If you didn’t make it out to any concerts this summer, you weren’t the only one. Across the country, concerts have shown poor attendance causing some artists to cancel tours. No one has felt the heat like concert promoter and ticket provider Live Nation Entertainment Inc. (NYSE: LYV)
Over the past few months, perennial sell-out acts such as Rihanna, the Eagles and Christina Aguilera have either canceled show dates or entire tours due to declined attendance.
That is just one reason why analyst Ben Mogil of Stifel Nicolaus downgraded LYV stock from a “buy” to a “hold” Tuesday. The stock fell -6.5% after the news; a tough blow after an already uninspiring summer. Live Nation Entertainment’s stock has fallen -20.2% since mid-June and has dropped a worrisome -33.8% during the last six months. A net profit margin of -2.6% along with two straight quarters below earnings estimates has shareholders biting their nails. The entertainment stock is currently trading at $9.42.
Mogil also mentioned that the money guaranteed to artists is much too high, particularly in a down economy. In his opinion, these artists are taking too high of a percentage of the revenue from concerts.
“We are lowering our rating on Live Nation from Buy to Hold as we would like to see further signs that the industry is committed to reducing artist guarantees,” Mogil told investors. “The issue for us increasingly is concern that escalating artist costs are capturing the bulk of the economic gains from the secular growth in the concert business. In years when the economy is weak the extent of those fixed artist costs is evident as is the case this year.”
Others, including rock-legend Ozzy Osbourne, point to ridiculously high ticket prices for the drop in attendance. Poor consumer spending mixed with excessively priced tickets is a recipe for disaster. The average price of a concert ticket in 2009 was $62.57. That’s an increase from $25.81 in 1996, according to touring-industry trade magazine Pollstar.
While the news has been grim for Live Nation, there is a silver lining. LYV will be running the “concert listings” feature on the new iTunes 10, which allows users to view upcoming concerts and purchase tickets immediately. The new feature should spark sales for LYV with its click-and-pay convenience.
Additionally, while many artists are noticing a stark drop in attendance, some are still playing in front of packed houses. Current pop icon Lady Gaga and teen-idol Justin Bieber have seen no drop-off in attendance.
It will be interesting to see whether the new Live Nation powered iTunes feature will help salvage revenue numbers, and lead to an increase in concert attendance. If not, Eagles fans might have to become Bieber fans if they want to attend a live concert in the near future.
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