March 5, 2021

Media Decoder Blog: SFX Entertainment Buys Major Stake in Dutch Festival Promoter

As corporations hear the siren call of electronic dance music, the deals keep getting bigger.

On Thursday, SFX Entertainment will announce that it has bought 75 percent of IDT, a Dutch festival promoter, for $102 million in cash and stock. The deal, perhaps the biggest in the market so far, will give SFX a major foothold on the global festival circuit as it tries to build a $1 billion media empire centered on dance.

IDT puts on the annual Tomorrowland festival in Belgium, which last year drew 180,000 people, as well as Sensation, an indoor event held in 20 countries. IDT already formed a joint venture with SFX to bring a festival to North America, and on Wednesday the two companies revealed the details of that partnership: TomorrowWorld, an event for 150,000 people to be held in Chattahoochee Hills, Ga., from Sept. 27 to 29.

(Why not call the new one Tomorrowland? Disney owns that name in the United States, according to Duncan Stutterheim, one of IDT’s founders.)

“We are aligned with a festival operator who has been doing this for 20 years and has helped define quality and a great experience for fans,” Mr. Sillerman said in an interview. “It also gives us the global footprint to begin creating the worldwide community of dance fans.”

The deal values IDT at $136 million.

Mr. Sillerman, who corporatized the concert industry in the 1990s through a previous incarnation of SFX, revived the company last year to capitalize on the rise of electronic dance music, or E.D.M.

After decades on the cultural margins, dance has taken over the sound of Top 40 radio and drawn huge crowds to festivals around the world — and, in turn, the attention of Wall Street investors.

So far SFX has bought a string of Miami nightclubs and several festival and live-event companies. But its acquisition spree took off recently when it paid $50 million for Beatport, a download store that Mr. Sillerman wants to use as a hub to connect the disparate global dance audience, and therefore and attract advertising dollars from major brands. This week, SFX also announced an investment from the advertising giant WPP that has been estimated at $10 million.

Mr. Stutterheim said in an interview that SFX’s resources would help his festival franchises expand quickly around the world. This year, IDT events will take place in Brazil, South Africa and perhaps in Kenya, and Mr. Stutterheim said he was looking at various spots in Asia.

“I believe in this story, that this will build into a new worldwide electronic company,” he said of SFX. “This is a really big step, and we could never do it ourselves.”

Last year, IDT brought its Sensation event to the Barclays Center in Brooklyn in cooperation with Live Nation. But the SFX deal is a sign that corporate allegiances are being drawn at the top levels of the festival market. Live Nation, which has been building its own dance empire, is said to be in the advanced stages of takeover talks with Insomniac, the promoter behind the Electronic Daisy Carnival events.

Another power struggle is taking shape in Las Vegas, where top D.J.’s are booked to multimillion-dollar residencies at the nightclubs attached to major casinos. The Wynn casinos have built a lineup with dozens of D.J.’s; a nightclub branch of Hakkasan, a high-end restaurant chain, has arrived as a major competitor. The club, opening next month at the MGM Grand, has booked a number of star D.J.’s, like Tiësto, Deadmau5 and Steve Aoki, who have been associated with Wynn.

Mr. Stutterheim, like other entrepreneurs in the dance world, built his business and his festival brands as an independent company, and said that at first he was ambivalent about selling to a corporation whose goals were anything but indie.

“There was hesitation in the beginning, of course,” he said. “But for me the big change was when the agents came in with the big D.J.’s, the big, top-dollar stars that changed the game. Now it’s just the professional entertainment industry. I’m seeing possibilities, and I don’t have any hesitance now. That’s the way it’s going, so, O.K., let’s go that way.”

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BSkyB Board Is Said to Keep James Murdoch as Chairman

The board of British Sky Broadcasting, a satellite television company known as BSkyB, discussed Mr. Murdoch’s role “at length” and decided he should keep the job, said a person with direct knowledge of the decision. The board planned to closely monitor developments linked to the phone hacking scandal, said the person, who declined to be identified because the meeting was private.

It was the first time BSkyB’s 14-member board had met since a public and political outcry over phone hacking at The News of the World, the now shuttered tabloid, forced the News Corporation, the global media company controlled by Mr. Murdoch’s father, Rupert Murdoch, to withdraw its offer for the rest of BSkyB.

The News Corporation owns a 39 percent stake in BSkyB.

The board meeting had been initially scheduled to discuss BSkyB’s annual earnings, which are to be released on Friday, but the phone hacking scandal had obliged it to also address the question of whether James Murdoch should stay on as chairman. James and Rupert Murdoch faced angry questions from British lawmakers this month about how much they knew about phone hacking practices at The News of the World.

