Despite their dominant positions in the live entertainment and ticketing industries, respectively, Live Nation and Ticketmaster Entertainment are having a hard time convincing Wall...

Despite their dominant positions in the live entertainment and ticketing industries, respectively, Live Nation and Ticketmaster Entertainment are having a hard time convincing Wall Street that their planned merger will right their fortunes.

Since the merger was announced Tuesday, February 10, Live Nation stock, which trades under the symbol LYV, has dropped almost $1 dollar to $3.93 as of 1 pm today. It closed at $4.82 on Tuesday, which was also down from its close of $5.29 on Monday.

Ticketmaster’s stock has not fared any better. On Tuesday, the stock, which trades under the symbol TKTM, closed at $6.15, and it was trading at $5.06 as of 1 pm today. On Monday, the stock closed at $6.57.

The proposed merger of equals is valued at about $2.5 billion, and the two companies currently have a combined market capitalization of just under $600 million. According to TicketNews’s exclusive industry rankings, Ticketmaster is the world’s largest primary ticket seller, and Live Nation is the second largest. Ticketmaster is also by far the largest overall ticket seller, while Live Nation is the fourth largest, but Live Nation is the world’s largest concert promoter and live entertainment company.



Besides the two companies’ stock prices dropping, Ticketmaster’s corporate rating was dropped on Wednesday to “BB+” with “negative implications” by Standard & Poor’s (S&P), primarily due to Ticketmaster’s debt leverage will increase as a result of the deal. S&P gave a better rating to Live Nation, a “B,” for the inverse of the Ticketmaster rating, namely Live Nation’s debt leverage will decrease.

“The rating action is based on the expected changing financial risks from the merger,” S&P’s credit analyst Andy Liu said in a statement. “Furthermore, Live Nation has significant historical discretionary cash flow deficits and it is unclear that the combined entity would be able to generate meaningfully positive discretionary cash flow, especially with consumer discretionary spending and corporate sponsorship under pressure from the recession.”

The deal is far from being finalized. The U.S. Justice Department’s Antitrust Division has opened an investigation into the merger, and already U.S. Sen. Charles Schumer, D-NY, has come out against it, joining rocker Bruce Springsteen and others who also oppose the deal.

“There is great potential for abuse when two companies of this size join forces,” said Schumer in a statement issued Wednesday. “We must protect consumers against these practices and make sure that Ticketmaster and Live Nation both continue to provide tickets to buyers fairly.”

Those sentiments were echoed by Scott Devitt, managing director, Internet Consumer Services for Stifel, Nicolaus & Company, Inc.. In a report to investors Wednesday, Devitt wrote that fans could lose out if the merger were to happen.

“[The two companies believe] that the merger will: (1) improve access and transparency, in terms of ticket purchases, (2) improve ticket pricing options, (3) increased invest in better ticketing technology, and (4) increase event attendance. We believe the merger will result in higher prices for consumers, no incremental increase in ticket sales, and that consumers will not benefit economically from synergies created by combining the two entities.”

The reason for the merger, Devitt believes, is because of “the failure of the [Live Nation] ticketing system,” in addition to the current economic pressures placed on both companies and the entire live entertainment industry due to the recession. Live Nation’s new ticketing system, launched last month with the help of CTS Eventim of Germany, struggled with a recent onsale for Phish tickets.

“We find it odd that combining the premier ticketing company with a failing ticketing platform will increase R&D and innovative technologies. We believe that any technologies evident in the Live Nation ticketing platform belong to its partner CTS Eventim. Furthermore, based on comments by former management at a recent TKTM client lunch, we are uncertain that Live Nation will bring any technological developments to the Ticketmaster platform. At the lunch, management stated that they have no plans of introducing a seat mapping function in the near term, and most likely never will,” Devitt wrote. “The biggest difference, in our view, between the LYV and TKTM platforms is seat mapping technology. The LYV platform utilizes seat mapping technology provided by CTS Eventim, which allows customers to choose an exact seat. The TKTM platform allows customers to select a number of tickets, price level, or general section of the venue when purchasing tickets. Customers of TKTM are then give random seat assignments based on what is available in the database and customer inputs.”

