Strictly Business: The Economics of EDM

EDM is the music industry’s cash cow and punching bag. What once went down in warehouse raves now fuels multi-million-dollar festivals. Can they clean up their act and still clean up?

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Complex Original

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EDM is the music industry’s cash cow and punching bag. What once went down in warehouse raves now fuels multi-million-dollar festivals. Can they clean up their act and still clean up?

Written by Michaelangelo Matos

At the end of July, more than 180,000 people from over 200 countries gathered in a scenic national park in the small town of Boom, Belgium (near Brussels), and partied for three days straight. (Or really, two-and-a-half: The torrential downpour that hit on Saturday night around 10 p.m. was a crowd-killer for sure.) Walking along the grounds of Tomorrowland, a festival in its ninth year, on Friday morning before gates opened, the place seemed almost surreal even without hordes of party people in wildly divergent stages of sobriety (though like all such festivals, Tomorrowland runs a hard line against drug use). It felt very European fairy-tale, clean but florid. The main stage set-up was something like a scale version of Castle Greyskull from He-Man, complete with waterfall to the right of the DJ and a sit-down restaurant inside its stage-left gateway. Another stage looked like a butterfly; the get-up of yet another, the hardstyle-focused Q-Dance stage, resembled a rabid insect.

Tomorrowland’s sheer size is stunning—the park is rented for two additional weeks after the party finishes so ID&T, a dance-events company with additional headquarters in Amsterdam, Sao Paolo, and now Brooklyn, can restore the grounds to their exact prior state. Lines are run entirely underground, in purpose-made trenches. The biggest change from the run of American megafests may be the service. Security guards and vendors were friendly, and so was the crowd, unperturbed even by American at their most boorish—of the young woman who threw a screaming tantrum when she wasn’t allowed into an overcrowded venue.

One of Tomorrowland’s top draws is Afrojack, the Dutch producer behind Pitbull and Ne-Yo’s “Give Me Everything,” as well as his own hits; he was also the first DJ to sign an exclusive contract with the Wynn Hotel in Las Vegas, in 2010. He’s been headlining festivals like Tomorrowland for a few years now, but it’s the people at home that make him nervous. “I was on a stream to ten million people, and I realized that eight million of those people were watching from America,” he after playing his Tomorrowland set. “It’s so big there that it changes everything. You’re not just playing for the club—you’re playing for the world.” It’s been estimated that some 90 percent of the profit in EDM is made in the live arena. “The numbers are jumping up,” says Donnie Estopinol, the New Orleans native, now in Puerto Rico, whose Disco Donnie Presents was annexed by Robert Sillerman’s SFX Productions to great fanfare last year. “Even though it’s grown from 2009 to 2012, the exponential growth, the real growth, has come in the last 16 to 18 months. It was growing 10 to 20 percent a year to now 40 percent of people coming to shows, and that has changed in the last year and a half.”

Naturally, Tomorrowland is looking to expand into the States.

TomorrowWorld will take place in Chattahoochie Hills, Georgia, just outside of Atlanta—on a private farm, rather than a public park—from September 27 to 29. TomorrowWorld features many of the same headliners as its parent fest: Afrojack, Porter Robinson, Steve Aoki, Chuckie, Dimitri Vegas & Like Mike (also managed by festival honchos ID&T), Nicky Romero (who was playing the overcrowded venue mentioned above), Armin Van Buuren, David Guetta, and Tiësto, among others.

Décor from throughout Tomorrowland’s history will come over on some 80 semi-truck-sized containers. “After ten years, we have a lot of different decorations,” says Shawn Kent, who oversees ID&T’s U.S. office. “There’s a huge quantity of materials coming over to Atlanta.” There, they’ll mix with specially designed new installations, assembled on the ground. Partnerships with local vendors are in the works. There will be a greater emphasis on local and regional styles—a trap stage, for example.

