Live Nation Is Stuck in a Pandemic. What Now?

Michael Rapino
Paul A. Hebert/Invision/AP

Michael Rapino, President and CEO of Live Nation Entertainment, during the announcement of the Made in America Festival from the steps of City Hall on April 16, 2014 in Los Angeles.

"Our teams have probably never felt so energized around what Live Nation 3.0 will look like heading into 2021," said CEO Michael Rapino.

This is what a pandemic looks like for promoter Live Nation: in the second quarter of 2020, a 97.7% year-over-year revenue decline, a 94.6% drop in concert revenue and a quick pivot to ramp-up online alternatives to its suddenly moribund core businesses.

Of course, none of this was unexpected after the breadth of the coronavirus pandemic became apparent in April. To that point, Live Nation shares dropped just 2.35% on Thursday, the day after the company’s second-quarter earnings release. In fact, the market had already baked into the share price the expected short-term struggles and a recovery in 2021 or 2022.

With venues closed and tours suspended, Live Nation’s modus operandi turned to surviving 2020 while planning for 2021. Like many other companies, Live Nation increased liquidity and cut expenses in order to conserve cash, plus it furloughed a portion of its workforce. It promoted a few concerts -- most being experiments in social distancing in theaters or drive-ins. The quarter also saw the launch of Live at Home, a new “virtual hub” that repurposes livestreams it already owns.

Looking ahead, the touring industry is planning for a return by the 2021 summer concert season. Existing strong consumer demand is baked into Live Nation’s expectations for 2021: 86% of this year’s concertgoers have chosen to keep their tickets rather than get refunded, while two-thirds of festival ticket buyers did the same. In particular, the Download Festival in the U.K. is “pacing well ahead of last year,” said president Joe Berchtold during an earnings call Wednesday. In all, Live Nation has sold 19 million tickets to more than 4,000 concerts and festivals scheduled for 2021, “pacing well ahead of this time last year,” Berchtold said.

What happens next year? If a vaccine is made widely available by early 2021 -- and that’s a big if -- Live Nation expects to return to scale in summer of 2021. (The company defines scale as thousands of shows for tens of millions of fans.) CEO Michael Rapino remained upbeat on the call and predicted “2021 is going to be a spectacular year” because the concerts that weren’t canceled are ones “that [were] selling well and [in] high demand.”

In the meantime, Live Nation can focus on its Live At Home product, which attracted 57 million visitors streaming over 18,000 concerts and festivals during the second quarter. That wealth of content is “a natural advantage in the streaming business” and provides “incredible digital opportunities,” said Rapino.

Live at Home has a abundance of concert footage, such as R.E.M.’s 1999 Glastonbury Festival performance and dozens of Lollapalooza performances from over the years, along with a cache of interviews and profiles (a video about Silent House Productions, one in a series of profiles created with Live Nation’s fund for out-of-work stage crews, Crew Nation, is a fascinating look at set and design). Just as artists have used livestreams as a placeholder for concerts -- and as a complement to their overall brand -- Live At Home is an effective reminder of live music’s emotional pull.

Short of going out of business, Live Nation’s virtually blank second quarter shows how the pandemic indiscriminately hurts businesses built around shoulder-to-shoulder gatherings. Through no fault of its own, live music is caught between science and politics. Governments have banned large gatherings and, in some cities, placed a low cap on head counts in small venues (some as low as 25 customers).

Other “live events” are still playing. Professional sports leagues have it easy by comparison; television broadcasts pay all parties (leagues, teams, players) even when fans aren’t allowed into venues. While restaurants are going under en masse, those that remain are open for takeout and delivery. Universities can collect tuition while teaching students remotely. Even elementary schools have opened before theaters and arenas. When public schools are closed, their tax-supported budgets pay for remote learning.

A well-known leader once said, “Only if you’ve been in the deepest valley can you ever know how magnificent it is to be on the highest mountain.” The concert business now finds itself in the deepest of valleys, but fans’ love for live music will eventually return it to the highest mountain. You may be surprised to learn that quote was by disgraced president Richard Nixon in his final speech before leaving the White House -- but 2020 has been full of surprises, hasn’t it?

Here are seven other questions answered in the Live Nation earnings report and call:

How much cost-cutting has Live Nation done in 2020?

In order to survive the concert slowdown intact, Live Nation has reduced costs in 2020 by over $800 million and reduced cash usage by $1.4 billion compared to its pre-COVID-19 plan. “With these reductions, we have lowered the estimate on our operational cash burn rate to $125 million per month [from $150 million at the pandemic’s onset], and our gross burn rate to $185 million per month on average from the second quarter through the end of the year,” said Berchtold.

Does Live Nation plan to hold concerts before summer 2021?

Yes. Limited capacity, socially distanced shows will happen “where permitted,” said Rapino, in New Zealand, France, Denmark, Finland, Spain and even the U.S.

What is Live Nation’s liquidity situation?

Through the summer of 2021, by which time Live Nation expects a vaccine will be widely available, Live Nation has greatly improved liquidity. On June 30, the company had liquidity of $2.7 billion broken down as $1.8 billion of free cash and 966 million of borrowing capacity.

Did Live Nation recover any money from canceled concerts?

Yes, it put $68 million on its gross margin generated by “business operations and insurance recoveries for events impacted by the pandemic.”

Did Live Nation receive any stimulus money to help pay its employees?

Yes. Live Nation received $60 million of benefits “from various government payroll funding programs” globally, Berchold said during the earnings call.

Has any good come from the pandemic?

The lockdown has given Live Nation time for reflection and self-assessment. Rapino explained the 15-year-old company had built its “bureaucracy” and “rust” because it hadn’t “had the luxury or opportunity” to think about how it can operate more efficiently and market its concerts differently. “I would say the part that motivates me daily is Joe and I and our teams have probably never felt so energized around what Live Nation 3.0 will look like heading into 2021.”

What will Live Nation look like in the future?

Berchold said executives expect to exit the pandemic “with some different organizational structures, a bit leaner, a bit tighter in terms of how we do a few things.”

Coronavirus

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