News came out last week that Live Nation (LYV) was in talks to buy Principle Management, the management of U2, and Maverick, the manager of Madonna. This deal makes perfect sense for Live Nation, as the company has large investments in both artists and it would further the amount of profits received from the success of both.
Under the buyouts of both firms, Madonna's agent Guy Oseary would take over management of U2, while Principle owner and U2 manager Paul McGuinness would become Principle's chairman. McGuinness has been with U2 since their early beginning. The acquisition price for both is rumored around $30 million.
The acquisition of U2 and Madonna will greatly improve Live Nation's Artist Nation business segment. Artist Nation boasts 200 acts and is one of the top artist representation names in the business. In 2007, Live Nation signed a 10-year deal worth $120 million for a portion of profits from studio albums, concerts and merchandise. In 2008, the company completed similar deals with U2 and Jay-Z. In 2011, U2 broke the record for a worldwide yearly tour with $700 million in tickets sold. Last year, Madonna brought in over $300 million from her 88 stop tour.
Here is a look at some recent deals signed by Live Nation:
· June 19: Took majority stake in BDG Music Group, the largest concert promotion company in the Baltic region. Will rename Live Nation Baltics.
· June 21: Launched a new ticketing platform in Austria.
· July 18: Named Robb Spitzer Managing Director of Live Nation China Concerts. This new role will help expand the brand that was created through a 2005 joint venture with Beijing Gehua Cultural Development Group.
· August 19: Created joint venture with mixitup Enterprises in Australia. The combined company will be Australia's largest brand entertainment agency.
· September 26: Launched G-Major Management with Virginia Davis. Will represent artists like Jewel, Thomas Rhett and Danielle Bradberry (recent winner of Season 4 "The Voice").
· October 24: Acquired Voodoo Music & Arts Experience.
Live Nation also enjoys a strong partnership with Jay-Z through his Roc Nation brand founded in 2008. Roc Nation represents singers like Jay-Z, Shakira, Rihanna, J. Cole and MIA. The firm also represents athletes like Kevin Durant, Geno Smith and Robinson Cano through Jay-Z's new sports venture.
In the most recent third quarter, total revenue increased 15% to $2.3 billion. The company saw a large increase in global concert attendance (+27%), an area which continues to rise through acquisitions and joint ventures. Here is a breakdown of revenue by business segment:
· Concerts: $1.73 billion, +21%
· Ticketing: $356.8 million, +3%
· Artist Nation: $111.1 million, -13%
· Sponsorships And Advertising: $110.2 million, +15%
As you can see the quarter was extremely strong, with the company's Artist Nation segment the weak link. With the addition of Madonna and U2 and a new September partnership to form G-Major Management, Live Nation's pool of artists grows in size and should help boost the growth of this segment. The company is able to post larger attendance and higher revenue despite fewer events. This is part of the company's vertical consolidation to acquire assets that give it a larger portion of the revenue proceeds. This shift in management is what makes me bullish on the company going forward.
Analysts on Yahoo Finance see Live Nation posting a loss of $0.16 per share for the current fiscal year. This would be an improvement on the loss of $0.87 per year posted last fiscal year. Going forward, earnings per share are expected to hit $0.03 in fiscal 2014. Revenue is expected to rise around 7% in both the current and next fiscal year.
I last wrote about Live Nation in December of 2011. At that time I praised the company as a possible winner from Super Bowl XLVI. Madonna, who shared a deal with Live Nation, was the half time performer. With a Super Bowl appearance comes strong tour sales and album sales typically for artists. I said the $8 stock could hit $12 by mid-2012.
Shares have risen all the way to $19.79 since the time of that article, through the success of Live Nation and Ticketmaster, which are now owned under the same brand. Shares currently trade toward the high end of their 52-week range with a price around $17.50. Year to date, shares are up 82%, but I don't believe they're done. This is a $20 stock waiting to happen. Live Nation is simply the best of breed in ticketing, band management and international concert promotion. The company continues to strengthen its assets and its renewed focus on long-term deals with high in-demand acts should power shares ahead. Buy stock in Live Nation and own a small piece of Madonna, U2 and other big name acts.