LIVE NATION & AEG

The other day there was a great comparison made between Live Nation and AEG.  To paraphrase; “Live Nation is a concert promoter who happens to own facilities while AEG is a facility owner that happens to own a concert promoter”.  Oversimplification, probably…yet it has merit. 

Michael Rapino and company didn’t collect the assets of Live Nation; they inherited them…or at least most of them.  Part of Live Nation’s strength is also its weakness, real estate.  Specifically the under-performing amphitheatres they seem stuck with through long-term contracts with municipalities, sponsors, vendors, and/or a combination.  Although Live Nation did shed (pun intended) a few of these venues like Nashville and Columbus, the problem persists in Florida, California, the Carolinas, and the like.  The company’s profits seem to be tied to touring which would explain why the venues can be even more troublesome. 

As a concert promoter, Live Nation uses its facilities’ income (ticket rebates, parking, facility charges, F&B, rent, sponsorship, etc) to entice more shows to go their way (concert promoter over facility owner).  Meanwhile (w/ exceptions of course) Tim Leiweke runs AEG and AEG Live as separate entities.  Randy Philips’ organization makes offers to tours and shows based on revenues those events can produce.  They can’t (under most circumstances anyway) pay over 100% of the show’s gross to an act without the ancillary revenue.

Maybe another oversimplification, but Live Nation’s business model seems very similar to 6 Flags Amusement Parks.  Both based on volume over the individual sale.  6 Flags keeps attendance up with season passes costing a similar price to a single-day entry, along with constant discounting and couponing (maybe they make $ from the $.05 they can redeem from their Coke can coupons), with the goal to make their money on parking, F&B, merchandise, upgrades, sponsorship, etc.  Same look at Live Nation, although in their case, they are giving much of the ancillary income back in guarantees to the performer (s). 

What’s the best model, it depends on what business you’re in.  Public companies have the advantage of Wall Street capital to fund operating expenses.  The problem of course, they do eventually have to make a profit (something Live Nation has yet to do).  Since AEG is a private company, it is hard to say how much money they make.  At the same time, no one would believe that a billionaire like Phil Anschutz would stand-by and watch money hemorrhage for too long.  I would also argue that Tim Leiweke is one of the most capable executives in our business and would have a similar view as Phil. 

No one really knows what the future holds, but if Irving and Rapino’s plan is to take Live Nation private, it looks like a good one from the outside.  Hopefully then, the playing field will be more level…or at least look that way.

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