While EDM seems to be the flavor of the month for many corporations buying their way into our scene, building this long-term strategic alliance with Ultra Music sets the stage for establishing Ultra as the essential global lifestyle brand for the best of everything EDM has to offer."
Back at the EDMBiz Conference in June, Estopinal got a lot of grief on the "An Agent and 5 Promoters Walk Into a Room..." panel, partly from his former partner Rotella, who was also sitting on the panel. Defending his decision to sell to Sillerman, Estopinal told the audience, "As long as you don't lose creative control, it's going to give me more to do bigger and better things."
"Until it's flipped," Rotella interrupted. "Then that all goes away. And if it's a public company you don't have the freedom to make choices that make sense."
Sillerman's track record suggests that's exactly what he'll do. He's always sold, and always for a profit. But for EDM to even be worth flipping, the U.S. scene must continue to grow across all sectors -- nightclubs, live venues and festivals -- and earn the "next rock'n'roll" title that has already been hoisted upon it. Sillerman might also have to turn his eye overseas where EDM has been festival-grade popular for years, which might already be happening. (Rumor has it he's interested in buying Dutch company ID&T, which produces Sensation events internationally, and Belgian mega-festival Tomorrowland.) Some believe he might try to harness the power of EDM online -- the currently fractured video views, track downloads, Facebook likes and other consumer touch points -- into a lucrative media platform. After all, going national is one thing, going global gives an entirely new meaning to economy (and marketing) of scale.
Still, Sillerman maintains he has no intention of selling. "If somebody thinks that what we're doing is for the purpose of selling, they shouldn't sell their business to us," he says. "And if they think that they're not going to get the kind of opportunity that is only afforded with size and bulk and access to capital, and the mandate to invest and take risk, then this doesn't make sense for them."
The thrill of the deal, the study of the sociological significance, even the wordplay involved in explaining it all -- they all make Sillerman's eyes dance. But while he always wants to win, the endgame, he says, is no longer personal gain.
Sillerman's a different man than the one who bought and sold the world in the '90s. In 2001, he beat tongue cancer and the only color amid today's black ensemble is yellow, from Nike's iconic Livestrong bracelet he wears on his wrist. The battle left him with a tracheotomy tube, and what he calls "perspective."
"The only reason that I do anything now that has a commercial overtone is to have more money to give away," he says.
Together, Sillerman and Laura, his wife of 38 years, are active givers: Their Tomorrow Foundationsupports educational and environmental programs for underprivileged populations. It also established the Sillerman Center for the Advancement of Philanthropy at his alma mater, Brandeis University. But even with these, "almost all" of their donations are anonymous, he says.
"I've been very blessed in business, and the only reason economically to do this is the joy of doing what we do," he says. "We're going to be like [duty-free-shopping magnate] Chuck Feeney. Great quote of his: 'I want the last check I write to bounce.'"