Live Nation is trying to recover from a dismal 2010 with new approaches to selling and pricing tickets. And if the company's second quarter results are any indication, it's off to a good start. Total revenue was up 23.1% to $1.56 billion, concert revenue rose 25.9% to $1.08 billion and ticketing revenue increased 7.3% to $284 million.
"We are demonstrating that despite tough economic conditions, if we price concerts right the fans will come because of the unique experience of the live show," said CEO Michael Rapino during Monday's conference call.
A key strategy to increase profitability and market share was avoiding the type of mass discounting used in 2010. This year, prime seats were priced higher to absorb demand from high-value customers while lower-value seats went through different sales channels. As a result, prices for top seats in amphitheaters were up 15% to 20% in terms of adjusted operating income while lawn prices were "generally flat to down," said Rapino.
Serious fans will buy often and early. But to attract what Rapino called the "casual, value-driven consumer," Live Nation has used GrouponLive, its partnership with daily deals company Groupon, to move unsold tickets without giving blanket discounts to fans. It appears to be off to a good start. Live Nation has sold over 400,000 tickets from over 1,200 Groupon Live offers, said Rapino, and he praised GrouponLive for its ability to target specific concerts to a very particular kind of buyer. In addition, Live Nation is reaching the value-driven consumer through its partnership with Walmart. The retailer has sold over 200,000 tickets through its Ticketmaster kiosks in over 1,200 stores.
The use of Groupon for ticket sales has brought worries that discounted tickets will cannibalize regularly priced ones or anger buyers of higher priced tickets. But the targeted nature of GrouponLive offers, and consumer's understanding of flash sales, may mean GrouponLive deals are less conspicuous than the kind of mass discounting that can make some ticket buyers irate. In fact, Rapino said the company's strategy has received "minimum to a few complaints" from ticket buyers. Artists and executives also find the strategy appealing, added Executive Chairman Irving Azoff. "Because Groupon is a nice buzz word, they're buying into it."
Dynamic pricing, which will roll out in the second half of the year, also carries potential problems. Like GrouponLive, dynamic pricing requires Live Nation to employ tactics that could be interpreted as being unfriendly to fans. The better seats will cost more and overall prices can change as dictated by demand. While it works for airlines, concerts can be a difficult place to let capitalism work more freely. But Azoff, while noting earlier tests had gone well, explained that artists who may have previously worried about bad press are responding positively. "Every major artist is understanding the upside here," he said.
Other notes from the earnings call:
-- The company grew its share of the top 100 tours to 48% from 41% in the first half of 2011.
-- Live Nation will launch eight new festivals in North America and Europe, including four electronic festivals, for a total of 40 festivals in 2011.
-- The third quarter is off to a good start, Rapino said during Monday's conference call. In the concerts segment, July concert tickets were up 6%. On the Ticketmaster side, ticket sales were up 17% and 2% organically in July. Some of that improvement is coming from last-minute sales at the venues, he said. "We have a very strong walk-up (business) in the month of July, something we didn't have last year."
-- The third quarter lacks the fear that permeated the industry last year and will be business as usual for artists, said Rapino. "If they had planned on going in the fall, they're still going." Added Azoff, "Artists are more anxious to work than ever."
-- Ticketmaster has renewed all of its top 25 clients up for renewal and expects to have a 90% renewal rate in 2011, according to Rapino. "The renewal rate is consistent with history."
-- Ecommerce improved through overall growth in ticket sales (gross value of tickets sold was up 17% in first six months of 2011) and improved upselling (upsell volume increased 5% in North America and "more than doubled" internationally).