Concert promoter Live Nation Inc will launch its own ticketing business in 2009 after it ends ties with Ticketmaster, the dominant box office service, and expects the venture will add to earnings in its first year.
Live Nation’s venture, announced on Friday, is part of a strategy shift to provide a complete pipeline of marketing, ticketing and merchandising for artists and events, creating competition for Ticketmaster and music labels alike.
“We will have a fully operational new ticketing company and reach a new milestone in this journey,” Live Nation Chief Executive Michael Rapino said on a conference call. “We expect to sell more than 20 million tickets annually.”
Ticketmaster said in August it had not been able to negotiate a new long-term agreement with Live Nation, its largest client, which generated about 15 to 20 percent of Ticketmaster revenue. Their deal expires at the end of 2008.
Ticketmaster is part of IAC/InterActiveCorp and is due to be spun off as an independent company later this year. Ticketmaster officials were not immediately available for comment.
Live Nation estimates the new business will add at least $7.3 million to operating income in 2009 and at least $17 million in 2010. It will sell tickets for its own concerts and for third-party events.
That contribution could even double as the company cultivates sponsorships and other marketing opportunities, executives said.
“MORE CONTROL”
“The numbers look good,” said David Joyce, analyst at Miller Tabak & Co, who rates Live Nation shares a “buy.” “It’s important for Live Nation for the long term to have much more control and relationship with the customer that is coming to their shows. The margins will expand over time.”
The company recently lured pop star Madonna from her long-term music label, Warner Music Group Corp, in a deal estimated at $120 million over 10 years.
Live Nation shares rose 16 cents, or 1.2 percent, to $13.52 after trading as high as $13.98 earlier in the session. IAC/InterActiveCorp fell 35 cents, or 1.5 percent, to $23.67 on Nasdaq.
Live Nation has signed a 10-year agreement to license ticketing software from Germany’s CTS Eventim AG.
The company expects to spend about $20 million in 2008 to buy new computers, servers and other equipment ahead of the launch of its ticketing unit, with capital expenses to drop to about $3 million annually in 2009 and 2010.
Live Nation also expects to increase revenue by using data it gathers on ticket buyers to better promote events and new artists.
“We spend close to $100 million a year marketing concerts around the world,” Rapino said. “We believe over time we will shift a lot of our print and radio advertising to a much more efficient, direct consumer model.”
It will also cultivate sponsorships from advertisers, such as allowing a retail chain to be the exclusive source for buying tickets to a particular show.
Asked whether Live Nation could move into selling tickets for sports events, a key business for Ticketmaster, Rapino indicated it was possible, based on the company’s existing relationships to venue operators.
“We believe that our customer, the venue operator who we have a very long and local relationship with, when we’re in business with them we will be in business with their full ticketing platform,” he said.
January 13th, 2008 at 2:03 am
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