Live Nation Results Not So Lively
Eric is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Every business wants to get in the position Live Nation Entertainment (NYSE: LYV) occupies. The company is the world’s largest concert ticket slinger, far outpacing its rivals. It’s vertically integrated too, owning or operating many of the venues it hosts concerts in and boasting complementary units like an in-house artist management company.
So it really should be more successful than it is. The company just reported 4Q and annual results, and they weren’t good. Revenue growth for all of 2011 was only 6% year-on-year while the company recorded yet another annual net loss, at $83 million. That was certainly better than 2010’s shortfall of $228 million but worse than the comparatively good 2009, when the firm lost $60 million. The company did manage to shave its quarterly loss (to $67 million from 3Q’s $86 million), but that was a minor victory, plus it was on the back of a drop in revenue.
Fingers have been pointed at the NBA for its labor dispute that delayed and nearly canceled the 2011-12 season, and the lack of blockbuster concerts during the year, but those don’t appear to be solid reasons. Even during a full NBA slate of games the previous year and lucrative tours by rock luminaries such as Bon Jovi and Paul McCartney, the company still managed to lose money. This, despite its ownership of Ticketmaster (following a merger completed in 2010), which operates a near-monopoly on ticket sales for popular events and charges accordingly -- its obnoxious, justifiably despised “convenience” charges and “processing ” fees can add costs approaching 20% to the price of a ticket.
Costs related to the Ticketmaster merger were more of a factor; without those drowning the results, LYV would have posted a net of $50.7 million during the last quarter. Which is fantastic, except that the number represents an anemic margin of 4% and it’s almost $6 million less than in the same period of 2010.
The company is fairly circumspect about its results and the foundations underneath them -- red flag! -- but it’s not doing badly in certain areas. Concert revenue was a wash but the take from ticketing (responsible for nearly a third of the company’s top line) grew 14.5% year on year while the eCommerce division zoomed ahead at 64%. What’s revealing about the latter is that, despite the strong growth, the unit brought in less than $150 million, or around 2.7% of the total. At this point, with the piles of data Ticketmaster’s collected over its many years in the business, LiveNation could leverage its assets to produce much more in revenue from its online segment. That it doesn’t indicates a lack of dynamism and imagination in its approach to the business.
Hopefully for its investors, LYV will get as creative as some of the artists it promotes and start figuring out how to use its many advantages to turn a healthy profit. It already has to compete in the eCommerce and ticket sales space with the likes of eBay (NASDAQ: EBAY), whose StubHub ticket resale website does a fine business in the second-hand market. While Ticketmaster is a one-sided sell transaction, eBay collects commission from both the buyer and the seller of the ticket.
For investors, then, LYV is probably a good stock to ignore at the moment and into the foreseeable future. Those determined to play the live event business should consider eBay, although of course ticket sales are only a fraction of its business. In terms of the broader entertainment sector, much greater potential and growth can be bought with a position in, say, Walt Disney (NYSE: DIS). The Mouse is significantly more well integrated vertically, with business units that actively feed each other’s revenue growth. Plus, a stock like DIS offers a nice and steadily increasing dividend; LYV almost certainly won’t pay out to its shareholders anytime soon, if at all.
In fact, all things considered Live Nation doesn’t have a great deal to recommend it. Live sporting events and concerts are a lot of fun and market players should continue to enjoy attending them. Investing in the big company that operates them and provides the tickets is another story.
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