Live Nation: the new alternative to record company giants?

Article  by  Matt DARTI  •  Published 28.10.2010  •  Updated 29.10.2010
The live events management company Live Nation is in the process of becoming a force to be reckoned with on the global music scene.

Summary

From Clear Channel’s “Spin-off” to the merger with Ticketmaster

In 2005, the Clear Channel group, threatened with lawsuits for not adhering to anti-competition laws, was obliged to divide into three parts: Clear Channel Outdoor, Clear Channel Communications and Live Nation. This divide, called a “tax free spin-off”, is at the source of the Live Nation group, with Michael Rapino at its helm, in charge of around 4,700 employees throughout the world. While the company refers to itself as a simple promoter of live performances and sport, in reality, it is a major superstructure with a whole diverse range of activities: artist management, selling merchandise on its site livenation.com, the production and promotion of concerts, and even creating records.

In 2009, Live Nation wanted to extend its influence to the realm of online ticket sales. To avoid entering into competition with Ticketmaster (the number one site for buying tickets online), they arranged a merger with the latter in February 2009. In October, the UK Competition Commission released an unfavourable initial recommendation about this merger within markers of the European anti-trust laws. However, in December, after negotiations the commission finally authorised the project, as had the United States Department of Justice. In January 2010, the merger of these two important companies was made official.

However, this collaboration did not escape criticism from the media and even from some artists. Following the formalisation of this alliance, a website called TicketDisaster.org – initiated by consumer and anti-trust associations – was created in protest of the monopoly that the holding company now known as Live International Entertainment had over the market. Similarly, in 2009 Bruce Springsteen declared to Rolling Stone magazine that “…the only thing that could make the situation worse for fans today would be if Ticketmaster and Live Nation joined forces, which would reduce the concert ticket industry to a quasi-monopoly”. Journalist Alfred Branch revealed on the site TicketNews that even the CCIA members (Computer & Communication Industry Association) who endorse Google, Oracle Corporation, Microsoft, Yahoo, Intuit and eBay, were against the merger. 

This new firm, strengthened by its alliance, became a giant in the music industry, and they certainly possess all of the necessary aspects to become a serious player on the world market.

 
Live Nation’s Management structure prior to the merger with Ticketmaster
Name                             
Age             
Position
Michael Rapino
43
President and Chief Executive Officer and Director
Brian Capo
42
Chief Accounting Officer
Arthur Fogel
55
Chief Executive Officer—Global Touring and Chairman—Global Music
Jason Garner
36
Chief Executive Officer—Global Music
John Hopmans
50
Executive Vice President—Mergers and Acquisitions and Strategic Finance
Nathan Hubbard
33
Chief Executive Officer—Ticketing
Thomas Johansson
60
Chairman—International Music
Alan Ridgeway
42
Chief Executive Officer—International Music
Michael Rowles
43
General Counsel and Secretary
Ben Weeden
32
Chief Operating Officer—North American Music
Kathy Willard
42
Chief Financial Officer
 
 (source: Live Nation’s annual external report 2008)
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The desire to be a part of a globalised world

 In 2008, according to the company’s annual external report, Live Nation organised no less than 22,000 events in over 33 countries and the Live Nation group website was visited by more than 72 million people. Furthermore, the company that was listed on the Nasdaq Stock Market has since been indexed on the New York Stock Exchange under the name of LYV. According to Pollstar, the company’s sales figures went from 3.6 billion dollars in 2006 to 4.2 billion dollars in 2008, an increase of around 8%.
 
This multinational company is constantly growing and is undoubtedly a global company working on an international scale with the promotion and production of more than 4,000 concerts and events outside of North America. Its International Musicdealings actually represent 33% of its total takings.

To widen its influence, the company has purchased several strategically-placed concert venues. In 2008, Live Nation bought the Heineken Music Hall, and bought a 51% share in AMD (Amsterdam Music Dome) as well as in Main Square Festivalin Arras, France. Loyal to its ambition to partake in a wide variety of professional activities, Live Nation also invested in clubs, stadiums, arenas, festivals, the House of Blues and theatres.

At the same time, the business was concentrating more and more on the promotional side of things, having bought a 51% share in the Canadian company Emerge Media Ventures Ltd., better known as Emerge, as well as shares in the Fantasma Productions Inc. group, which promotes concerts in Florida. In Italy, the company bought out Milano Concerti and Trident Agency. In South America, with the purchase of Clear Channel Entertainment do Brasil Ltda – a Brazilian production and promotions company – Live Nation forced itself into the number one spot for music promotion. However, within certain European markets, they still come head to head with their main competitor: Anschutz Entertainment Group (AEG).
 
The company’s strength lies not only in the way it coordinates all of its contracts across the globe in order to facilitate the movement of international artists, but also in their understanding of how best to utilise the Internet, bringing a whole community of Internet users together on livenation.com and winning loyal fans (through personalised emails, the offer of online accounts, etc.). This, along with its recent merger with Ticketmaster, has resulted in Live Nation’s domination of the online ticket sales sector.

The development of the Live Nation group’s income

 
(source: Zonebourse.com – Thomson Reuters)
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The sale of online tickets: a challenge for the future of music

 The merger with Ticketmaster has incited many debates, especially concerning ticket prices. For a Bruce Springsteen concert, for example, fans were directed to the site TicketNow – which is owned by Ticketmaster – on which prices had been raised despite the fact that normal priced tickets were still available. To counteract this type of “anomaly”, Congress evoked a law ensuring the complete transparency of performance ticket prices.
 
