It's Bullet Point Wednesday.

• It's the economy. In the absence of a recession, neither company would be as prone to do this merger. But the willingness to tough it out is not what it used to be. The value of Live Nation's multi-million, multi-rights deals has declined since those deals were signed (granted, Madonna's recent tour did well). Ticketmaster is looking at both the loss of Live Nation's business and a tough live event market for the next year or two (at least).
• Now that the economy is tanking, the two companies have less incentive to compete against one another. The better option is to join forces.
• Live Nation can find some security in Ticketmaster's higher margins and lower debt. Through the first nine months of 2008, Live Nation's EBITDA was 2.9 times greater than its interest expense. Ticketmaster's EBITDA was 19.6 times greater than its interest expense.
• Shareholders for both companies -- and especially executives with ownership -- look years into the future, see the troubles facing nearly all entertainment companies, and see a merger as one way to create some return on investment.
• This may not impact the average ticket price. If ticket prices drop in 2009, it will have been due to the economy. Live Nation may not make high margins from ticket sales, but they do account for the majority of its revenue and margin dollars. Its Artist Nation division, which houses many of the products and services that are part of the next-generation music company, consistently loses money ($35.9 million through nine months in 2008).
• Labels, agents and promoters may argue otherwise, but there is no clear indication that a Live Nation-Ticketmaster Entertainment tie-up would hinder competition or raise prices for consumers. People are painting worse-case scenarios. Better to ask, What is most likely to happen?
• If regulators have an issue with the combination of ticketing and venue operation, one solution would be to force Live Nation to sell its ticketing service and contracts with other venue operators.
• Overhead reduction will be fairly small given what little overlap exists between these two companies.
• There are numerous synergies that could be realized from a merger: secondary ticketing, improved e-commerce sales and direct marketing opportunities, sponsorship opportunities.
• Similarly, there are a number of ways a merger could fail to create value. Integration of the two companies and their management teams provides numerous opportunities for underachievement and discord.
• Ticketmaster's stronger cash position helps Live Nation. On September 30, 2008, Ticketmaster had $547 million in cash and cash equivalents. Live Nation had $206 million in cash and cash equivalents. Ticketmaster's net cash flow from operations is very strong while Live Nation's was negative through the first nine months of 2008.
• One needs to imagine if AEG would be a better partner for Ticketmaster. Given Live Nation's foray into ticketing, there could be less regulatory concern if AEG and Ticketmaster partnered up. And a Live Nation-Ticketmaster partnership would require combining or selling off some duplicate e-commerce and merchandise divisions.