08 Apr 2013
Posted by admin 
IIn the business world, the term “bubble” refers to prices of assets going to levels way above their intrinsic value. The most common usage is in the real estate world. Prior to the economic hard times that hit the U.S. in 2007/2008, real estate prices soared to bubble levels. When the economy went into a recession, the bubble popped and prices plummeted. Typically right before a bubble bursts, there are small signs that something is amiss. One leading indicator in the real estate world is the average length of time a property is on the market before it sells. The longer the property is listed for sale, the weaker the market is.
Prices for top notch DJ talent continue to skyrocket. Have they gotten to levels way above their intrinsic value? That is hard to say. Clearly, when people are spending $50,000 for tables at LIV to see Tiesto and Calvin Harris, the value people are placing on seeing that talent is quite high. If that same table costs $5,000 on a normal night, the key questions is: was the Tiesto/Calvin Harris night 10x more valuable? It is hard to imagine that it is. Especially when going to see Tiesto at LIV is possible on a monthly basis (he has a contract to play there once a month). At some point, one has to wonder when the madness stops. If people are no longer willing to pay $50,000 for a table, does the value of the DJ talent start to go down?
Have there been any signs of cracks in the DJ value bubble? Possibly. Yesterday, The New York Times published an very interesting article about club Pacha Ibiza. With all of the money being spent in Las Vegas, DJs have migrated there and are spending less time in Ibiza. Ibiza has been the Electronic Dance Music capital of the world for 20 years but Las Vegas is making a strong run at that title. One option for the clubs in Ibiza is to engage in a war for talent by throwing more money at the DJs. The other option is to refuse to play the game. It seems that this is the route Pacha is taking. Instead of paying more and more for the likes of Tiesto, they are looking for new DJ talent and embracing other types of music. Piti Urgell, one of the owners of Pacha Ibiza, told the New York Times: “The DJs wanted more money to play less. It was an abuse. We had to come up with a new plan because the old one was going to explode.”
It remains to be seen if this strategy is going to work. However, when the most storied nightclub in EDM history takes a step back, it is news. Is it the first crack in the DJ value bubble? Only time will tell.
