About 18 months ago, as hastily-assembled EDM conglomerate SFX became more and more obvious about transforming its Beatport digital download store into a streaming service that would promote its artists and festivals, someone I respect too much to name gave me the company line that his contacts at Beatport were spinning to the leading lights of the artist caste.
“It’s really just promotion,” he echoed. “It’ll be no hassle to set up and everyone can still buy tracks if they want. It’s aimed at the consumer market rather than DJs. Win-win.”
A year and a half later, as Beatport abruptly shuts down streaming, SFX staggers through a managed bankruptcy and a host of copycat services are contemplating a similar fate, we have to ask why this dream of a “celestial jukebox” that consumers love has uniformly failed practically everyone else involved in the business – rights holders, artists and apparently even the streaming companies.
None of these services have made any money. Apple is redesigning Apple Music, as if their (admittedly somewhat cluttered) app is the cause. Spotify is sitting upon a mountain of losses.
But at least those companies managed to build an “audience.” They really do have “just promotion” (Lord knows, no artist is getting much of anything else from streaming.)
But Beatport Streaming failed on every level: audience, revenue and even its existential reason for being. One by one:
Beatport Streaming Had No Audience
Sources inside the company (which leaked on Glassdoor and other sites) told me that the app was a massive disappointment when it launched. SFX had aimed for a “soft launch” and building its audience during the Summer 2015 festival season. The reality dawned fairly quickly that nobody was really crying out for a Dance Music version of Spotify. Beatport’s streaming app went nowhere. Ask yourself how many people you know have it – and how many of those actually use it.
Beatport Streaming Made Little Revenue
Beatport was an odd fit in SFX’s portfolio, in that it sold things (intangible things called mp3s, but still things.) After a company reshuffle in late 2014, streaming was intended to transform Beatport’s business model from selling things to selling ears — in other words, advertising. Yet despite an experienced executive team and owner Robert FX Sillerman’s own connections in the corporate world, advertising never materialized. Partnerships with T-Mobile and Spotify itself generated some revenue, but not nearly the bonanza SFX had hoped for.
Beatport Streaming Made No Sense for SFX
As mentioned above, Beatport was an odd fit in SFX’s portfolio of companies. In SEC disclosures, SFX referred to Beatport as the centerpiece of its “platform” business — Beatport would keep fans interested and plugged in about dance music & SFX’s festivals in particular. This of course is very different from a site which sold mp3s to DJs. The transformation was half-baked, half-done and in the end completely irrelevant to the type of business SFX will become as it navigates through a managed bankruptcy.
We Already Have Curators. They’re Called “DJs”
Of these failures, the first is the most crucial. Dance Music fans never glommed on to the idea of a music streaming service — an exclusively electronic Spotify that would function like all streaming apps, playing music on demand or based upon your preferences.
The reason? Dance Music already has an intelligent algorithm that streams songs based upon your preference. Dance Music already has “curators.” They’re called “DJs,” for Christ’s sake. Dance Music isn’t just another marketing demographic that’s otherwise indistinguishable from rock, hip hop or jazz. Approaching a huge archive of Dance Music is of critically less importance than the DJ/curator selecting from it. And SFX never understood this, despite owning the premiere digital DJ site.
They sold DJs “things,” and presumed they always would. Yet they critically ignored the tendency by Dance Music fans to discover new music by following what DJs play rather than what DJs made. Given their Beatport assets and festival goodwill, SFX had a better opportunity than anyone to seize upon this DJ-centric mindset and bake it into Beatport Streaming, but they never did (or, with SFX spiraling toward bankruptcy, never got the chance.)
It wasn’t their most fatal or most obvious misfire, but it was perhaps the most telling. SFX didn’t really fail to develop a great Dance Music streaming app. They failed to even understand why their audience would want one.