It took nine minutes last fall for Swedish House Mafia to show the concert business that electronic dance music was suddenly big enough to compete with Jay-Z or Phish in the world's biggest venues. In late September, the European DJ trio's manager, Amy Thomson, put a December 16th show at Madison Square Garden on sale via Facebook – and 20,000 tickets sold out almost instantly. "Since that point," says Thomson, "a lot of the large promoters assumed if you can blow out Madison Square Garden in nine minutes, then this scene must be able to sell out 100 Madison Square Gardens."
Swedish House Mafia's arena-size house party – a massive laser-and-pyrofueled spectacle – completed the transformation of electronic dance music, or EDM, from DJs spinning in urban clubs to an international concert-biz phenomenon. This month, 345,000 fans are expected to attend the Electric Daisy Carnival in Las Vegas. Top stars like Skrillex, David Guetta and Kaskade headline arenas and festivals, and Deadmau5 sold 40,000 tickets to club shows in New York and L.A. last fall. DJs from the scene have become some of pop's hottest producers, with Afrojack and Calvin Harris crafting hits for Rihanna and Pitbull. "I see Deadmau5 T-shirts at Target," says Matthew Adell, chief executive of Beatport, the Denver dance-music download store that has sold 90 million tracks and grown from three to 80 employees since 2004. "When we play in the U.S. there's the excitement of a new musical movement," adds Guetta. "It's wonderful to feel this."
The boom has attracted intense interest from top players in the tour industry. Live Nation, the world's largest concert promoter, bought British dance-festival promoter Creamfields for roughly $21 million in May and Los Angeles-based promoter Hard Events in June, and live-music veteran Robert F.X. Sillerman and supermarket magnate Ron Burkle (both billionaires) are reportedly trying to jump into the festival market. "This massive rise is just the beginning," says Skrillex's agent Lee Anderson. "It's not much different than hip-hop in the late Eighties – it's a subculture, and all of a sudden Beastie Boys and Run-DMC are doing arena tours."
For top DJs, paydays have skyrocketed: The biggest names earn more than $1 million to headline a festival and $10 million a year for a Las Vegas nightclub residency, according to The New York Times. Producer salaries for remixing commercial tracks have leaped by "hundreds of percentages," says Hugo Langras, manager of Afrojack and R3hab: "In the early days it was maybe a couple of thousand, and now some of them have five zeroes."
The success is a major vindication for promoters who have been nurturing the scene as it rose from illegal raves to Bonnaroo-dwarfing megafestivals. "In '91, I could only hear this music at two in the morning in downtown L.A.," says Gary Richards, founder of Hard Events, which promotes festivals from L.A. to Toronto. Major rock events have boosted their EDM lineups, too: At 2008's Lollapalooza, creator Perry Farrell arranged a small stage with the late DJ AM in which the sound system kept malfunctioning; last year, the dance tent held 15,000 people. "In Europe, it's just massive," says Farrell. "We're behind, but catching up extremely quick."
Swedish House Mafia spent months marketing their MSG show with secret codes and YouTube videos, but not all tours scaling up to arenas are going as smoothly. This summer, Avicii and Afrojack are playing arenas, but both postponed or canceled dates due to production issues. "There have been EDM shows in these arenas for the last 10 years, but there's a perception that 'Well, these things aren't doing as well as you thought,'" responds Joel Zimmerman, who runs the William Morris Agency's electronic-music department and represents Avicii, Afrojack and 200 others. "This thing is not going away, ever – it's just that people are going to start getting a lot smarter."
The scene's biggest player, L.A.-based Insomniac, which produces the Electric Daisy Carnival, has had to battle the lingering perception that the events are dangerous: In 2010, a 15-year-old girl died of a suspected drug overdose at the Electric Daisy Carnival in L.A., forcing promoters to move the festival last year to Vegas. (Of course, fans have died at rock fests, too.) Insomniac CEO Pasquale Rotella also recently appeared in a Los Angeles court to face corruption charges involving payments to the city-owned venue that hosted the L.A. Electric Daisy. (His attorneys have denied wrongdoing, and some of the charges have already been dropped.) Despite his problems, Rotella remains astonished by the genre's mainstream success. "Finding a venue when I first started that wouldn't get busted – that was challenging," he says. "There was this stigma attached to dance music. Now you'll run into police officers who go, 'Oh, I love Daft Punk!' In '99-2000, I was doing 40,000 people, and I was like, 'Wow, this is peaking, this is crazy.' I didn't think it would get any bigger. And it did."
Additional reporting by Dan Hyman.
This story is from the June 21st, 2012 issue of Rolling Stone.