Irving Azoff stepped down as chairman and CEO of Live Nation on Monday, just over four years after Ticketmaster purchased Front Line Management and just under three years after Ticketmaster merged with Live Nation. How much will the company miss the revenue he and his management clients will take with him?
Live Nation stated in the press release announcing Azoff's departure that it "does not expect" his departure or the related restructurings to have "any material impact on its ongoing operating results." Investors actually showed a bit of enthusiasm: Live Nation shares were up 4.1% to $9.69 on Wednesday, outpacing the Dow Jones' 2.4% gain and the Nasdqaq's 3.1% gain.
Azoff is taking with him a core stable of artists, a reported 10, of which the major ones are the Eagles, Van Halen, Christina Aguilera and Steely Dan. The first two, especially, have long relationships with Azoff and many years of touring, recording and licensing revenue. But they are only a small number of Front Line's over 250 artists, and much of their peak earning power is likely in the past.
Live Nation gets most of its adjusted operating income from ticketing, sponsorship and advertising. In the first nine months of 2012, the latest period for which the company reported earnings, Front Line accounted for $33 million, or 8.3%, of the company's $396.6 adjusted operating income. Ticketing ($226 million) and sponsorship & advertising ($137.8) segments contributed the most adjusted operating income. Concerts, in spite of its $2.9 billion in revenue, had only $60.4 of adjusted operating income.
The Eagles will probably be missed the most. It's the kind of band that improves the bottom line in touring-heavy years and makes year-over-year comparisons difficult in off years. The group's "Long Road Out of Eden" tour grossed $172.8 million from 2008 to 2011, according to Billboard Boxscore (the figure counts roughly two-thirds of the tour's shows). The Eagles are actually more lucrative a touring entity than just the face value of ticket sales and merchandise, however, because the group can command top dollar for VIP sales and private events.
In addition, the Eagles' recording and publishing catalogs generate solid revenue year after year. For example, last year the group's "Greatest Hits '71-75" sold 463,000 units in the U.S. through December 23, according to Nielsen SoundScan - some 35 years after the album's release. The band stands to make far more money from some of its catalog if it can take advantage of the provision in the 1976 Copyright Act that allows artists to take ownership of post-1978 works 35 years after their creation. "The Long Run" was released in September 1979, meaning it can reclaim rights next year. Azoff is just the type of manager to seize those rights for the financial benefit of his artists.
Van Halen tours infrequently but is still a valuable client. The group's "Viva La Van Halen" Tour grossed $54.4 million and was the #8 tour on Billboard's top 25 tours of 2012. The band's 2012 album, "A Different Kind of Truth," sold 411,000 units last year. Its catalog continues to sell modestly. For example, Van Halen's 1978 self-titled debut sold 67,000 units in the U.S. through December 23 last year, according to SoundScan. That and four other albums are eligible to revert back to the band's ownership in the next five years.
Aguilera is mainly TV draw these days. She reportedly is making $10 million this season on "The Voice." Aguilera's latest album, "Lotus," was released on November 13 and has sold 182,000 units and 687,000 tracks, according to Nielsen SoundScan. Her previous release, the 2010 album "Bionic," has sold 314,000 units and 1.15 million tracks to date. Aguilera has been an infrequent touring artist in recent years. Her "Back to Basics" tour in 2006-2007 grossed $48.2 million, according to Billboard Boxscore. Her 2010 "Bionic" tour was cut short in part due to poor ticket sales.
Steely Dan's "Shuffle Diplomacy Twenty Eleven Tour" in 2011 grossed $16.9 million, not counting dates in Australia. Most of Steely Dan's best-selling catalog was released prior to 1978 and, as a result, the rights will not revert to the artists. "Gaucho" was released in 1980.
Live Nation will get favorable treatment in dealing with Azoff, according to details in Monday's SEC filing. Azoff will offer Live Nation the right of last refusal to promote at least 75% of the Eagles' concert dates in 2013 and 2014 and will give the company the right of last refusal for any artist tour in those years.
In addition, Azoff will give Live Nation a right of first refusal to provide VIP ticketing for developing or established acts with up to $5 million in annual revenue, and Live Nation will get right of first negotiation for any other Azoff artist (such as the ones with higher annual grosses). Similar offers will be made to Live Nation's merchandising companies.