LN Q2 Losses Widen

Live Nation Entertainment attempted to prepare investors for a less-than-glowing second quarter earnings call at a bruising meeting July 15 at New York’s Irving Plaza, and when the results came Aug. 5, at least no one could say they were surprised.

But the losses were larger than analysts expected. Its net loss in the three months to June 30 grew to $34.6 million, or 20 cents per share, from $27.2 million a year earlier.

On average, three analysts polled by Thomson Reuters expected the company to report a loss of 2 cents per share for the quarter.

Revenue grew 21 percent to $1.27 billion, mainly because it merged with Ticketmaster in January to form Live Nation Entertainment Inc. Another key post-merger figure, $40 million in anticipated “cost synergies” – or headcount reduction – is on track to be met by the end of the year.

The company maintained its outlook for adjusted operating income, which excludes merger-related costs and other special items. For the year, it expects that figure to be $405 million, down from $445 million last year, despite the synergy benefits of its merger.

The number of concerts staged by Live Nation dipped by 2.7 percent from a year ago, to 5,553, while total attendance fell 4.7 percent. Total revenue per head was down by 1.4 percent and 12.6 percent fewer tickets were sold.

LYV ended the period with $1 billion in cash and $1.7 billion in long-term debt after an earlier refinancing.

As it was during that disastrous investors meeting, the soft economy was blamed in part for lower attendance at concerts and overall ticket sales. And it was noted, by CEO Michael Rapino and executive chairman Irving Azoff, that superstar artists had either taken the year off or canceled tours during the quarter, adding to the malaise.

Despite fears expressed by Rapino and Azoff that “the media” has scared some of the top artists off the road, particularly in fourth quarter, Azoff pointed out that many marquee acts are still in the on-deck circle.

“Key artist tours anticipated during the summer and balance of the year for our artist management business include the Eagles, Jimmy Buffett, Kid Rock, Kings of Leon and the Scorpions, just to name a few,” Azoff said in a statement.

On the call, he expounded a bit on the summer touring absentee list, and added a few more that can be expected to announce itineraries for 2011.

Both assured investors that the A-list will be back on the road in 2011.

“Kenny Chesney, Christina Aguilera, Fleetwood Mac and Journey didn’t tour [in 2010], but key tours that will and are anticipated to drive revenue, like the Eagles, Buffett, Glee, Ke$ha, Brooks & Dunn, Aerosmith, Kings of Leon, John Mayer, Scorpions and Weezer, give us confidence Live Nation will be in a unique position as the economy rebounds,” Azoff said.

The co-founder of Front Line Management indicated he’s been having talks with his artists about how to best lower ticket prices and insists that there’s consensus amongst his 250-client roster to do that.

“Everyone wants to [tour], and everyone has asked, ‘How do we price our tickets right? Do we do a few extra shows?’ We feel good about product for 2011,” Azoff said.

Despite the week quarter, Rapino and CFO Kathy Willard both
said the earnings were on track with expectations.

“Our second quarter results were in line with our plan and financial guidance for the full year,” Rapino said. “Our performance to date reflects the impact of the uncertain economy on consumers, offset in part by our efforts to aggressively promote, price and expand access to concerts across our global platform.

“We have now largely completed the integration of Live Nation and Ticketmaster and we are generating considerable progress in driving efficiencies across our combined business. As we head into our biggest quarter, we are executing a range of revenue enhancement programs, while taking additional steps to reduce our operating expenses.”

During the earnings call, Rapino acknowledged to what some have called a “revolt” by concertgoers to the cost of attending shows as well as industry fears of the effect of ticket discounting. He said LN is responding to that message.

“The industry has read enough of the press and the tea leaves. We will all be smarter about how we price the talent and get ahead of the curve instead of discounting,” Rapino said. “We are very optimistic that the change in the business model in reducing costs and better buying will result in the customer coming to the show at the right price.

“We will be ahead of the curve in how we buy and price that product in the beginning, so there is no need to discount,” Rapino said.