Live Nation (LYV) is growing and reinvesting in its best businesses (ticketmaster and advertising) while managing its much smaller concert and talent management businesses for better returns and lower risk.  Ticketmaster and advertising account for over 85% of segment ebitda and have excellent ROI performance and growth potential.  Concerts and Talent management do feed the other businesses and should, with more focused management, show at least stable performance.  Following "addition by subtraction" at the top, management is very focused on driving ROI and free cash flow.  Further Ticketmaster is about to launch a significant upgrade to its technology platform which should materially reduce costs and significantly expand the company's secondary ticket revenue opportunity.  Assuming managemnt can hit the 3 year EBITDA expansion target of roughly $600M in ebitda and that the business is valued at 8X, LYV would be valued at $19, a 50% gain from current levels.

 

Aviclara181 wrote this idea up in 2011 with a solid and detailed writeup. I will not attempt to repeat that but refer anyone interested.

 

Happy to go into more detail for anyone interested and respond to questions, but my recent notes are included below.

 

 

A near monopoly on primary event ticket sales. 

Nearly done updating a 20-year old enterprise based platform which was highly reliable but inflexible.

$100M later, they have a web based system, which allows clients to develop apps, customize and do their own data analysis.

More importantly, the new system will (1) lower costs and (2) allow mobile commerce and (3) host the launch of a secondary market.

Costs are expected to come down by 35c / ticket, which sounds more impressive when multiplied by 100M tickets for savings of $35M /year.

Mobile apps account for only 7% of revenue today given the limited flexibilty of the leagcy system.  This should change significantly following the launch in July.

The secondary market launch will attack the $4B ticket resale market.

Consider that ticketmaster can currently sell you a ticket to a Beyonce concert for about the 10 minutes that it takes to sell out and then can't sell you anything for the next 3 months before the concert.

The new system, to launch in July, will allow secondary tickets sales right up to the show as well as other mobile promotions geared to fans.

Ticketmaster already has 200M users and is the 3rd largest e-commerce site.

The new platform will also allow digital tickets (the venues are the gating factor) and secure email distribution of tickets

 

2012 Adjusted Operating Income (AOI): $459M vs. $438M in 2011.

 

 

 

Sells corporate sponsorships and advertising around 25K shows worldwide per year.

Hard to replicate as already at scale, 100 offices in 40 countries.

Excellent ROI, though perhaps overstated as leverages but is not tagged with the investments in concerts and artist management.

 

2012 AOI: $176M vs. $165M in 2011.

 

 

Concerts $31M and Artist mgmt $38M account for the rest of segment AOI.  There was about $80M or corp and other in 2012 to get to the total of $459M in consolidated AOI.

I expect these businesses to continue to support Ticketmaster and Sponsorship/Advertising, but don't count on them for much growth.

There is actually a growth case for concerts because artists now make most of their money touring and thus the industry has been growing, but given the relative size, it just doesn't move the needle versus the big two above.

The potential for artists to participate in secondary market markups/profits suggests some interesting options to leverage the core ticketmaster franchise.

 

 

 

With the exit of former chairman Irwin Azoff and the naming of Greg Maffei as chairman, Liberty Media is now a 25% holder and providing "adult supervision" from a VERY interested party.  CEO Michael Rapino now is sole CEO and has the opportunity to deliver after making all the right noises about the refocused company strategy.

 

 

While the company cites a higher number, we estimate free cash flow to be about $200M /year, ar a bit over $1 /share after growth capex required to drive the AOI acceleration.  In the valuation and $19 tgt above, i used 2 years of FCF at the same $200M.

 

Expect EBITDA progression of $500M in 2013, $550M in 2014 and close to $600M in 2015 as new platform cost saving, mobile comerce apps and especially secodary ticket sales kick in.  This is roughly in line with mgmt's staed goal of adding $150M to AOI over the next 3 years.

 

Good franchise, getting better.  Significant management/board upgrade.  New market opportunity in secondary ticketing.  Future benefits from long overdue systems upgrade.  Reasonable valuation on current outlook, upside from EBITDA grwoth and free cash flow as management delivers.

 

 

 

 

 

 

 

 

 

 

System upgrade/relaunch in July 2013 will drive secondary market sales and rapid uptake of mobile usage and monetization.

Continued operational and revenue upside following recent management and board changes.