While expecting some coronavirus “hot spots” and concert cancellations, Live Nation is “cautious” yet “optimistic” the pandemic will not leave a lasting mark on the global concert promoter and ticketer, CEO Michael Rapino said during Thursday’s earnings call for its record $11.5 billion 2019 results.
To be sure, the concert business will be affected by the fast-spreading COVID-19 to some degree. The question is how many concerts will be affected and whether people feel comfortable, or are allowed, to gather in close quarters. “So [over] the next few months we’ll have some cancellations, I assume, here and there, [at] some arenas and clubs,” Rapino said.
But like a sound investment portfolio, Live Nation’s business is large enough to absorb small shocks, Rapino said. “The beautiful part of our business model is it’s dispersed over 30,000 shows covering all types of venues and genres.”
Live Nation has little exposure in COVID-19’s most affected region, he noted. “Asia is less than .01% of nothing of our business right now,” Rapino estimated. Through Thursday, Live Nation had canceled just 17 shows in China with an expected 75,000 fans. In the next three months, Berchtold said Live Nation has 70 shows throughout Asia.
Rapino was equally nonplussed about exposure to COVID-19 in Italy, a budding hotspot with 820 cases and 21 deaths confirmed as of Friday (Feb. 28), where Live Nation has 30 shows booked in the next three months with about 125,000 attendance. But overall, Live Nation had seen “no pullback in fan demand or ticket buying outside of the specifically affected areas,” said Rapino.
Rapino and president Joe Berchtold apparently said the right things Thursday, because Live Nation’s stock saw a significant bounce the next day. On Friday, Live Nation’s share price gained 5.2%, improving the full-week loss to 18.1% and retaking some of the $3.45 billion of market capitalization lost through Thursday.
The drop share price created a buying opportunity because stock values “have corrected,” Morgan Stanley analyst Benjamin Swinburne wrote Friday in an investor note that affirmed his $80 price target — 31.6% greater than Friday’s closing price of $60.77. Swinburne echoed Rapino and Berchtold’s talking points: 2019 revenue and adjusted operating income were strong, the 2020 concert outlook is positive and COVID-19 poses little danger for a company that spans concerts, ticketing, sponsorships and artist management.
Similarly, Jefferies analyst Khoa Ngo downplayed the threat in a letter to investors. He said COVID-19 risk was mitigated by “a vast geographical footprint,” the company’s flexibility to rebook events and the fact that 70%of the events for the company are scheduled to start after mid-June, which he said “should mitigate concerns, despite near-term fluidity.”
It was a brutal week for many travel businesses dependent on international travelers. Following the two-week quarantine of a Carnival cruise ship in Japan, the share prices of three publicly traded cruise companies — Carnival, Royal Caribbean and Norwegian — fell an average of 21.5% this week. Airlines and hotel companies’ share prices were battered as well. Overall, U.S. stock markets had their worst week since the onset of the Great Recession of 2008 in percentage terms, as the S&P 500 fell 11.5% and the Nasdaq composite dropped 10.5%.
Live music is widely considered to be recession-proof entertainment. “The great escape,” Billboard called the concert business in December 2009 after a record-setting year for global revenue and attendance. The same year, AEG Live president/CEO called London’s O2 Arena “the recession beater” after drawing 1.34 million fans to 96 shows amidst a challenging financial environment. Now the question is what entertainment music fans will seek if COVID-19 further impacts North America and Europe. What’s scarier: a global recession or a virus that might cause a pandemic and global recession? But at the end of February 2020, with worry still outpacing the actual virus in Live Nation’s key markets, Rapino isn’t doubting live music’s draw: “Supply and demand will be there.”