Analysis: Ticketmaster Surviving Without Live Nation But Other Issues Remain

Analysis: Ticketmaster Surviving Without Live Nation But Other Issues Remain
May 14, 2009 - Touring

By Glenn Peoples, Nashville

Ticketmaster’s Q1 2009 earnings release on Tuesday saw the company being impacted by the loss of Live Nation ticketing volume, the Bruce Springsteen ticketing fiasco in New Jersey and the proposed merger with Live Nation. Like many other companies in the entertainment world, Ticketmaster praises its long-term strategy of acquisitions, synergies and cost-cutting. And like many other entertainment companies attempting to lure cash-conscious consumers, Ticketmaster can point to middling results rather than clear-cut successes.

This was Ticketmaster’s first quarter since Live Nation contracts began to expire and the concert promotion giant began selling its own tickets in January. With the loss of Live Nation, Ticketmaster’s ticket volume was down 6% and the value of those tickets was down 7%. Those losses from Live Nation took away $8 million from Ticketmaster’s profits, which fell 78% to $7.2 million on $373.8 million in revenues (a 7% increase). The company said ticket value was down only 1% excluding Live Nation.

TicketsNow, Ticketmaster’s secondary ticketing service, has proved to be a problem child. A settlement with the Attorney General of New Jersey cost the company $350,000. Even worse are the effects of changes at TicketsNow that pulled $15 million in profits from the bottom line in Q1. As a part of the settlement, tickets cannot be posted to TicketsNow until primary tickets go on sale. In addition, customers will be informed about and provided a link to primary tickets at Ticketmaster.com if the event is not yet sold out. Those changes are good for consumers but will lower short term profits. The best long-term strategy, however, may be to acquiesce to government demands and forego further punishment and financial pain. In the context of a longer time frame, changes at TicketsNow are prudent.

Merger costs were also a big part of Q1 results, amounting to $6.5 million during the period. Ticketmaster said yesterday over half its bank lenders have approved the proposed merger with Live Nation. Both Live Nation and Ticketmaster believe their merger will be approved later this year. Recent statements by antitrust officials at the Department of Justice, however, give hints the merger will face far greater scrutiny than had it been pushed through during the previous administration.

With a traditionally slow Q1, the Artist Services division (via the merger with Front Line) contributed only $34.8 million of revenue and $4.4 million of EBITDA. This division will continue to be in flux will take some time to reach its potential as Front Line is re-shaped and fit into the larger, merged company. It continues to acquire smaller competitors -- Mick Management (John Mayer) in November 2008, for example, and Dale Morris (Kenny Chesney, Big & Rich) just recently.

The company has decided to move Echo, the online e-commerce and artist services company Ticketmaster acquired in March 2007, to Los Angeles. Judging from conversations with involved parties, the transition could easily be a drag on artist relationships and the division’s Q3 performance. There is a good chance the transition will cause lower levels of e-commerce, and the loss of employees means an absence of knowledge and relationships that Front Line will need to service the handful of Echo clients Ticketmaster will keep.

One bright spot was a resilient average revenue per ticket, which increased 1% in the domestic market as ticketing volume dropped 9%. Global ticketing volume was down 8%. The concerts segment was down 9%.

BMI Tops $900 Million Mark in Revenues

BMI has announced that it earned more than $901 million in revenues for its 2008 fiscal year, including its subsidiary Landmark Digital Services, LLC™. This is the first time any copyright organization has topped the $900 million mark for music performance revenues, and represents a 7.2% percent increase from the previous fiscal year. BMI also set a historic high in royalty distributions, and will disperse more than $786 million to the songwriters, composers and copyright owners it represents, an 8% percent increase over the prior fiscal year. With more than 375,000 songwriters, composers and music publisher affiliates, BMI is the world’s largest music copyright organization.

Royalty Distributions

Both figures represent milestones in royalty collection and distribution for the public performance of music. BMI President & CEO Del Bryant said, “BMI has been extraordinarily successful in signing the brightest and most popular new music creators across all genres, building upon a repertoire that already includes the most beloved songs of America’s legendary songwriters and composers.” Bryant pointed out that BMI has consistently embraced new media businesses that use music, and developed innovative licensing solutions to permit these companies to reach new audiences, while assuring that creators and copyright owners are fairly compensated. “Our pro-technology and pro-business attitude has made it possible for BMI to continue to grow our revenues more than 7% each year, on average over the past 10 years, almost doubling our income in that period,” said Bryant

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Total Revenue

BMI generated an impressive $664 million in domestic licensing income, an increase of 8% or $51 million over the prior year. BMI’s leadership in licensing the explosive growth of music in cable, satellite radio and satellite television brought in revenues of more than $208 million, accounting for more than 23% of the company’s consolidated revenue. Traditional broadcast radio and television accounted for $340 million, or about 38% of revenue. Growth in revenues from the performance of music in retail and service establishments, including restaurants, bars and the hospitality industry, increased to a total of $97 million, accounting for approximately 11% of BMI’s revenue. BMI’s New Media revenues increased to a total of $15 million. Thanks to growth in the mobile, social networking and website categories, BMI now licenses more than 6,500 digital media properties, an increase of more than 50% over the prior year. International revenues were also an especially bright spot, accounting for $238 million, or more than 26% of BMI’s revenues.

During the year, BMI extended its eCommerce initiatives, significantly enhancing its business-to-business tools for songwriters, composers, and copyright owners, as well as its licensing customers. BMI added almost 30,000 new songwriters and composers to its rolls, with the vast majority joining online. The company launched new tools permitting licensees to initiate and renew contracts, report music use and pay license fees online. BMI also dramatically increased its royalty-processing infrastructure to handle the explosion of music reporting from its many digital licensees, processing more than nine billion feature audio performances during the year. The strategic use of technology in all of these initiatives permitted BMI to grow its business while lowering overhead to 11.7%, the lowest in the company’s history.

BMI’s fiscal year runs from July 1 to June 30. BMI’s consolidated financial information includes Landmark Digital Services™, LLC, a wholly owned subsidiary. Landmark provides advanced audio-recognition products and services to BMI, as well as third-party clients, including content providers, copyright owners and consumers of music and digital entertainment.