It's always good to see a company show focus. Continuing its pledge to sell non-core assets and invest in music-related assets, Live Nation announced today it has completed the sale of its motor sports division to Feld Entertainment for $205 million (which includes a $30 million earn out). From the press release:

The company will use the net proceeds from the sale to repay borrowings under its revolving credit facility, to permanently reduce a portion of its term loan and to invest in its core music business.

Since 2006, the company has sold assets for a total of $465 million. Some of those assets were venues, such as the Starwood Amphitheater outside of Nashville, TN, and nearly all of its theatrical business for $90.4 million.

It has been a hectic year for Live Nation. Assets sold. A chairman gone. Speculation about the cost and potential of multi-rights deals. A recorded music division up in the air. A stock price that dropped sharply but has made up some ground. An encouraging Q2 in a tough economic climate.

Posted by Glenn at 6:22 PM | Link
|Live Nation|

Live Nation's stock rose 28% a few weeks ago after the company reported razor-thin profits that actually beat market expectations. That jump increased the company's market cap by $262.5 million. In the days after, the stock rose as much as 8.2% (it has since dropped a bit). Why? Where will the company generate the sort of growth that merits a that kind of increase in market cap?

The market has rewarded Live Nation for eking out a slight profit during a very trying summer. Ticket prices have increased and attendee spending increased 6%. The assumption, which I think is fair, is the company will be able to do the same in similarly difficult years and especially in economic booms.

Analysts also like Live Nation right now because recorded music is doing so poorly. That doesn't say anything about the future of Live Nation's business. All that says is that live music is doing relatively better than recorded music.

I see a couple problems in the focus put on Live Nation: The wrong business segments are getting the attention. Live events have too small a profit margin to merit much excitement. Live Nation is acquiring venues and smaller promoters. This allows for revenue growth but means the company will book more shows in smaller venues and work harder to barely break even. The company understands the future of live music will follow the current trend in recorded music: Stars will sell fewer tickets. Venues are being rightsized accordingly, and some larger venues have been sold. Live Nation can continue on this course and increase revenues and market share, but little is going to end up on its bottom line.

The important growth segments are those with better margins: Ticketing, merchandise and e-commerce. Those areas, if done correctly, will offer more reward than does promoting concerts. (As a point of comparison, Ticketmaster, as a division of IAC, had a 13.65% profit margin in 2007. Its pro-forma margin was 8.77%. Live Nation had a profit margin of -0.3% in 2007.)

But those growth segments that will add most to Live Nation's profit are too clouded in uncertainly right now. The company is going to have to get a few wins under its belt before people pay attention. Live Nation said it plans to debut its own ticketing operation on January 1st, 2009. Expect the learning curve and up-front expenses to hamper results in the first year or two. Beyond that period, ticketing has strong potential.

Right now investors seem to be more impressed by breaking even last quarter than they are by the company's growth strategy. That's a mistake. Multi-rights deals (recordings, fan clubs, merchandise) and big tours make for good headlines, but it's often the least sexy side of the business that generates the most positive cash flow (think American Airlines and its SABRE reservation system). For Live Nation, ticketing won't be glamorous but it could be the main driver of growth.

Multi-rights deals with superstars don't have as much downside as critics think, but any one successful deal won't move the needle much. Live Nation's estimates put Nickelback's contribution to operating income at $60 million over ten years. The estimate for Shakira is $110 million in operating income over ten years. How likely are those scenarios? Time will tell, but there are risks involved.

These multi-rights deals are based on historical numbers for revenue streams such as ticket sales, album sales and fan club memberships. If an artist peaks commercially before or even during its Live Nation contract, those deals will not pay off as expected. Another unique risk is the degree to which the deals' successes depend on album sales and radio play. That's usually the domain of the record label, but Live Nation has said it will not built a traditional label infrastructure. That means those functions will be outsourced or handed off to retailers (think Wal-Mart exclusives). The company is probably safe with U2 (recorded music is not part of that deal) but less so with a band like Nickelback. Take Nickelback off the radio and ticket sales could drop sharply. In addition, radio-friendly arena rock, a la Nickelback, is prone to cycles and it's not clear if the band has reached the sort of "heritage" status by which arenas can be without a hit album. Any deviation from historical averages will lead to less successful multi-rights deals and lower operating incomes.

