Guarantees Hurting LN Rating?

Stifel Nicolaus analyst Benjamin Mogil has downgraded his rating of Live Nation stock from buy to hold based on what the firm is calling an increasing cause for concern – escalating artist guarantees.

“Escalating artist costs are capturing the bulk of the economic gains from the secular growth in the concert business,” Mogil said.

And while many have been wringing their hands over ticket prices, fees and “demand issues,” Mogil seems to think the concert industry has it all wrong.

“We believe that the industry does not so much suffer from a demand problem, but rather a supply problem brought on by artists needing to tour more exhaustively (the case in 2010) than ever to offset deteriorating record royalties,” he wrote. “This has created a situation whereby tour dates for many bands are too extensive given their market appeal.”

Mogil doesn’t expect LN results will take a total dive this year, but did lower his estimates for the company to the $10 to $11 range, as Stifel Nicolaus would apparently like to see some commitment from the industry to “reducing artist guarantees.”