MBW’s Stat Of The Week is a series in which we highlight a data point that deserves the attention of the global music industry. Stat Of the Week is supported by Cinq Music Group, a technology-driven record label, distribution, and rights management company.
If you want to know how painful calendar Q2 quarter was for Live Nation Entertainment, know this: the company’s revenues from ticketing, mainly via Ticketmaster, were negative (-$87m) in the quarter.
We’re not talking about a loss, there. We’re talking about minus revenue.
Why? Because Live Nation technically spent more on ticketing in Q2 than its customers did. In other words, LNE refunded customers for previously bought tickets, while obviously very few newly-announced shows were put on sale during the pandemic.
“Before refunds, our fee-bearing tickets were 2.0 million [units] for the quarter, a reduction of 51.3 million tickets, or 96%, compared to last year,” the company told investors this week in an SEC filing. “A total of 10.7 million tickets were refunded in the quarter, amounting to just slightly over $1.1 billion of gross transaction value.”
Unsurprisingly, amid a global concerts shutdown, there wasn’t much else deserving of cheer in Live Nation’s Q2 results.
In the three months to end of June, Live Nation’s Concerts revenue (covering its live promotions operation) generated $141.8m, down 95% year-on-year. And Live Nation’s overall Q2 revenue – including Concerts, Sponsorship and Ticketing – at $74.1m, was down 98% on the $3.16bn the firm generated in the same quarter of 2019.
Live Nation’s management, however, remains defiant, nay optimistic, in the face of such conditions – and hopeful that, by summer 2021, concerts, particularly outdoors, will have largely returned to “to scale… preceded by ticket sales earlier in the year”.
Amongst the meager bright spots within Live Nation’s latest numbers, the company said that its live streaming operation attracted 67 million fans to watch over 18,000 concerts and festivals between them in Q2 – including 150 performances of its Virtual Lollapalooza Festival last week.
“Given the tremendous popularity of these shows, we are seeing the potential for live streaming to become an additional long-term component of our concert business, allowing fans in other cities, or those who can’t attend, to enjoy the concert as well,” said the firm.
Furthermore, Live Nation pointed out to investors on Wednesday (August 5) that some 86% of its concert goers have, so far, held on to previously-purchased tickets for rescheduled shows, rather than requesting a refund.
The most sobering line in Live Nation’s Q2 shareholder letter? “We estimate the lost revenue impact from the global COVID-19 pandemic in the second quarter and first six months of 2020 to be approximately $2.9 billion and $3.3 billion, respectively.”
Ouch.
And yet Live Nation President and CEO, Michael Rapino, is very much keeping his cool. Here’s five more key things we learned during Rapino’s earnings call with analysts on Wednesday…
1) Live Nation has enough liquidity to see it through to September(ish) next year
Back in the first half of April, as the reality of the pandemic’s disastrous impact on live music was rapidly becoming clear, MBW reported that Live Nation had taken swift action – assuring its shareholders that it would slash costs by up to $500m in calendar 2020.
Four months on, and we discover that the axe was even sharper than first suggested: On Wednesday, the company’s President, Joe Berchtold, revealed that Live Nation is currently on course for over $800m in cost savings this year, with a reduction in annual cash usage of $1.4bn.
Berchtold also revealed that LNE’s Q2 gross burn rate stood at just $185m per month. If that rate continues, even if no revenue comes through the door (which it surely will when big 2021 shows are put on sale later this year), it will last Live Nation approximately 14-and-a-half months.
We know this because Berchtold also confirmed that, across its own cash reserves plus debt, Live Nation currently has “over $2.7 billion in readily available liquidity”.
2) The effects of Live Nation’s cost-cutting won’t stop at the pandemic – it’s going to be a leaner machine in the years ahead
So, with $800m in cost-cutting already executed, what will the long-term impact be on Live Nation’s operations?
According to Michael Rapino, he’s going to run a leaner company going forward, as a direct result of the efficiencies COVID has forced upon his business.
