The Fed Factor

I don't like the Fed right now. I've been complaining about them for a while. The lowering of the rate to bail out the subprime mortgage industry has lowered the dollar, lowering liquidity, draining the economy and causing a spiraling effect. The dollar has not hit a new bottom yet.
This whole business with Bear Stearns from my perspective is just a scapegoat. They're not the only one who are going to post HUGE losses this quarter. I am watching these bobbing heads on CNBC, MSNBC and other news programs and what needs to happen is to make the world want to buy products made in the US, but is there still enough of a manufacturing base to make that happen?
I think there were a ton of bad loans out there. The fed was lending money out to all of these banks that took the money to leverage each other instead of putting it where it was needed. There should have been strings attached to these loans and there weren't... that's like giving an alcoholic money and telling them not to spend it on booze.
I've mentioned this before, but when the Fed lowered rates it was like spiking punch at an AA meeting. Sure it's a lot of fun, but there's a huge hang over to look forward to. All this time, the housing markets still aren't acknowledging the fundamental problems that started this whole problem! The assessors are still over estimating property value. There were bad lending practices set in place. Realtors are still telling John Q Public that there are up and coming neighborhoods and they are not. A bunch of yuppies are stuck with two mortgages and are losing their houses. Just go ahead and keep an eye on the ever increasing number of bank owned housing in the US!
What are these banks going to do with all these houses? They don't make money off of empty housing. There's no liquidity... this is BAD PAPER. This is almost as worthless as the $600.00 check you might receive from the government. This is all too little too late. Where is this money coming from? Who is staking these claims? Where is the money coming from?
If we want to talk about reasonable banking practices, we must... MUST put an end to the banks who lent like this. The Fed has the collateral, but I firmly believe that the Fed should not bail out the housing sector. The Fed had an opportunity two years ago to change this.
Right now, stop what you're doing and think about places where your money can hide. Metals? Foreign currency? Transportation companies? Oil?
Is oil getting more expensive or is the dollar just worth less?
Praise Alan Greenspan? Ben Bernanke?
Give me a break.
THESE RATE CUTS ARE HURTING THE MARKET.
Tomorrow I hope the Fed does NOTHING!!!
How do you change this trend?
1. Buy US assets and dollars.
2. Don't cut rates any further!!!
3. Establish a price stability target.
4. Get government out of the economy!
5. Make something that you can sell to China, India, & Europe.
There's a lot more! Happy St Patty's Day!

Real Men Are Green

There was a farm on the outskirts of Madison that grew the best heirloom tomatoes. The air was fresh and the soil was dark! Like much of the midwest, the farmland here is about as good as it gets! The tomatoes were the most delicious I ever remember having.
Since then the farm has closed, gave out to constant pressure of developers, and in it's place is a stand of cookie cutter houses. One house was just like the next, people storing their silverware in the same drawers and keeping their glasses in the same cupboard... they shopped at Walmart and at Target. They wear cashmere sweaters and drove SUVs and pick up trucks which they never needed and have the paper delivered every day which they never read.
Madison is a city in sprawl. The farmland that was lost will never be recovered. The endothermic processes of the farm have given way to the exothermic processes of overheated homes powered by electricity generated through coal fired power plants.
As mammals, we are endotherms... in every equation our output releases heat energy. The effects of our seemingly important investments and conquests reveal the simple inequity that the heat balance is scewed. We must produce an equilibrium to maintain the environment, but we make things brown... not green.
Recently, we've found ways to minimize these effects.
Electric cars are muscle cars in respect to pick up. The torque produced by an electric car is better most cases than it's gas counterparts because the motor doesn't have to rev up.
Unfortunately, there are very few pure electric and no viable hydrogen cars on the market. So my attention has turned to hybrids (hopefully that will be outdated in a decade).
At home my house is cooler (~65 degrees) until I need it to be warm. I keep the room temp lower than room temp to save on heat and it's even lower when we're all off at work. I insulate windows, close doors, shut vents and work the blinds.
On the road, the Prius is the best Hybrid on the market.

There are some really cool pure electric cars coming onto the market in the next year. Right now one of the coolest is the Tesla Roadster. If you drive less than 200 miles a day and have a garage with an outlet, then this might be the right car for you.

Unfortunately, because it's a prototype, the cost is a barrier for entry into the market... ~ $100,000.
At the office, the City of Chicago is offering $5000 grants for creating Green rooftops. They are more than aesthetically pleasing, they are effective insulators, and lower cooling costs in the summer substantially.
The city has stepped up to the plate by insulating their city hall:

This is something really cool you can talk to your boss about. If you need roofing to be done, increase the property value, get tax relief, and do it on budget:
This is how they operate:

At the music venue:
I chose a Green ticketing solution.
Every ticket purchased helps to plant trees.
My ticketing system is dedicated to plating one tree planted per ticket sold in advance.
We provide carbon-offset education at events.

