AEG, SFX: Showdown
At Double JJ

It has all the markings of not so much a contested lease agreement and ownership transfer but a proxy war being waged by electronic dance music provocateur SFX Entertainment against AEG Live and, indirectly, Live Nation.

At stake is the Electric Forest festival itself.

What started out as a minor, but well received, jam band festival called Rothbury in 2008 morphed into Electric Forest – which has already sold some 23,000 advance tickets without so much as a 2014 lineup announcement.

Madison House co-produces the festival with Insomniac Events.

The festivals have taken place at the Double JJ Resort, a resort property with a troubled financial history despite the success of the festival staged there.

It’s changed hands multiple times since Rothbury’s inception, and a long-term lease agreement with Madison House Presents has always been honored.

But the property isn’t all that’s made changes recently.

Madison House Presents – with its 20-year lease with Double JJ Resort – made a deal between its three principals and AEG Live in January, and Insomniac was acquired last year by Live Nation.

AEG Live beat out several suitors for MHP’s services, including SFX Entertainment.

A source with knowledge of the discussions told Pollstar that SFX submitted a bid more than double that of AEG’s and was “infuriated” that it was rejected.

Last year, a similar scenario is said to have played out in SFX’s bid to acquire Insomniac Events – owner of the massive Electric Daisy Carnival franchise – which went to Live Nation despite being vastly outbid for by SFX.

Having failed in its attempt to acquire Electric Forest’s festival producer, SFX is apparently now interested in the property it takes place on.

According to an emergency motion filed in a Michigan court Feb. 6, AEG Live accuses SFX of being in discussions with Progressive Resorts LLC – the company that bought Double JJ Resort out of bankruptcy in 2009 – regarding the resort’s collateral, which includes Madison House’s 20-year lease.

Progressive Resorts was ordered by a circuit court judge in November to sell Double JJ Resort to Antler Bar Amusements, which took receivership of the company after gaining control of two bank loans made to Progressive.

However, the sale included a provision that allows Progressive to redeem property and collateral by paying some $7.6 million in debt.

“SFX decided to make a move around Thanksgiving,” a person close to the case told Pollstar. “They decided to discuss a deal to purchase Progressive after Progressive did the redemption deal.

SFX offered to buy them out and pay the redemption in December.” AEG Live’s motion had a hearing Feb. 10 that was adjourned to Feb. 28 in Oceana County Circuit Court in Michigan.

The complaint accuses Progressive of suggesting it may strip AEG Live from the festival lease by attempting to redeem selective portions of the collateral, including the resort, but not the lease.

“AEG Live is informed that Progressive is considering carrying out this scheme to sever the Festival Lease from the Resort with funds provided by SFX,” the complaint reads. “SFX is a concert promoter that is in direct competition with AEG Live and MHP – it is not in the business of owning or operating resorts or other venues.

“Further, SFX previously attempted to acquire MHP but failed to do so. SFX’s current actions appear to be an attempt to make an end run around its previous failure to acquire MHP and Festival Lease.”

For its part, AEG Live argues the court’s sale order requires Progressive to redeem the entirety of the collateral, including the festival lease.

“None of these parties can cherry pick particular assets purchased or redeemed to deprive AEG Live of its rights under the Festival Lease,” the complaint says.

The company asks the court for a temporary restraining order and preliminary injunction in order to preserve the status quo and prevent ABA or Progressive from violating the lease as it stands, or from violating the sale order by separating the lease from resort collateral.

Social media in the tight-knit EDM fan base has been swift and not flattering to SFX, despite its claim to “electronic music culture.”

Live Nation and Insomniac are not parties to the complaint, but on Insomniac’s Facebook page is a link to a description of the suit with a post saying, “The show will still go on!” – followed by scathing comments from Electric Forest fans including one that simply reads “scumbag SFX.”

A Reddit posting of local coverage of the dispute is followed by nearly 200 comments of similar sentiment, and includes the name, email address and phone number of SFX public relations officer Ed Tagliaferri.

“We will have no comment, other than to say we will vigorously defend this baseless lawsuit,” SFX said in a statement Feb. 5.