Live Nation, Ticketmaster Merger Gets Board Approval

For a long time, Live Nation (LYV) and Ticketmaster (TKTM) were joined at the hip. The nation’s largest concert promoter and the nation’s largest ticket vendor formed an inseparable pair. Then Live Nation, pursuing better margins and greater ambitions of vertical integration, decided to go it alone. The tie was severed, with prejudice. Live Nation began acquiring assets and partners to be more self reliant. It joined with CTS Eventim to begin selling tickets on its own. Ticketmaster spun off from its parent corporation, IAC, and tried to blaze its own path.

Now, not a month into Live Nation’s re-incarnation as both promoter and ticket vendor (ticket sales began in January), it turns out the old pals are ready to not just rekindle their old relationship, but tie up entirely in a merger.

Last week the Wall Street Journal discovered the two companies were in the late stage of discussions. Widespread reports citing “sources familiar” and “inside sources” predicted a deal would hit the news wires by early Monday.

The Monday news never came. The boards of both companies apparently met late Sunday but failed to hammer out all issues. A second meeting on Monday afternoon is believed to have settled the remaining impasse.

At this point, there’s no official press release nor comment from the companies but reports are starting to circulate that both boards agreed unanimously. (Details will be updated on Metue as they become available).

What is believed known now: the new company will be called Live Nation Entertainment, dropping Ticketmaster’s name. It will combine Live Nation’s lower margin business (operating margins were about 4.8% in the Sept. quarter) with Ticketmaster’s leaner machine. The jointly operated ticketing, promotion, and band management assets could save tens of millions in costs per year.

The org. chart will likely (according to report early Monday from the Financial Times) put IAC Chairman Barry Diller in one of the top seats as Chairman. Irving Azoff, Ticketmaster’s CEO and a former record producer who rose up by managing bands ranging from the Eagles to Van Halen, to Neil Diamond and Morrissey would take the other as Executive Chairman. Live Nation’s CEO, Michael Rapino, would stay in his current role to oversee day to day of the combined company as CEO.

Structurally, the merger would go ahead as a “merger of equals” with Ticketmaster taking a slightly larger share in the stock swap.

While the companies might argue they’re not competitive (given Live Nation’s new entrance into the ticket market), given the scale, the deal will have to pass what is sure to be substantial regulatory review.

There’s no question, combining ownership of the companies’ assets will consolidate a substantial amount of power over live entertainment into a single entity.

Already, in the past week with the deal just rumor, fans, politicians and artists have been rallying against any combination; their outrage stoked by an incident of just the kind of inappropriate behavior they fear could become an issue if the companies combine.

At issue: last week, fans looking to buy just released tickets to Bruce Springsteen concerts found themselves being re-directed to Ticketmaster’s premium priced reseller TicketsNow which upsells tickets above face value.

On his website (in a letter from February 4th reprinted at the bottom of the post here), Bruce Springsteen condemned Ticketmaster’s behavior. While Ticketmaster has apologized for the confusion (see the same post for full text as well), and is offering to repay differences in the purchase price, Springsteen’s letter went further and called on his fans to speak to their representatives to voice opposition to greater consolidation of ticketing power.

New Jersey Representative Bill Pascrell and New York Senator Charles Schumer, along with at least two state Attorney Generals have also spoken out.

Senator Schumer, a ranking member of the Senate Judiciary Committee (and a member of its antitrust subcommittee) said explicitly that “if the two entities were to merge, the sale of tickets, control of concert venues and the representation of artists in those venues would be controlled by one organization, a potential problem for ticket buyers who could see prices skyrocket.” He called for both FTC and Department of Justice review.

In Canada a lawsuit has been filed over the Springsteen Ticket Affair.

While we wait for official news from the companies, here are a few key facts about the companies and their financials:

•According to Pollstar, Ticketmaster has sold tickets for more than 80% of large arenas and stadiums in the US. Live Nation rival Anschutz Co. which owns the LA Staples Center and promotes both sports and music events (via AEG Live), has agreements for ticket sales through Ticketmaster that aren’t believed to expire until 2012.

• Live Nation has a five year deal in place to sell tickets for SMG managed venues. SMG was Ticketmaster’s second biggest partner behind Live Nation itself. Over the life of the five year deal, an estimated 25m tickets are expected to be sold. SMG operates more than two hundred venues including major arenas and stadiums like Chicago’s Soldier’s Field, Houston’s Reliant Stadium, The Louisiana Superdome and the LA Forum. SMG Stadiums represent more than 422K stadium seats and more than “1.5million managed seats.”

• For the quarter ended Sept 30, 2008, Ticketmaster had revenues of approximately $339m, up 16% Y/Y. $105.9m of that was International. Gross Margin was 36%. Operating Margins around 8%. Live Nation in contrast had revenues of $1.5b in the same period. Operating income was $75.6m and operating margins were about 4.8%. (LYV data via Gridstone Research, click on chart to enlarge)

•Ticketmaster has deals with the NBA, NFL and NHL. Live Nation has a multi-year sponsorship deal with CBS Radio.

• Ticketmaster sold 141million tickets in 2007. For the recent Sept. quarter, the company sold 33.7m at a gross value of $2.068b.

• Both companies own large direct-to-fan service groups - Ticketmaster via the acquisition of Echomusic. Live Nation following the purchase of MusicToday in 2006. Live Nation’s fan club websites provide a database of information on more than 20 million music fans, many of which are regular visitors to their sites.

•The companies have approximately 74 common institutional shareholders representing approximately 19% of Ticketmaster’s stock and 38% of Live Nation’s (click table in thumbnail for full roster via Metue.com).

• Through its "360" Artist Representation Deals (or variants thereof), Live Nation has partnerships with Madonna, U2 (which sold its equity component in December), Nickelback, Jay-Z and Shakira. Through Frontline, which Ticketmaster acquired this fall, Ticketmaster represents artists including the Eagles, Jimmy Buffett, Guns N Roses, Neil Diamond and Christina Aguilera. Frontline’s client roster includes about 200 acts.

• The infrastructure for Live Nation ticketing is currently provided through a partnership with European seller CTS Eventim. It’s unclear what will happen with this relationship if a merger is completed (CTS Eventim and Ticketmaster are competitors in many markets).

•Ticketmaster has approximately $765m in debt due between 2012 and 2016. Scheduled repayments begin in 2011. (via recent 10Q, period ending Sept 30.)

•Live Nation’s principal website generates between 8 and 12m unique visitors a month (Nielsen). Ticketmaster reaches about 10.2m a month in the US (via Quantcast).

• Through a partnership struck in December, Live Nation will be able to sell tickets out of 500 Blockbuster Video stores.

• Attendance at Live Nation events for the quarter ending in Sept. ‘08 was approximately 18.4m. North American music promotions accounted for 12.26m of that. 5,687 events were put on during the period. (via information consolidate by Gridstone Research).

•Madonna’s Sticky and Sweet show was the highest-earning tour of 2008, taking $281.6m worldwide. Celine Dion was second with $236.6m. Bon Jovi was third with $176m. Bruce Springsteen was fourth with $166m. The Police came fifth with $120.6m. The average ticket price in the US rose by 8% to $66.90. Concert revenue hit $4.2 billion in 2008, according to Pollstar, a 7% rise over the previous year, even though the number of tickets sold was down (via Pollstar).

Comments

[SumoBackup:]

With all of the accessible technology today, I'm surprised that the artists and venues haven't banned together and formed their own service.

Feb 10 08:17 AM