That’s a lot for one party—but one party is all the Tomorrowland crew has planned for the time being. Though ID&T aims to put its parties on every continent, the company doesn’t have a set timetable; it is focusing exclusively on the U.S. edition of TomorrowWorld before moving forward, its timetable extending about two years. “We’ve got a great number of options that, at this moment in time, we’re not pursuing,” says Kent.

AFTER SEPTEMBER 1, ID&T’s caution seems especially wise. At 11:24 that morning, the publicists for Electric Zoo—Made Events’ annual Labor Day weekend bash in New York City’s Randalls Island, near Harlem—sent the press a link to an official statement: Sunday was canceled. The third and final day of its fifth year was called off due to a pair of deaths the night before. A 20-year-old woman, Olivia Rotondo of Providence, R.I., and 23-year-old Jeffrey Russ of Rochester N.Y., had ingested too much Molly. There have been five other deaths since the American dance-festival season began in March. Some of those deaths have been traced to tainted or faked drugs—bath salts were being sold as Molly, a powdered, snorted form of MDMA, which in pill form is generally called Ecstasy.

This was bad news anyway, but especially so for a style that is both the music industry’s cash cow and punching bag. There’s long been a backlash inherent in the EDM craze; the music’s funkless exuberance is the most blankly formulaic pop style in ages, and the culture’s gushing-over-thinking worldview is unsustainable at any level. No one rides a long serotonin high without crashing into the dirt eventually. Dance cognoscenti see it as a clown-school version of the more refined peaks and drops they dote on. The rock establishment can’t figure out how this music makes so much money and sells so few recordings, even in a drastically downsized sales age. The press reports, yet again, from Vegas.

But Vegas is only the gaudiest example; it’s not the status quo. For one thing, the audiences at many EDM festivals, contra The New Yorker, are quite racially mixed—though the non-whites are predominantly Hispanic, Asian, and South Asian, rather than African-American. For another, even age-restricted festivals like Electric Zoo are built for exertion, not the creature comforts of Vegas. Attending Friday and Saturday evenings of this year, I saw a significant loss of energy from EZoo 2013 and last year’s edition, and at the time I put it down to general exhaustion. There are a lot of festivals out there now—more all the time—and lots of fans hit as many as possible. By the time Labor Day comes around, everyone’s tired. Also, you are aware that MDMA depletes your serotonin and leaves you bone-tired if you use too much of it, right?

This is not to scold anybody. Death is no joking matter, especially when it’s unnecessary. No one in the dance biz was laughing, either. Electric Zoo’s third day, canceled by the mayor’s office, in one of the biggest markets for this surging music—music that has had one mainstream watershed after another this year, from Daft Punk to Avicii—sent a message that made long-timers’ blood run cold, long-timers who were around the first time everything got shut down and a thriving business ground to a halt. It’s particularly bad timing for SFX, whose impending IPO needs to be filed, according to Billboard, by October 16.

IN THE COMING MONTHS, Live Nation—which merged with Ticketmaster three years ago to create a live-events megalith—is planning seventeen shows throughout the U.S. and Europe. Just as Estopinol partnered with SFX, Pasquale Rotella, the L.A. native—recently relocated to Las Vegas—behind the global Electric Daisy Carnival (EDC) events and the more California-specific Nocturnal Wonderland, recently began working with Live Nation. The conglomerate’s president and CEO, Michael Rapino, also oversaw the 2012 acquisition of Gary Richards’ Los Angeles events crew, HARD; according to Bloomberg Businessweek, its current revenue stands at $1.68 billion.

“At one point I had eleven offers,” says Rotella of his decision to throw in with Live Nation. “Live Nation wasn’t one of them.” But once they got wind of the other talks, Live Nation got in the game. “I didn’t go with the highest bidder,” he says. “I went with the best partner.”

Rotella is a rave-scene veteran. "Listen, I don’t want to be talking about myself,” he says in a classic Cali drawl, “but no one else was really there, so if I don’t credit myself no one else will, and I don’t want to be forgotten." Rotella went to his first parties in 1991, at age 14, during the heady peak of L.A.’s early scene; by the end of 1992, he said, things began to sour: “It became a tweaky kind of scene.” By ’93, it was a wrap. “There was nothing going on.” Rotella’s parties in 1994–95—many at broken-into warehouses—led to a pair of arrests and a subsequent decision to go legit, right around his 18th birthday.