And I am actively involved in supporting and promoting the Green Apple Music Festival:

Live Nation 2nd Quarter Review

***Warning: For those who haven't heard me talk shop... look away! There is business acumen and forecasting ahead.
LIVE NATION WEBSITE COMPANY INFO

Live Nation is the "world's largest live music company." As many of you know,

They have a lock on +7500 person outdoor ampitheatres.

Their parent company is the nations largest holder of radio media assets, Clear Channel. Last quarter they

decided to liquidate key assets including aforementioned underperforming outdoor venues

and real estate... these will no longer be outdoor music venues, but rather, converted into office parks.

They sight higher ticket prices as the other key reason

why they did so well. They increased (on average) the ticket price by 15%. In some cases the bump was 65% from $22 a ticket to $35 a ticket.
They reduced the number of concerts that brought in 7500 people and under. I consider these concerts to be critical shed events.

If they continue to reduce the number of these concerts they will continue to stifle artist development and be forced to sell the ampitheatre properties.

Here it is in simple math:
1st QUARTER: -$32,000,000
2nd QUARTER: +$ 27,200,000

THIS YEAR NET: -$4,800,000

Let's face it, they're counting ALL of the Police concerts and other major tours that they bought outright from the talent buyers with out a single local promoter getting a chance to place a bid. As an agent, I can tell you it is much easier to make one phone call and sell an entire tour to a single promoter. As a buyer, I can tell you that it is ever increasingly difficult to develop new capable and equipped artists and make your money back on the investment (so we can build new talent) because of this same event!
A business with monopoly power, like Live Nation, can choose the price at which it wants to sell. If it sets a high price, it may sell less; if it sets a lower price, it will likely sell more, however this difference is much smaller.

They are creating deadweight loss and artificial scarcity

by not using the venues which they have a monopoly on to get patrons to pay higher ticket prices instead of selling more tickets at a lower cost and having higher operation costs.
As Live Nation continues their conquest of smaller and smaller venues and markets to provide a vertically integrated platform for an artist to enter and rise (and fall) into they will ultimately force many smaller venues out of business.
And now for Pollstar's Report on the Report:


LN Posts 2Q Surprise

Posted Thursday, August 09, 2007 at 4:00 pm

Live Nation reported better-than-expected second quarter financial results in its August 9th earnings call, including a sizable increase in adjusted revenue despite what it described as a softer 2007 concert season. The same day, its share price held its own – down only 4 cents and closing at $19.42 – while the rest of the stock market was taking a nosedive.

Total revenues for the quarter ended June 30th were $1.04 billion for a 35.3 percent increase over 2006's 2Q revenues of $768 million. Pro forma revenue of $1.7 billion was up by 16.8 percent from last years $914.9 million.

Net income rose slightly, with LN posting $9.9 million, or 15 cents per share, compared with $9.7 million, the same 15 cents per share, of the year-ago period.

Adjusted OIBDAN of $46.6 million was up from $17.1 million on a pro forma basis, and operating income rose to $39 million from $27.4 million (pro forma) from 2006. The company's performance will make investors happy: Analysts polled by Thomson Financial had expected a profit of a penny per share on sales of $861 million in the latest period.

For the first six months of 2007, LN reported a loss of $35.1 million, or 54 cents per share, after a profit of $10.8 million, or 17 cents per share, in the same period last year.

There are several factors in play in 2007 that weren't yet in the LN picture at this time last year: The acquisition of House of Blues Entertainment, Musictoday, Trunk Ltd., and the divestiture of some amphitheatre properties all contributed to Live Nation's latest numbers.

Higher ticket prices at arenas, increased co-promotes at small- and mid-sized venues, fewer shows at underperforming sheds and an increase in concession income per head were all cited by Live Nation as factors in the revenue increase.

"Our strong second quarter 2007 North American Music results were driven by the consolidation of higher margin House of Blues clubs for the full quarter and the improvement in our North American operations as a results of the successful implementation of booking and cost saving initiatives at our amphitheatres," Live Nation said in its financial report.

The company reduced its number of shed events that attract fewer than 7,500 attendees by 47, or 33 percent, compared to the same period last year.

Revenues were offset somewhat by increased legal costs, increased costs associated with Live Nation Studios initiatives and reduced income from co-promoted events.

