The concert ticket market is ‘dramatically underpriced’… and 3 other things we learned from Michael Rapino on Live Nation’s Q1 earnings call

Credit: Live Nation/press
Live Nation CEO, Michael Rapino

Looking at media coverage over the past year, one could conclude that Ticketmaster’s parent company, US-headquartered entertainment company Live Nation, is under siege.

It’s facing a US Department of Justice antitrust investigation (not its first), a number of legislators are pushing consumer-rights bills that would affect its business model, and – perhaps most importantly – many music fans have expressed anger at Ticketmaster for what they see as excessive ticket pricing.

Yet Live Nation’s executive leadership certainly doesn’t seem to be worried. In fact, they’re elated about the company’s latest earnings report, which showed revenue up a stunning 73% YoY in Q1 2023, to USD $3.1 billion worldwide across all divisions.

Quarterly revenues from Ticketmaster itself jumped 43% YoY, to $677.7 million, on sales of 145 million tickets. The ticketing division reported “record levels of activity across all markets.”

On the touchy issue of ticket prices, CEO Michael Rapino sees things quite differently from the people complaining on social media: When you look at demand, he argues, ticket prices are still much lower than they could be.

MBW listened in on the company’s latest earnings call with analysts, held last Thursday (May 4). Here’s what we learned:

1: The concert ticket market is still ‘dramatically underpriced’

Live Nation’s execs made it clear on the earnings call that they see concert ticket prices as having plenty of potential to rise. The main indicator of that, in their view, is the “secondary” market – that is, the market for resale tickets, serviced by scalpers and reselling services.

“Average secondary ticket prices remain close to double that of a primary ticket, continuing to show the extent to which concerts and other live events remain priced below market value,” said Joe Berchtold, Live Nation’s President and Chief Financial Officer.

While this approach is unlikely to satisfy the angry Bruce Springsteen fans who complained on social media about ticket prices for The Boss’s tour rising as high as $5,000, Rapino said that artists and live entertainment firms like Live Nation alike are beginning to realize how much money they’re leaving to the secondary market.

“We’ve seen the artists looking at their ticket price and [ask] ‘How do we bring the prices down in the back, bring the prices up in the front, so we can sell out and make sure everyone gets a ticket at an affordable price?’” he said, in response to a question about pricing from Morgan Stanley analyst Benjamin Swinburne.

“But let’s not let [the] secondary [market] run away with the front row. So we think that we’re still dramatically underpriced versus demand, and you see that every day on the secondary [market].”

Live Nation’s Q1 earnings seem to back up that assertion. Ticket prices rose 16% YoY, even as “cost pressures are declining and our operational cost per fan is down across our indoor buildings,” in Berchtold’s words.

He added: “We are forecasting that cost increases will remain below general inflation levels for our festivals and amphitheaters.”

“When fans attend shows they continue spending to enhance the experience.”

Michael Rapino, Live Nation

At the same time, Live Nation’s leadership is aware of the controversy about rising ticket prices, and they stressed efforts to create a wider range of pricing, which would include lower-priced tickets for concerts, as well as higher-priced tickets for premium seats and experiences.

“As a further initiative to make tickets affordable to all fans, we launched today our Summer Concert Week, with $25 tickets available to nearly 4,000 shows,” Rapino said during the call.

This year’s Summer Concert Week will run from May 10-16 and will feature 3,800 shows across North America, with acts including Big Time Rush, Janet Jackson, Maroon 5, Shania Twain and Snoop Dogg.

Rapino stressed that the low ticket price is just the starting point for Live Nation’s revenue from these shows.

“When fans attend shows they continue spending to enhance the experience,” he noted.

2: There’s a great deal of opportunity in the premium market, and Live Nation is jumping on it

In keeping with the company’s strategy to capture both the high end and the low end of the concert market, Live Nation is expanding its premium offerings for concertgoers.

We’re not talking about simply selling pricey tickets – the company is looking to sell premium “experiences” to committed fans.

To that end, among other things, Live Nation recently launched Vibee, a “music-led destination experience company” that caters to fans through all-in packages that include such things as exclusive concerts in intimate venues, cruises and hotel takeovers.

Among Vibee’s offerings are Curated Destination Experiences – “extraordinary multi-day events with today’s top artists in the Bahamas, Mexico and more” – as well as Festival Integrations such as EDSea, “a premium cruise and music festival experience based upon the colorful paradise of the world’s largest electronic dance music festival, Electric Daisy Carnival.”

“[W]e think there’s a great opportunity… to launch more products and services that can provide a better premium experience for the customer.”

Michael Rapino, Live Nation

The company launched with a VIP concert and hotel experience for U2’s residency at the Sphere in Las Vegas this fall.

“I’ve said many times [that] this is an industry that has done a great job of being [scaled to general audiences], but not done a great job of doing a premium experience for customers,” Rapino said on the earnings call.

“The sports [industry] and new arenas and stadiums are doing a great job on that. But as an industry, Live Nation and the music industry has not done that. And we think there’s a great opportunity overall to launch more products and services that can provide a better premium experience for the customer.”

3: Live Nation isn’t worried about the consumer legislation being proposed in the US

The social media outcries about ticket pricing have gained the attention of US legislators, and some are now moving forward with bills to change how ticketing is handled.