The Jay-Z deal is another one with uncertainty. Ticket sales are safe, but Live Nation is effectively providing the capital for the M&A activity of Jay-Z's business ventures. Whatever profits these new ventures muster will be split between Jay-Z and Live Nation. Compared to ticketing, the arrangement looks like a crap shoot.

Since Michael Cohl left the company, I like Live Nation's outlook more. The company needed to slow the number of large deals it is signing with artists, be more selective and focus on ticketing. The post-Cohl company will be a more deliberate company that will choose more carefully the artists it signs. It is a company that stands to significantly improve its profit margin as it grows non-concert revenues and works through the inevitable growing pains.

Posted by Glenn at 10:59 AM | Link
|Live Nation|

On Friday, Live Nation reported paper thin profits margins in Q2 2008, but they were better than expected. Analysts expected Live Nation to report a loss of 15 cents per share on revenues of $1.1 billion. Instead, the company reported positive earnings of 2 cents per share on revenues of $1.16 billion. Live Nation's profit margin dropped to 0.1% from 1.0% in Q2 2008 while its operating margin dropped to 2% from 3.7%. (press release here, conference call notes below). Q2 2007 revenues were beefed up by the sale of some assets.

Given the company's quest to build new revenue streams to improve its margins, it is ironic that the meat and potatoes of the company, North American amphitheaters and arenas, were what saved Live Nation from a terrible quarter. Lower international music revenue (from weak festival turnouts) and a decline in global touring volume were made up by higher North American revenue (up $95 million) and acquisitions (House of Blues Canada, AMG, DF Concerts and Heineken Music Hall). Total attendance was up 13.8% in Q2 and up 19.9% in the first half of the year.

Sponsorship revenue, the gravy of the income statement, declined 10% to $44.7 million.

Since about half of the company's revenue growth was the result of acquisitions, looking at average spend per consumer is a good way to assess improvement in the important metric of attendee spending. In Q2, total revenue per attendee increased 6% to $82.18 and ancillary revenue per attendee (at North American amphitheaters) rose 2.7% to $17.46. The company expects Q3 figures to be just as strong.

Live Nation will introduce its own ticketing service on January 1, 2009, a date the company disclosed in its earnings release. Revenue growth is not a problem, but there has been little left over on the bottom line. Ticketing holds the promise of far higher margins and the company expects big things.

As for the multi-rights deals, Live Nation provided a few bits of information in a supplement to the earnings release (PDF). Madonna's "Sticky & Sweet" tour has sold over 1.3 million tickets and has moved 83% of tickets available. The company believes the tour can gross $240 million in total revenue. The Nickelback deal is expected to have an operating income of $60 million over its ten-year term at a 9% margin. Shakira's ten-year deal is expected to have a $110 in operating income at a 13% margin.

At close Friday, LYV was up 28%. It is up about 3% at midday today. The Q2 results showed the economy won't be as bad for this year's touring business as had been feared. I don't think you can infer anything about future concert seasons, but it's clear investors think Live Nation has weathered this year's storm and can do it in the future as well.

Notes from conference call:

Five-step strategy to grow revenue: expansion of platform (acquisitions around the world), increased number of shows and tickets, increase operating income (per-head operating cost dropped 2% in Q2, marketing costs being shifted to online), increase in-venue revenue, and grow sponsorship base.

Growth in touring: Live Nation is "positioned in the sweet spot" as artists seek more revenue from touring.

Ticketing is expected to have a negative $15 million impact to 2008 operating income. Will spend $20 million in capital improvements. The company expects ticketing to contribute "strong" growth in operating income in 2009. Rapino said it has "full staffing in place at venues and box offices" and new software platform will provide all the scale and resources it will need next year. Having a lot of conversations about third-party ticketing.

Not seeing any increased competition for multi-rights deals from the likes of Ticketmaster/Front Line. They assume Ticketmaster will stick to its core business of ticketing.

Competitive response to multi-rights deals: Labels are talking to their younger artists, but "established touring artists" are not being approached.

Zero to 5,000-seat venues have had consistent growth for the last five years. Arena and larger shows have not been growing. Goal is to buy the better shows and get out of the shows and markets that aren't profitable. "More than enough" shows to fill its amphitheaters.

