LN 2018 financials: Rapino on best-ever results, SMG-AEG merger

Live Nation recorded its eighth consecutive year of record results in 2018, according to the company’s just-released annual financial report, with revenue and income both growing significantly from an already record-breaking 2017.

Total group turnover increased 11%, to US$10.8 billion, while operating income grew to $272.5 million, up from $91.4m in 2017 (accounting for the $110m legal settlement with Songkick). Adjusted operating income (AOI) – which excludes several expenses, mostly related to acquisition costs, stock-based compensation, depreciation and amortisation – was  $829.1m, a 33% year-on-year increase.

Growth across all areas of the business revolves around Live Nation’s “concerts flywheel”, says Live Nation president and CEO Michael Rapino (who joked in yesterday’s earnings call that he should have patented the term, as he was using “flywheel long before any other business nailed that one”). “We have a big flywheel of concerts, and we’re going to wake up every year finding new adjacent businesses that we can monetise because of that flywheel,” he told investors. “And no one else in the world has 30,000 shows and 100 million people walking in the door.”

In addition to growing concert attendance 8%, to just shy of 100 million (93m), Live Nation also grew its ticketing volume 14%, with a rapidly digitising Ticketmaster selling $33bn worth of tickets in 2018 – earning it $1.53bn in revenue and $201.9m in AOI – and sponsorship and advertising revenue 13%, to $504m, bolstered by new sponsorship deals at its festivals, including with Heineken, Barclays and Frito-Lay.

Rapino also used the earnings call to address the impending merger of arena/convention centre operator SMG – a Ticketmaster customer – with AEG Facilities, a division of LN rival AEG, to form ASM Global.

“We’ve always looked at AEG Facilities and SMG as partners”

The union of SMG and AEG Facilities “has no impact on our day-to-day business”, Rapino told Goldman Sachs’s Drew Borst. “We’re not […] in the conference centre management business… That’s not what we do.

“But between the two of them, the buildings that they do have, we have an existing Ticketmaster contract with SMG. […]  And we received a call the minute that there was a public announcement from them to reassure us that filling their buildings and ticketing their businesses [remains] a huge strategic imperative of theirs.

“We’ve always looked at AEG Facilities and SMG as partners. They all need us to put on more shows and fill those venues that they’re managing.”

Rapino added that both companies have “probably experimented elsewhere and ended up realising Ticketmaster also happens to sell them the most tickets. They’re managing those buildings for someone else, generally. And that someone else doesn’t care about competition – they care about results.”

Looking to the year ahead, Live Nation says tickets sold for concerts in 2019 are already in the double digits ahead of last year, and Rapino is confident of a ninth year of growth.

“In 2019, I expect us to further extend our global concerts position”

“We continue to see the tremendous power of live events, with strong consumer demand and a robust supply of new and established artists hitting the road from clubs to stadiums,” he comments. “Live is truly a unique entertainment form – it cannot be duplicated and creates lifetime memories that fans are craving more than ever in this experience economy.

“We believe that the live business will continue to have strong growth for years to come as fans globally drive demand, artists are touring more, and on-site spending, sponsorship and ticketing all benefit from the concerts flywheel.

“In 2019, I expect us to further extend our global concerts position while enhancing our on-site hospitality business and capturing additional pricing opportunities. Our sponsorship business will continue driving double-digit growth as more brands look for that direct connection with music fans. And as Ticketmaster continues its transformation to a truly digital ecosystem, it will also benefit from continued growth in concert ticket sales and further expansion of our global footprint.

“We believe that the combination of macro trends and our demonstrated ability to execute are strong indicators of our capability to continue to grow the business for many years to come.”

Live Nation’s Q1 2019 results are expected in May.

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