Rotella is pretty disdainful of just about any party in Southern California he didn't mastermind himself. In 1996, he helped put on Organic ’96 at a ski resort in San Bernardino—in part, a press showcase for the rising British live acts who would define the music-biz selling of “electronica” in the late 1990s. (The headliners included the Chemical Brothers, Orbital, Underworld, Meat Beat Manifesto, and the Orb.) Today, Rotella disdains Organic: “All that event did was satisfy people that didn’t support the culture anymore, that don’t go out, and journalists that gave the scene a chance for a night. That wasn’t what was driving the scene. All it did was push the real people out of the way.”

Rotella’s initial “baby” was Nocturnal Wonderland, which began in 1994 and by 2000 had taken over the Empire Polo Grounds, the future home of Coachella, where it drew 40,000. Electric Daisy Carnival (EDC) started in 1997 and was drawing 30,000 by the early 2000s in Tulare’s International Agri-Center. When Nocturnal skipped a year in 2002, EDC’s attendance gained parity before outstripping it once Rotella moved the festival to the Los Angeles Coliseum in 2008.

The mid-2000s were a trying time for the dance scene in America. In the wake of an August 2000 DEA bust at the State Palace Theater in New Orleans—Estopinol’s regular event home—the government attempted to prosecute him under the “crack-house law,” which makes building owners responsible for any wrongdoing on the property during an event. As a result, venues around the U.S. stopped renting to rave promoters. A once-thriving rave scene dried up—including in L.A., long the number-one EDM city in the U.S. In 2002, EDC’s draw was 6,000—meager compared to the 30,000 to 40,000 of the previous couple of years. “It just dropped off a cliff,” said Estopinol (who worked with Rotella at one point; the two are currently entangled in a lawsuit). “When that happened everybody was shocked. It happened to me in lots of places where I had shows set up. Most people quit coming then.”

Estopinol made do by tying together the various strands left over from the crackdown years: “I would do Cincinnati on Thursday, Cleveland on Friday and Columbus on a Saturday. I started a hub system, like an airport—building on all these hubs around that market. It wasn’t an ‘a-ha! moment.’ I knew there was still a small percentage of the population that wanted to see DJs. If I was in Portland, I started calling about Seattle. Nobody wants to fly out to the Northwest without another flight.” Estopinol also instituted cheaper tickets: “I was doing $5 for the first 50 tickets just to get the ball rolling.”

The key event in beginning to turn things around was the appearance of Daft Punk at Coachella 2006. They headlined Friday night in the dance-centric Sahara Tent, the night before the festival’s big get: Madonna. But she was rendered an afterthought when the French duo entered in an enormous lit-up pyramid and the crowd went berserk. “All the tastemakers were at Coachella,” says Estopinol. “They thought rave music was dirty and gross, and they were finally able to put dance music [together with] the visual aspect that was apparently so important. They were finally able to see what everybody else had been seeing the whole time. It made it cool.”

Video clips of the show proliferated on the just-established YouTube; eventually someone compiled a “supercut” of the entire thing. In 2007, Daft Punk triumphantly toured the U.S. in their glowing pyramid, and Kanye West had sampled their “Harder, Better, Faster, Stronger” for his number-one “Stronger”—part of a larger wave of hip-hop and pop acts starting to pick up on dance music tricks and grooves for source material. “You had the Lady Gagas of the world coming out,” said Estopinol. “If you look into pop radio, you heard the beat changing behind most of the songs—a big dance influence going on.”

“The commercial crossover that brought EDM to what it is was when Will.I.Am started working with David Guetta,” says Afrojack. Their 2009 collaboration on the Black Eyed Peas’ “I Gotta Feeling” became the biggest-selling song in iTunes history (racking up 5.5 million downloads by 2010). “It was the first dance-crossover song where people were like, ‘What is this music?’” says Afrojack, who was inspired by it. “I thought, ‘I want to make a commercial radio dance song, just to try it.’ Pitbull called me and said, ‘Let’s work together.’” The result, “Give Me Everything,” went to No. 1 in 2011.

