July brings in the hottest moment of the year and the “prosper” of China’s EDM festival market.
In the evening of Thursday, June 22 in Shanghai on the hanging garden of the 6th floor of K11, the founder and CEO of T.X Entertainment Xu Xubin (Tony) confirmed to bring in the foreign IP Life In Color music festival (hereinafter referred to as LIC) on its press conference and insanely poured a barrel of orange pigment over his head to light up the hall.
“We are gonna to redefine this summer by music and paints!” He declared the LIC will be on August 19 at the North Plaza of Shanghai’s National Exhibition and Convention Center. Later on the nights of June 23 and 24, T.X took 2 other LIC warm-up parties with the commercial real estate brand K11.
The organizer of Budweiser Storm, A2LiVE, arranged a grand press conference in early May to announce its journey plan in 11 cities within the year. Prior to this, news about the China station of Ultra Music Festival (referred to as UMF) and Electric Daisy Carnival (referred to as EDC), which are of the world’s top ten e-music festivals, has caused uproar. On April 10, UMF officially pronounced its Shanghai travel would take place on September 10, through a widely spread internet video. “Ravers” cheered, discussed and commented on social media about their eager on this upcoming worldwide best e-music festival and its top lineup.
UMF, LIC, EDC, Electric Zoo (once played in Shanghai last year), Tomorrowland…For youngsters who love e-music, these foreign large festival brands are quite acquainted and every year tens of thousands of visitors will attend. On the e-music song lists of NetEase Cloud Music and other platforms some fans commented “to go there at least once in a lifetime”. They are so sought after these brands not only because of the world-leading DJs, but also of the trendy lifestyles to freely release hormones.
△The Top 100 DJs increase the frequencies of their journeys to China, and this chart only cites the representatives in H1 for reference
Are the “Sky-high” license fees challenging the “localization”?
On June 15, 2017, Japanese famous music festival Summer Sonic pronounced its landing in China on its Shanghai press conference.
For the more and more foreign large music festival brands to enter the Chinese market, Paul, the MSE Manager under Modern Sky and the organizer of Myth Festival, said, “China looks attractive to those mature foreign brands for their oversea expansion plans, which deserves our expectations. Additional competitions are helpful to domestic e-music brands to improve the line-up quality, stage designs and overall experiences.From those the audience may also benefit to enhance their tastes and embrace greater chances for more high-quality services and experiences. Meanwhile the organizers will pursue the differentiation strategies to do something cooler, more unique to appeal to the audience by a more localized way. “
The LIC Shanghai officially started on sale at the end of June. Background information shows that LIC was born in Miami, Florida, USA and welcomed over 25 thousand fans world-widely within its first open flagday of December 28, 2014. 2-day LIC Miami from December 26, 2015 witnessed more than 60,000 people and refreshed a Guinness World Record with greater than 20,000 gallons of paints to cover most people at the same time. On January 16, 2016, LIC came back as one-day festival again in Miami attracted more than 60,000 participants plus a large Ferris wheel, fireball performances, acrobatics shows to present a quite fresh surprise. In addition to the e-music festival of over ten thousand people, various types of LIC have penetrated into more than 40 countries around the world.
Apart from the super large EDM festival UMF, LIC and Electric Zoo are both medium-sized ones with precise positioning and differentiation strategies but without rivaling top singers.
In 2015, Wang Ming (a pseudonym) returned from Miami with the e-music festival IP authorization from SFXE (which has been renamed as LiveStyle after the bankruptcy reorganization) to search for investors and sponsors but met lots of troubles. His enthusiasm has gradually disappeared in the “self-doubts” and “external reviews”.”Everybody is afraid of the big risk brought by such high authorizing fee of a foreign brand.”
How to price the introducing fee of overseas IP? Mr. Wang thought it generally depends on the size of the music festival. 10,000 audiences per day will cost 100-150 thousand dollars, and two days will double the charges. “LIC and Electric Zoo are in the same level and they will nominate a director to help us on artist booking, stage producing and video shooting.” For super-large EDM festivals like UMF, EDC and Tomorrowland, the price of authorization import would be at least 2-3 times of those of the former medium ones.