Rapino told shareholders on Wednesday: “There’s no question [that as] we’ve been going through this process, we’ve been looking at our fundamental cost structure and we do expect that we will come out of this… a bit leaner, a bit tighter in terms of how we do some things.”
Credit: Live Nation/press
“[We] probably have never felt so energized around what Live Nation 3.0 will look like heading into 2021. Our main obsession isn’t just to sit still but to come out of this looking and feeling different.”
Michael Rapino, Live Nation
Rapino acknowledged that across the course of building Live Nation over 15 years “you build up your own bureaucracy and your own rust”.
He added: “[Up until this COVID-hit year] we haven’t had the luxury or opportunity to sit back division by division and look under every rock and challenge ourselves on: How are we going to go to market differently? What are some new products we need to go to market with, and how are we going to operate more efficiently on a global basis?”
He suggested that Live Nation’s management and staff “have never felt so energized around what Live Nation 3.0 will look like heading into 2021. Our main obsession isn’t just to sit still but to come out of this looking and feeling different.”
3) Artists are desperate to play shows again (and they’re delaying big Q4 records too)
Obviously Live Nation is keen for artists to play shows as soon it’s safe for them to do so. But what about the world’s biggest superstars themselves – where’s their head at on the topic?
Rapino says he has artists “calling me daily saying, ‘When can I go?’ When’s it going to be safe? I’m dying to go – I’ve got new music and want to drop new music.”
Noting that he expects the post-pandemic music industry to experience a “creative boom”, Rapino said: “We believe long-term, regardless of what quarter we exactly scale [concerts back to the size they were], the business will be stronger than ever – with the creative push by all these artists who need to get on the road to drive their new music.”
“I talked to an artist this morning. They were going to release [their new record] in November. They’re going to wait until March now so they can coincide with the tour schedule later in the year in 2021.”
While noting the impact that lighter-than-normal release schedules had on major record company finances in Q2, Rapino said: “We believe 2021 into 2022 will be record years with artists on the road who are pent-up. They need to get on the road economically and they’re now powered by crates of backlog and they are all waiting.
“I talked to an artist this morning. They were going to release [their new record] in November. They’re going to wait until March now so they can coincide with the tour schedule later in the year in 2021.”
One wonder who that could be…
Rapino reiterated that Live Nation’s determination not to rush out artists on the road too early and compromise their safety.
“We’re going to play long on this one, so we have artists with lots of ideas on shows they could do now,” said Rapino. “We won’t be doing DJ sets in The Hamptons anytime soon.”
4) The live business is in a dire state. For the biggest company in the field, That makes it a great time to buy.
Live Nation is conserving cash, then, and it’s in no hurry to get touring ramped up again before the time is right.
That doesn’t mean, however, it won’t spend on opportunities if they present themselves. With COVID hammering the businesses of venues, agents and promoters across the world, many fear that independent companies – without access to the sort of capital Live Nation has – might bite the dust.
“We believe that over the next 24 months there’ll be ongoing opportunities for us to expand our global footprints in foreign and international markets.”
Could this create a run of acquisitive opportunities for live music’s biggest company?
“We continue to look to build our global market share,” said Rapino when the question of consolidation opportunities was raised on LNE’s earnings call.
“We believe that over the next 24 months there’ll be ongoing opportunities for us to expand our global footprints in foreign and international markets that we’ve have been looking to get into and build some businesses around.
“So, yes; we do think that over time this will provide us some opportunity in international markets.”
5) Live Streaming is becoming a proper business for Live Nation – with a new platform coming next year
As mentioned, some 67 million fans watched live streamed concerts via Live Nation in Q2. We don’t know how many of them paid, but we do know this: Live Nation sees a meaningful business here, one that’s additive to its core live event operation.
“I think we have a natural advantage in the streaming business in the sense we [already] have studios [record] these events,” said Rapino, adding that the company had previously been “great at the physical execution [of concerts], but they provide incredible digital opportunities that we haven’t focused enough on”.
Live Nation’s business development team, he said, are “deep at work” on new live streaming products, launching in the new year, which will provide extra opportunities for the 900 sponsors that Live Nation already works with.
