Live Nation Ticketmaster

Here they go again. History has not been good to music industry mega-mergers. The latest involves Live Nation and Ticketmaster for an all stock offering. No cash would be exchanged. Live Nation just launched it's ticket service and from the postings on message boards, it did not make those purchasing U2 tickets happy. The site couldn't process orders, etc. A lot of people were left without tickets. Live Nation also has taken on Madonna, Jay-Z, etc to promote tours, release records, sell merchandise, etc. They do not have the infrastructure to do it. Tickemaster bought Irving Azoff's ever growing management company. On paper, the merger would help Live Nation on the artist and ticketing side. Ticketmaster gets the benefit of the extensive Irving Azoff roster.

I'm skeptical that this sum is greater than the parts. What does this mean for artists outside this circle? There is an alternative in AEG, the other big promoter. Most of the local promoters who had non-compete agreements when they were bought by what is now Live Nation, have expired. The concert promotion business has vastly changed since the SFX/Live Nation creation, comprised of many, many local promoters. Can these promoters still compete and make money? It used to be that artists would forge relationships with the promoters, which lead to artist development. Start out at a small club and as the career builds, you move up to bigger venues with the same promoter, everyone was happy. The artist and the promoter knew each other which made for good promotions and well run shows. It is such a DIY world for the artist now. They not only have to make music and perform it, but they have to be creative directors, graphic artists, videographers, editors, web designers, merchandisers, distributors, bloggers, accountants, booking agents and promoters.

The Live Nation Deals: Where Are They Now?

The following AP release is very telling. Apparently U2 has cashed in their stock options on their Live Nation deal. This happens before they have performed one show under the new contract. See piece below:

U2 Divests LN Stock - Promoter Takes A Hit
Posted: December 18, 2008
Irish rock band U2 made a killing in the stock market after they moved to sell the 1,556,386 shares in Live Nation stock. U2 acquired the shares as part of the 12-year 360 deal they signed with Live Nation in March of 2008.
At the time, the company touted the stock holding as evidence of the band's faith in the business model. As a part of the agreement, Live Nation guaranteed that the band would receive at least $25 million for the stock. Unfortunately for Live Nation, their share price has dipped precipitously in recent months and company's shares were trading at $3.80, clearing just under 6 million, leaving the promoter holding the bag for the remaining $19 million.

Despite the sale, the U2's manager took pains to restate the band's commitment to the pact. "We're very much in business with [Live Nation] and we're planning to tour in 2009." Paul McGuinness, the band's manager told the Wall Street Journal.

U2's deal with Live Nation has yet to be very profitable for the promoter as the band hasn't toured since 2006. The Irish rockers have stated that they plan to release an album next year with aforementioned tour to follow and the band has a proven track record of moving tickets so it remains very likely that Live Nation will still post a profit from the U2 deal in the long-term.

Unfortunately, however the other shoe may be ready to drop for the promoter in April, as Madonna becomes eligible to sell the $25 million in stock holdings she acquired from her own 360 agreement with Live Nation. Unlike U2 however, Madonna has been an earner this year, pulling in more than $120 million (and counting) from her "Sticky & Sweet" tour.

Live Nation CEO Michael Rapino tried to offer some perspective to the sale, noting to the WSJ that "Madonna and U2 are the only two deals that did contain this provision. The Madonna business is great, and we look forward to monetizing our investment in U2 next year."

At time of publication, Live Nation's shares were trading slightly higher at $4.07.

Live Nation: Spend? Wait? Exit the Chairman?

Is the buying spree at Live Nation coming to an end or just starting? Michael Cohl who sold his concert promotion company to Live Nation and then became it's Chairman thinks the deals need to cease until they can prove the formula a winner. Chief Executive Michael Rapino thinks more 360 deals should be happening. 360 deals are those in which an artists puts all his/her eggs in one basket. In most cases the company that makes the deal with you gets a piece of record royalties, touring, merchandise, etc. essentially anything that you make money from, possibly publishing being the only exception. Live Nation has taken a financial leap by signing Madonna and Jay-Z to deals totaling $270 million in guaranteed money to those artists. These seem like two crazy deals in the current music atmosphere. Since Live Nation announced the Madonna deal, their stock has fallen 44% and that of course is the number everyone looks to. Give me the days when Warner Brothers signed an act they liked and took two to three album cycles to develop the act. Careers were made, the acts had fans and fans could afford to attend numerous shows. I heard somebody say the other day that Madonna tickets were $400 a piece. I guess Live Nation has to try and make the money back somehow and justify the signing to their shareholders. Younger people can't afford those prices! Most people can't afford that number! If she had a faithful audience, this is a great way to lose them. Randy Meisner, one of the original Eagles and the author of their classic, Take It To The Limit, was quoted in Rolling Stone last month as saying how much money do you really need?

