Why Live Nation's Q1 Revenue Really Grew 6%, not 17%
-- Live Nation had a decent first quarter of 2011. Concert attendance was flat and ticket sales were up 11%. But revenue growth wasn't really as good as you might have read in various media reports. For practical purposes, revenue was up 6.2%, not 17.4%.
Why is that? Live Nation, which merged with Ticketmaster at the end of January 2010, did not include Ticketmaster's January 2010 revenue when calculating its year-over-year growth (the pre-merger financial data was mentioned in a foot note in the earnings release). That means Ticketmaster's financials from January 1, 2010 to January 25, 2010 were not taken into consideration.
True, Live Nation is now a larger company with more revenue than it was at the beginning of Q1 2010. But mergers tend to have that effect. So while the earnings release may have technically correct numbers, it's best to compare the performance over two equal periods of time.
When you exclude Ticketmaster's pre-merger revenue, revenue grew 17.4% in Q1 2011 - as reported in the earnings release. But include Ticketmaster's $76.1 million of revenue before the merger - from January 1, 2010 to January 25, 2010 - and revenue growth was only 6.2%.
An adjustment is also needed for operating income. Add in Ticketmaster's $14.7 of operating income in the pre-merger period in Q1 2010 and Live Nation's operating income improved 4.6%, not the 20.8% given in the earnings release.
Continuing with yesterday's Live Nation earnings release, the company says it expects ticket sales to be flat in 2011. "While the company is encouraged by its first quarter ticket volume, it is closely watching several potential risks, including a recent slowdown in the ticketing growth and the NBA and NFL labor issues if the buildings do not fill dark nights with other activity."
Ticketmaster sales on global basis are up 7% year-over-year and North America is flat, CEO Michael Rapino said during the earnings call. Helped by acquisitions in Spain and France, the International division is up 27%. Live Nation admitted it is seeing some "softness" on the concert side of the business. Rapino explained that the biggest artists went to market first - with better results than in early 2010 - and now the company is getting into the soft middle with about 75% of concerts booked. Here's Rapino during the conference call:
"What typically happens in a concert year is the bigger acts always go on sale early. They've got the bigger tours. So you always have your January, February, March, then you have your world tours, your big artists are probably on sale at the beginning. As you move into April and May, it starts to become the second level of artists that go on the road. And those are always a little softer than your first, big artists. A year ago, we didn't have the January and February kind of tail wind behind us. The big stuff and small stuff started to cave early. This year, the good stuff - the Lady Gagas, the U2s, the big acts, Princes of the world - they're they're selling out and doing very good business. And we expect like most summers, now we're into the thick of the middle of the roster. And we're starting to see a little softness in the B markets, and some of the B and C acts."
Gassing Up or Down?
Economic factors are leading to uncertainties in the summer concert market. "I think we could better predict what's going on if we could better predict what gas prices are going to be," Azoff told an analyst who asked if the company would give guidance on its second quarter call. "I didn't mean to be funny about the gas prices," he later said, adding that Front Line metrics showed daily concert ticket sales dropped as gas prices rose and consumer confidence faltered.
So what's expected for gas prices this summer after oil prices dipped below $100 per barrel at the end of the week? Even if oil prices are falling now, one economist tells the New York Times' Green blog "this is a correction and not a shift in trend" because the fundamentals of the global market have not changed much.
A post at VentureBeat's GreenBeat blog says to expect prices to remain high. "[U.S.] drivers are at the mercy of consumer behavior on the other side of the globe. At least among some analysts, the consensus is that the recent slide in oil prices may lead to a temporary cut in gas prices-but that won't last."
( Green, GreenBeat)
Topspin Entrepreneurial Advice
-- Topspin co-founder and Chairman Peter Gotcher advises music business entrepreneurs to get a working prototype and a capital-efficient idea to have the best chance of getting their companies funded. Here's a partial transcript from the video taken at the Rethink Music conference in Boston.
"If you're doing a music startup today, the ones that can raise money are the ones that already have some momentum - so there's a trend toward later-stage investing - or have a very well established team with prior success. Like Rdio, the ex-Skype founders, they were able to raise a bunch of money. But I do think if you're a new entrepreneur and you have a music idea, your best bet is to look for one that's capital-efficient - that doesn't require a lot of money. Starting a Rhapsody competitor requires a lot of money. I don't think you want to do that. And go to the angel investing community, friends and family if you need to, and just get a prototype, get it out there some traction. Because that's really your leverage.
"This is kind of a 'show me' era for venture capital. It's pretty difficult to raise money [based] on a PowerPoint [presentation], especially around a music concept. But there are new music concepts getting funded right now. Some of the major VCs are putting their toes back into the water in this space." ( Topspin blog)