LN CFO: ‘We have a product that is in demand’
Live Nation president/CFO Joe Berchtold says 2023 is shaping up to be “another great year” for the concert business as demand returns “stronger than ever”.
The company recently recorded its best Q1 performance ever, with revenue topping $1.8 billion as it powers back to full strength following the Covid disruption of 2020/21.
And speaking to Yahoo! Finance, Berchtold describes how the firm is bucking the trend in the face of a worsening global economic backdrop.
“We have a product that is so in demand right now,” he says. “Coming out of the pandemic, the one thing that everybody knows they need to do is they need to get back out, they need to socialise, they need to interact. And where better than concerts to do it? So we’re seeing that the demand that existed before Covid is coming back and it’s coming back stronger than ever.
“Every indicator we’re seeing right now is saying that the demand is there. The demand looks to continue to be there over the course of this year and we’re already seeing some setup for next year – that looks to be another great year.”
“It’s an affordable luxury that they continue to do”
Berchtold highlights the consumer shift towards spending their money on experiences rather than goods.
“You talk to any consumer that’s a music lover, the going to the show is the high point of the connection with that artist,” he says. “It’s a night out with their friends. It’s an affordable luxury that they can continue to do. It’s historically performed very well in recessionary times. It’s also performed well in inflationary times.”
Asked whether all ticketing will eventually switch to “NFT tickets or some kind of blockchain-based contract”, the executive adds: “In some form that is absolutely what will happen and digital tickets is the first step in that. Digital tickets is making sure those rights are transferred, managed on a digital basis. You can add the NFT to it, you can create a visual that is your digital memorabilia, you no longer have that ticket stub of yesterday. So NFTs can fill a great spot.”
Berchtold also references LN’s recent partnerships with Verizon and Snap when discussing the company’s strong Q1 performance in sponsorship, which saw operating income and AOI increase 83% and 75%, respectively, on the same period in 2019.
“We’re a platform of scale that can deliver a very attractive audience to sponsors and advertisers,” he says. “We’re not a spot market purchase, we’re a multi-year relationship business with the brands that we align with.
“Whether it’s Verizon putting in a 5G infrastructure at our venues to make a better experience for the fans, or Snap developing augmented reality opportunities at our festivals and our concerts to enhance that experience, that’s the sort of situation the brands are looking for now: how do they make it a real connection with the fans on a multi year basis? So we’re not subject to those same spot market, short-term fluctuations that you see with some others.”
Get more stories like this in your inbox by signing up for IQ Index, IQ’s free email digest of essential live music industry news.
Rapino predicts ‘strongest multi-year period ever’
Live Nation’s share price is on the rise in the wake of the company’s latest quarterly report, with 45 million tickets already sold for its 2022 shows.
The results covered both Q4 last year and 2021 as a whole, when revenue hit $2.7 billion and $6.27bn respectively, compared to $237.3 million and $1.86bn for the same periods in the Covid-ravaged 2020.
The stockmarket reacted positively to the numbers, with shares jumping more than 7% to $125.28, although just short of the all-time high of $127.50 reached after the promoter’s Q3 2021 figures were released last November, before settling at $120.44 at close of play.
“Over the course of 2021, we saw the strength of live events,” Live Nation CEO Michael Rapino told investors. “The year started in the midst of the pandemic, but by summer fans were returning to shows, and by the end of the year, we had a record pipeline of concerts, ticket sales and advertising commitments for 2022.
“Restarting our concerts business in the second half of the year, we put over 17,000 concerts for 35 million fans in 2021, mainly in the US and UK markets. In the final five months of the year, in the US and UK, we had over 15 million fans attend our outdoor events: festivals, stadiums, and amphitheatres, nearly 25% higher than during the same period in 2019.”
“I believe this is just the start of what will be the strongest multi-year period ever for the concert industry”
He added: “The two-year wait for artists and fans is over. Never have the tailwinds to our business been so strong, and I believe this is just the start of what will be the strongest multi-year period ever for the concert industry.”
Focusing on 2022, ticket sales are up 45% on 2019 levels, with the concert giant citing last year’s acquisition of Latin American power player Ocesa Entretenimiento as a key factor in the accelerated growth. LN reported that eight artists have already sold in excess of 500,000 tickets for their tours this year, including Bad Bunny, Dua Lipa and Billie Eilish. Ticketing revenue came to $487.7m for Q4 and $1.13bn for the year in its entirety.
