Ticketmaster and Live Nation Boards agree to merger. Antitrust review certain.

Live Nation and Ticketmaster Merger Gets Board Approval

Seth Gilbert, 02-10-2009

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For a long time, Live Nation and Ticketmaster were joined at the hip. The nation’s largest concert promoter and the nation’s largest ticket vendor formed an inseparable pair. Then Live Nation, pursuing better margins and greater ambitions of vertical integration, decided to go it alone. The tie was severed, with prejudice. Live Nation began acquiring assets and partners to be more self reliant. It joined with CTS Eventim to begin selling tickets on its own. Ticketmaster spun off from its parent corporation, IAC, and tried to blaze its own path.

Now, not a month into Live Nation’s re- incarnation as both promoter and ticket vendor (ticket sales began in January), and it turns out the old pals are ready to not just rekindle their old relationship, but tie up entirely in a merger.

Last week the Wall Street Journal discovered the two companies were in the late stage of discussions. Widespread reports citing “sources familiar” and “inside sources” predicted a deal would hit the news wires by early Monday.

The Monday news never came. The boards of both companies apparently met late Sunday but failed to hammer out all issues. A second meeting on Monday afternoon is believed to have settled the remaining impasse.

At this point, there’s no official press release nor comment from the companies but reports are starting to circulate that both boards agreed unanimously. (Details will be updated on Metue as they become available).

(UPDATE: As of Tuesday morning, the companies have now confirmed the merger and issued statements regarding the details. A full summary of the deal terms as currently announced is available here on Metue. Other details about the company can be found at the bottom of this article).

What is believed known now: the new company will be called Live Nation Entertainment, dropping Ticketmaster’s name. It will combine Live Nation’s lower margin business (operating margins were about 4.8% in the Sept. quarter) with Ticketmaster’s leaner machine. The jointly operated ticketing, promotion, and band management assets could save tens of millions in costs per year.

The org. chart will likely (according to report early Monday from the Financial Times) put IAC Chairman Barry Diller in one of the top seats as Chairman. Irving Azoff, Ticketmaster’s CEO and a former record producer who rose up managing bands ranging from the Eagles to Van Halen, to Neil Diamond and Morrissey would take the other as Executive Chairman. Live Nation’s CEO, Michael Rapino, would stay in his current role to oversee day to day of the combined company as CEO.

Structurally, the merger would go ahead as a “merger of equals” with Ticketmaster taking a slightly larger share in the stock swap.

While the companies might argue they’re not competitive (given Live Nation’s new entrance into the ticket market), given the scale, the deal will have to pass what is sure to be substantial regulatory review.

There’s no question, combining ownership of the companies’ assets will consolidate a substantial amount of power over live entertainment into a single entity.

Already, in the past week with the deal just rumor, fans, politicians and artists have been rallying against any combination; their outrage stoked by an incident of just the kind of inappropriate behavior they fear could become an issue if the companies combine.

At issue: last week, fans looking to buy just released tickets to Bruce Springsteen concerts found themselves being re-directed to Ticketmaster’s premium priced reseller TicketsNow which upsells tickets above face value.

On his website (in a letter from February 4th reprinted at the bottom of this article), Bruce Springsteen condemned Ticketmaster’s behavior. While Ticketmaster has apologized for the confusion (see below for full text as well), and is offering to repay differences in the purchase price, Springsteen’s letter went further and called on his fans to speak to their representatives to voice opposition to greater consolidation of ticketing power.

New Jersey Representative Bill Pascrell and New York Senator Charles Schumer, along with at least two state Attorney Generals have also spoken out.

Senator Schumer, a ranking member of the Senate Judiciary Committee (and a member of its Antitrust subcommittee) said explicitly that “if the two entities were to merge, the sale of tickets, control of concert venues and the representation of artists in those venues would be controlled by one organization, a potential problem for ticket buyers who could see prices skyrocket.” He called for both FTC and Department of Justice review.

In Canada a lawsuit has been filed over the Springsteen Ticket Affair.

While we wait for official news from the companies, here are a few key facts about the companies and their financials:

•According to Pollstar, Ticketmaster has sold tickets for more than 80% of large arenas and stadiums in the US. Live Nation rival Anschutz Co. which owns the LA Staples Center and promotes both sports and music events (via AEG Live), has agreements for ticket sales through Ticketmaster that aren’t believed to expire until 2012.

• Live Nation has a five year deal in place to sell tickets for SMG managed venues. SMG was Ticketmaster’s second biggest partner behind Live Nation itself. Over the life of the five year deal, an estimated 25m tickets are expected to be sold. SMG operates more than two hundred venues including major arenas and stadiums like Chicago’s Soldier’s Field, Houston’s Reliant Stadium, The Louisiana Superdome and the LA Forum. SMG Stadiums represent more than 422K stadium seats and more than “1.5million managed seats.”

• For the quarter ended Sept 30, 2008, Ticketmaster had revenues of approximately $339m, up 16% Y/Y. $105.9m of that was International. Gross Margin was 36%. Operating Margins around 8%. Live Nation in contrast had revenues of $1.5b in the same period. Operating income was $75.6m and operating margins were about 4.8%. (LYV data via Gridstone Research)

•Ticketmaster has deals with the NBA, NFL and NHL. Live Nation has a multi-year sponsorship deal with CBS Radio.

• Ticketmaster sold 141million tickets in 2007. For the recent Sept. quarter, the company sold 33.7m at a gross value of $2.068b.

• Both companies own large direct-to-fan service groups – Ticketmaster via the acquisition of Echomusic. Live Nation following the purchase of MusicToday in 2006. Live Nation’s fan club websites provide a database of information on more than 20 million music fans, many of which are regular visitors to their sites.