Posted by Glenn at 12:43 PM | Link
|Live Nation|

Today they New York Post carried an article about Live Nation's recorded music division and its search for a way to sell its music.

The one thing in the article that I did not know was that the recorded music division, Live Nation Recordings, was gutted last week. Bob Ezrin, Bob Cahill and Bill Hein, all hired by now-gone chairman Michael Cohl, were let go. (I don't believe that was reported last week.) With them gone, signals point to Live Nation outsourcing and licensing as much as possible, and more than the distribution deal the company was probably always going to have to sign with one of the four majors' distribution companies (that's what happens when you sign artists that appeal to older, CD-buying audiences).

No idea what this means for Zach Brown, the Atlanta-based artist who did a deal with Live Nation Records and currently has a song on the country chart.

The bigger question mark is what this means for Live Nation's operating margin. Concert promotion has the margin of office paper. Live Nation spends billions in order to break even (or lose a bit) on talent and make a few points on promotions, merchandise and other revenue streams. Recorded music is one of the rights that Live Nation plans on using to increase operating margin from its current four percent. But recorded music is only one of the rights (and not even one of the rights for the U2 deal).

Without recorded music, there would still be plenty of opportunity to increase margins. The Jay-Z deal, which Live Nation expects will bring in $340 million over ten years (a forecast based on historical data) with an 11% operating margin, includes ticketing, secondary ticketing, merchandise, sponsorships, endorsements, DVD, TV broadcast, fan club, website and publishing. Rapino told the WSJ's Ethan Smith the Madonna deal is modeled at a 9% operating margin.

If recordings are licensed to major labels for sales and distribution, Live Nation will have a harder time squeezing out much margin. There are other options -- retailer exclusives, for example -- and this would be a fantastic time to do something different than a typical retail strategy. If driving ticket sales is the goal, bundling or giveaways are options.

Live Nation won't be in the recorded music business for a few years, so it has time to figure these things out. Investors are not worried by the news. LYV was down 2.9% today and is up 15.5% since signing Nickelback on July 8 and is up 33.4% from its 52-week low earlier this month.

Posted by Glenn at 6:05 PM | Link
|Live Nation|

Live Nation CEO Michael Rapino was interviewed in CNBC (video, via Ticket News). Executives on financial news programs don't do much more than rehash the company line, but Rapino did admit Live Nation will "take some time to put some numbers on the board" and win back the faith of investors.

Rapino said Live Nation is having a "great summer" and its numbers are the same as last year. Funny that he said of the company's stock since the Madonna deal was announced, "We got hit by everything at that point. The market started to collapse. So I don't know what part was Madonna and what part was the market."

Truthfully, Live Nation, like many media/entertainment stocks, is faring much worse than the market. News of the Madonna deal broke on October 10, 2007. Live Nation closed at $23.68 the prior day. It closed yesterday at $11.24. That's a decline of 52.5%. (It's hard to say what part of that decline is due to Madonna and what can be attributed to the deals with U2, Jay-Z, Shakira and Nickelback.) During that span, the Dow has dropped 18.8% and the Nasdaq is down 18.6%. And I'll throw in Warner Music Group, which lost Madonna to Live Nation. WMG is down 31.1% since October 9.

Posted by Glenn at 4:48 PM | Link
|Live Nation|

Michael Cohl has resigned as Live Nation's chairman of the board and CEO of Live Nation Artists. The decision is effectively immediately but Cohl will stay on as a consultant. Billboard.biz just posted an article about its exclusive conference call with Cohl and CEO Michael Rapino.

The event confirms recent reports that Cohl was negotiating his departure, but the interview did not confirm what was said to be an internal rift between the two over the number of large, multi-rights deals Live Nation would sign with superstar artists. "Just the moon and the stars," Cohl said when asked what prompted his departure. Well, that's not very believable but it's to be expected.

Rapino said the company's goal was four such deals in the first year. "Maybe we get to four in 2008 as was the plan, or maybe we get to five or six," he said. "We're happy to be in the business and we will continue to be in the 360 business." That sounds about right. Slow down, use capital wisely -- especially in this uncertain economic climate -- and get a few small victories before expanding the scale of the deals. The company can be fully committed to its strategy without jumping in head first.

