Illustration by Che Saitta-Zelterman.
In 2004, a time when George W. Bush, CD-ROMS, and Myspace loomed large in the collective imagination, three club music nerds and DJs in DenverJonas Tempel, Bradley Roulier, and Eloy Lopezlaunched a webshop for dance music. They had already been digitally ripping music from vinyl to perform live during their sets, but in an era when DJs were still lugging around crates of records to gigs, the idea of creating an online marketplace for dance music downloads brimmed with potential.
Beatport launched in January 2004 with 79 labels, mainly house music-focused, in its catalogue. Over the next decade, the platform would mature into a catalyst for the worldwide explosion of dance musicand particularly, that of the EDM movement, where massive crowds, venture capitalists, and superstar DJs turned club sounds into big business. As the company’s inventory grew, its chartsBeatport’s top sales rankings, broken down by genrebecame an industry standard for measuring a DJ or producer’s success. When Robert Sillerman’s dance media conglomerate SFX Entertainment bought the company in 2013for $58.6 millionBeatport was the hottest startup in all of electronic music.
Almost immediately after acquisition by SFXa live events company boasting an expansive portfolio of festivals and promoters, including Tomorrowland, Electric Zoo, and MysterylandBeatport’s fortunes changed. Alleged corporate mismanagement from the new owners, a fast-changing technological climate, and a conveyor belt of new products that drew focus away from Beatport’s founding mission led to the spectacular and very public crumbling of one of dance music’s pillars. SFX filed for Chapter 11 bankruptcy earlier this year, with Billboard reporting that its stock had plummeted to just over one cent a share. The bankruptcy culminated in Beatport laying off nearly 50 employeesapproximately half of its staffand shuttering all of its departments that do not involve the direct sales of music.
To understand what the story Beatport meansboth for the company and for dance music culture as a wholewe have to go back to a time before massive drops and millions of dollars, to the town of Denver, Colorado.
Over the phone from his home in Denver, former staffer Lloyd Starrwho joined Beatport as a software developer in 2003, and later ascended the ranks to become Chief Operating Officer, and then President of Beatport Pro, a vertical specializing in music library management software for DJspaints the early days of the company as the stuff of startup utopia. “I was there right at the beginning, prior to launch,” he says. “I was the first employee at Beatport! We were building as a Wall Street playthat’s why I never did a deal with them,” Insomniac Events CEO, EDC progenitor, and major SFX competitor Pasquale Rotella told Billboard last month. DJ Eric Sharp, an 11-year veteran of the West Coast club scene and professed long-time Beatport user, echoes this sentiment from the trenches of the underground. “Dance music came from a subculture,” he says. “It wasn’t created as a brand or a trend to attract consumers. So when someone like Sillerman comes along who, to my knowledge, has no history within dance music, he’s seen as an outsider just trying to cash in.”
In October of 2013, SFX went public with an IPO of $13 a share, and soon went into freefall. It became clear that SFX’s rapidly assembled portfolio of properties had been purchased at premium prices and had loaded the company with hundreds of millions of dollars in debt. “The last thing we’ll be thinking about is margins,” Sillerman said to Forbes in July of 2012. “You know if you make cars or washing machines or something like that, I guess you have to focus on margins. That’s not the way I view the entertainment businessI view it as an art not as a science.” Unfortunately for Sillermanwho was not available for comment on this storySFX’s shareholders cared about margins.
SFX’s empire was premised on the the idea that its various properties would align to support each other. This idea was never given a chance to flourish, as the company’s disastrous IPO obliged the company to shift its focus to damage control. The company’s market cap valuea metric for determining the “market value” of a companydropped by a third between December 2013 and March 2014. Amidst the stock market turmoil, SFX laid off as many as 20 Beatport engineers in December of 2013a quarter of the company’s staffand closed its satellite San Francisco office (its other offices, in Denver and Berlin, remained open). By October 2014, a year after the company had gone public, SFX’s stock price had dropped from $13 to approximately $5 a share. A year after that, in October 2015, it was down to 93 cents a share.
Back in Denver, Beatport’s expansion into myriad consumer-facing services was not going well. The streaming platform struggled to find an audience. “Beatport’s streaming efforts were always half-hearted,” says Mark Mulligan, Managing Director of London-based media-tech analysis firm MIDiA. “Its core customer base is DJs, producers, and wannabe DJs and producers. They go to Beatport to either buy the downloads, or find out which ones to download from Torrents. They’re not going there as music listeners.”
Even worse, In August of 2015, Beatport fell into scandal after notifying labels that their payments had been frozen, a situation exacerbated when it became clear that a number of major labels were, in fact, still getting paid, while independent labels were forced to hold out. The very entities that Beatport was founded to support were being shafted. “I am deeply embarrassed, both personally and professionally, by what has happened,” Sillerman said in a statement two days later. The remaining payments were forced through, but the writing was on the wall.
