News broke last fall that Randy Phillips would helm beleaguered electronic music juggernaut SFX Entertainment, and ever since the industry has been waiting to see how and if Phillips, as President/CEO, could turn around the lifestyle/live entertainment company, which operates about 100 events worldwide along with digital lifestyle platform Beatport and ticketing firm Paylogic. In early December, SFX re-emerged from Chapter 11 bankruptcy (restructuring a reported $400 million in debt) as LiveStyle, and the firm remains the largest producer of electronic music festivals in the world. Since then, the typically outspoken Phillips has, for the most part, remained uncharacteristically silent.
Until now. In an exclusive in-depth interview with Venues Today, Phillips talked about how LiveStyle (producer of such major festival brands as Electric Zoo, Mysteryland, Tomorrowland, and many others) would move forward with its substantial, far-flung assets and resources.
SFX Entertainment was already a familiar name to the entertainment industry long before it became associated with electronic music. Entrepreneur Robert F.X. Sillerman first employed his capital-raising and consolidation skills in the radio business in the 1980s before focusing on the concert promotion industry in the ‘90s, rolling up regional promoters in rapid succession in building the nucleus of what is now Live Nation, the world’s largest promoter. Beginning in 2012, SFX began buying up electronic music fest producers and promoters—once again paying high multiples of annual earnings—and went public with a valuation of more than $1 billion before a much publicized collapse that sent SFX into bankruptcy and Sillerman into a quagmire of legal entanglements.
Phillips, too, is a well-known entity. He was a successful manager and label exec before spending 13 years helming AEG Live, the live entertainment division of sports and entertainment firm Anshutz Entertainment Group. Phillips’ eye for executive talent, aggressive nature, and appetite for risk helped power AEG Live to quickly become the No. 2 promoter in the world, a position it still holds under the AEG Presents banner. An early believer in the festival opportunity in North America, Coachella became the world’s most successful music festival due in no small part to Phillips’ faith and willingness to commit resources to its founder Paul Tollett (president of AEG Live subsidiary Goldenvoice).
In LiveStyle, Phillips is out of the gate with a much more powerful portfolio than he enjoyed at AEG Live in the early going, so the executive’s challenges are different, if no less daunting. In the beginning, Phillips’ first hurdles at LiveStyle were financial. “We’ve put our heads down and just plowed straight ahead to clean up the company,” he said, “which we’ve done, and now we start building it. We came out of the Chapter 11 proceeding with no debt and the assets intact.”
In building his team and a corporate structure, Phillips’ named former UMG exec Charles Ciongoli as chief financial officer. He then turned his attention to the perception challenge, both within and outside the company. He began referring to LiveStyle’s core genre as “EM”—electronic music—as opposed to the more traditional term “EDM,” or electronic dance music. He solidified his relationship with LiveStyle’s board and two principle owners, Doug Forsyth, who oversees a private equity fund owned by insurance conglomerate Allianz; and managing partner Andrew Axelrod, head of investor relations at Axar Capital.
We’ll let Phillips tell the rest. In this excerpt from the VT interview, the executive candidly weighs in on his priorities at LiveStyle, the state of its businesses, the future of the company, and what’s next. (The entire Q&A will appear in the next issue of Venues Today).
VT: So what was appealing to you about this job?
RP: The same thing that appealed to me when I took the AEG gig originally. People look at AEG Live now as this No. 2 juggernaut with Live Nation, but when I went in there, it was struggling, almost a failure, in terms of how it started. I like a challenge, and I love the idea of building something up. At some point in your life it’s not just about the money. There’s a “life’s too short” file, to do things you really don’t want to do, or deal with people you don’t want to deal with. In this case, I loved the challenge and I loved the two owners. I’m very close to the board, they’re really cooperative, and we have a very transparent, open relationship. And because there are no politics in this company, it gives me the opportunity to really build on what we have.
VT: LiveStyle is a different scenario in that you do have significant assets and brands already in place, whereas at AEG Live you were, in many ways, starting from scratch. It does seem that much of your challenge now is a perception issue.
RP: That’s why I had to change the name. Every time I said “SFX” to anyone I got the sign of the cross, like with a vampire. I’m surprised people didn’t wear garlic around their necks when they met with me. Remember, in November we were in negotiations, and didn’t know when we would actually emerge from Chapter 11, so I had to be ready with a name, because you only get one grand opening. I had to make sure it was clearable worldwide, the whole thing, and that was a daunting task.