Investors, who have shown their lack of interest in the company's plans since the Madonna deal was signed, would like fewer than more deals. Although the personnel are being put in place and the deals look good on paper, carrying them through and reaching their potentials is not going to be easy.

The Los Angeles Times' report on Cohl's departure quoted Miller Tabak & Co.'s David Joyce on the difference of opinion on the company's strategy. "Cohl wanted to hurry up and get more of the artists locked up so they didn't lose them to competitors. The market is very nervous right now regarding those deals and that's why there was the disconnect." According to Reuters, Joyce downgraded Live Nation this morning -- it was down 9.8% today -- but was reassured later today when he learned Cohl had not sold his stock.

The Reuters piece questioned Live Nation's ability to land superstar deals without Cohl on board. On one hand, Cohl had the relationships. On the other, the deals he wanted to pursue "probably would have bankrupted the company," said one unnamed industry executive.

Posted by Glenn at 8:11 PM | Link
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The Wall Street Journal's Ethan Smith has an article that just went up about executive in-fighting at Live Nation over its strategy of signing top artists to top-dollar, multi-rights deals. Give it a read.

Opposing views between Chief Executive Michael Rapino and chairman Michael Cohl reportedly escalated "into a full-blown feud, with Mr. Cohl threatening to leave Live Nation and move his business to Miami" (though a no-compete clause would prevent that). Rapino is said to want to slow the rate at which artists are signed to huge deals while Cohl wants to "quickly strike deals with as many as 15 more artists."

People close to Live Nation said the company is not wavering from its 360 deals dispite their disagreements on how many deals should be signed.

I couldn't help but think of the cleverly titled report by a Banc of America securities analyst released when Live Nation signed Madonna. Maybe "For $120 Million, She's All Yours" was a proper assessment of the risks of these deals.

Extra credit reading:

• "Live Nation And Jay-Z: Setting A New Tone For Music Industry?" at CNBC
• "Defending Madonna's $100 million deal" at Fortune

Posted by Glenn at 8:20 PM | Link
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• Live Nation is nearing a $150 million, 10-year deal with Jay-Z that would cover nearly every part of his career -- recorded music, publishing, licensing, live concerts and other business ventures (such as clothing). (Wall Street Journal)

• EMI Christian Music Group plans to lay off an unspecified number of employees from its Brentwood, Tennessee office. (AP)

• Ian Rogers is out as the head of Yahoo! Music and on his way to a start-up. (News.com)

• Country singer Taylor Swift has left CAA for William Morris Agency. (Hollywood Reporter)

• Canadian wireless carrier Rogers Wireless has an exclusive partnership with Live Nation to offer mobile ticketing in Canada. Mobile ticket buyers will get a special VIP line when entering the show. Nice perk. (Ticket News)

• If you haven't strolled over the Pennywise's MySpace page lately, the band's free album download started its two-week run on March 25. You have to have a MySpace account to get the album...which I do not. Click on the link at the top of the page, follow a few steps and you'll get a download link. (Pennywise at MySpace)

• Pitchfork has a list of upcoming releases, organized by Tuesday release dates, that stretches into July. (Pitchfork)

Posted by Glenn at 8:41 AM | Link
|Live Nation|

This Fortune article is dated November 30 but I didn't see if for a few days. Writer Paul Sloan has a good look at concert promoter Live Nation and how it is striving to make the term "concert promoter" an outdated description of its business. I wasn't surprised that Live Nation head Michael Rapino dismissed labels' attempts at 360 deals, and I wasn't surprised he (probably) overestimated his company's ability to assume the duties of a record label.

Here's a sample:

"Live Nation execs won't reveal specifics, but people familiar with it say it's valued at around $120 million over a decade. They paid her $90 million upfront in stock and cash, these people say.

Could Live Nation make money on the expensive pact? Well, the contract would pay for itself if Madonna does four tours and three albums in the next decade with revenues comparable to her recent output, the key assumption being that the 49-year-old star suffers no major dropoff. Profits would then come from merchandise, sponsorships, DVDs, and on and on.

