Live Nation’s annual report came out earlier this year and from the looks of it, Madonna done good. The world’s largest live concert producer increased its revenues by 12.8 percent to $4.2 billion, a year-over-year increase of $473.3 million. Live Nation’s adjusted OIBDAN (operating income before depreciation and amortization, non-cash compensation expense) was $180.9 million, an increase of 15.9 percent, as a result of improved results in North American and international music and global theatre tours and productions. Operating income was $82.1 million, an increase of $49 million, or 148.0 percent.
Under Live Nation President and CEO Michael Rapino, the live music business is coming to resemble Wall Street rather than Bleecker or Beale Street from an operational point of view. Listen to Rapino wax on how the concert touring business is changing — or more to the point, how he’s changing it: "During 2007, we made substantial progress in executing our strategic plan to fully capitalize on our global leadership position in live music. We consolidated our global network and strengthened our core business through changes in how we drive revenue, manage our costs and measure our success. Our improved performance reflects early returns from the investments we made in transitioning our core business into a more focused, profit-driven organization. We also made substantial progress in building an integrated platform aimed at further strengthening and monetizing the relationship between artists, fans and sponsors — before, during and after live events. In the year ahead, we remain focused on driving our core business and implementing our plan to capitalize on the transformation of the global music industry."
He’s not P.T. Barnum, or even Simon Cowell. But Live Nation is the biggest promoter in an industry that’s shown a compound annual growth rate of 15.5 percent since 2001, and which generated $3.6 billion in revenue in 2006, up from $1.8 billion in 2001, according to Pollstar. In 2008, Rapino expects live concert touring and revenues to expand further, and plans initiatives to further build Live Nation’s ticketing services. The company will take ticketing completely in-house starting Jan. 1, 2009, ending the company’s deal with Ticketmaster. Instead, Live Nation announced a 10-year deal with Germany-based CTS Eventim, Europe’s largest ticketing company, which last year sold 60 million tickets to over 100,000 events in 17 countries. It looks like a win-win: CTS gets entrée to the North American market and Live Nation has a globally capable ticketing partner.
In fact, Rapino looks like a genius on this one — for virtually no capital outlay, Live Nation has access to customer preference data, gets the chance to create new ticket-based products around the shows themselves (they’ve already worked on CDs of the show ready for patrons as they exit the venue), and lots of new sponsorship opportunities. And the CTS-Live Nation deal only addresses primary ticket sales; Live Nation retains the ability to resell secondary tickets.
CTS brings a wave of new technology and innovation to the ticketing business, all of which Rapino will be able to leverage. The features include interactive seating maps, mobile distribution, alternative access models (auctions, lottery, etc.), print-at-home, radio frequency identification (RFID) ticketing and customer relationship management (CRM) capabilities. Its software has a flexible architecture that seamlessly handled the 2006 World Cup, for which during its peak, the system processed more than 3 million tickets in a single day and handled more than 30 million inquiries in the first hour the event went on sale.
Live Nation’s annual report — only its second since being spun off from Clear Channel in 2005 — is an affirmation of Rapino’s oft-quoted comment, "Live Nation will use its most important asset, the concert ticket, to build artist careers and customer relationships…” underscoring the company’s corporate slogan: “The future of the music business.”
I wasn’t using the Madonna reference earlier simply for effect. While Live Nation is at first glance a live music proposition, Rapino is building an infrastructure that could replace what’s left of the music industry. Aside from signing Madonna and other artists to the company’s new record label, Live Nation also started its own recording studio group. The company’s vertical integration now includes fan club services (Live Nation acquired the MusicToday fan management site in 2006), Internet content, publishing, touring, promotions, sponsorships and talent management.
According to Forbes, 75 percent of earnings for top moneymakers in the music industry in 2006 were earned from touring. That’s not going to last forever. With the top grossing live tours consisting mainly of classic rock acts from the 1960s, ‘70s and ‘80s, the end of that gravy train is already in sight. The “Steel Wheelchairs” tour, perhaps? Building out a comprehensive vertical infrastructure that can find, sign, record and develop new artists is critical for Live Nation going forward. It is, in fact, critical if there is to be a viable music business in the future.
What will also be crucial, however, is competition. Live Nation may have much of the DNA from its erstwhile parent still quite active. The business needs Live Nation to be a strong proposition, one that can pull the music business through the transition it’s currently in. But what it does not need to be is another Clear Channel, stifling competition and institutionalizing mediocrity. It’ll be interesting to see if Rapino can pull back on the throttle in time, and if AEG Live turns out to be a true innovator, not just an arena builder.
Contact Dan at ddaley@fohonline.com.
