Pandora’s executives are cashing $15 million a piece; Spotify is burning that much on one label license! But selling for a billion or hoodwinking Wall Street isn’t a game that most can play. It just isn’t reality in a smaller, distressed music industry.
Which is why after twelve years on the grind, Sonicbids sold the company for $15 million. This is called taking the money off the table. And it’s what smart music companies are doing these days, if they’re lucky enough to get an offer in the first place.
The Sonicbids buyout, revealed Wednesday, finds Backstage making the purchase, with Guggenheim Partners ponying the cash. Sort of like Sonicbids, Backstage is in the casting business. Sonicbids will help you submit to SXSW or Bonnaroo; Backstage enables your submission to Broadway (or a comedy show, or an acting gig, etc.) Both are making some money by brokering this exchange, and facilitating the aspiration.
And they hope to make more: these are worlds that sometimes overlap, but ultimately rest on a very similar business model. On one side, both help the venue, festival, or brand effectively field thousands of submissions, while also helping the artist submit materials in a uniform, easier-to-manage format. And both charge for aspirational access: according to details shared by the company, Backstage+Sonicbids will have 600,000 registered users, with 60,000 paying for the privilege.
So, what does $15 million mean to you? That depends on where you stand: Goldman Sachs would sneeze at that return, that’s not why they’re putting cash on Spotify (or anything else, for that matter). But Edison Ventures did put $4.5 million into Sonicbids in 2007; they didn’t get their hoped-for return, but they did get out within a reasonable timeframe. And Sonicbids founder (and majority owner) Panos Panay also gets his exit (and a lot more money in his pocket).
So dude, where’s my outrageous multiple? The world has changed since 2008, not just for the music industry but the broader world. And there probably wasn’t a $25 million deal around the corner for Sonicbids. Or any other deal at all, for that matter.
Others have also survived the long game, planned that way or otherwise: CD Baby, acquired by Discmakers for $22 million, waited ten years before a buyout in 2008. And BigChampagne, acquired by Live Nation for north $25 million (at least according to our sources), waited nearly twelve. Both were incredibly smart to close those deals, and diversify or exit accordingly.
These are multiples that fit the times.