•The companies have approximately 74 common institutional shareholders representing approximately 19% of Ticketmaster’s stock and 38% of Live Nation’s (click table in thumbnail for full roster via Metue.com).

• Through its "360" Artist Representation Deals (or variants thereof), Live Nation has partnerships with Madonna, U2 (which sold its equity component in December), Nickelback, Jay-Z and Shakira. Through Frontline, which Ticketmaster acquired this fall, Ticketmaster represents artists including the Eagles, Jimmy Buffett, Guns N Roses, Neil Diamond and Christina Aguiiera. Frontline’s client roster includes about 200 acts.

• The infrastructure for Live Nation ticketing is currently provided through a partnership with European seller CTS Eventim. It’s unclear what will happen with this relationship if a merger is completed (CTS Eventim and Ticketmaster are competitors in many markets)

•Ticketmaster has approximately $765m in debt due between 2012 and 2016. Scheduled repayments begin in 2011. (via recent 10Q, period ending Sept 30.)

•Live Nation’s principal website generates between 8 and 12m unique visitors a month (Nielsen). Ticketmaster reaches about 10.2m a month in the US (via Quantcast)

• Through a partnership struck in December, Live Nation will be able to sell tickets out of 500 Blockbuster Video stores.

• Attendance at Live Nation events for the quarter ending in Sept. ‘08 was approximately 18.4m. North American music promotions accounted for 12.26m of that. 5,687 events were put on during the period. (via information consolidate by Gridstone Research)

•Madonna’s Sticky and Sweet show was the highest-earning tour of 2008, taking $281.6m worldwide. Celine Dion was second with $236.6m. Bon Jovi was with $176m. Bruce Springsteen was fourth with $166m. The Police came fifth with $120.6m. The average ticket price in the US rose by 8% to $66.90. Concert revenue hit $4.2 billion in 2008, according to Pollstar, a 7% rise over the previous year, even though the number of tickets sold was down (via Pollstar)

(see below for Springsteen Letter and Ticketmaster Reply)

Springsteen’s Letter to Fans:
"A Letter to Our Fans:
We know there was much confusion regarding Ticketmaster and TicketsNow during last Monday’s on-sale dates. We were as confused as you were, as we were given no advance notice of the major changes in the Ticketmaster-TicketsNow world. (Bear in mind that we are not clients of any ticketing company, and that all those arrangements are between venues and ticketing companies.)

Last Monday, we were informed that Ticketmaster was redirecting your log-in requests for tickets at face value, to their secondary site TicketsNow, which specializes in up-selling tickets at above face value. They did this even when other seats remained available at face value. We condemn this practice.

We perceive this as a pure conflict of interest. Ticketmaster is there to ensure that we have a good, fair sale of our tickets at their face value plus normal ticketing charges. TicketsNow is supposed to be a secondary site where people who already have tickets may exchange, trade, and, unfortunately, speculate with them. We have asked this redirection from Ticketmaster to TicketsNow cease and desist immediately and Ticketmaster has agreed to do so in the future and has removed its unwanted material from their and our site.

We know the many cynical arguments some make in favor of the Ticketmaster system: There are rumors that some artists or managers participate in Ticketmaster charges–we do not. There are rumors that some artists or managers are receiving a percentage of the amount above face value at secondary outlets like TicketsNow–we do not. Some artists or managers may not perceive there to be a conflict between having the distributor of their tickets in effect "scalping" those same tickets through a secondary company like TicketsNow–we do.

While many of you have sent notes to us and your local promoters, you may also send accurate informational letters to Albert Lopez of Ticketmaster Albert.Lopez – at- ticketmaster.com and he will try to address your questions.

A final point for now: the one thing that would make the current ticket situation even worse for the fan than it is now would be Ticketmaster and Live Nation coming up with a single system, thereby returning us to a near monopoly situation in music ticketing. Several newspapers are reporting on this story right now. If you, like us, oppose that idea, you should make it known to your representatives.

The abuse of our fans and our trust by Ticketmaster has made us as furious as it has made many of you. We will continue to do our utmost now and in the future to make sure that these practices are permanently curtailed on our tours.

Bruce Springsteen, Jon Landau and the entire Springsteen Tour Team"

TICKETMASTER’S REPLY:

"An Open Letter of Apology to Bruce Springsteen, Jon Landau and the entire Springsteen Tour Team (source) :

While we were genuinely trying to do the right thing for fans in providing more choices when the tickets they requested from the primary on-sale were not available, we clearly missed the mark. Fans are confused and angry, which is the opposite of what we hoped to accomplish. We sincerely apologize to Bruce, his organization and, above all, his fans.

We recognize that we need to change our course. We have committed to Bruce and state publicly here that we have taken down all links for Bruce’s shows directing fans from Ticketmaster to TicketsNow. This redirection only occurred as a choice when we could not satisfy fans’ specific search request for primary ticket inventory, but to make sure there is no misunderstanding in the future, we also publicly state that we will never again link to TicketsNow in a manner that can possibly create any confusion during a high-demand on-sale. Specifically, we will not present an option to go to TicketsNow from Ticketmaster without the consent of the artist and the venue, both of whom work together to bring the joy of live entertainment to millions of fans.

If any fans inadvertently purchased tickets in the resale marketplace believing in error they were purchasing from the initial on-sale, we will refund the difference between the actual purchase price and the face price of the ticket. (Please don’t abuse this good faith gesture, we did not give brokers any preferential access to tickets.)

We are committed to helping deliver the most transparent and best live entertainment experience to fans. We will do better going forward.
Sincerely,

Irving Azoff, CEO, Ticketmaster Entertainment"

Metue.com

Live Nation and Ticketmaster Merger Gets Board Approval

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