Every time you read about the "platform wars" it's a discussion about how the tech giants of the last two to three decades are battling to decide the future of consumer technology. So the usual names: Apple vs. Amazon vs. Microsoft vs. Google fighting to create the dominant operating system platforms and pre-eminent hardware.
Music is almost always a pawn in these wars -- but it is also always present, even if it comes across as a disposable consumer enticement that provides stickiness, enhanced experience and overall sexiness.
This is why it will be intriguing to watch two fledgling companies started by veterans of the music business, SFX chairman Bob Sillerman and former Live Nation chairman Irving Azoff.
Sillerman is pushing ahead with his EDM startup, which has rolled up some 15 EDM festival businesses in the last year. In the coming weeks he'll take the company on a roadshow to institutional investors to discuss the potential of SFX Entertainment and the wider youth-led EDM market ahead of an initial public offering that could value the company at up to $1 billion by some estimates.
Azoff has teamed with his good friend and artist client Jim Dolan, chairman of the Madison Square Garden (MSG) Co., to create a new joint venture called Azoff MSG Entertainment (AMSGE). It will operate in artist management, publishing, live entertainment branding and digital services, among others.
But here's what is most notable about these two veterans' latest moves. They're showing investors a different way to think about music business models in a digital world. They're indirectly making the argument that music, just like technology, should be a consumer-facing platform around which one builds a business rather than battling to own rights as a lower-margin music "supplier" like a label or publisher.
SFX is most explicit with its ambitions. It is pitching brands the opportunity to get in front of millions of elusive, young, disposable-income-rich and attention-poor consumers in a captive setting through its roster of major EDM events. Billboard has learned SFX is asking for as much as $50 million from marketers for one of several global branding opportunities. Whether or not SFX gets what it's asking for, what's important is that a music startup has shifted its value proposition from the usual fraught discussions around rights and music use to the music itself as a platform for the right partner.
Azoff is less explicit about his plans just a couple of weeks after announcing his joint venture. Cynical observers might wonder how a business that has yet to create anything is worth the $300 million valuation implied from the announcement. While the Dolan family's control of the MSG board might mean the due diligence might've been less intense, that doesn't mean this isn't a smart bet. Azoff's vision is to use music as a platform to leverage artist relationships more efficiently under one roof blending traditional artist management with live branding and digital media. You can expect AMSGE's combined clout to help it in reaching out to brand partners offering live artist sponsorship packages as just one example.
Interestingly, Sillerman and Azoff are both just a couple of degrees removed from today's Live Nation, which has been developing a music-as-a-platform concept for several years now. Its brand sponsorship business generated impressive operating profit margins of 70% on revenue of $248 million in 2012 compared with razor-thin margins in the concert and ticketing business. But a much smaller, nimbler startup like SFX or AMSGE, which doesn't have any of the legacy issues of a $4.5 billion company like Live Nation, could have a significant impact in rewriting the rules of the game. It would appear old dogs are teaching us all new tricks.