Sillerman, Adell Talk SFX-Beatport Deal: ‘A Great Starting Point for Everything We Do’

The industry has been buzzing about it for months, but SFX Entertainment formally confirmed its acquisition of Denver-based Beatport last night for an undisclosed price that was reported by the New York Times and Billboard sources as $50 million.

It’s the first media-focused pick-up for Robert F.X. Sillerman’s revived empire, joining a collection of promoters and live entities including Disco Donnie Presents, Life in Color, and ID&T (the latter via a North American-only joint venture). But judging from conversations today with Sillerman and Beatport CEO Matthew Adell, Beatport could be the lynchpin of the entire venture, encompassing music sales, mobile media, research, and even ticketing.

“Beatport is unquestionably the source for EDM music for DJs, and consequently it provides the backbone - the DNA, if you will - for what is successful and what people like,” says Sillerman. “It provides us a great starting point for really everything we do.”

Beatport’s bread and butter is digital downloads, aimed at a professional DJ user base; the site offers exclusives and high-quality WAV files to justify its higher costs (from $1.49 to $3.24 each). But that core business is just one element of its value to the brand- and data-focused Sillerman, who defended its reported $50 million price tag without actually confirming it.

“Look, Beatport has 40 million users, the majority of whom are not in the U.S.,” he said. “I don’t know how people value these things, but if you take a look at a business like Instagram, it only had 10 million users and no revenue. So what are 40 million users with lots of revenue worth? If we paid $50 million, maybe it’s the bargain of all time.”

Beatport was founded in 2004 by good friends and Denver natives Jonas Tempel, Bradley Roulier, and Eloy Lopez, with an initial investment from former Denver Bronco Trevor Pryce and some unnamed DJs. Originally a download storefront, its aim was to migrate the business of independent dance labels from vinyl to digital, in the wake of record store closures worldwide, and a shift in DJs’ format preferences (and hardware) from vinyl to CD to (eventually) MP3.

The company received a $12 million investment in 2007 from Insight Venture Partners, which at the time valued it at $50 million – SFX’s reported purchase price today. Tempel and Roulier have since moved on to pursue DJ careers of their own (Roulier in popular dance duo Manufacturer Superstars), and Insight brought on current CEO Adell, who had stints at Motorola, Napster, and Amazon under his belt, not to mention dance music pedigree as VP of WaxTrax! and head of label Organico. Under his watch, Beatport has launched a slew of new initiatives, including a News channel, DJ pages (like a social network for DJs within the site), Mixes (allowing users to package and sell tracks available on Beatport), and Baseware, which helps labels distribute their music outside of Beatport.

In addition to a thriving and diversified retail-based business, SFX gets Beatport’s users: At the most simplistic level, their 80 million eyeballs (“We’ll use the Beatport platform to help promote events, and the event audiences to help promote awareness of Beatport,” says Chris Stephenson, CMO of SFX), but also their data, including demography, buying preferences, and the songs, artists and genres they like in real-time.

“This is perfectly aligned with what Beatport has been doing for years,” says Adell. “The more data we have the more value we can create.”

That powerful information can help influence SFX business decisions, as well as create attractive targeting capabilities for potential sponsors.

“It’s interesting speaking to brands and advertisers; they really want to connect with this audience, tens of millions of 18-34s, but there’s no real platform for them to do so,” says Stephenson, who headed up Sillerman’s social TV app Viggle before his SFX appointment. “One of our goals is to be able to provide a really elegant platform solution from both the digital and analog side of the business to advertisers. It’s a really exciting thing that doesn’t exist right now.”

That proposed platform will transcend mere event sponsorships and music downloads. Both Stephenson and Adell speak of point-of-sale and ticketing opportunities under the Beatport brand, all powered by mobile.

“Viggle is a very successful example of how to use mobile to add value and monetize the consumer experience, and it’s exactly the same in this market,” says Stephenson. “There’s a mobile opportunity not only to take your music on the road, but also the ticketing aspect; the idea that when I buy a ticket, it goes to my mobile phone and allows me to engage at an event in a way I haven’t been able to before. We can push directly to Facebook, or scan an RFID at the events themselves, tracking real-time what people are doing. We can preload mobile devices, partnering with a wallet-type business. We can enhance wifi at venues so when you’re there your phone is a tremendously useful object, not a dead weight. Anything that helps make the mobile phone a key, intrinsic part of the experience.”

Stephenson also hints at monetization opportunities for artists and labels, leveraging the Mixes product to distribute event sets; say, Fedde Le Grande’s headlining set at an SFX-backed, ID&T-produced Sensation event, available for paid download on Beatport.

In addition to the eminent roll-out of Beatport-branded mobile products (“We’ll be making a lot of announcements,” says Adell), SFX is prepping to make other big noise, reportedly regarding ID&T’s long-hyped move into the American market with its powerful overseas brands: three-day Belgian festival Tomorrowland, most notably.

“We have pretty high expectations [of ID&T] and they’ve exceeded them at every turn,” says Sillerman, who installed key players, including CEO Duncan Stutterheim, in an office in Brooklyn, New York earlier this year. “They are an astounding company; just as professional and creative as any I’ve ever run across. That’s a very difficult combination, but they pull it off.”

When asked about pending ID&T announcements, Sillerman said he was planning a trip to Miami Music Week, the EDM industry confab framed around Ultra Music Festival.

“I just might be in Miami,” he said, “and there just might be a reason I’ll be there.”