Warner fought to keep its star but ultimately conceded defeat. Publicly, it wished her well, noting that it was proud to retain her catalog of past albums and song rights, and that Madonna owes her next album to Warner. Privately, execs say the price just got too high. Says one industry insider: 'This is nothing but a loss leader.'" ...

Rapino dismisses 360 deals, which he argues simply take more from musicians. He brushes off the view that Live Nation needs record labels. He says he knows how to market and can pursue endless distribution options, whether it's cutting an exclusive deal with a retailer, as Paul McCartney did with Starbucks (Charts, Fortune 500), or slicing up albums into digital pieces and selling in a whole new format.

Ultimately, Rapino says, he's not looking to transform Live Nation into a label that bets on scores of artists in the hopes that one or two will score big. He plans to cherry-pick perhaps a dozen superstars over the next few years. That suggests he's less a revolutionary aiming to topple the labels than someone who hopes to use his superior cost structure and promotional acumen to make gobs of money.

Whatever the ultimate goal, investors are dubious. Live Nation's stock has sagged 30% since news of the Madonna deal. Rapino was concerned enough about the reaction that he and his lieutenants spent much of their first-ever presentation to analysts and investors in November defending the plan."

Sloan points out that Live Nation's cash flow margin is "anemic" (it really is thin). And there's one of the attractions of recorded music. Though it doesn't offer Google-esque margins, it beats concert promotion margins.

Here's something that's missing: Rapino's plan to "cherry-pick" (Sloan's words) only the top artists implies not the destruction of the label-artist model but a demarcation point at the highest levels of revenue. Not all artists are worthy of a Live Nation contract like Madonna recently signed. There exists a long process of artist development and a very low probability an artist will ever get to the point at which Live Nation would take interest. Sloan wrote that the model implies Rapino is "less a revolutionary" than a guy using his market presence to make a lot of money. If you consider artist development as the only visionary aspect of the process, then that's true. Personally I think Live Nation's approach is indeed visionary -- even if they're going to skim only the best of the best off label rosters.

Posted by Glenn at 3:18 PM | Link
|Live Nation|

• Live Nation will sell tickets to its events at 263 Costco stores across the nation. A gift card called the "Amphitheatre Concert Pack" will sell for $39.99 and offer general admission lawn seats for two to (almost) any Live Nation 2008 concert in amphitheatres owned and operated by Live Nation (there will be some exceptions). The card will also get the buyer six downloads at the PureTracks-powered Live Nation music page. Side note: This retail relationship could help -- it couldn't hurt -- when it comes time to sell some Madonna CDs. Bulk food shoppers pretty much comprise her target market these days. (Ticket News)

• Creative Artists Agency, the talent agency with a huge roster of music artists, is teaming up with Draper Fisher Jurvetson to raise a venture capital fund (ranging up to $200 million) which will invest in the digital/entertainment sector. paidContent points to recent ventures by other agencies and points to the changing dynamics in the agency marketplace. (paidContent)

• Billboard.biz names names: A&R representatives Paul Pontius and Rob Stevenson have left Island Def Jam. In addition, Stolen Transmission ended its indie-to-major experiment and will go back to its indie roots. (Billboard.biz)

• Radio revenue was down 5% in Q3 2007. "The leading growth categories, the RAB reports, were communications, including cellular and public utiities, which rose 9 percent in Q3 and is up 17 percent for the year so far, and concerts, theater and movies, up 11 percent in Q3 and 21 percent year-to-date." (Radio Ink)

• Wal-Mart and playphone have launched a mobile phone storefront that will sell wallpaper, games and (Eagles) ringtones. Three downloads of any kind will cost $5.99 a month. (MediaPost)

• Maybe this is why hip hop sales are in the toilet: Some rappers are quitting (and others go into retirement every six months). "It's kind of hard to get excited about rap music when the people making the music keep reminding you how over it they are. .. Another weird thing is the recent mentality that being a rapper isn't cool and so every rapper needs to constantly remind you that he's not a rapper but that he's really a master kingpin drug-dealer who also raps, just for fun." (Village Voice's Status Ain't Hood blog)

Posted by Glenn at 7:35 AM | Link
|Live Nation|

• Entertainment retailer Trans World received a buyout offer from Sherwood Investment Overseas Ltd., one of the company's shareholders, of $7 per share, or $217 million. The company previously received a buyout offer from its CEO, Robert Higgins, for $5 cash. That offer was criticized at the time by Sherwood. Trans World posted a Q3 loss of $14.3 million and saw its same store sales decrease 4%. (Billboard.biz)

