Business Overview and Segments
The behemoth of the live music industry – Live Nation. They are so dominant that the biggest risk to their success is being broken up due to having monopolistic control. It is a cleverly vertically-integrated business. What does that mean? It means that each of its segments helps the other. It has three segments;
- Concerts – the sales they make from running all their concerts and music festivals. Pretty much every major concert in the US is run by Live Nation. As for music festivals, they own; Lollapalooza, Bonnaroo, Reading, Sasquatch!, Austin City Limits, Bluesfest, Falls. This segment also includes their artist management services – pretty much doing all the leg-work for promoting an artist’s concert.
- Ticketing – this is Ticketmaster. The sales here come from the ticket fees they charge for their aforementioned concerts. If you think this is petty change, the average total ticket fee comes to around 27% of the ticket price.
- Sponsorship and Advertising – this is advertising dollars that are spent on the concerts and the ticketing website.
So here’s the vertical integration – they recruit artists through their artist management, using their record of looking after essentially every major artist that exists or has existed to lure the artists in. They also have exclusive rights to book out some of the most famous (and biggest) venues in the world – another factor that lures artists in. After they lure the artists in, they then do all the work for operating and promoting that artists concert. They then sell the tickets to these concerts through their platform Ticketmaster – the major profit source for the whole company. They then receive all the sponsorship and advertising dollars for the event. So you can see that from start to finish, Live Nation takes care of the whole package.
Moat
Network Effects – the more big, successful artists who use Live Nation, the more Live Nation earns a good reputation amongst artists, the more new artists who choose to opt for Live Nation.
Patent – they own the rights to the most famous and biggest venues in the world.
Key Facts and Figures
| Risk of Bankruptcy | Low |
| Last Year’s Growth | 15% (Moderate-High) |
| ROIC (Company Quality) | 10% (Moderate) |
| Free Cash Flow Margin (Company Strength) | 14% (Moderate-High) |