Mark Mahaney, Director of Internet Research for Citigroup Investment Research, is also skeptical that the merger will happen. Both Mahaney and Devitt list the companies stock as a “hold.”

“While the potential benefits to LYV and TKTM seem relatively clear, key ticketing clients such as AEG may view the combination as inherently conflicted, and TKTM runs the increasing risk of client defections when contracts come up for renewal. And finally, the biggest hurdle, in our view, is likely to be regulatory. Consistent with the acquisition of Paciolan in 2008 (now Ticketmaster Irvine), investors should expect regulators to scrutinize this transaction just as (if not more) closely,” Mahaney wrote in a report to investors.

Devitt continued, “In our view, Live Nation Entertainment would open itself up to patent law suits if it were to implement seat mapping technology without the consent of CTS Eventim. This begs the question will Live Nation Entertainment seek to purchase CTS Eventim to eliminate its main International rival.”

More TicketMaster/LiveNation merger news

Ticketmaster/Live Nation merger: Canadian officials look at TicketsNow 03/09/2009
Ticketmaster/Live Nation merger: NATB schedules meeting about the deal 03/04/2009
Ticketmaster/Live Nation merger: Live Nation reports 4Q loss 03/03/2009
Ticketmaster/Live Nation merger: Canadian AG investigates Ticketmaster 03/02/2009
Ticketmaster/Live Nation merger: National Association of Ticket Brokers irate 02/27/2009
Ticketmaster/Live Nation merger: Azoff would consider selling TicketsNow 02/26/2009
Ticketmaster/Live Nation merger: Azoff, Rapino and new speakers for House hearing 02/25/2009
Ticketmaster/Live Nation merger: Trouble with Leonard Cohen tickets on TicketsNow, and a third class action lawsuit 02/25/2009
Ticketmaster/Live Nation merger: Companies grilled by skeptical Senators 02/24/2009
Ticketmaster/Live Nation merger: Senate hearing to be webcast 02/24/2009
Ticketmaster/Live Nation merger: New Jersey AG settles investigation with Ticketmaster over Bruce Springsteen tickets 02/23/2009
Ticketmaster/Live Nation merger: Shareholder lawsuit details deal’s undervaluation 02/20/2009
Ticketmaster/Live Nation merger: Azoff, Rapino to testify at Senate hearing 02/20/2009
Ticketmaster/Live Nation merger: Dates set for congressional hearings 02/18/2009
Ticketmaster/Live Nation merger: Ticketmaster shareholders sue to block the proposed deal 02/17/2009
Ticketmaster/Live Nation merger: Law firm launches investigation into TicketsNow 02/16/2009
Ticketmaster/Live Nation merger: Live Nation expects strong 4th Quarter 02/13/2009
Ticketmaster/Live Nation merger: major shareholder may oppose the deal 02/13/2009
Ticketmaster faces second class action lawsuit in Canada 02/12/2009
Ticketmaster/Live Nation merger: stocks take a beating 02/12/2009
Visa fires back at Ticketmaster for ‘glitch’ statement 02/11/2009
U.S. Justice Department launches review of Live Nation, Ticketmaster merger 02/11/2009
LiveStub CEO Michael Hershfield discusses the Live Nation/Ticketmaster merger 02/11/2009
Ticketmaster and Live Nation claim now was the best time to merge 02/10/2009
Live Nation and Ticketmaster Entertainment agree to unprecedented merger 02/10/2009
Ticketmaster, Live Nation merger expected within a day 02/09/2009
Ticketmaster, TicketsNow face $500 million class action suit in Canada 02/09/2009
Connecticut AG wants review of proposed Ticketmaster, Live Nation merger 02/06/2009
Opposition mounts against proposed merger of Ticketmaster and Live Nation 02/05/2009
Ticketmaster apologizes to Bruce Springsteen and his fans over ticket mix-up 02/05/2009
Bruce Springsteen rips Ticketmaster over tickets and proposed Live Nation merger 02/04/2009
TicketNetwork CEO Don Vaccaro speaks with Fox Business about Live Nation/Ticketmaster merger 02/04/2009
Live Nation and Ticketmaster Entertainment talk merger 02/04/2009
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By Alfred Branch Jr.