
The music festivals of today are the direct opposite of what it was back in the 60s. What once went down as a gathering for hipsters has now exploded into a multimillion-dollar event.
By the end of the long Hari Raya Haji weekend, more than 30,000 music heads would have graced the Ultra Music Festival 2016 held at Marina Bay Sands. While attendees of the two-days-long event were snapping selfies with their country flags and sipping beer from a Carlsberg can, they were contributing to the thriving business of electronic dance music (EDM) festivals.
How Much Are Event Companies Making From These Festivals?
Unknown to many, SFX Entertainment is one of the leading producers of live events, media, and entertainment content, focusing on electronic music culture. It is the company behind music festivals such as Tomorrowland, TomorrowWorld and Sensation, just to name a few.
A quick look at the financial statement of SFX Entertainment, Inc for the year 2014 indicates that the company bagged closed to US$285.9 million in terms of revenue from all their live events. Ticket sales from the events amounted to US$172.1 million, taking up 60.2% of their total revenue.
Source: SFX Entertainment, Inc.
However, despite the huge revenue, the cost of organising festivals are high. Musician and artist costs amounted to US$67.1 million and production cost incurred amounted to a high US$102.6 million. Factoring in the rest of the cost for advertising, administrative fees for the sales of tickets and depreciation of equipment, the company ultimately made an operating loss of US$22 million throughout the year.
The same may not apply for Ultra Enterprise Inc, which organised the Ultra Music Festival. However, assuming it has a similar cost structure to that of SFX Entertainment, Inc, UMF may not be as profitable as we expect it to be.
SFX Entertainment, Inc. On Wall Street
Share price of SFX Entertainment
Source: Bloomberg
SFX Entertainment went public in October 2014 with a US$260 million share offering on NASDAQ. However, the share price for SFX Entertainment has fallen drastically since then due to the decline of investor confidence, when their financial records cast doubt on the profitability of the business.
Nevertheless, the prospects of the EDM industry could change for the better. The EDM industry is currently valued at close to US$4 billion and is still growing. On top of that, Music festivals such as Ultra and TomorrowWorld are boosting the Gross Domestic Product of the countries they are held in. When Ultra Music Festival was held in Miami, it created close to 2,000 jobs and generated US$17 million in the form of taxes for the government.
This growing influence of music festivals may encourage a lot more countries to open their doors to such events and capitalise on the benefits that they bring to the economy in years to come. Investors who wish to invest in the rave industry can purchase shares of SFX Entertainment through NASDAQ. For now, that is the only option available until more of such companies get listed.
Read also: This is what you should be afraid of when investing in the stock market
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