• Ethan Smith details the transformation of Live Nation. Most of the main info is rehash of previous news, but Smith does go into some of the "mundane tasks" (read: important strategic decisions that don't get the headlines) such as its push away from its 52 amphitheaters ("offer few ways of making money beyond parking and concessions revenue") and its push into smaller theaters (many theaters are taking on the "Fillmore" brand). "That would not be a strategy for long-term growth," said CEO Michael Rapino of simply running Live Nation's concert operations more efficiently. There's not much info about its post-Ticketmaster strategy, but I found this to be really funny: A Goldman Sachs anaylyst referred to Live Nation's shift to small and mid-sized clubs as "a river of nickels" in reference to their far lower revenues involved compared to large venues. (Wall Street Journal)

• Entertainment distributor Handleman has hired turnaround expert Albert A. Koch as its new president and chief executive. (Freep)

• Universal Music Publishing has signed country artist and recent Grand Ol Opry inductee Josh Turner to a worldwide publishing deal. (Music Row)

• EMI Japan has launched EMI Entertainment Japan, a talent management division that will manage all aspects of its artists' careers. One established artist and one new signing are the first on the roster. (Variety)

• The Times' Dan Sabbagh on EMI's cost-cutting, need for creative leadership and need for a chief executive. Here's a tempting plan and a historical precedent: "Mr Hands is smart enough to know the importance of empowering label bosses but he has to get on and do it. When he owned pubs, he stripped out the central financial management team of 1,000 people and landlords ran their own budgets. Costs fell and sales grew. Yet music is more complicated than running a boozer (despite some superficial similarities). Talk that the Virgin label might be revived in the US, as an example of empowerment for middle management, has yet to be matched by action." (The Times Online)

• In case you missed it on Sunday, here's the "60 Minutes" page for its piece on The Eagles. It was a nice enough profile. The big business part of the story is that the retailer purchased three million CDs directly from the band and will spend tens of millions to promote the album...and all three million CDs are non-returnable. Amazing. (CBS)

Posted by Glenn at 12:00 PM | Link
|Live Nation|

• Live Nation continues its expansion. The concert giant announce it will acquire Signatures Network, the music merchandising company, in a deal worth $79 million. Signatures holds merchandise licenses to such artists as Kanye West and U2. Last month, the New York Post reported Live Nation was closing in on a deal for Signatures valued at $50 million. (Reuters)

• Chet Flippo chimes in on 360 artist contracts ("a lot of potential drawbacks to this path") and gives some history on such deals (going all the way back to Hank Williams' deal with Acuff-Rose). (CMT.com)

• With a U.S.-China summit two weeks away, representatives from three majors and the IFPI met with the European Commission's trade commissioner to talk about piracy concerns. The parties voiced concerns about three things: online piracy in China, market access restrictions and the absence of broadcasting and public performance rights. (Euro Observer)

• Since RCRDL LBL is going to be a talking point for a while, you may want to listen to a podcast at the website of RCRD LBL advertiser Nikon. It's an interview with co-founder Peter Rojas in which he discusses the business model. Said Rojas, "We're taking the A&R function, the discovery function of a record label, and marrying that to the great platform that you have as a blog, not just blogging as a genre but really blogging as a format or as a platform, as a publishing platform for getting niche content out there. What we recognized was that if we were going to put music out there for free then a blog was really the ideal platform to do that, and to have a place where music fans could go and everyday be turned on to something new to an artist they already know or discover something brand new that hopefully they'll like." (Nikon Podcast)

• Nominees for the 2008 Plug Awards have been announced. Coolfer got a nomination for Music Blog of the Year, which is nice since I don't talk music much and stick to unsexy business topics. (Plug Awards)

• The Boston Modern Orchestra Project is going to launch its own record label, BMOP Sound, in January 2008. (All About Jazz)

• It has been widely reported that Oasis was considering a donation scheme for its upcoming album. This article says that while the band is recording without a deal with a label, singer Liam Gallagher stated the band has no intention of allowing people to have its music without the band getting paid. (AndPop.com)

• Here's a good article, a sort of introduction to the topic, on home music systems that can connect to the Internet without going through a PC. (BusinessWeek.com)

Posted by Glenn at 12:56 PM | Link
|Live Nation|

Concert promoter Live Nation reported Q3 earnings yesterday. (Also available is a PDF of the earnings release.) Revenue in the quarter was $1.51 billion worldwide, a 0.5% increase, and $785 million in North America, a 6.4% decrease.