Beatport posted a $5.5 million loss in 2015. SFX filed for Chapter 11 bankruptcy in February of 2016. Sometimes referred to as “reorganization bankruptcy,” Chapter 11 allows a company to remain in operation as it attempts to restructure its finances. SFX began wholesaling and downsizing its properties. Sillerman stepped down as CEO at the end of March, and Beatport was on SFX’s bankruptcy auction block by May. Other SFX properties, like Fame House and Flavorus, were sold for pennies on the dollar to mammoth media conglomerate Vivendi/Universal Music Group. The auction for Beatport was at first postponed, then suspended, though the company published a statement explaining that it would “continue considering offers.”
“We’re back to dedicating 100% of our resources to the store, and to our core customer, the DJ.”Terry Weerasinghe, Beatport VP of Music Services
To survive, Beatport shut down Beatport News; its struggling streaming platform; its digital distribution, platform Baseware; the Beatport Live video portal; and maintenance on its mobile app, laying off around 50 employees in the process. At the time of this writing, the only thing left under the Beatport banner is the webshop, where people can buy MP3s and WAVs, and Beatport Sounds.
“We’re in a refocusing period,” says Terry Weerasinghe from Berlin. Hired as Beatport’s VP of Music Services in 2013, he’s now in charge of its marketing, content curation, and business analytics departments. “The features we were developingstreaming, video, the news platformthey require time and investment to develop. Some of the ideas were good ideas, but with the debt load that SFX took on, it just wasn’t financially realistic to continue investing in those services, so we took them offline. We’re back to dedicating 100% of our resources to the store, and to our core customer, the DJ.”
For the first time in a long time, Beatport’s current business model is something its current staff and founding members can agree upon. “Beatport doesn’t have to be a dot-com, billon-dollar store,” says Tempel, echoing the words of an open letter he recently penned to Beatport. “That’s just a fantasy people created. Beatport needs to be the world’s best platform to buy dance music. That’s it’s only job. That’s the way forward.”
Perhaps even more importantly, dance music still needs Beatport. “I’m hoping that they make it through Chapter 11 in a positive way,” says former Beatport Pro president Starr, who parted ways with the company in January 2016, to co-found a consulting firm named Velocity Plus. “There are a lot of labelsout of the 37,000 independent labels that are out there, let’s just say 40% of them rely on somewhere between 50-and-70% of their revenue coming through Beatport.”
Matthew Willems of Perfect Driver agrees: “If Beatport went away, it would push Perfect Driver to the brink of nonexistence. As it stands, we don’t take home much revenue, barely enough to keep the lights on. To run a label the right way, there needs to be cash flow. Without Beatport, I have nothing to fall back on.”
To Richard Tullo, a financial analyst from Wall Street firm Albert Fried & Company, what brought SFX down was actually quite clear. “Too much debt and not enough focus on due diligence and integrationas well as faulty assumptions on the level of the sponsorships SFX could sellconspired to kill SFX,” he explains. In the bigger picture, Tullo posits that the EDM machine may have only been a short-lived financial opportunity to begin with. “EDM growth will level off this year,” he says. “The best festivals will continue to sell out, and mediocre festivals will close or cut days. Festivals will never be as big as they were, because the millennial is aging out of the demographic.”
It’s easy to view the fall of SFX as a cautionary tale about the danger of a subculture being commodified, but the debacle can just as easily be seen as a lesson for the corporate world about the obstinance of outsider communities. Prior to the EDM boom, dance music had been a grassroots and marginal community for decades, its constituents skeptical of any attempt to make a buck off its preciously guarded authenticity. For all its attempts to connect with a new generation of dance music lovers, SFX never connected with the dancefloor lifers at the genre’s core. “SFX was built in the EDM bubble, when it looked like EDM was going to rule the world,” music industry analyst Mark Mulligan told THUMP. “The problem with when a subculture goes mainstream is that it alienates its core audience. When the newly won, casual fans move onto something else, there is a gaping hole left behind.”
That’s why even though EDM was one of the biggest fads in recent memorya fad it was, and as a fad it will go. On the bright side, Beatport survived the fallouteven if in terms of personnel, it is totally unrecognizable from the faces that built it in the early 2000s. Amidst the rubble of SFX, Beatport has returned to the mission with which it began: to be the world’s best web store for purchasing dance music. As of this writing, the companyper a Beatport repstocks over 6 million tracks from over 46,000 labels. On an average week, 25,000 new tracks are added to the store; on an average year, the site receives over 40 million unique visitors.
The company still faces the same existential challenge it’s been struggling to answer for most of its historythe impending obsoletion of downloadingbut for the first time in decades, Beatport will have a chance to answer on its own terms. “I don’t think you can guarantee success in any form anywhere,” says Jonas Tempel. “But if there’s anyone that should be able to do it, it’s Beatport.”