In the past few weeks, the value of Live Nation Entertainment’s stock has dropped about 30 percent as the concerned investors ponder a host of challenges to the live entertainment and ticketing giant.
On May 3, the stock, which trades under the symbol LYV, closed at $15.97, but as of yesterday, May 27, it closed at $12.21, a decline of about 30.8 percent. And, today the stock was trading well below that for parts of the day, but it ended up closing at the same price of $12.21.
During the month, the overall stock market has taken a beating due to debt concerns in Europe, among other things, but some of those issues have straightened out and the market rallied. Live Nation’s stock, however, has not yet fully rebounded.
At least three issues could be contributing to the stock’s decline, industry insiders told TicketNews, all of which may only have an effect in the short term: TicketsNow, the New York ticketing law and the postponements of some high-profile tours.
The performance of the company’s ticket resale subsidiary TicketsNow has been a disappointment to Live Nation President and CEO Michael Rapino, he said earlier this month, and the company is trying to figure out what to do with it.
The likely scenario is that Live Nation will sell it, and it reportedly has been trying to do so for quite some time, but who wants to buy it, considering the way Rapino and Chairman Irving Azoff have disparaged the secondary ticket market? The company’s Ticketmaster division paid $265 million for TicketsNow, but it now might be worth a third of that.
In New York, the company is in a pitched battle over paperless ticketing, a technology it believes is key to its future growth, in part because it offers consumers certain conveniences and allows the company to better control how tickets are distributed. Several New York legislators, including Gov. David Paterson, want paperless tickets as one of several options for consumers at check out, but that could create logistical hurdles for Live Nation, and could possibly delay the return on investment for the development of the technology.
When asked which issue was of the most concern to investors, financial analyst Ben Mogil of Thomas Weisel Partners, gave a succinct response, “Tours.”
This week, two major Live Nation-produced tours were shut down temporarily due to unexpected surgery in one case and prior commitments in the other. U2’s frontman Bono required back surgery recently, which led to the postponement of the band’s upcoming tour. In addition, Christina Aguilera postponed her upcoming tour because of scheduling issues with her new album and a new movie.
Both tours are expected to be rescheduled for 2011, but both were also expected to generate big dollars for the company this year, and nervous investors showed some of their displeasure by selling off some of the stock.
In a piece in the New York Times this week, Mogil was quick to add that the postponement of the those two tours will not have a material impact on the company’s earnings for 2010, but how the overall concert industry performs this year will.
“The real gauge of the health of the concert business is the strength of the 25 to 75 top shows, not the top 10 shows alone,” he told the Times.