VT: You’re taking a different approach now than at AEG Live, where you did a lot of talking, especially in the early going, promoting the brand. Now it seems you’re under the radar a bit.
RP: Yes, that was a decision I had to make. At AEG, at the beginning, there was a lot of negativity about whether Phil Anschutz was committed to the business, would he stay in the business, and I had to counter that by creating the impression that we were larger than we were. In this case, I had to do the opposite, because Bob Sillerman did too much press. The problem was SFX and its origins, and all the press, the cover of Billboard, that article, was too much smoke and mirrors. So, for me to make this company work in this reincarnation, I had to break the mirrors and get rid of the smoke.
VT: Talk to me about that process.
RP: Let me give it to you exactly straight. When I got into the company, I brought Chuck Ciongoli with me, because this is a huge job, more than one person could do, so while I’m strategizing he had to create processes that didn’t even exist here. Process counts. You’ve got to believe in your numbers, or you can’t even make decisions.
The first thing I did was [LiveStyle’s] biggest division is in Europe, and that’s the ID&T company in Holland (leading international dance music event producer operating in 19 countries on four continents), where we are the dominant player in the festival space, and Holland is the biggest festival market in the world. I went to the Netherlands and sat down with all the founders of all the different festivals, Wouter Tavecchi, Rocco Veeboer, and Jan Lok. They’d been through hell with the bankruptcy, and they were also quite wealthy from the buyouts from Sillerman. I needed to figure out how to get them re-engaged, to believe in the future that I was going to create for this company, and for them.
Instead of them coming to me, I went to them. That was important. Chuck and I, as a management team, we manage by walking the factory floor, we don’t sit on thrones. While I was over there, I also met with Michiel Beers, one of the founders of Tomorrowland, arguably the biggest festival in the world. They were very alienated from SFX, so I had to sit down with them and break the ice, with Michiel, and their COO, Bruno Vanwelsenaers. It started off very cold, and warmed up over time.
Then I met with our i-Motion company in Germany, which has a massive festival called Nature One, very successful, but no one really paid attention to them. So I had to forge a relationship with CEO Oliver Vordemvenne; these were people I did not know at all going in. So it was a lot of breaking the ice in the beginning, which was really important for us to be successful. There was no corporate culture at SFX, I had to create one from scratch.
VT: How would you describe the culture when you came in?
RP: A lot of scared people wondering if they were going to have their jobs the next day. A lot of people living paycheck to paycheck, wondering if the company was going to survive. And a lot of entrepreneurs wondering if they were going to be able to buy their companies back on the cheap after taking a lot of money out of the company.
VT: At AEG Live your approach was to let talented people do what they do, as opposed to micromanaging. Is that the approach at LiveStyle? You’re not going to be able to step in and run Freaky Deaky, right?
RP: No, I can’t. First of all, Europe is 8,000 miles away. You make your decision when you hire somebody, and if you have to babysit a senior executive, then you made a bad decision when you hired them. In our business, the people who really excel are entrepreneurs at heart, so you’ve got to incentivize them, encourage them, and then you’ve got to clear a runway for them to succeed. It’s not rocket science.
VT: Assess your business today.
RP: Tomorrowland [Brussels, Belgium] is up, introduced a second weekend, and has sold both of them out; that brand is stronger than ever. The Dutch, ID&T, are on fire; their events, Mysteryland, Sensation, Q-Dance, Awakenings, Back2School, all have come back strong, because the founders are focused on their events again, and growing them. The same thing in Germany, so Europe is really strong overall. Paylogic, the ticketing company, which does Tomorrowland and all the ID&T events, is doing incredibly well, the technology is very advanced. Paylogic is outperforming its projections, and that’s because the events are doing so well.
Beatport, the ultimate online destination for EM, had a major turnaround, and I’d like to take credit for it, but I didn’t really do it. The folks at Beatport that are running it turned it around, and it’s making really good money again, and engagement and subscribers have grown dramatically over the last year.
In North America, we didn’t have as many powerful assets as we have in Europe. Issues had to be dealt with, and there’s good news and bad news. With React in Chicago, Freaky Deaky [Toyota Park] and the New Year’s Eve show [Stephens Convention Center, Rosemont] underperformed, but Spring Awakening [Soldier Field] is exploding this year, and way ahead of the last two years in terms of how it’s performing. That festival is going to grow and grow, it has a path now to be the second most important music event in Chicago next to Lollapalooza, you can feel it happening.
