Music festivals are a generally good money making opportunities for promoters and producers. This is ostensibly why a number of festivals continue to grow in popularity. When you think of South by Southwest in Austin, Texas, Electric Zoo in New York City and Mysteryland, the music and hype that bring people to these venues suggests that they will continue to be profitable for years to come.
However, popularity and profitability don’t always go hand in hand. Such is likely the story behind the bankruptcy announcement by SFX Entertainment. The company that was created less than five years ago to promote large-scale dance music festivals is seeking bankruptcy protection to eliminate more than $300 million from its balance sheet.
The company will also replace its chief executive officer who founded the company, as he attempted to reincarnate an earlier version of a musical empire that combined promoters across the country and was eventually sold to Clear Channel in 2000 for more than $4 billion.
Unfortunately, the road to profitability was quite rocky for SFX.
In the meantime, SFX’s lenders appear to be agreeable on a plan that will allow the company’s other businesses to remain viable, especially its digital music store, Beachport. However, the possibility remains that the company could be sold in pieces, with other promoters opting to purchase them at a substantial discount.
In either scenario, the story exemplifies the need for experienced bankruptcy attorneys to be involved when a company seeks to restructure its debt in order to remain viable.