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Is Live Nation really hurting as much as it claimed to be on Capitol Hill? That's not what Mr. Rapino tells his shareholders

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A key aspect of Live Nation CEO Michael Rapino's testimony on its proposed merger with Ticketmaster has been that the giant national concert promoter is severely hurting in these tough economic times. Statements along these lines were made again and again before a Senate subcommittee on Tuesday and a House subcommittee today.

But in transcripts of the company's last three earnings calls statements to shareholders, Rapino paints a very different picture.

For the first quarter of 2008, his statement reads, in part:

Our competitive advantage lies in our global concert platform that spans multiple cities throughout 19 countries, staffed by the most experienced promoters and marketing personnel in the business, selling directly to over 40 million fans, servicing 1,000 artists annually through our 16,000 concerts. ...

We continue to refine our North American platform by exiting low-growth markets and expanding in the top 20 markets. The agreement to acquire the majority of the live music assets of Fantasma Production, a leading Florida-based promotion company, is part of this growth. The acquisition includes Fantasma's calendar events, two important outdoor midsize music venues, and two outdoor music festivals, significantly strengthening our position in the Florida market, where we historically have been underdeveloped.

MORE FOLLOWING THE JUMP

Rapino's first quarter 2008 statement continues:

Our new House of Blues club in Houston is nearing completion, and construction of our House of Blues in Boston has begun. We expect both clubs to open during the fourth quarter of 2008. ...


As the largest acquirer of live artists' rights, we have a team of over 400 buyers regionally and centrally that are continually ensuring our distribution pipes are offered at high occupancy. We promote over 16,000 concerts across our platform on an annual basis, spending over $3 billion per year on artists and direct costs related to putting on these events. We acquire these live rights from over 1,000 artists, and we finance these outlays through our working capital. ...

In 2008, we currently expect to acquire 16,000 local concert rights, over 40 national tour rights, one to three global tours, and to date, three long-term full rights deals with Madonna, U2 and Jay-Z. The Jay-Z deal demonstrates how acquiring long-term multiple rights for our pipes can produce higher margins than our current local concert model. With Jay-Z, we have acquired the following rights for 10 years, all crossed touring, ticketing, secondary ticketing, merchandise, sponsorship, endorsement, DVD, TV broadcast, VIP, fan club, website, publishing and recordings.

We should generate, based on historic and forward modeling, a minimum of $340 million in revenue over the term and over $38 million in operating income, or an 11% margin versus our current North American 4% margin on single concert rights. We will share in approximately 21% of the total profit versus our current 10% model. We expect to advance Jay-Z approximately $100 million over the term as the rights are performed, which is standard practice. ...

The most expensive and lowest-margin artist right is the concert right. Leveraging our concert guarantee to add higher margin rights will produce higher returns for our platform. The incremental cost of acquiring and executing a Tshirt right is minimum, but produces increased margin to our bottom line. ...

Finally, as we have previously stated, we are not seeing nor do we currently expect to see any significant impact on our business stemming from the current economic slowdown.

The second lever that drives our business model is maximizing the 46 million fans that walk through our distribution pipe. The key five levers that drive our profit in this platform are ticket sales, ticket fees, venue ancillary fees, sponsorship, and artist ancillary rights.

In 2008 we will continue to use our growing database and online services to better market our shows and convert marketing dollars from traditional media to online in an effort to reduce overall spend through efficient reach. ...

We continue to elevate our average deal size as our proposition to sponsors has evolved over the last two years from a fragmented live on-site proposition to one now that we believe is the most compelling for sponsors looking to reach 46 million avid music fans and 1,000 superstar artists, onsite to online.

Increasing our earnings per artist is another way we leverage our relationship with 1,000 artists annually. Live Nation Artists has assembled the world's leading full-service platform for artists, from merchandise and web store management to VIP services and live streaming. Our division houses nine unique services that we currently expect will acquire and execute over 1,000 ancillary rights in 2008, producing what we currently expect to be over $300 million in revenue with great growth potential. This is a new revenue stream we did not participate in three years ago.

To conclude, we're off to a solid start in 2008 with regard to the execution of our strategic plan, and we look forward to another successful year for live music.

In his third quarter 2008 earnings calls statements, Rapino is just as optimistic. The transcript reads, in part:

We reported solid financial and operating results for the third quarter despite the global economic slow down. We executed on our strategic plan and delivered substantial progress across the majority of metrics used to evaluate our business.

We believe our performance was among one of the best in the global music industry. ...

Our revenue and adjusted operating income margins grew during the quarter and our highlights include: we produced over 4,800 concerts compared to 4,100 last year, representing a 17% increase, total attendance grew by 6% to over 17.5 million; total sponsorship revenue and average revenue per sponsor demonstrated strong growth during the quarter up 13% and 5% respectively.

North America music operating income increased 10 million over the year and total ancillary revenue per fan at our amphitheaters and also total revenue per fan were both compared to last year. ...

During the quarter we were successful in that we acquired over 4800 live concerts versus 4100 which represents a 17% increase in show count. We're looking at ancillary rights to the core live rights we're acquiring to feed our artists service platform. We have close to over 800 ancillary rights that we acquired in the third quarter of 2008. ...

We also continued in our top 20 U.S. market expansions with agreement to operate the Bayfront Amphitheater in Miami. We're currently making upgrades to the venue and look to open that in June of 2009. In our House of Blues franchise we opened a new one in Houston in October and Boston will open in 2009; giving us 12 locations.

Our second strategy is to increase in tickets throughout the pipe. We demonstrated our ability to do this by growing attendance to 17.5 million attendees during the quarter versus 16.6 last year; an increase of 6%.

Our third focus is reducing costs and improving efficiencies. Operating in North America music increased 10 million in the quarter as we increased the average profit per show by 33% partially driven by improved cost controls around talent buying and venue operating costs. ...

Our second priority is expansion into the ticketing and E-commerce platform to extend our pipe. Our ticketing platform remains on track for lots in January 1, 2009. The sale of our in-house tickets has increased 74% in the first nine months of 2008 compared to last year.

Over the past several months we have made substantial progress implementing our third party ticketing strategy. We formed an exclusive agreement with SMG, the world's leading venue management company, which will allow Live Nation to sell North American facilities controlled by SMG.

The first tickets will transition into a Live Nation ticket in late 2009 and we expect to ramp up to an estimated five million tickets annually by 2011. The total tickets included in the deal amount to roughly 25 million over the term of the deal. In addition the incremental tickets included in that deal represent an estimated 25% annual increase over the 13 million tickets we expect in service in 2010 from our North American vendors. ...

To conclude, the concert industry continues to grow during the third quarter in spite of the economic downturn. We are carefully monitoring attendance trends given the recession but thus far we have not seen any major impact.

Our balance sheet is healthy and we're going to remain prudent with regard to expense management without sacrificing our operating momentum. As I mentioned it's all about execution for us at Live Nation. Our business model is producing tangible returns and our margins are improving. In addition, our pipeline is full, our share of artists is growing and we're on track to launch our ticketing business in January.

Judging by statements like those above, Live Nation is doing very well indeed. Though judging by statements like those above, you'd also never know that it's a company that has anything to do with music, art and culture.

(As for launching that ticketing business, it did indeed happen in January. And a few weeks later, Live Nation pulled back from it and announced plans to merge with Ticketmaster.)

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This page contains a single entry by Jim DeRogatis published on February 26, 2009 6:57 PM.

Update: Schulter's office denies rushing the return of the promoters ordinance was the previous entry in this blog.

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