In an interview with Forbes Magazine Live Nation opened up their business model for all of us to see just how they’re changing the concert side of the music business. We’ve been following Live Nation for months, but here are a few things we didn’t even know.
Live Nation’s business model has it dipping its hand into multiple buckets that make up for the revenues that Live Nation loses to the artist. Typically, Live Nation only takes 10% of ticket sales, giving a hefty 90% to the musician (most concert promoters give 50% to 70% to the artist). But Live Nation also takes home all of the revenues from concession, parking, and large chunks of revenues from merchandise sales, DVD sales and sponsorship revenues.
The company began as a subset of mega broadcaster Clear Channel Communications out of San Antonio, TX. In December 2005, Clear Channel decided it would be better for its bottom line to leave the events-promotion business to someone else, and thus spun out Live Nation into a publicly traded company.
Even then the landscape of the music business was changing so it was the perfect time for the small concert promotion company to begin building its empire. Live Nation executives thought finding synergies in the business would allow them to make riskier bets on artists and keep the business virtually recession-proof. While at Clear Channel, the business was strictly a concert promoter, handling live shows, theatrical performances, sports engagements and motor sports events. At the end of 2004, the last full year before the spin-off, the unit had profits of $16.3 million.
Now comes the fight with Ticketmaster. Live Nation plans to launch an online ticketing platform in January, leaning on their strength in mounting tours to gut the competition. According to Natixis Bleichroeder analyst Alan Gould, Ticketmaster sold 7.5 million tickets for SMG (recently bought by Live Nation) in 2007. Beginning in 2010, all those sales will go to Live Nation.
The split with Ticketmaster was not only prompted by Live Nation looking for a better revenue stream, but by a lack of cooperation on the part of Ticketmaster, which does not provide most of the customer data that comes with selling tickets to any of its clients. Live Nation’s database of 23 million fans gives it the power to offer uniquely tailored sponsorships and marketing campaigns, something it couldn’t do when it didn’t have all the data.
The music business from top to bottom is changing from the old days which were simply based on “That’s how it’s always been done” to new ways like our friend Jin-Young Park in Korea. I like the direction Live Nation is headed, but I do hope it makes going to shows a little more affordable for a family of 5.