Currently, ticketing is the most affluent aspect of the music industry, although it does have some failings. Irving Azoff, the executive director of Live Nation, believes that the future of online ticket sales will soon involve adapting prices according to demand.

The music industry can only be considered today within the logic of its extreme diversity. The Ticketmaster group even owns Front Line Management – the largest artist management agency in the world. This means that the work of record companies now only represents a small portion of the work taken on by the larger entertainment companies.
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The birth of a new kind of record company

 Live Nation has had such considerable success in concert organisation that the company decided to branch out into artist management and even record production. Artists such as Madonna – for her Confessions on a Dance Floor album – and U2 have signed exclusive contracts with Live Nation for their upcoming albums. More recently, the rapper Jay-Z and the singer Shakira also signed comprehensive contracts with them. The strength of these “all-inclusive” or 360° contracts is that they take care of all aspects of an artist’s career: from music production right through to the conception of all branded products. This makes Live Nation more than just a simple record company. With the economic crisis hitting record sales in the years following 2000, the live entertainment business has become the main source of income for the music industry.
 
However, CEO Michael Rapino’s policy is different from those of the major companies. Indeed, according to the New York Post, Live Nation’s strategy aims to externalise as many of its undertakings as is possible, following the lead of Hollywood: in contrast to the major record companies, their main source of income comes from contracts signed with other entertainment industries rather than from direct record sales. Since the collapse of CD sales due to the appearance of free downloading platforms such as Napster in 1998, the music industry’s resources come mostly from external production linked to live shows and the creation of related products such as mobile phone ringtones, etc.
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Live Nation in France: Live Nation Holding

 Live Nation is also gaining ground in France. After having bought 51% of shares in the company Jackie Lombard Productions, Live Nation decided to create a French subsidiary – Live Nation Holding – presided over by Isabelle Gamsohn, long-time producer of jazz festivals.

Simultaneously, the American offices in London invested in Festival Main Square in Arras via their subsidiary Live Nation Belgium. The installation of an international company in France encourages world-renowned artists to go there, yet it still displeases some producers, such as Jules Frutos who, in an interview with French newspaper Le Monde, explained how “since 1945, it had been obligatory to possess a performance manager’s licence in order to organise a concert in France. Today, however, that licence has been removed by a European directive in the name of free circulation. Any individual or company from the European Union now has the right to organise a live show in France.” This decision means that organisers now have the option of subscribing to CNV ( the French National Centre of Entertainment) – the organisation responsible for taxation of ticket sales and the redistribution of these funds to support shows on tour – and applying for subsidies from them.

 In order to not be seen as an “imperialist ogre”, Live Nation France decided to organise “discovery” evenings in smaller venues such as the VIP room or the Maroquinerie in Paris. Through this type of work, the company is hoping to gain credibility and legitimacy that will aid the development of other professional aims, such as concert hall management and the creation of music events. Isabelle Gamsohn explains that “we are in discussions with different cities to create events in collaboration with them. There are certain regions that do not as of yet benefit from such music events and we are looking to find new untapped markets. We hope to introduce the production of both small and large concerts in these regions. Working with local promoters is essential in order to expand current French music networks.”

Live Nation has therefore adopted a “crossover” policy within which both super-productions and small independent events are managed in the same way. Armelle Campagna, who works as a promoter for them, says: “At the moment we are organising large concerts in Paris Bercy as well as much smaller ones at the Petit Faucheux in Tours, which holds only 190 people. It’s a real first for Live Nation in France.” The French branch of this company is taking real care not to impose itself upon the country by sheer force: “We aren’t currently responding to requests to organise gigantic events at the Zenith. First of all we want to prove ourselves”, states Isabelle Gamsohn.
 
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Barry Diller’s resignation

 Very recently, the Hollywood Reporter announced that the CEO of Live Nation Entertainment, Barry Diller, had resigned. Irving Azoff, the overall CEO of the group, made a statement concerning this departure in an unusual way…on his Twitter account! According to him, it had simply been agreed that Barry Diller would leave his post at the end of the year. However, The New York Times believes the real reason to be related to certain rivalries within company management.
 
It does indeed seem as though the group’s merger with Ticketmaster in January of this year generated certain tensions amongst the management. Starting in June, these difficulties then seriously affected the summer’s ticket sales. This meant that, by October, the group’s shares had devalued to $9.95, compared with $16.90 prior to the merger. The journalist Glenn Peoples considers the resignation of Barry Diller to be due to the investors’ call for drastic changes to be made. Market Intellisearch offer another version: “investors’ current actions within Live Nation confirm an imminent movement of shares, which will be favourable for the group”. Barry Diller’s departure will in fact mark a decisive turning point in the group’s economic and financial strategy. It seems as though Live Nation is entering into a new era of development, supported by new investors who want to create an alternative to major record companies…
 
 
(Translated by Leah Williams)
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For further information

  • Richard HARRINGTON, “A Concert Promoter Out to Steal the Show?”, Washington Post, 28 August 1998
  • Paul R. LA MONICA, “Live Nation: A Hot Ticket?”, CNNMoney.com, 4 January 2006
  • L.M. SIXEL “Live Nation Is Going to L.A.”, Houston Chronicles, 23 December 2005



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