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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.

 


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‘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.

 


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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 cutbacks at Live Nation follow similar spending reduction measures at other concert businesses, including ticketing companies Eventbrite and StubHub and most of the major booking agencies.

“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.”

 


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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.

 


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