Many domestic practitioners showed interests on Mr. Wang’s strategic cooperation agreement, but finally chose to give up due to copyright fees and approvals. Actually aside of expensive authorization fees and approvals, in order to match them better there must be a large amount of money spent on oversea top artists, gorgeous effect and stage imitations, such as LIC’s iconic lion head stage, UMF’s big spider stage, and even Tomorrowland’s differentiated stages(like the world famous dreamy fairy tale stage). To “imitate” the brand, the promoters must 100% implement by following the standards of the foreign brand side, including applying the original design team. On the currently immature Chinese electronic music market, few promoters have the willingness to pay much for a try.
He said, “It will fail easily unless for the altruistic investors and actually the Budweiser Storm is a super ‘cash-burning’. I think a lot of people will understand finally why the more incomings result in more costs.”
Beyond the money, the “dream scenes” and “extreme carnivals” demand for much effort on localization if we take into account the venue selection, audience characteristics, consumer preferences and policy factors among China and other countries.
The first is to get the official approval. A music festival organizer told us, in the second half before the 19th Session of National Congress of CPC, all large activities would confront of the approval problems more or less. Under this circumstance he made some decisions in advance to put the festival at an earlier date in the H1.
Following are the irreversible factors such as weather. Music festival organizers are afraid of heavy rains, typhoons and sandy storms, which would harm the live experiences of audience and most importantly cancel their schedules and all former hard preparation. Just a few days ago, another e-music festival was canceled unfortunately because of a rare “heavy rain”- On July 7, Changsha’s Asgard Festival switched its venue temporarily but still failed to put things right and suffered heavy losses.
△ The stage of Asgard Music Festival from the official WeChat account
It is understood that it has reached the cooperation with the famous electronic music label Monstercat and carried the entire stage (Monstercat Stage) from EDC and Tomorrowland to China as the earliest “Chinese version of EDC EDM Festival”.
The hidden risks of “cool sections” and “Drug Culture” in the electronic music events also challenge the nervousness of Chinese promoters. For example, foreign games such as the super large Ferris wheels, fireballs and innocent paint carnivals cannot come in for security risks. Previously the Color Run and some similarities have drawn a lot of concerns through media after entering Asia. How to avoid possible fighting and drugs and how to do 100% security work while getting comprehensiveness from fans are seriously the questions to the fresh promoters who cannot simply say at the end, “Apart from the overall promising market, we met complex problems and ineffectual implementation teams which brought a considerable loss…”
Refer to the refund and arrangement issues after cancellation, Myth Festival became a special stage of the Strawberry after calling off its independent play and a large number of scheduled artists can only be transferred to the various small or middle venues in Shanghai, resulting in “all parties” and “crowded disco”- It is the local team who has more advantages to properly handle the problems after cancellation.
Can diversified small or middle live events lead the wave?
“The sales of EMD festivals in China run worse to the north. Shanghai has a comparatively mature market and VVIP sales from nightclubs are one of the main income. People will only remember the DJs but not the brand of the festival, which makes the whole market appeal to the foreign brands and stars.” Mr. Wang feels there are still some misunderstandings to generate a large number of counterfeits, rip-off products, and inferior festivals which will never survive after failing.
Accordingly 60%-65% of the revenue of current domestic EDM festivals comes from the box office, 30%-35% from the sponsorship and 5%-10% from the sales of derivatives. Behind the so-called prosperity, more and more promoters suffer from the dramatically increasing DJ booking prices. The topper the stars are, the faster the prices climb up.
“It is extremely terrible that the DJ booking prices generally increase by 20% or even 50%. South Korea, Japan, Thailand and Taiwan Area have lower show booking prices but higher ticket ones. We have a limitation on participants, while the ticket prices cannot clamber to a certain height immediately.” After analysis, Tony came to a conclusion that large EDM festivals are out of control and the money burning mode cannot win till the end.
What leads the chaos of the price towards e-musicians on Chinese market? As an instance, an artist came to China for the first time and got 200 thousand dollars from Promoter A. Occasionally Promoter B told him, “Hey come on, we’ll pay you $300,000 as you are quite hit now!” Usually he will choose the one with a higher price without doubts. From then on, an original 200-thousand-dollar star will become a 300-thousand-dollar one in China because of his previous 300-thousand offer.
Wang has temporarily given up making EDM festivals, from the end of last year, he started a careful analysis of “new” artists on the platforms like Netease Cloud, and then decided whether to invite those to China according to general understandings. “A star with a price of 20,000 dollars requires the sales of 1,000 tickets at 200 yuan, and in most cases we can only ‘entertain’ ourselves without earning back. Hence, the advertisement and publicity of labels are especially essential to find the ones who are really willing to pay.”