“Our ticketing business had the dual benefit of strong ticket sales for events in 2021, while also being the first of our businesses to benefit from our 2022 pipeline,” said Rapino. “Ticket sales were at a record pace across every metric with October, November and December being our top three months ever for ticketing gross transaction value, excluding refunded tickets. And the fourth quarter and second half of the year also set records for a quarter and six-month periods.”
“We have a lot of confidence that 2023 and beyond look very good”
Rapino and LN president/chief financial officer Joe Berchtold also weighed in on the higher than usual no-show rates at concerts since the restart, with both suggesting the issue had been overstated.
“I think there’s been a lot of reporting by anecdote out there, as opposed to reporting by collective facts. And I don’t think our experience is any different than the industry is, as a total,” he said. “First of all, arenas in 2019, if you look at the number of people that showed up for a concert versus the number of people that bought tickets, it ran at 93% in 2019. That number thus far, in 2022, over the past six weeks is running at 91%. So not materially different from the 93% for the total of 2019.
“For our theatres and clubs, the smaller shows, you tend to have a slightly higher no-show rate. And that number was 87% in 2019. It’s running at 83% in 2022. So I think if you first of all recognise that there were a number of shows that have taken place over the past few months that were rescheduled, and when shows get rescheduled, people will naturally forget about the show or have a conflict different than what they originally had, it’s probable that accounts for all or almost all of that difference in the attendance level.”
Commenting on media reports, Rapino said: “I think they were saying as 15%, 20% weren’t showing, but again, they weren’t taking into account that on a normal year, 7%, 8% of people don’t show up to shows, so you’re already starting at that level.”
Berchtold also gave an insight into the intense level of activity expected next year, adding that plans were well ahead of where they would be at a similar stage, pre-pandemic.
“Right now, I have in front of me a list of 40 some tours for 2023 that are either confirmed or in our pipeline,” he said. “Normally, at this point, a year from earlier, we’d have a list of five to 10. So yes, we have a lot of confidence that 2023 and beyond look very good because there is a lot of pent-up supply, there is a lot of pent-up demand, and we expect it’s a multi-year run.”
Get more stories like this in your inbox by signing up for IQ Index, IQ’s free email digest of essential live music industry news.
Live Nation share price hits all-time high
Live Nation‘s share price has rocketed to an all-time high less than 24 hours after the firm released its Q3 financial results.
Stock in the company was up 16% to $122.13 at press time, having peaked at $125.88 earlier in the day following chairman and CEO Michael Rapino’s bullish projections during yesterday’s earnings call. The share price broke $100 for the first time only last month.
Rapino told investors that 2022 was on track to be a record year after the company reported revenue of $2.7 billion (€2.3bn) for the quarter. He said ticket sales for the 2021 summer season “reflected tremendous pent-up demand”, with 17 million fans attending Live Nation shows.
The promoter, which recorded a $19.8m loss for the same period in 2020, returned to positive operating income and AOI for the first time in two years, with a company-wide operating income and AOI of $137 million and $306m, respectively.
“Festivals were large part of our return to live this summer with many of our festivals selling out in record time, and then overall ticket sales for major festivals was up 10% versus 2019,” said Rapino, who referenced upcoming sell-out tours by Harry Styles and Chris Stapleton.
“Through mid-October, we have already sold 22 million tickets for our shows in 2022 and demand has been stronger than ever for many of these on sales, with a million tickets sold for each of the Coldplay and Red Hot Chili Peppers tours, and several other tours already selling over 500,000 tickets,” he added.
No industry has so proven the durability of its demand in the face of such disruption
Live Nation’s Ticketmaster division, meanwhile, delivered revenue of $374.2m for the quarter and has already sold 65m tickets for next year.
“As we get close to turning the page in 2021, I remain more convinced than ever in the power and potential of live entertainment, and the strength of our position,” added Rapino. “No industry was more impacted by the pandemic over the last two years, and no industry has so proven the durability of its demand in the face of such disruption.
“I fully expect we will continue to have bumps in the road in the coming months. And it will take some time for international artists to be touring on a truly global basis. But the fundamental strength of live entertainment and Live Nation has proven out and expect we will only continue to grow from here.”
Speaking on the company’s earnings call, Live Nation president and chief financial officer Joe Berchtold said the resurgence had been driven by the UK and US.
“These markets accounted for 95% of our fans in Q3 versus 75% in Q3 of 2019,” he said. “And they represented 90% of fee-bearing GTV in Q3 versus 80% in Q3 of 2019.”
With concerts in North America and the UK already back in full flow, Rapino discussed when the rest of the world was likely to open up.
