Stereosonic Is Definitely Cancelled, But Not Really Because Of Drug Deaths

Annual dance-music festival Stereosonic will indeed not go ahead in 2016, The Music has confirmed.

Despite a report yesterday from the Daily Telegraph ostensibly linking the deaths of two festival punters to the event's ultimate cancellation, sources close to the company have revealed that the primary reasons for Stereosonic's cessation are financial.

Legal documents filed in the US on 4 April, and sighted by The Music, show that SFX, owner of festival promoters Totem Onelove, must obtain spending approval from the US Bankruptcy Court as part of its Chapter 11 bankruptcy proceedings in the US, pursuant to an Artist Carve Out agreement negotiated for its debtors.

Crucially, the documents reveal that no relief funding has been arranged for Stereosonic, nor approval given for any artist payment, despite such agreements being pushed through for several other festivals in the SFX cabal including renowned events such as Mysteryland and TomorrowWorld, and assets such as Beatport. In fact, among the ream of SFX-backed companies — domestic and international — listed as debtors in the proceedings, Stereo's absence is rather noticeable:

In case you're wondering why that's suspicious, it should be noted that the point of the Artist Carve Out Agreement is to ensure that SFX's currently booked festivals are able to pay their artists with minimal disruption to planned proceedings. To wit: "The Artists are an integral part of the Debtors' successful reorganization. These Artists cannot timely or efficiently be replaced given the highly unique nature of the Artists' popularity and the services they provide … The inability to enter into Artist Agreements during these Chapter 11 cases or to maintain payment terms with the Artists and Agents would severely and negatively impact the Debtors' ability to survive."

Unless, as is the evident case with Stereosonic, there were never any plans for it to be one of the Debtors to survive the Chapter 11 proceedings. Indeed, the agreement seems tailor-made to ensure the futures of several events; multiple references are made to the urgency of securing and announcing headliners, for example, while one document asserts that "The Debtors cannot afford any risk that Artists will not perform at SFX festivals, as such may result in festival cancellation or SFX signing lesser-known artists". 

"Assumption of the Assumed Agreements counteracts these risks, and allows the Shows to go on," it explains. The fact that Stereosonic is nowhere to be found among the list of companies being granted financial relief to secure artist line-ups and other resources further drives home the reality of the festival's (lack of) future.

According to an agent source, it is believed that many agents have refused to have their artists sign contracts unless SFX pays a minimum 75% of the total fee upfront or, in extreme cases, 100%. That fact has been corroborated in the Chapter 11 court documents filed in the US, which state: "Since the commencement of the Chapter 11 Cases, the Agents, and the Artists they represent, have been unwilling to enter into agreements with the Debtors without 100% payment in advance and without assurance that their agreements with the Debtors will be honoured."

As a result, SFX and its debtors have had to enter into the Artist Carve Out Agreement, which includes, according to the court papers, "postpetition amounts owed by the Debtors to artists, talent agents and credit card processors that are provided for in the Approved Budget and separately approved in writing and designated by the Debtors' Chief Restructuring Officer as an 'Operational Carve Out Payment'".

Further speculation has arisen around what Stereosonic's demise means for the wider Australian festival market, with Stereo founders Richie McNeil and Frank Cotela — who both left the fest when it was sold to SFX in 2013 — having completed a non-compete period in the wake of that deal and thus now being able to make a return to the scene, should they so desire.

The Stereo co-founder recently ran A Belfast Event, one of the longest-standing Australian music brands, and his Stereo partner, Cotela, has been growing his OneLove label with an expanded A&R team and the launch of management and publishing arms. Although neither has confirmed their plans for the future at this stage, McNeil and Cotela aren't the sort to rest idly on their laurels — we'd suggest staying tuned intently.

UPDATE, 11.20am: The organisers of Stereosonic have confirmed on Facebook that the festival is cancelled in 2016, but are planning to return in 2017 "bigger and better".

UPDATE, 4.30pm: Former owner Frank Cotela has spoken out on the cancellation on Facebook, reflecting on the significant impact Stereosonic's cessation will have on the Australian festival scene.