Keeping James Murdoch on the board of BSkyB, one of the best-performing and most important parts of the News Corporation’s British business, is essential to the Murdoch family’s media empire, some analysts said. James Murdoch runs the News Corporation’s European operations, which include the BSkyB stake and News International, the newspaper group that published The News of the World. He is also the News Corporation’s deputy chief operating officer.

Pressure on James Murdoch intensified last week when two former News International executives contradicted testimony he had given to a parliamentary committee. The executives said that in 2008 they had made Mr. Murdoch aware of evidence that suggested phone hacking at The News of the World was more widespread. Mr. Murdoch denied he had ever been told that underlying evidence in the case implicated more than one reporter at the tabloid.

James Murdoch became chairman of BSkyB’s board, which also includes three other members who are on the News Corporation’s payroll, at the end of 2007, amid opposition from some institutional investors and pension funds. Some shareholders criticized the election process and said they would have preferred a chairman who was not linked to BSkyB’s biggest shareholder.

Lorna Tilbian, an analyst at Numis Securities in London, said James Murdoch’s support among BSkyB’s board members did not come as a surprise. “He’s done a good job as BSkyB’s chairman, and it’s innocent until proven guilty,” Ms. Tilbian said.

The phone hacking scandal might affect BSkyB in other ways. Ofcom, the British broadcasting regulator, is proceeding with inquiries into whether BSkyB remains “fit and proper” to hold a broadcasting license because of the hacking scandal still unfolding at the News Corporation.

The scandal took a toll on BSkyB’s share price because some investors were concerned that new investigations into phone hacking and bribery allegations could distract management. BSkyB’s shares slumped 16 percent from their peak this month. The shares remained unchanged at 7.2 pounds in London on Thursday.

BSkyB’s board also discussed whether  to either  pay a special dividend or buy back its own shares to compensate BSkyB shareholders, which includes the News Corporation, for the recent drop in the share price.

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British Leader Defends His Actions in Hacking Case

Mr. Cameron’s appearance before a special sitting of the House of Commons offered one more remarkable moment of passion and spectacle, following the separate appearance of Rupert Murdoch and his son James before lawmakers on Tuesday for nearly three hours of questioning of one of the world’s most powerful media moguls by British legislators.

Their appearance — made yet more dramatic by a protester’s attack on Rupert Murdoch with a plate of shaving cream — did not seem on Wednesday to have come close to answering many of the questions the father and son faced about phone hacking in the British outpost of their media empire in 2002.

Indeed, one of the two parliamentary panels investigating the widening scandal released a scathing report on Wednesday accusing Murdoch companies of “deliberate attempts” to thwart its investigations, and said police inquiries had been a “catalog of failures” to investigate the issue.

The events played out against a backdrop of huge public revulsion over the central allegation that The News of the World, a now-defunct tabloid closed down by Mr. Murdoch earlier this month, ordered a private investigator to hack the voice mail of Milly Dowler, a 13-year-old girl abducted and murdered in 2002. So great is the interest in the affair that the BBC devoted live television coverage on Wednesday to what it said was the Murdochs’ executive jet flying out of Luton airport north of London. Its destination was not announced.

The gathering of so many emotive issues, laced with big money deals, tabloid scandal and long-running British suspicion of the Murdoch machine, has crystallized into the most serious crisis of credibility and confidence of Mr. Cameron’s 15 months in office — a crisis in which he seemed to be trying on Wednesday to regain some of the initiative seized earlier by the Labour opposition leader, Ed Miliband.

Mr. Cameron returned home early from an African trade tour late Tuesday to face questions about his relationships with former senior figures at News International, the British subsidiary of Rupert Murdoch’s global News Corporation, particularly his choice of a former Murdoch employee, Andy Coulson, as his director of communications.

Mr. Coulson, a former editor of The News of the World tabloid, resigned from the prime minister’s office in January and was among 10 people who were arrested in the affair.

Referring to his decision to hire Mr. Coulson, Mr. Cameron said, “I regret and I am extremely sorry about the furor it has caused.”

“With 20-20 hindsight and all that has followed,” he said, “I would not have offered him the job and I expect that he wouldn’t have taken it. But you don’t make decisions in hindsight, you make them in the present. You live and you learn and, believe you me, I have learned.” He added that Mr. Coulson had been properly vetted before joining his staff and had given “assurances” that he had not been involved in phone hacking.