StubHub and Madonna Deal to Resell Tix

I guess any news that is music business related should not surprise me, but it still does. Years ago you would not see the artist getting into bed with the scalpers, but I guess Madonna feels if you can't beat 'em, join 'em.

According to an article in today's Wall St Journal, Madonna will get a a percentage of sales as well as a flat fee from StubHub. This is her first tour under her new $120 million deal with Live Nation. She is doing 18 dates in the US this fall. Several of them will be stadium shows including Dodger Stadium. I've only seen Madonna once and it was at Radio City. It might have been the Like A Virgin tour. I can't image her show translating to a big stadium where she has to connect with at least 45,000 people. Even though Madison Square Garden isn't intimate by any means, you can still see the dancers. I could be wrong, but I have a feeling her fans will not want to see her in a major league ballpark. So Madonna plays bigger venues than ever, gets into the scalping business and is releasing her last record on Warner Brothers. It was also reported in the Journal that the Warner Music Group's losses widened. Some things will still surprise me, others won't.

Live Nation Scooping It Up

According to the NY Times, Live Nation is now signing Jay-Z for a $150 million dollar deal. He was president of the record label he was on. He now signs with a tour promoter. JayZ is not know as a road warrior.

The deal includes financing for his own entertainment venture, in addition to recordings and tours for the next decade. The pact, expected to be finalized this week, is the most expansive deal yet from Live Nation, which has angled to compete directly with the industry’s established music labels in a scrum over the rights to distribute recordings, sell concert tickets, market merchandise and control other aspects of artists’ careers.

As it's been stated, it appears Live Nation is just bulking up the assets to sell it again. Nothing like regifting. As Bob Lefsetz said, who do you want to be in with Michael Jordan or the hottest young basketball player. He also points out that when David Geffen started his own label he signed Elton John, John Lennon and Donna Summer. Not until he signed a new act, Guns N Roses, did he start printing money. Three veterans now signed to 10 year deals with Live Nation. Jay-Z wil be 49/50 years old when the deal expires. Madonna will be 60/61 and U2 will be close to Madonna. I'm not throwing stones as I could have gone to school with Bono. I just know that touring is not for the faint of heart. The older you get, the less important it is prove yourself or take on the road. We'll see if Live Nation gets the big payday. We'll see if it's worth the money to these acts.

U2 latest to sign on with Live Nation

U2 is one of the rare acts today that doesn't need the music industry to survive. They might not sell as many records as they used to (no one does), but they can sell out any tour they put on sale. They must sell lots of merchandise. In other words, they do not lack for financial resources. An article in the WSJ yesterday laid out the terms of what Live Nation will be handling for U2. The monetary compensation was not announced.

Live Nation will not have a stake in the band's recorded music or publishing. They will be promoter of record for tours for the next 10 years, handle merchandise and the band's website. For the same portion of her deal, apparently Madonna was paid $70 million by Live Nation. As WSJ points out, this deal keeps the status quo. Live Nation or it's predecessors have produced and promoted every U2 tours since 1997, a subsidiary, already manages their website and deals with their merch.

I scratch my head as to why U2 made this deal. Is it a monetary windfall? Does that even matter to them? The ability to control your own destiny, the ability to go where you want, when you want seems to be synonymous with U2. After the debacle of their fan club members, who paid a minimum of $40, not being able to buy choice seats for their tour, you think they would want to rethink the whole thing, not make a 10 year deal. Do they want want to be beholden to a behemoth?

Live Nation is acquiring at break neck speed. They own merch companies, website/fan club administers, recording contracts (Madonna)-but no label, as well as being promoters. They are starting an in-house Ticketmaster type service. Is Live Nation becoming an otopus with a few too many arms? Are they spreading themselves too thin? Are they the future of the music business?