The good news is ’22 is going to probably be a record year
“Europe will be fully open by the end of the year, so we’ll have most of the main markets open into January,” he said. “Pacific Rim, Latin America, all looks positive in terms of being open fully for international artists by April. We think internationally, on a global basis, by April the world will be moving around again.
“It doesn’t overly affect our business short-term because most of the outdoor stadium festival business is summer time, so that will be all fully up and rolling. We have Lollapalooza starting in April in Latin America and Australia festivals. So we think we’ll be open for prime season and we’ll be rolling around indoors in the main markets of US, Europe, Canada, and the UK between now and April.”
Rapino also expanded on his expectations for 2022 and beyond.
“The good news is ’22 is going to probably be a record year, but there’s only so many Fridays and Saturdays and artists are pretty smart about how they route their tours and how they look at the world and find their right positioning, so it kind of self-regulates itself,” he said.
“You’re never going to have a bunch of tours on the same weekend piled on. So that just meant we have a more inventory to spread into ’22, ’23, and we’re talking ’24 now. So I would say we have a backlog that needs to still work through the system in ’22, ’23, which will be incredibly strong years. And then we continue to get back to regular.
“We’ve had over the year, double-digit growth in the live entertainment space ongoing. We project that to continue both on pricing and global volume as demand and supply continues to grow around the world.”
In a further sign that investor confidence in live music is returning, shares in CTS Eventim have risen from €63 to €72 since the start of the week.
Get more stories like this in your inbox by signing up for IQ Index, IQ’s free email digest of essential live music industry news.
Live Nation: ‘We expect shows at scale next summer’
Live Nation execs were bullish on the company’s prospects during its Q3 2020 earnings call, citing further cost cutting, progress on Covid-19 testing and a “consistently low” refund rate as reasons to be cheerful after another difficult quarter for the US concert giant.
With next to no concerts taking place globally, Live Nation reported a 95.1% drop in revenue, from US$3.77 billion (in Q3 2019) to US$184 million, in the third quarter of 2020 (June–September), the second full financial quarter of the Covid-19 pandemic.
This resulted in an operating loss of $504m, compared to an operating profit of $260m the previous year, although the financial picture has improved somewhat compared to Q2 2020, part due to new concert formats such as drive-ins, live streams and socially distanced shows. (Fans attending Live Nation shows grew 180% quarter on quarter.)
Live Nation’s share price increased slightly, to a near-one month-high of just over $56, following the earnings call.
“We are working on a roadmap to get back to live safely”
Speaking to investors and analysts yesterday (5 November), LN CEO Michael Rapino said while there have “been no major changes in our business conditions or outlook since the last time we spoke”, he is encouraged by the small number of fans who have returned tickets for refunds, as well as strong festival onsales for next summer, including for EDC Las Vegas (pictured), which sold out 2021 in 24 hours.
“Meanwhile, we are working on a roadmap to get back to live safely,” he continued. “We are encouraged by progress on testing technology treatments and vaccines which will help us build our plans.”
Rapino added that the promoter “expect[s] shows at scale next summer”, although he concedes that the “exact timeline of this return will vary by region, and so we continue to focus on remaining flexible.”
He also highlighted Ticketmaster’s new SmartEvent technology, which aims to enable event organisers to easily ticket Covid-secure shows, and revealed that Live Nation is developing a set of procedures, in partnership with health experts, that will allow shows to go ahead safely until a vaccine is found. “From venue sanitation procedures to fan-friendly policies and on ticket purchases and the latest testing options, we are setting standards that will give the fans, crews and artists peace of mind before, during and after the show,” he commented.
“We are setting standards that will give the fans, crews and artists peace of mind before, during and after the show”
Live Nation president Joe Berchtold revealed that the company has made savings of a further $100m, taking its 2020 cost cutting to a total of over $900m (at last estimate, in May, the figure was nearer $600m). “We have […] reduce[d] our cash usage by $1.5 billion relative to our pre-Covid plans,” he explained.
“With these reductions, we have lowered the estimate on our operational cash burn rate [negative cash flow] to $110m per month and our gross burn rate to $175m per month on average for the last nine months of the year and prior, to the benefit of contribution margin generated by the business.”
The call also saw Rapino touch on Marc Geiger’s plan to spend $75m on buying up US venues, saying he disagrees that there is a “fire sale” on grassroots venues (“the thesis […] that these independent venues are so distressed that they’re to throw someone they keys at a very cheap price” is, he said, disproved by the amount of “capital out there” at present, including Paycheck Protection Program loans), and the problem of securing insurance for shows next year, explaining that LN remains “optimistic that the government here in the US, like many of them internationally, [will] sort it out and make sure that there’s not spurious liability [claims] for everybody who is doing the appropriate actions [on making shows Covid-safe].”