One such piece of legislation is the TICKET Act, introduced last month by Republican US Senator Ted Cruz of Texas and Democratic US Senator Maria Cantwell of Washington. That bill would require “all-in” ticket pricing – meaning ticket sellers would have to advertise the total, final price of a ticket.

Currently, tickets are subject to a number of add-ons such as a facility fee, a processing fee and a service fee. The controversy over these fees came to a head earlier this year, when fans of The Cure, who had been promised $20 tickets, found that the fees added on to the ticket price in some cases were higher than the ticket price itself.

Asked about the legislation by Daivd Karnovsky of JPMorgan, Rapino said that Live Nation is in support of all-in pricing for tickets – echoing comments that Rapino made last month during an interview on the Bob Lefsetz Podcast.

“Through all of the noise, most people are ending up – in the industry and politics – at exactly where we are” on the issue of fair ticket pricing, Rapino said.

“Whether it’s all in pricing, cleaning up deceptive practices in the secondary [market], giving artists more tools – those seem to be all the common themes coming out in all of these different bills, which we’re fully supportive of.”

Rapino continued: “So this is not [Live Nation] versus any of these [bills]. We are aligned to all of these bills. We think all of these bills – we’ve said continually for a long time – [are] better for our business because it helps us deliver a better on-sale and fan experience. So right now, it’s the Wild West. We’re doing our best, but any bills [of this nature] that start putting some better regulations and controls around the experience are going to help our overall business.”

However, when it comes to legislation that would end the practice of venues giving a monopoly to one ticket seller, Live Nation’s execs sound less supportive – and doubtful that such legislation would pass.

“In today’s Congress… any bill that doesn’t have bipartisan support out of the gate has its challenges.”

Joe Berchtold, Live Nation

A bill introduced last month by Democratic US Senators Amy Klobuchar of Minnesota and Richard Blumenthal of Connecticut would “help restore competition to live event ticketing markets by empowering the Federal Trade Commission to prevent the use of excessively long multi-year exclusive contracts that lock out competitors, decrease incentives to innovate new services, and increase costs for fans.”

“These are the venues’ rights,” Berchtold said in response to a question from Brandon Ross of LightShed Partners.

“And the venues have been figuring out, over time, how [they can] best monetize certain rights they have. What they have determined is the best way to monetize those rights in the US is by auctioning them off for exclusivity. So I think… were there to be any changes in exclusivity, it’s venues that would be hurt the most, because they would lose the ability to fully maximize their rights.”

Berchtold cast some doubt on whether the bill could pass through Congress: “In today’s Congress… any bill that doesn’t have bipartisan support out of the gate has its challenges.”

Nonetheless, the analysts on the call weren’t quite ready to let the issue go. Stephen Glagola of TD Cowen noted that in many markets outside the US, venues allocate tickets to different sellers, without any one seller getting exclusivity. Would that model work for Ticketmaster?

Rapino responded that, in fact, many of those markets are headed in the same direction as the US – towards exclusivity for ticket sellers.

“International is moving more towards an exclusive model… As the new buildings are getting built, they are looking over here [to the US]  and realizing that this is another revenue stream that they should be leveraging. So I look at international probably moving closer to the US model than the US model moving to the international model, because I think they’re now realizing that they’ve been undervaluing their exclusive ticketing rights for their venues,” Rapino said.

But he made it clear that Ticketmaster wouldn’t have a hard time competing in a market where it can’t get the exclusive rights to sell tickets to a particular venue.

“We do really well [in international markets] because we always will do well in an open market [where we have] the best technology. We sell more tickets than the competitor. So if you’re [in] an open, allocated market and you’re going to allocate to us and others… we’re going to be the one that probably sells the most tickets for you.”

4: Musical acts are ‘truly globalizing’ right now

The music industry has been globalized for some time – multinational music companies like Sony Music Entertainment, Universal Music Group and Warner Music Group, for instance, operate divisions all over the world.

But the same couldn’t really be said of musical artists, which have remained siloed within national or regional boundaries, with only certain artists from the Anglo-American world becoming globally popular.

Right now, that’s changing, Rapino said on the investor call, and he believes it’s largely thanks to social media and digital streaming providers (DSPs).

“This is the real breakout year where the world and the consumer are truly global. And now you can see artists coming from Latin America and Korea and becoming global superstars.”

Michael Rapino, Live Nation

Talking about the issue of whether there would be enough new artists in the music world to support rapid growth in the concert market in the years ahead, Rapino said a new supply of artists from all over the world would keep crowds coming to concerts.

“We’re… seeing this encouraging new supply strategy where for many years, it was all about US- or UK-based artists that filled the charts and filled the stadium. And most other talent was domestic,” Rapino said.

“It might have been big in Canada, it might have been big in Asia, but it didn’t travel. This is the real breakout year where the world and the consumer are truly global. And now you can see artists coming from Latin America and Korea and becoming global superstars. That didn’t happen for the last 30 years. It was a very… US- or UK-controlled industry.

“So we think that alone gives the next kick to the supply chain for the next 10 years of young talent… It will be from India, South Africa, it’s going to be everywhere, overnight finding their way to TikTok and Spotify and other places to become these global stars that are still in arenas and stadiums out in their markets.”Music Business Worldwide

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