Ticketing and concert promotions giant Live Nation Entertainment, which late last year sued its insurance carrier over legal costs in the case, announced this week that it was taking a one-time, $22.3 million expense against earnings to settle a class action lawsuit over the delivery and processing fees its Ticketmaster division charges.
Specific details of the settlement were not disclosed, but in documents filed with the Securities and Exchange Commission (SEC) Wednesday, January 26, the company said it was not admitting any wrongdoing in relation to the lawsuit, which originally had been filed in 2003 by ticket buyers Curt Schlesinger and Peter Lo Re. The two fans, on behalf of the class, had argued that Ticketmaster’s fees of between $14.50 and $25 were misleading because they were profit generators for the company and not simply passed on fees related to delivery.
“Ticketmaster and its parent, Live Nation Entertainment, Inc., have not acknowledged any violations of law or liability in connection with the matter, but have agreed to the settlement in order to eliminate the uncertainties and expense of further protracted litigation,” Live Nation stated in the 8-K filing with the SEC. “Pursuant to the terms of the settlement, among other things, Ticketmaster will pay the fees of the claims administrator as well as the plaintiffs’ attorneys’ fees and certain costs that are approved by the Court and subject to a set maximum, and class members who meet certain conditions will be entitled to receive from Ticketmaster a cash payment and/or discounts off one or more future ticket purchases.”
The $22.3 million settlement — in addition to a $4.9 million charge related to reorganizing its concert business — led Live Nation to adjust its 2010 earnings estimate downward to $362 million from $389 million, a 7 percent drop. Also weighing on earnings is losses of $6 million due foreign currency exchanges. Live Nation is scheduled to release its fourth quarter and 2010 full year financials on February 28.
Live Nation’s concert business in 2010 was not as robust as the company had hoped, which led to a huge drop in the company’s stock price. The stock, which trades under the symbol LYV, had almost reached $17 per share in the spring, but by summer the stock price was virtually cut in half. It has since rebounded, and as of today, January 27, the stock was trading at about $10.55 per share at 1:30 p.m. EST.
And, even though the economy is improving, 2011 presents several challenges for the company as it seeks to regain its footing and keep costs in line.
Despite the concerns, financial analyst Ben Mogil of Stifel Nicolaus & Company said in a report to investors this week that he is retaining his “hold” rating for the Live Nation’s stock.
“Live Nation is scheduled report results on February 28 and we view this disclosure as somewhat positive in terms of taking away concern about how the year finished up,” Mogil wrote. “The response is likely muted as investors await additional commentary on the 4Q10 call as how advance sales are faring. We continue to believe that the company will have limited disclosure on artist fee negotiations given the public setting of their calls and the sensitive/competitive nature of the topic.”