Looking to the future, Rapino says it is clear that “the path to live will not be a straight line”. That’s why, he says, Live Nation “will maintain flexibility and focus on innovating” until the long-awaited return of live music.
‘The glass is half full’: Live Nation upbeat after difficult first quarter
Executives from Live Nation were bullish on the company’s future, both immediate and long term, as the concert giant posted its first quarterly financial results since touring came to a halt in March.
After recording its best-ever financials in 2019 (its ninth consecutive year of growth), Live Nation’s first-quarter 2020 results, as expected, look less rosy, with revenue falling 21% year on year (from US$1.72 billion to $1.37bn) and operating loss widening to $172.7 million (from $23.9m in Q1 2019).
Total net loss for shareholders was $184.8m, or 94¢ per share, according to the company’s Q1 2020 filing with the US Securities and Exchange Commission.
Speaking during Live Nation’s latest earnings call at 5pm ET (9pm GMT) yesterday (7 May), its CEO, Michael Rapino, president, Joe Berchtold, and CFO, Kathy Willard, moved to reassure investors of the company’s financial viability, highlighting continuing fan demand for live entertainment, as well as recent measures to cut costs and increase liquidity.
Berchtold said the firm had exceeded its previous target of cutting $500m in costs, and is now targeting $600m, resulting in projected burn (negative cash flow) rate of approximately $150m per month for the rest of 2020.
Helping cash flow is the fact that 80% of Live Nation’s shows are rescheduled, rather than cancelled outright, added Rapino, with “almost all fans” choosing to hold onto their tickets for vouchers rather than asking for cash refunds.
“In ’20 and ’21, the promoter can’t take all the risk on the business as we historically have. We need to share some of that”
“[T]he glass half full here,” he said. “Thankfully, our show is not time-dependent. […] So, the great advantage we have is it’s just now timing. The fan wants to see Billie Eilish. They would have liked to see them in March, but they’ll wait until October or they’ll wait until February.
“The average customer goes to two and a half shows a year. So, these are the Kodak moments, and they’ll wait for them.”
Rapino also praised the industry for its unity during the coronavirus outbreak, saying it “has never come together this well, from the agents, the artists, the buildings, the managers, the promoters… we’re all in the same boat.”
Addressing ongoing negotiations between promoters and agents, in which the former are seeking better terms on rescheduled shows, he said: “I would say that the artists, the agents, the managers have been incredibly supportive. The reality is that in ’20 and ’21, the promoter can’t take all the risk on the business as we historically have. We need to share some of that, especially refunds on the guarantees.”
“They’re helping sharing some of that risk,” he added, “which will provide us great opportunity to get back, scale fast, but not have to worry about losing money on the show.”
Addressing the immediate future of Live Nation’s shows, Rapino said the company will get creative when it comes to emerging alternative concert formats, including drive-in concerts, fan-free concert broadcasts and reduced-capacity seated shows.
“We’re going to play for the long safety of business. We’re not looking to rush”
“We did 15,000 club and theatre shows last year, and we did them in 40 countries,” he told Jefferies Wall Street analyst Khoa Ngo. “So, we’ll […] start slow and small, focusing on the basics, kind of testing regionally. […] We’re going to dabble in fan-less concerts with broadcast. We’re going to go and reduce capacity shows, because we can make the math[s] work.
“There are a lot of great artists that maybe they can sell an arena out, but they’ll do ten higher-end smaller theatres or clubs. We’re seeing lots of artists jumping to get back out when it’s safe. So, you’re going to see us in different countries, whether it’s Finland, whether it’s Asia, Hong Kong – certain markets are farther ahead.”
“[I]t’s important for us to keep doing drive-in concerts. We’re going to test and roll out – which we’re having some success with – fan-less concerts, which have great broadcast opportunities,” he continued. “[We can] reduce the capacity of festival concerts, where it could be outdoors, could be in a theatre, it could be in a large stadium floor, where there’s enough room to be safe.”
He concluded” “So, we have all of these plans in place depending on the market, and where that city may sit in their reopening phases. [But] we want to be smart. We don’t want to rush. We’re playing long ball.
“One of the realities is we and AEG are the two companies that can withstand this storm as long as it plays. And we’re going to play for the long safety of business. So, we’re not looking to rush and provoke any new spread of the virus. We want to do it smart, with local participation. But there’s lots of great opportunities that are arising now [that] we will get to test over the summer period.”