In New York, we had a hiccup and a huge success. Electric Zoo on Randall’s Island, Labor Day, is coming back really strong. When you look at EM festivals in America, you have Electric Daisy in Las Vegas, Ultra in Miami, and Electric Zoo in New York; those will be the three pillars of massive electronic music festivals in America. The Electric Zoo brand is coming back bigger than ever. The hiccup in New York was an event that got approved while we were still in bankruptcy and I wasn’t in the company, or else I probably would not have approved it, and that was Mysteryland in Bethel Woods, N.Y. It was poorly booked, the lineup didn’t make a whole lot of sense, it kind of alienated the core fan, and the venue does not work. As beautiful as the site is, there are not enough hotels in the area, so it becomes strictly a camping festival, and that didn’t fit Mysteryland. The brand and the site were off, it didn’t make sense, so I pulled the plug on that about two weeks ago.
VT: Why does this genre intrigue you as a live entertainment producer?
RP: Someone said, “you’re the king of EDM now.” No, I’m not the king of EDM. I’m an executive running a company whose core is electronic music festivals. You have to adapt.
VT: Is there a danger in associating so strongly with one specific genre?
RP: Yes. Even when I was sitting at the desk as CEO of AEG Live, I remember reading Billboard with Sillerman on the cover and thinking, “this cannot work, you cannot be in one genre of music, especially if you’re in the live business.” You can do it at a label, but you can’t in live; you have to be broader than that. Now that we’ve cleaned this company up, and its functioning well, and I have a lot of capital to reinvest to build this because the owners believe in what we’re doing; the next thing is I’ve got to reinvent it. That’s the strategy and the path we’re looking at now.
VT: Can you give me a hint about how you will reinvent LiveStyle?
RP: No one respects you more than I do, but no, I cannot give you the family secrets.
VT: So you have specific ideas about what you want to do?
RP: Yes. We are out there aggressively in that area, making some moves now. Even though I’ve been a very big supporter of [AEG Live Chairman] Jay Marciano his whole career, and all my former colleagues at AEG are still some of my best friends; and, believe it or not, [Live Nation CEO] Michael Rapino and I have become great friends since we’re not competing any more, and I have nothing but awe for what he’s done at Live Nation. This is still a very competitive business, and I do not want them to know what I’m thinking.
VT: Do you see LiveStyle entering the tour promotion game?
RP: The festival business is like the venue business: the deals with the artists are flats, there’s generally no back-end participation, you have the food and beverage and parking, a lot of the ancillary revenue streams; there’s real residual value. Touring is a lease, it’s like renting a car. Once you’re done, you turn it in, there’s no real residual value other than the cash flow. It’s a very risky business and the margins are very thin. I will always be a tour producer at heart because I love it, and if an artist really wants me to do their tour because they believe in my vision and marketing skills, I may entertain it. We certainly have the capital to do that, and the board would support me. But that’s not our core business, nor do I plan on competing on a wholesale touring perspective with Live Nation or AEG Presents, that’s not the plan going forward. But, just like the title of the Justin Bieber film that I co-produced: Never Say Never.
VT: What did Bob Sillerman do right in building SFX?
RP: He was a master at raising money. He had so much success with SFX 1 and 2, one being radio and the other being the concert business. Now when he did [SFX 3], sure he was able to raise a lot of money. I think some of the problems were; one, he had all these disparate assets and he was never able to put it all together and create that corporate culture where they all worked in unison. Basically, as hard as he tried—and you have to give him an A for effort—the actual concept of being just one thing—electronic music festival producer — probably doesn’t work in the long term. You have to be more diversified than that.
VT: Do you envision a spin-off of LiveStyle at some point?
RP: I don’t have a crystal ball as to when my owners may want to sell it, or not. They’re private equity players, and eventually they may want to sell it to a more strategic player. But, for sure, we’re going to be building this company for the next three to five years.
VT: What do people in the industry need to know about LiveStyle today with you at the helm?
RP: I want the managers and agents and artists and, obviously, the consumers to support us, because I think it’s important, as I did when I started AEG Live. And that there be more than one buyer, more than two buyers, more than three buyers, in the business. It’s healthy for everybody, healthy for growth. Competition breeds champions, and I want the industry to support us as we build this company.
VT: Are they so far?