News of Live Nation’s efforts to acquire the recorded music division of Warner Music Group has some industry observers questioning the company’s motives as it continues to labor at making its year-old merger with Ticketmaster work.
While Live Nation may not seek to buy all of Warner Music Group — estimated to be worth almost $3 billion, according to the Wall Street Journal — the acquisition would likely strain Live Nation’s financial situation, which already includes more than $1 billion in debt. In addition, such an acquisition would likely lead to another antitrust investigation by the U.S. Department of Justice, even though many observers believe DOJ would be hard-pressed to stop it after clearing the way for the Live Nation/Ticketmaster merger.
“Those people [at the DOJ] aren’t going to do anything about it,” veteran rock promoter Seth Hurwitz, owner of Washington DC’s famed 9:30 Club and concert company I.M.P., told TicketNews. Hurwitz, currently embroiled in litigation with Live Nation, and several other independent concert promoters argued against the merger only to see it go through with virtually toothless protections against Live Nation gaining competitive information about them.
Live Nation is not the only entity vying for all or part of Warner Music Group, so there is no guarantee that the company will land it. But, if it does, the acquisition would add a large catalog of music and roster of artists under its control. John Breyault, spokesperson for the consumer advocacy group the National Consumers League, told TicketNews that the move would be “yet another attempt by Live Nation to spread its influence into every vertical of the music business,” following concert promotion, ticketing, venue operation and artist management, among others.
“Does this make [Live Nation’s artist management firm] Front Line more attractive to artists? I think so,” Breyault said. “What’s the impact on consumers? It’s tough to say. Consumers have certainly seen a benefit as the industry has transitioned away from a per-song/album model to a subscription model. But, if Live Nation were to use ownership of Warner’s business to keep recorded music away from the subscription services, that would be an issue for many consumers. I’d worry too if they somehow used their Warner content to add a required fee to ticket prices – I can already see the ‘Five free songs service fee’ added to the ticket price.”
Live Nation has not publicly commented on the possible acquisition.
One ticketing executive told TicketNews that he believes the effort to acquire part of Warner Music is Live Nation’s admission that “their whole strategy isn’t working” as it to the Ticketmaster merger. “They can’t make money as a promoter because the margins are so tight, and their ticketing operation is under serious attack, so now they’re looking at becoming some sort of music portal,” he said. “But, you can’t be all things to all people. Irving [Azoff, chairman of Live Nation] is a master at spinning things, but I don’t think he can spin this.”
Stifel Nicolaus & Company director and analyst Ben Mogil, has not issued any change to his “hold” rating concerning the company’s stock, but he, too, appears a bit skeptical concerning the possible acquisition.
“The growth of Live Nation has been a result of consumers reallocating their music expenditures from recorded music because of the pricing deflation in that market and piracy to the live event,” Mogil told Billboard. “This [deal] would fly in the face of those trends.”
Shares of Live Nation stock, which trades under the symbol LYV, were selling at about $10.13 a little after 3 p.m. EDT today, April 5. The stock has hovered around the $10 mark for weeks, and since mid-February the price of shares exceeded $11 only once.
[The acquisition] is certainly threatening to artists,” said Washington DC attorney David Balto, a vocal critic of the Live Nation/Ticketmaster merger who testified before Congress. “And, it can’t be good to consumers.” Balto, and others, believe that Live Nation would have a strong hold on another vertical market with the Warner deal, and as such could control how much artists receive and how much consumers would pay for music.
“They’re trying to create some sense of power, but it’s misguided,” Balto said.