At press time, Live Nation’s share price was $39.37 – down from a one-month high of $46.53, but up from a low of $36.35 on 22 April.
Rapino to forgo salary as LN slashes costs by $500m
Live Nation, the world’s biggest live music business, has announced a US$500 million package of cost-cutting measures, as well as a new, liquidity boosting line of credit, as part of its efforts to weather the worst effects of the coronavirus.
The cost-reduction programme will see the company’s president and CEO, Michael Rapino, this year sacrifice his $3m salary altogether – with other execs taking pay cuts including president Joe Berchtold (from $1.3m to $650,000), chief accounting officer Brian Capo ($363,500 to $272,625), general counsel Michael Rowles ($800,000 to $400,000) and chief financial officer Kathy Willard ($950,000 to $475,000) – according to LN’s latest current report with the Securities and Exchange Commission.
Other cost-cutting measures include hiring freezes, reduction in the use of contractors, rent renegotiations, furloughs, and reduction or elimination of other discretionary spending (including, among other things, travel and entertainment, repairs and maintenance, and marketing), reads a Live Nation press release.
The company adds that it is “making full use of government support programs globally”, including initiatives in countries such as the UK, Germany, Italy, France, Spain and Australia, where the state will pay a significant proportion of furloughed employees’ wages. In its home market, meanwhile, LN expects to receive similar support under the “employee retention credit for employers program [sic] established as part of the 2020 CARES Act”.
In addition to targeting $500m in savings in 2020, Live Nation is seeking to eliminate, or defer into 2021, some $800m in “cash outflow”.
Operating in tandem with the cutbacks are new measures to boost cashflow, including a $120m revolving credit facility, extending Live Nation’s unused debt capacity to around $940m.
“With this additional liquidity, the flexibility in our debt covenants and cost-cutting efforts, we have financial strength to weather this difficult time”
The firm has additionally secured an amendment to its existing credit agreement which will see the second and third financial quarters of 2019 (as opposed to the corona-affected Qs 2–3 of 2020) to calculate its debt-to-earnings ratio, “allowing the company the flexibility to manage its business through the disruption it will experience in 2020”.
As of 29 February 2020, LN’s total cash (and equivalents) balance is $3.3 billion, according to the company.
“The company believes this aggressive cost and cash-management program, combined with a strong liquidity profile, positions Live Nation to manage through the Covid-19-related hold on show activity and provides the flexibility to scale up quickly when shows restart,” according to an LN statement.
“The live entertainment industry has delivered incredible global growth for over 20 years, which speaks to the great passion and resilience of fan demand,” Michael Rapino comments.
“With this additional liquidity, the flexibility in our debt covenants and cost-cutting efforts, we believe that Live Nation has the financial strength to weather this difficult time. We will be ready to ramp back up quickly and once again connect audiences to artists at the concerts they are looking forward to.”
Berchtold, Willard, Rowles re-up with Live Nation
Live Nation’s Joe Berchtold, Michael Rowles and Kathy Willard have followed CEO Michael Rapino in extending their contracts with the company until 2022.
Berchtold, formerly chief operating officer, becomes president – a role also held by president/CEO Rapino, who recently extended his tenure with Live Nation until 31 December 2022 – while Rowles and Willard remain in their current roles as executive vice-president, general counsel and secretary, and executive vice-president and chief financial officer, respectively.
As president, Berchtold will receive a base salary of $1.3m annually, along with a 200% performance bonus and a grant of 100,000 restricted shares and 300,000 performance-based shares.
Rowles, meanwhile, receives a base salary of $800,000, a 100% performance bonus and 25,000 restricted shares, while Willard receives a $950,000 base salary, a 100% performance bonus, 50,000 restricted shares and a grant of 50,000 options to purchase Live Nation common stock.
Live Nation’s share price currently stands at $43.37, after having broken the $40 mark for the first time in August
That compares to $9m per annum ($3m base salary + $6m in bonuses) and a grant of 289,505 shares in restricted Live Nation stock for Rapino.
Live Nation’s share price currently stands at $43.37, after having broken the $40 mark for the first time in August.
Live Nation Entertainment, now the world’s largest live entertainment company, continues to grow, both financially – it is on course for a seventh consecutive year of record growth, turning over $3.6bn in Q3 2017 – and in scope through buy-outs, joint ventures and partnerships: The company has made 17 acquisitions or equivalent in the past two years alone, the most recent being the Bank of New Hampshire Pavilion in Gilford, New England.