Thursday, August 09, 2007

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 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.