Live Nation revealed in the announcement that it has purchased the outstanding 50 percent interest in House of Blues Canada, which was originally a partnership with Canada's Molson beer company.

It also bought the remaining outstanding shares of Musictoday and Trunk Ltd., and now has 100 percent ownership of those assets. The company also divested some assets such as its remaining sports representation businesses. The process of selling the Live Nation theatrical division is also continuing.

Live Nation also exercised its option to require a joint venture partner to contribute its remaining 12 percent in Academy Music Group to its joint venture that now holds a 55.9 percent interest in the company. AMG operates 12 small and mid-sized venues in the U.K. that attract more than 3 million fans per year.

Also internationally, LN's 2006 2Q report did not include the consolidation of Spain's Gamerco and France's Jackie Lombard Productions. Gamerco was singled out by Live Nation CEO Michael Rapino as having surprisingly strong earnings last quarter.

Rapino added that the company will continue to divest its theatrical properties and evaluate real estate holdings, and pointed to its commitment to provide vertically integrated services to artists as part of its goals.

"Our vision is to build a global live music network that provides touring artists the opportunity to maximize their revenues and expand fan reach all under one aligned platform," Rapino said.

"We are already a leader in the global concert industry with tremendous fan access and we seek to augment and solidify that position and grow our business by providing artists with a 'triple play' of services" including global promotion and services, the ability to provide "one-stop" products and service and a direct online sales channel to fans.

What I'm listening to today

Live Nation's First Quarter... holds bad news

Clear Channel is known as the largest single owner of radio stations in the world. There is no other business that has cornered the market like they have. Like most business, they always had their eyes on expanding their business. The United States conformed to their format of radio stations: Rock, Country, Adult Alternative... until you could go into almost any market in the nation and here the same artists played on almost the same stations. A West Coast DJ would be played across the nation to the East Coast. Alarmists said that it was this type of action which would stifle the music industry and make it harder for artists to make it big. Then technology struck an amazing blow against radio, but it didn't happen before Clear Channel started buying up every large outdoor ampitheatre it could get its hands on. Alpine Valley in Wisconsin, Deer Creek in Indiana in the Midwest... probably the biggest ampitheater in your market is owned by them too.
It seemed like to get to the top, you had to contend with their power. The economic model was to start from the top and work its way down and out! They would vertically integrate themselves into every facet of the music industry. They built a ticketing company called Music Today. They bought smaller theaters and world reknowned clubs. It kept getting smaller and smaller until you had to look around and wonder when it was that Clear Channel would come calling for your little slice of heaven. And then they did just that. They called on every independent promoter in the nation who built their careers on their personal reputations of doing good business and getting in touch with todays music fan and bought them out. For years, they let these promoters hold on to their old fashioned names, but they were unmistakenly Clear Channel. Most notably, Bill Graham Presents... a man who was the father of modern music promotion had his name sold to the most dominant corporation of promotion the US would stand witness too. Then after criticism from consumers as the word leaked out that their favorite independent artist was in fact performing for the machine's benefit... they swallowed all the names and cast a blanket of a new color upon the land: LIVE NATION was born.
It was only a matter of time before the self inflicted wounds would bleed themselves dry. The tighter their grip became, the fewer artists there were to fill the largest ampitheatres and they would not have as much money to apease their shareholders!
They would use their ticketing service, MusicToday as a fan portal and create ancillary revenue streams by selling the live concert to the fans. However, the mentality had switched away from the tours of the Grateful Dead and Phish. It was much more fun to see your favorite band play in a smaller setting anyway and its perfectly reasonable to enjoy that. Everyone loves an underplay, especially the promoters, because you can't lose money on a sold out show!

We knew that it was only a matter of time before Live Nation had to cut its ties with the ampitheatres. There simply wasn't enough talent that could bring in enough dollars to meet the operating expenses that go along with those venues. These artifacts of the past will become office parks. Live Nation set their eyes on smaller venues and finally they would turn their eyes on artists themselves. In the short term, stock holders will see a buck or two more in their pockets, but in the long run... good bye to the days of the Rolling Stones. Goodbye.
~G.

And now for the article that prompted this statement.

It is true that the next logical step is to offer their dynamic services to artists who intend to grow large in the live music circuitry that exists today! And not that its any wonder, but here it is... an article that came out in Pollstar today!
It is worth reading if you want to know where the eye has turned.


Live Nation’s first quarter earnings call May 10th revealed the company plans to reduce the number of its amphitheatre shows, cut its contracts with third-party local food and beverage vendors, and implement a new program called "Artist Nation."