This year, Wang’s label turned to hold small-scale live events as “they are safe, interesting with higher audience loyalty and less investment pressure.”
In addition to the higher frequency of top DJs coming to China, CMBN has observed domestic large EDM festivals are improving their stage production towards the European or American standards. Thus, why are there still plenty of companies willing to get license of international music festivals under such heavy artists booking fees and production costs? Is this really a kind of cost-effective trading to improve its brands and industry status in a short time?
Budweiser Storm’s founder Eric Zho said the copyright lawsuit of “The Voice of China” has long proved the natural deficiencies of this model.”I think to make the company stronger we must have our own brands. ” In fact, Budweiser Storm has become the brand output side and will never accept LiveStyle’s IPs despite of their good interaction. Eric said the optimistic feedback would only apply to the situation where Storm can become the owner of international brands or go out with its brand in the agreement of both sides.
Tony agreed with the risks of importing authorization to some extent. “Nevertheless, the fact is an authorized agent earns from performances but is not an IP operator.” He believed IP re-development and operation are long lasting. As a new company, T.X. established its own market strategy – to hold “diversified” and “multifarious” EDM events. Tony introduced that the previous LIC did not invite many super top-line artists, but all tickets were sold out. As the greatest “artist”, LIC itself is a splendid show with hosts, DJs and even robots to warm up all the audience. Besides, he believed the process of operating LIC can help the team find the key to manage a top brand promptly.
△ From the left is Xu Xubin (Tony), the CEO of T.X. Entertainment and Chen Yiming (Sabestian), the CFO.
The CFO of T.X Entertainment, Mr. Chen Yiming (Sabestian), has worked in Haitong International Securities (Hong Kong) and Morgan VC, and served as VP of Investment Department of Herun Group. He met Tony since their childhoods and they went together to US for study but in different cities. When Tony found Sabestian for this crazy idea of creating a new company , the two clicked with each other. Then they quickly set up a team using their own money without raising money from outside investors.
The two untangled all of the EDM festivals around the world and found LIC as the most cost-effective one. Sabestian said to CMBN, “LIC is not the most familiar or the highest ranking one, but it profits the greatest among all the brand of EDM festivals. We don’t want to pay too much for Top DJs and we’d like concentrate on the event experience.” In his opinion, LIC has the advantages on the “good content”, “possibility to copy” and “diverse income resources.”
“At present, a single-day large EDM festival with 20-30 thousand audiences cannot be supported in Tier 2 or 3 cities, while events with around 5,000 ones can be copied to the other cities or even the Tier 5 towns. ” Sabestian said.
Paul deeply agreed, “International music festivals have existed for dozens of years, so their products, the overall performances and team execution power have touched a considerable height. The Chinese market is developing rapidly with frequently changing policies and consumer needs, which requires a new operating way. China’s music festival market has its own running systems and business rules to which the foreign brands need to adapt flexibly. Local EDM festivals have more resources, contacts and better awareness of consumer needs and preferences, but less experiences and common senses about such activities.”
(2017 Strawberry Music Festival Myth Stage)
Throwing money on DJs reminds Modern Sky E-Music labels of its own way. This year Modern Sky is engaged in various small live events beside of the Strawberry stage. “I do not think it’s necessary for China to get in all the international top e-music festivals and artists.” said Paul. “I always believe the audience will be more enthusiastic about the activities with more mixed and localized entertainment elements, and this is the direction of domestic music festival brands.” As mentioned above, well-known e-music brands provide the audience with stereotypes about top line-ups. Yet the overseas teams may also confront many political or man-made risks when apply for the domestic performance permission, and it seems not unusual for them to fail in the reviews by some passport related problems.
Although there is still a long way to go, the industry insiders keep optimistic and cautious to the entries of more and more foreign top EMD festivals. In the wake of the increasing interests of the domestic investors on the subdivided music market appealing to youngsters, organizers are pleased to jump down into the pool driven by capital.
“A lot of challenges and opportunities will come to enhance the quality of domestic activities and products.” However, “the domestic service platforms cannot catch up with the dramatic booming of the market development”. The e-music talents demand for more supports and development now than ever before, which is the core of a variety of types of e-music to improve without barriers and promote relative knowledge in the country.”Paul said.
To “normalize” this kind of “chaos” during development requires at least 3 years more, as the current hot money investors and foreign brands are eager to obtain a piece from the “invisible pie” of Chinese market. Paul said, “However, domestic audiences and local e-musicians will laugh to the end of this game.”
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