NEW YORK (AdAge.com) -- Live Nation, the world's largest concert promoter, and Ticketmaster, the world's leading concert-ticketing company, agreed to merge late yesterday to form Live Nation Entertainment.
The companies will be combined in a tax-free, all-stock merger of equals, with an estimated enterprise value of about $2.5 billion. Live Nation and Ticketmaster shareholders will each own approximately 50% of the combined company. Both companies expect to generate approximately $40 million in operating synergies by combining their ticketing, marketing data centers and back-office functions.
The news comes less than two months after Live Nation spun off ticket sales for its venues from Ticketmaster for the re-launched LiveNation.com. In a statement, Barry Diller, chairman of Ticketmaster Entertainment, said, "I'm extremely glad we could reunite with this combination. No different from any other industry, the challenges are all around every aspect of live entertainment. Being able to put Live Nation and Ticketmaster into an equal partnership will allow the companies to get through this difficult period and be able to expand live entertainment options to audiences throughout the world."
News hit last week
Rumors of the merger circulated last week after The Wall Street Journal reported the companies were close to combining assets. Live Nation declined to comment but announced new partnerships with Starwood Hotels and CBS Radio, two deals representative of the company's aim to own every aspect of the concert experience, from ticketing and hospitality to event sponsorships and the artists themselves. The company has racked up a number of high-profile "360 deals" with artists such as Madonna, Jay-Z and Shakira, in which Live Nation will have exclusive ownership of the artists' ticketing, merchandising and music-distribution rights.
In a note issued to investors last Thursday, Benjamin Mogil, a media analyst at Thomas Weisel Partners in San Francisco, gave the proposed Live Nation-Ticketmaster merger a neutral review.
"For Live Nation, the deal is a positive, as despite their internalizing of ticketing, they have not been able to gain ticketing rights for shows they promote at venues for which they do not have the ownership of or the operating leases for," said Mr. Mogil, citing many of the major indoor sporting arenas, such as Madison Square Garden, as examples. "For Ticketmaster, the deal is somewhat mixed as it is clear that its market position has eroded considerably between the loss of the Live Nation contract, the loss of at least some [music-event company] SMG venues/tickets, and the potential for more contract losses at Live Nation became increasingly aggressive in its pricing for new contracts."
Majority market share
A Ticketmaster merger would give Live Nation roughly 75% of the concert ticket market, according to analyst estimates, and would be the first major merger under the Obama administration. (White House Chief of Staff Rahm Emanuel's brother Ari Emanuel sits on Live Nation's board of directors.)
The merger also comes at a time of inflated ticket prices and declining attendance for the concert industry. According to grosses reported to Billboard Boxscore, global ticket sales were up almost 13% in 2008 over 2007, totaling just under a record $4 billion worldwide. Total shows, however, were down 6% with flat concert attendance worldwide. North American concert attendance decreased by almost 2%, following a 20% drop-off in 2007. Average North American box-office gross, however, was up 18% and average attendance was up 6.3%, a sign that hiked prices on top-grossing tours such as those of Bon Jovi, Madonna and Bruce Springsteen and the E. Street Band helped contribute to record revenues.
The proposed merger has already been the subject of scrutiny from top artists such as Bruce Springsteen, who called the combined company a "near monopoly situation in music ticketing" on his website. "The abuse of our fans and our trust by Ticketmaster has made us as furious as it has made many of you. We will continue to do our utmost now and in the future to make sure that these practices are permanently curtailed on our tours," Mr. Springsteen wrote.