Why Wall Street Loves Live Nation

Since January 2012, Live Nation stock gains have increasingly outpaced the overall market.
Azoff: Jim Smeal/BEIMAGES; Jay Z: Kevin Mazur/Wireimage for Parkwood Entertainment; Smith: Courtesy of Live Nation. 

The booming concert industry, executive turnover at AEG and a little help from Irving Azoff fuel a healthy and diversified business that Wall Street loves.

Investors like what they’re seeing from Live Nation. Shares of the world’s biggest concert promoter have risen 21 percent year to date and 47 percent in the past year. Over those time periods, the overall New York Stock Exchange, on which Live Nation trades, has risen 5 percent and 15 percent, respectively. Most impressively, its shares have climbed 193 percent since the dismal summer of 2010 when the touring business was being pummeled by the economic recession.

Why is Wall Street so smitten? When the live entertainment business is healthy, so is Live Nation. Its business model uses concerts to drive revenue in ticketing, sponsorships, advertisements and other revenue streams, all of which grew 11 percent to $6.5 billion in 2013; the more people attend low-margin concerts, the more opportunities Live Nation has in its high-margin divisions. (Note: This story went to press before Live Nation’s earnings call on July 31 -- go here for full details on that call.)

Forecasts for concert revenue are optimistic these days. In a December report, investment bank Macquarie Group said it expects Live Nation to grow concert revenue about 7 percent annually from 2014 to 2016. Brokerage firm Sterne Agee expects just 3 percent in concert growth this year and 2 percent in both 2015 and 2016, but noted the proven demand for concerts around the world, and that sagging recorded-music sales incentivize artists to tour.

Live Nation is better positioned than its competitors to benefit from this demand for live entertainment. “Some years the overall content will be better than others, but in North America and Europe, they’re the dominant provider by leaps and bounds,” says Stifel Nicolaus analyst Ben Mogil.

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And with more concert demand comes more brand involvement. Last year the sponsorship and advertising division derived $285 million in revenue from 900 million online visitors and 60 million concertgoers. Experts think there’s room to grow: Macquarie analysts believe Live Nation can sustain or accelerate its double-digit growth in sponsorships and advertising during the next few years.

An off-balance competitor also helps, adds Mogil. “They’re certainly benefiting by the fact that AEG has reduced its exposure to the business.” While 2013 was AEG’s most successful year to date -- with concert grosses exceeding $1 billion for the first time -- executive turnover at the company has helped Live Nation secure some of the year’s biggest tours, including One Direction and Miley Cyrus. Within the last 18 months, Tim Leiweke and Randy Phillips both lost the title of president/CEO at AEG Live. Earlier this year, Rob Hallett, president of international touring, departed the company.

Not least, Live Nation has benefited from its 2010 merger with Ticketmaster, says a veteran touring executive. The business model set in motion by former executive chairman Irving Azoff allows the concert promoter to leverage ticketing revenue. Live Nation’s share price increase since Azoff’s departure is a significant reflection of his impact, says this exec. “The truth is, Irving is the reason Live Nation is healthy today and why they’re impossible to compete with.”

This article first appeared in the August 9th issue of Billboard Magazine.