On the money end of the call, Live Nation reported revenue of $584.2 million, an increase of $67.6 million (or 13.1 percent) compared to the same period in 2006, and operating loss of $30.4 million, a decline of $38.5 million.

However, the adjusted EBITDA of $4.1 million is a decline of $12.1 million for a net loss of $45 million.

Asset sales in the first quarter alone yielded $37.6 million in net proceeds, reflecting the divestiture of Donington Racetrack in the United Kingdom, Starwood Amphitheatre near Nashville and Live Nation’s remaining stake in "Phantom – The Vegas Spectacular" as well as an office building in San Francisco.

Live Nation reported a softer first quarter in concert revenue, citing the difference a Rolling Stones tour can make. The lack of Stones dates in the first quarter was offset somewhat by the addition of House of Blues shows to the box office tally in 2007.

The company reported 20.5 percent more shows held, for an increase in attendance of 1.5 million, or 12.8 percent. Still, the mix of shows in the first quarter, including The Who, Josh Groban, Bob Seger, and Rascal Flatts weren’t quite strong enough to keep up with last year’s early tours including U2, Coldplay, Billy Joel, Aerosmith, Toby Keith, and Depeche Mode.

Looking ahead, Live Nation announced it is taking steps to stop some of the bloodletting at its amphitheatres by severely cutting back on shows that draw fewer than 7,500 concertgoers.

"We are targeting a lower number of events this summer with a focus on eliminating unprofitable events and improving profitability of the remaining events," Live Nation said in a statement.

Another cost-cutting initiative announced in the earnings call is the reduction of the number of different goodies for sale at venues and the elimination or reduction of "low-margin third-party local food and beverage vendors." The number of F&B items available is expected to be reduced to about 50 from more than 200.

Live Nation also introduced a potential new revenue stream with the introduction of Artist Nation, which consolidates all of LN’s artist service businesses under the Global Artists segment. Artist Nation includes LN’s interest in fan portal MusicToday, merchandiser Trunk Ltd., content and marketing developer Ultrastar and tour marketing/creative services unit Tour Design.

The company previously announced the launch of exclusive ticketing offers, including the sale of premium seat, parking and VIP passes through the Live Nation Web site. Divestiture of Live Nation’s theatrical division and additional amphitheatre properties is continuing.

"We are one year into our three year transformation to become a vertically intergrated live music company," Live Nation CEO Michael Rapino said. "We have demonstrated quarter after quarter our ability to execute systematically on our fix/build/expand strategy to get us to that goal.

"Year one was about stabilizing our core music business and refocusing our mission. Now, with a defined music mission, year two is about improving the core, expanding our core music offerings. … Year three will see our growth being propelled by the synergy of our core live, online and artist services businesses."

Italy Wins World Cup - My Family in Rome

So my Mom and Dad flew off to Rome to be with Phil and Valqueria to help develop their wedding plans and incidently, Italia is in the World Cup Finals! So my family was in Circus Maximus (the real one) watching the event along with countless thousands of zealous Italian soccer fans! And they won in penalty kicks!

The event was nuts by report... parties went into the wee hours of the morning. My parents said it was like the 4th of July and New Years all mixed together! I'm very happy for them that they got to be part of this once in a lifetime opportunity.

As to Zidane, I feel he should be stripped from his award. He doesn't deserve it. He evidently doesn't understand team play and he let his entire country down. Zidane lost the World Cup for France. This kind of behaviour should not be rewarded!

Goodbye June

This was a cruel month of June filled with a series of unfortunate events. I felt a bit helpless because none of these incidents were in my control. If there's anything I've learned about this June its patience. Some things you can't slow down. Other things you can't speed up.

Philosophically, I've been engaged in a deep internal conversation about healing and have come to the conclusion that it all must happen in its own time. I'm just going to have to buckle up and enjoy the ride. Though sometimes the sadness is almost paralyzing or fear steers you in the wrong direction. Sometimes a broken heart shouldn't be listened to. Sometimes you just want to do something else to keep you from feeling the way you do and I can become reckless. I have a lot of fight in me. I'm in the game to win and I have faith that happy endings do happen. I will not let the nay sayers hold me down.

At the same time, I strive for eudemonia, which is life in accordance with excellence. If my goal is happiness, then it must come from the best in me. No one is harder on myself than me. I don't want to question every little move, but I do. The hypocrisy of my previous statements isn't lost on me. I should lower my burdens and not care about things that are not in my control. At the same time, I care about my friends and family too much not to. I have to start with faith in the fact that tomorrow is a new day and I'm dealt a blank slate, a new start (carte blanche). Goodbye June. Hello July!