- “For those about to rock, we salute you” - AC/DC
Live Nation Entertainment, Inc. (LYV) is one of the largest diversified live performance and venue operators in the world. Over the past 13 years, the company has become a household name in live entertainment and synonymous with the biggest and brightest in the music industry, including countless major headline artists (Prince, Sade, Ozzy Osbourne, Madonna, etc.) and the record labels to which they are signed (Warner Music Group (WMG), Sony Corp. (SNE), Vivendi SA. Indeed, with record label revenues struggling due to the rise of digital file sharing and illegal duplication of copyrighted material, live performances have reemerged as an essential aspect of the music business. In fact, many record labels have increasingly begun to adopt the “360 Model” artist agreement that enables them to tap into the revenue stream that the artists generate from live shows and appearances. This is likely to lead to greater investment in the “touring” aspect of artist promotion, which would enhance Live Nation’s revenue prospects. Moreover, the company’s diversified approach has provided an industry-leading position with an ever-expanding revenue base that should enable this business to capitalize on the broadening sphere of the live entertainment market for years to come.
The company originated in 1997 from a hodgepodge of entertainment businesses that merged to form one live performance production and promotion outfit. In August, 2000, Live Nation was acquired by Clear Channel Communications, Inc. Over time, the business grew and was eventually incorporated in Delaware in August, 2005. Upon assuming control of essentially all of Clear Channel’s entertainment business, Live was spun off in December, 2005 and became an independent publicly traded company.
Live engages in a wide variety of operations, including concert promotion/production, venue management, theatrical performances, ticketing, and artist management. The company produced approximately 22, 000 concerts through 142 venues globally, including The House of Blues and The Fillmore, serving some 52 million fans in 2009. Worthy of note is the recent merger with Ticketmaster, which has considerably expanded Live’s ticketing and Online services operations on a grand scale. Ticketmaster generated over $9 billion in revenue for its clients in 2009.
Recent statistical data indicates that the North American concert business is a $4.6 billion industry, of which Live Nation generates 87% of those revenues. Although the concert promotion business has endured some challenges in recent quarters due to recessionary factors, the company continues to leverage its position through strategic acquisitions that will maximize its market share and capitalize on developing trends in the live music industry. Live is attempting to establish long-term sustainable relationships with the artists it services by generating back-end revenue with tour merchandise, concert DVDs and downloads, fan clubs and websites, etc. Indeed, these initiatives help to attract more business from large corporate sponsors, such as British telecommunications service provider, O2 (owned by Telefonica SA (TEF), domestic telecom hardware manufacturer, Blackberry (owned by Research In Motion, Ltd. (RIMM), and financial services giant Citigroup (C), to name a few. These sponsors are typically engaged by Live’s ability to provide promotional programs that deliver more value to the sponsor through the company’s growing favor with the average music fan, as well as with the artist, and its expanding distribution network of venues and widening its online presence.
In addition, as record labels struggle to increase revenues due to the rise of digital distribution and file sharing and illegal duplication of copyrighted material, live performances are reemerging as an essential aspect of the music business. The aforementioned 360 Model artist agreement that is being adopted by many major labels entitles the record companies to a share of their respective signed artists’ live show and appearance revenue. Prior to these contract amendments, live performances and appearances were an artist’s bread and butter, as they typically received very little, if any, royalty income from the major record labels. Indeed, the revenue generated from touring, appearances and endorsements were the artists’ primary income source. We believe that this shift will encourage record labels and sponsors to invest more money into live shows with the hopes of increasing their return.
Overall, Live Nation is a sound business with decent prospects in a space where the company is leveraging its position through strategic acquisitions and shrewd partnerships that are enabling Live to devour market share and expand revenue streams.
At time of this article’s writing, the author did not have positions in any of the companies mentioned.