While Ticketmaster Entertainment's earnings release last week drew some media attention, most reports missed important details revealing the company's broader market value, revenue streams and an unusual appearance by chairman of the board Barry Diller.

As is often the case, a large, one-time charge made most headlines. A $1.09-billion impairment to goodwill wreaked havoc on TME's Q4 and fiscal 2008 earnings. The charge, which adheres to the Generally Accepted Accounting Principles mandated by the SEC for public companies, reflects the lower market value of the company.

Given the high frequency of goodwill write-downs by other companies in a variety of industries, the fact that TME took the charge is nothing out of the ordinary. The size of the charge and the current market value of TME, however, are indications the market puts less faith in the future of TME than it does the overall market. TME's share price is down over 83% since being spun off from IAC in August 2008. During that same span, the Dow Jones Industrial average is down 34% and the NASDAQ is down 37%. In comparison, Warner Music Group, a pure-play music company that has gained share in an eroding market, is down 74%.

Another important aspect of the earnings release was the earnings call introductory remarks by Diller. His appearance, unusual because he is not a company executive, was often combative and defensive. Diller lashed out at what he called "misconceptions" recently raised about the ticketing business and Ticketmaster. He railed against the "grandstanding" of Senator Charles Schumer during the Senate Judiciary hearing on the proposed Ticketmaster-Live Nation merger.

Of note was Diller's mention of two key points, both of which were brought up by Ticketmaster CEO Irving Azoff, during the hearing. First, Diller said, TME does not decide what to sell. Eighty-five percent or less of initial tickets go on sale due to holdbacks. "These tickets can end up in unintended places," he warned. Second, Diller said, TME never sets prices. Without saying so directly, Diller pointed the finger at artist and managers for their contributions to higher prices and lack of prime seats on the primary marketplace. The purpose of his comments is clear. TME believes it is taking too much criticism for the availability of tickets and their price on the secondary market. Diller effectively told Senator Schumer and critics their criticisms are not based on adequate information.

The one key insight of the earnings release was the appearance of Front Line's revenue in the new "artist services" category. Artist services, which in Q4 was comprised entirely of Front Line, generated revenue of $45.7 million. That's just 11.9% of TME's $338 million Q4 revenue. But Front Line offers higher margins than does TME's ticketing operations. Front Line's operating income accounted for 20.8% of TME's total operating income.

The rest of the earnings call was standard corporate fare. TME revenue was up 9% in Q4 and 17% for fiscal 2008. The number of tickets TME sold in decreased 12% in Q4 and 2% in fiscal 2008. The value of those tickets dropped 4% in Q4 and rose 14% in fiscal 2008.

Concert tickets were especially hard hit in Q4, dropping 14% by volume in Q4 (versus a company-wide unit sales drop of 9%). That lead to a decline in concert ticket value of more than 16%.

During the earnings call Q&A, TME said concert tickets would have dropped 10-11% without the loss from expired Live Nation contracts. That puts Live Nation's share of the drop in ticket sales at three or four percentage points. Concerts accounted for 50% of all TME tickets sold in Q4. Concerts and family events accounted for the majority of the 3.5 million decrease in tickets sold in Q4 versus the previous year.

With recorded music sales dropping, live music is taking greater importance. The tough Q4 brings into doubt the idea that the concert business is recession-proof. Even without the recent economic downturn, it is likely that TME's Q4 ticket sales and revenue would have been flat at best. Because of its dominant place in the market, TME concert ticket sales are very reflective of the entire industry. This earnings release indicates the concert business as a whole had a difficult Q4.

Though it is too early to predict, consumers may show resilience in 2009. During its recent earnings call, Live Nation CEO Michael Rapino added the company has strong ticket sales through the first two months of 2009. On Thursday, TME said its Q1 2009 ticket sales are trending upward sequentially, meaning unit sales should improve over Q4 2008 but could be far lower than the previous year. Ticket sales for most major tours have been "spectacular" in 2009, according to TME, and the company expects a strong summer based on advance sales.

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