Live Nation Stock Selloff: 10% Drop Since New York Times Article

Merger Opposition
(Photo By Tom Williams/Roll Call/Getty Images)
– Merger Opposition
Reps. Michael Capuano, D-Mass., speaks at a news conference along with Reps. Bill Pascrell, D-N.J., right, and Peter Welch, D-Vt., to oppose the Ticketmaster and Live Nation merger saying it would lead to higher ticket prices, Dec. 16, 2009.

Although the overall stock market has been volatile in recent months, Live Nation’s stock price has seen a major selloff following alengthy exposé from the New York Times April 2 that claimed the Department of Justice is looking into allegations of unfair business practices.

Over the last five days, LYV stock is down almost 10%, with more than $1 billion in market cap evaporated. There has been an overall volatility in the broader stock with uncertainties over the White House’s protectionist policies and foreign trade as well as large-cap tech stocks like Amazon showing a similar selloff.

However, the LYV drop is more pronounced than most and likely a knee-jerk reaction to the NYT piece. Overall, Live Nation stock is still up more than 20% over the past 12 months, beating the S&P 500’s gain of 10.78%.

The Times piece goes at great length in describing Live Nation’s vertical integration in the concert business, with graphics and charts showing its dominance in venue operations, artist management and stressing its ownership of Ticketmaster. The piece details specific claims from rival promoter AEG that Live Nation threatened to re-route shows from venues that chose to not use Ticketmaster, or that it later punished venues for doing so.

While the Times story claimed the DOJ is looking into Live Nation’s business practices, no actual investigation has been confirmed and that assertion may simply be that AEG has filed complaints with the DOJ. A DOJ rep only told Pollstar that the department neither confirms or denies any investigation.

Ticketmaster President Jared Smith wrote a lengthy rebuttal to the Times piece, saying that the company’s vertical integration with Live Nation was actually encouraged by the DOJ when the Live Nation/Ticketmaster merger was approved in 2010.

“The DOJ studied this issue very closely and determined that vertical integration between content suppliers (i.e. concert promoters) and ticketing companies was generally a good thing as long as it did not stifle competition,” Smith wrote.” In fact, the DOJ decided it actually wanted more vertically integrated competition, so it required the creation of a second company that could offer both content and ticketing.

“To achieve this, the DOJ required Live Nation to spin off some of its ticketing assets (namely a copy of one of its ticketing systems) to the second-largest concert promoter in the United States, AEG, so that AEG would become ‘a new, independent, economically viable, and vertically integrated competitor in the market for primary ticketing services to major concert venues.”

At press time Live Nation’s stock was at $37.91, which is up 3.55% from yesterday. 

There’s also the question of whether Live Nation, if the accusations are even true, is actually breaking rules as set in the consent decree with the DOJ, which included the “Anti-Retaliation Provision and Other Provisions Designed to Promote Competition.”

This states that Defendants shall not: “Retaliate against a Venue Owner because it is known to Defendants that the Venue Owner is or is contemplating contracting with a company other than Defendants for Primary Ticketing Services;

Condition or threaten to Condition the Provision of Live Entertainment Events to a Venue Owner based on that Venue Owner refraining from contracting with a company other than Defendants for Primary Ticketing Services; or

Condition or threaten to Condition the provision of Primary Ticketing Services to a Venue Owner based on that Venue Owner refraining from contracting with a company other than Defendants for the Provision of Live Entertainment Events.”

However, this also states that “Nothing in this Section prevents Defendants from bundling their services and products in any combination or from exercising their own business judgment in whether and how to pursue, develop, expand, or compete for any ticketing, venue, promotions, artist management, or any other business, so long as Defendants do so in a manner that is not inconsistent with the provisions of this Section.”