Live Nation Seeks to Reassure Investors on Eve of NYC Meeting

20 Jul

Live Nation shareholders will converge at Irving Plaza in New York tomorrow for the company’s first Investor Relations event since merging with Ticketmaster in January.

Live Nation’s stock has dropped about 30 percent after capping out at $16.70 in late April. Nervous trading and concerns about concert cancellations might have led to a drop in nearly $1 billion in marketshare, but Live Nation still has one important believer — influential analyst Ben Mogil. His reports from firm Thomas Weisel in San Francisco are some of the most widely read on the stock (partially because he makes them available to the public). Mogil thinks problems at Live Nation are overhyped and expects the stock will return to about $17 per share, but he lowered that projection from $19.50 which he had forecast earlier in the year.

“Our new estimates are largely a result of the U2 tour postponement and we believe that some of the concerns over the amphitheater environment, while valid, are overblown,” he said.

Anaylst David Joyce from the New York firm Miller Tabak also said concerns about the company were exaggerated, and trimmed his projections to $19 per share long term, a 70 percent upside from where the stock is currently trading. He estimated attendance would be down approximately six percent  to 12.3 million tickets.

In terms of debt-to-profit ratio, “They’re in better shape now with Ticketmaster, and they refinanced a large part of their debt and don’t have any maturities coming due,” he said.

As for the cancellations, he said that the company’s core demographic of 16-to-24 year-olds faced high unemployment and that many are attending fewer concerts than usual.

“And let’s face it, some of these acts are just overexposed,” he said.

On Tuesday, Live Nation announced the rescheduling of its U2 360 Stadium tour for summer 2011, with 16 shows from May 21 to July 23.

“More importantly Live Nation and Ticketmaster have each been in the concert business a very long time and we cannot imagine that in coming up with guidance in the first year of their merger they did not factor in some margin of error as there are always tours in good and bad economies which simply do not meet expectations,” he wrote in his report.

Weisel said that while No Service Fee promotions have led to a drop in some revenues, it has increased attendance and ancillary spending and accelerated a move toward all-in ticketing “likely allowing for a stealth return of fees.”

While a number of amphitheaters have faced cancellations, many sheds still have a full season, according to Live Nation’s report. The Woodlands (Texas) Pavilion, Cruzan Amphitheater in West Palm Beach, Fla., and the Pacific Amphitheater in Costa Mesa, Calif., have had zero cancellations this year. Other venues haven’t fared so well. The Cricket Wireless Pavilion in Phoenix lost 25 percent of its summer shows, while the Verizon Wireless Amphitheater in Charlotte, N.C., canceled 6 of its 19 concerts and the Sleep Train Amphitheater in Wheatland, Calif., cancelled four of its 10 gigs.

Don Vaccaro of TicketNetwork, which is hosting its annual TicketSummit in Las Vegas tomorrow, blames discounting for Live Nation’s problems, and while he acknowledges it might serve as the company’s short-term saving grace, in the long run, he said it will hurt the company.

“The concert model will fail if promoters continue to discount tickets. Consumers will start waiting closer to shows to buy tickets, which means more cancellations from nervous promoters,” he said, adding that he thinks artists will eventually need to lower their guarantees, along with ticket prices, if a full recovery is to materialize. – Dave Brooks

Interviewed for this article: Ben Mogil, (415) 364-2500; David Joyce, (212) 370-0040; Don Vaccaro, (860) 870-3400

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