However, the company touted 30% growth in amphitheater Adjusted OIBDAN (part of which was due to booking less depreciation). In addition, Live Nation frequently touted its signing of Madonna as the starting point of its new Artist Nation segment, and it alerted of an upcoming announcement about its ticket-selling strategy when its contract with Ticketmaster expires at the end of 2008.

OIBDAN, rarely utilized in public company accounting circles, stands for operating income before depreciation, amortization, non-cash compensation and expense and gain on disposition of assets. It is a measure that gauges core operating performance and is favored by Clear Channel, which spun off Live Nation in 2005.

Live Nation's OIBDAN was $95 million in Q3 2007, an 8.5% improvement year-over-year. Operating margin 6.6%, a big improvement over last year's 1.4%.

Turning around its core amphitheater business has been one of the company's main goals. In Q3, Live Nation pulled in 5% more per head in food and beverage, and it reduced by 67 (22%) the number of events with fewer than 7,500 attendees (excluding Ozzfest).

On the company's new Artist Nation division: "Already this division has over 300 employees focused on providing the services to artists to monetize their diverse rights outside of the tour while leveraging Live Nation’s global distribution and marketing platform. We expect to manage this infrastructure in a cost efficient manner as our limited artist roster and already strong platform provide us with an additional cost advantage over our competition."

One its online initiatives: "We expect that our online strategy will be supercharged once we are able to direct fans looking for tickets to our shows to our website. As a precursor to that impact - through September 30, we sold over $3.2 million of inventory online which drove increased traffic to our North American website (unique visitors through September 2007 to www.livenation.com were up 58% over last year) and enabled us to reduce the size of our local North American sales force by approximately 30. We expect to soon make an announcement regarding the path we plan to pursue with respect to ticketing as our contract with Ticketmaster for the bulk of our North American venues expires at the end of 2008."

Posted by Glenn at 12:18 AM | Link
|Live Nation|

What's $120 million when Live Nation expects to gross over $1 billion from the Madonna deal? The company revealed its revenue estimate in a conference call (go here to listen) yesterday. Two new higher margin businesses: Longer and deeper relationships with touring-based artists and online ticketing. Wants to attract other "independent-minded artists." Touring, private events, touring, etc. Does not tie specific advances to specific releases -- revenue streams are cross-collateralized. Artist Nation will maximize revenue from the whole of artists' music ventures. Live Nation said Madonna's 2006 tour grossed almost $200 million and was attended by 1.2 million people. The deal's first album is expected to arrive in two to three years and her next tour within the next two years, and there could be up to four tours in the life of the deal.

Additional details were given on Artist Nation's five divisions: Recorded Music (which will seek new methods of distribution but will also include traditional distribution), Merchandise (using its Anthill Trading, Trust Merchandise and Music Today divisions), Fan Clubs and Ticketing (via recent acquisitions Ultrastar and Music Today), Media Rights and Sponsorships & Marketing (employs over 200 people).

On competition: "We were told we weren't the highest bidder. We were lead to believe it was our platform and our plan that won the day."

How to distribute the recorded music? It will have a traditional component to it, but Live Nation will consider exclusives, deals with big box retailers and pretty much every way to distribute the physical product.

According to a Live Nation SEC filing, Madonna was given $25 million in stock (1,174,371 shares) for her recently inked contract. As of Live Nation's last quarterly earnings date, the company had 65.5 million shares outstanding. Let's do the math: Madonna now owns about 1.8% of the company's stock. The company's Proxy Statement lists the company's security ownership. Madonna, according to this list, would be the fifth largest shareholder of Live Nation and the second largest individual shareholder (behind only L. Lowry Mays, the chairman of the board and founder of Clear Channel Communications, who owns 14.9% of the shares).

Posted by Glenn at 1:29 AM | Link
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