It was the closest Mr. Cameron has come to an apology, and seemed to show that the prime minister was distancing himself from his former aide.

But Mr. Cameron continued to defend Mr. Coulson’s work as director of communications and said he had “an old-fashioned view about innocence until proven guilty.” If it is proved that Mr. Coulson lied to him, he said, “that will be the moment for a profound apology.”

“It was my decision” to hire Mr. Coulson, Mr. Cameron said, “and I take responsibility.”

Ed Miliband, the leader of the Labour opposition, responded by saying Mr. Cameron’s position had been compromised by his association with Mr. Coulson. “Why doesn’t he do more than give a half-apology?” Mr. Miliband asked.

Referring to Mr. Cameron, Mr. Miliband said: “He says in hindsight he made a mistake by hiring Mr. Coulson. He says if Mr. Coulson lied to him, he would apologize. That isn’t good enough. It’s not about hindsight, it’s not about whether Mr. Coulson lied to him. It’s about all the information and warnings the prime minister ignored. He was warned and he preferred to ignore the warnings.”

Mr. Cameron was questioned repeatedly about a  New York Times investigation into The News of the World that was published in September 2010.

“There was no information in The New York Times September 2010 article to make me change my mind about Mr. Coulson,” Mr. Cameron said.

The article found that hacking was widespread, and quoted two former News of the World journalists as saying that phone hacking was discussed in Mr. Coulson’s presence.

Jo Becker contributed reporting.

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Economix: Podcast: Sovereign Debt, Phone Hacking and Law Schools

There has been a flurry of headline-grabbing developments in the slow-moving financial and fiscal crises on both sides of the Atlantic.

In Europe, Italy’s cost of borrowing rose to the highest level in many months, as traders worried that Greece’s financial problems might not be contained. In the new Weekend Business podcast, Floyd Norris, chief financial correspondent for The Times, says that while the problems in Europe have roiled the markets, a major financial issue in the United States so far has not. That is the inability of Congress and the White House to agree on an increase in the debt ceiling of the United States. If such an agreement is not in place by Aug. 2, the Treasury secretary has warned that the government could default on its debt, with catastrophic consequences.

So far at least, Treasury yields remain extremely low and prices, which move in the opposite direction, are quite high, a sign that the markets are convinced that this crisis is a nonevent. We shall soon see whether this is true, Mr. Norris says. Other problems — the weakness of the United States economy, high unemployment, and a large and growing debt load — are also looming. For the moment, though, a benign summertime mood has prevailed, and domestic stock and bond markets have remained relatively calm.

In another portion of the podcast, I chat with Mr. Norris about the phone-hacking and bribery scandal that has shaken the Murdoch media empire. It has already led to the shuttering of one newspaper, numerous arrests, top-level executive changes and investigations in London and in New York.

The business of legal education in the United States is the focus of a cover article by David Segal in Sunday Business. In a podcast conversation with David Gillen, Mr. Segal says many law schools have sharply increased their fees, enrollment and capital spending, even as the job market for law school graduates has shrunk.

And in the Economic View column, the economist Richard Thaler revisits the annuity puzzle — the unpopularity of annuities despite their economic advantages. Traditional pensions are a form of annuities, but as working people shift to defined-benefit plans like 401(k)’s, they are faced with a bewildering set of options upon retirement. Yet few of them choose to buy annuities.

As he says in a podcast conversation, Social Security is a form of annuity — and he suggests that by delaying the receipt of benefit checks, people can greatly increase their monthly payouts. This may simplify financial planning. It’s advantageous, of course, only if you live long enough for your increased monthly benefits to offset the loss of the checks you are voluntarily giving up. Social Security could also be modified to allow recipients to “top off” their benefits by purchasing larger annuities, Mr. Thaler suggests.

I also discuss a contest between vice and virtue in mutual fund performance, the subject of my Strategies column in Sunday Business. The second-best performer among all general domestic mutual funds in the second quarter was the Vice fund, which focuses on tobacco, alcohol, gambling and military companies. The best performer, though, was the Virtus Small-Cap Sustainable Growth fund. Virtus is a Latin word for virtue. How virtuous is the Virtus fund? There are some answers in the podcast and in the column.

You can find specific segments of the podcast at these junctures: Floyd Norris on financial crises (38:52); news headlines (28:33); law schools (25:42); the Murdoch empire (18:39); Richard Thaler (11:38); mutual funds and the week ahead (3:57).

As articles discussed in the podcast are published during the weekend, links will be added to this post.

You can download the program by subscribing from The New York Times’s podcast page or directly from iTunes.

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