The public got a closer look at the recently merged Live Nation Entertainment on Thursday when the company reported its fourth quarter and full-year results. Analysts heard no income gains would be visible in 2010. Competitors heard about new ticketing and marketing strategies. Media watchers heard Chairman Barry Diller open the earnings call with a gushing tribute to President/CEO Michael Rapino and Executive Chairman Irving Azoff.
Even though the two companies did not merge until the first quarter of 2010, the earnings call had a few glimpses of the vision behind the merger. More time will also be needed for the merger to impact the bottom line as the company said it expects adjusted operating income to be flat this year.
The first substantial sign the post-merger company will push new innovations currently comes from an Eagles concert at Sacramento’s Arco Arena. Live Nation has employed about ten different price points – more variable pricing than dynamic – in which the most desirable seats effectively subsidize the cheapest seats. The experiment has been “phenomenally well received” by everybody but brokers, Azoff said during the call. The 50% of tickets priced lower than normal have been offset by the 28% of priced higher. Buyers of the cheapest, $32 tickets were issued paperless tickets because Live Nation believes they were worth more, and doesn’t want the secondary market to sell them.
Rapino addressed direct-to-consumer marketing, another tactic to be employed by the merged company. Live Nation now has 114 million customers in its database and will focus on making better use of direct relationships. It hopes to reduce traditional marketing expenses, which Rapino said run $200 million per year, by better marketing to that email list. And it plans to sell more to its most frequent customers, a strategy also being employed by record labels and artists who sell frequent and deluxe products to the most fervent fans.
Addressing the drivers of future growth, the company pointed to the international segment of the business, which it said tends to have margins twice as high as in the U.S. Live Nation is looking to expand into Germany and Japan, and Azoff said it is having conversations with promoters all over the world. Front Line and sponsorships, with their higher margins, are also expected to be growth drivers.
Rapino said the outlook for the 2010 concert season is good. The company has sold 18 million tickets to upcoming events, about the same pace as last year. Live Nation will make a point to avoid some lower-margin events and seek a roster that provides better returns.
Post-merger integration has been going smoothly, Azoff said. Live Nation expects 2010 adjusted operating income will see $40 million in synergies, most from the elimination of Live Nation’s ticketing division. Analysts expected more immediate results. “There’s been a lot of enthusiasm about this deal and people expected more from the synergies,” said David Kestenbaum, analyst with Morgan Joseph, told Reuters.
In spite of the expected cost savings, the company does not expect to see the fruits of the merger until 2011. Adjusted operating income is expected to be flat to slightly down in 2010. Live Nation expects $15 million in severance costs this year and $3 to $5 million in expenses relating to running its white label ticketing platform.
Other highlights from the earnings release:
— Live Nation had $4.18 billion of revenue in 2009. Its North American had an operating loss of $38.9 million. The entire company’s operating loss was $54.9 million.
— Ticketmaster had 1.49 billion in revenue and $96.1 million in operating income. Artist services contributed $191.8 million in revenue and $2.2 million in operating income. The company sold 130 million tickets in 2009, down 8%, and 34 million in Q4, down 3%.
— Concert ticket volume was down 12% and made up 50% of Ticketmaster’s total ticket volume.
