NEW YORK (CelebrityAccess MediaWire) — Since Live Nation’s initial public offering last December, investors and analysts have all joined up with the concert promoters vision, driving the stock to double in just six months.
“Retail investors think it’s exciting to be in a business like this,” David Joyce, analyst with Miller Tabak + Co. told Investors Business Daily.
“It’s a very low-margin business,” he continued. “In a nutshell, they have very little room for error on their operations.”
Live Nation, the country’s largest live-event producer, and the only one to be publicly traded, owns, operates and/or has booking rights for 153 venues worldwide. It produced more than 29,500 events in 2005.
Before the company’s high profile spinoff from parent company Clear Channel Communications in 2005, it was viewed as a financial drag to the company’s overall results, analysts said. CCC paid $4.5 billion for the live entertainment business in 2002, when it was called SFX Entertainment.
“They talked about synergies and it never really worked out,” Philip Remek, senior media analyst with Guzman and Co. told IBD. “Revenue growth was particularly tough in 2005. There seemed to be a lack of big-name tours.”
The big-name acts are one of the main reason for the slim margins, as many command high artist guarantees for concerts. Guarantees that are steadily getting higher.
“For certain artists, the guarantees have doubled,” Fantasma Productions’ Jon Stoll said. “The margins are going to be tough for everyone, including (Live Nation). You have to gross large dollars to net small dollars.”
Many analysts are looking toward the summer concert season for the greatest growth with the new company, as Live Nation owns a significant amount of outdoor amphitheaters.
Joyce said, “The summer season is when they generate the most revenue.”
The company has taken a gamble on some acts, agreeing to pay higher guarantees in order to lure them to its outdoor venues, promoters say.
Joyce’s final estimates peg Live Nation at earning 88 cents a share this year, then growing earnings 11% to 98 centers a share in 2007. From there, the company could continue going up, assuming it plays its cards, and its concerts, right. –by CelebrityAccess Staff Writers