That year, the dance underground seized the U.S. pop mainstream entirely on its own terms. That year, Rotella’s long-running Electric Daisy Carnival left southern California for the first time, following the death of a partygoer in 2010. The festival’s 2011 Vegas kickoff was wildly successful, drawing 230,000 people over three days and outdrawing Coachella by a slim margin. Porter Robinson, then an 18-year-old with a couple of Beatport bestsellers, played EDC ’11. “I remember getting a bunch of tweets like I’d never gotten before,” he says.

The new location was no easy ride. “Vegas was actually undesirable to people who loved dance music because it was fake,” says Rotella. “The clubs played hip-hop and it was cheesy.” But soon after the festival’s triumph, Jason Strauss, who booked hip-hop for Tao, at the Venetian, was lining up EDM DJs for the Cosmopolitan, and a slew of other clubs followed suit. “The train was leaving the station when Vegas got on board, but it’s definitely been a game changer,” says Estopinol. Sidney Samson, a Dutch DJ, plays ten times a year at the Wynn Hotel. In Vegas, he says, “You never know who your crowd is. You see people from all over the place.” He still gets the occasional crowd request during his two-hour headlining slot: “Maybe once or twice a night.” But, he says, “People are understanding that it’s a show—that you don’t have to ask for anything.”

ROTELLA IS UNREPENTANT that at his events, spectacle swallows individual talent. “There are new guys no one has heard that are amazing,” he says. “It’s not just about the same ten guys over and over again. Even the ten guys know that.” But musically, a blanded-out please-everyone aspect has risen to the fore—as audible at Tomorrowland’s big stages as anywhere—that’s reminiscent, more than anything, of Eighties soft-rock: Peter Cetera, Air Supply, Journey, Michael Bolton, Richard Marx—power ballads full of builds and drops. “I feel like I’ve heard 10,000 DJs playing the exact same sets,” says Porter Robinson backstage in Belgium. “I would rather play the worst DJ set with different music than play the same DJ set that’s super-functional, and works every time and in every venue.”

Familiarity sells, though—especially if it comes in a package deal, such as that which Tomorrowland—and TomorrowWorld—offers. For American visitors, this meant a flight from JFK on Brussels Air where, upon takeoff, passengers were bombarded by the 20-minute “after-movie” of Tomorrowland 2012. (This year’s edition clocks in at over 33 minutes.) This has become a standard marketing tactic since 2000, when video director Kevin Kerslake (most famous for his Nirvana clips “In Bloom” and “Come as You Are”) made a documentary about EDC. “The after-movies get people excited,” says Rotella. “You build these cities up and then you don’t really have anything to show for it after you tear them back down. These after-movies are meant to be for people who attended [to] look at and remember.”

Whether people remember them or not—and for many, obliterating the senses is precisely the point—profitability in the EDM biz is peaking. That means it’s a matter of time before things cool. Rotella thinks there are too many festivals: “And there’s too many nightclubs and concerts that are dance music—there’s too many events.” It will likely shake out in the “next two years,” he says. “There’ll be casualties. People are going to cancel shows.”

Interviewed weeks before Electric Zoo, Estopinol’s outlook was rosier. “At some point will there be some type of backlash, yes—but it will not go away. It will be a part of our lives and a part of our children’s lives. The gross revenue for the last five to six years is growing 30 to 40 percent per year—sometimes more.

That’s on average. If you see the attendance at the club shows and the festivals, the tickets are selling across the board. Every month this year is better from the month compared to last year.”

Beyond the U.S., he says, is still untapped territory. “I’ve been in Mexico for almost ten months and it’s been a learning curve for my local partner and myself. But it’s a serious growth market. There are 25 million people in Mexico City. I can combine 50 of my markets and not hit that. The potential is exponential.”

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