Live Nation Entertainment - The Largest Entertainment Company in The World

Company Overview

Live Nation Entertainment is a concert promoting company and is the largest live entertainment company in the world. They do face competition from other promoters and entertainment companies such as AEG, but this hardly has any effect on their popularity. Live Nation has close to 580 million fans in 40 different countries worldwide and has access to 220 venues that include the popular House of Blues and Fillmore’s across the United States. Live Nation is not just a promoter. They also own artist management companies as well as a ticket selling company, Ticketmaster. According to their Sec – 10k, their strategy is to sell more tickets which will in turn increase revenues at live shows, along with getting more sponsorships and putting on more live shows.

Live Nation is headquartered/has offices in Beverly Hills, California. It was incorporated in Delaware on August 2nd, 2005 in order to receive liabilities and assets from Clear Channel Communications. It then separated from Clear Channel by December of that year and became known as Live Nation. In January of 2010, Live Nation merged with Ticketmaster and became known as Live Nation Entertainment. Live Nation operates in Financial Quarters.

Live Nation works under three main reportable segments that make up the live entertainment industry. These are: live music events (concerts, festivals, etc.), venue operations, and management, sponsorship/advertising and ticketing services. The reportable live music segment includes concerts, operation management and music festivals and generated 76.3%/$7.9 billion of the total revenue. The revenue was generated by volume of ticket sales, the number of concerts put on, revenue from concessions, ticket resale, sponsorship, festivals, camping passes, etc. The sponsorship and advertising segment made up 4.3%/$45 million of the total revenue.

The higher revenue was found in the second and third quarters because the main sponsorship revenue is from festivals, which mainly happen during the second and third quarters of the fiscal year. Ticket sales made up 20.7%/$2.1 billion of the total revenue. Tickets were sold through websites, phone apps., call centers and outlets and 292 million were sold through Ticketmaster. They are audited by Ernst and Young, located in Los Angeles, CA.

Assets

On their balance sheet, Live Nation reports numbers in thousands. The first thing reported is cash and cash equivalents. Their primary fund sources for short term are cash flows from operations and borrowing. The primary cash flows for long term are cash flows from operations and long-term borrowing. Cash was used for purchases of sales, acquisitions, and expenditures. On the balance sheet, it reflects cash and cash equivalents of $1.8 billion. The cash and cash equivalents balance of $769.4 million and $591 million of cash received that includes the face value of tickets sold. They also recognize an accounts receivable which is reported as less their allowances of $32,755 and $29,634 from 2016 and 2017, prepaid expenses of $546,713 and other assets (inventory, etc.) at $55,403 bringing the total current assets to $3,152,742.

For plant assets, they recognize land, buildings and improvements of $955,937 in 2017, computer equipment at $610,924, furniture and other equipment at $312,962 and construction at $133,906 which brings the total to $2,013,729. They do have accumulated depreciation of $(1,127,793) which brings the plant assets down to $885,936. Lastly, Live Nation recognizes intangible assets. These intangible assets include a net of definite intangible assets of $729,265 and indefinite intangible assets of $369,023. They also have a goodwill of $1,754,589. Everything combined brings the total assets to $7,505,263.

Liabilities

Live Nation has an accounts payable to clients of $948,637, a 77% increase from 2016, an accounts payable account of $85,666, accrued expenses of $1,109,246, deferred revenue of $925,220, net of current long term debt of $347,593 and other current liabilities of $160,638, bringing the total to $3,577,000. Since they all fall under the current liabilities, they have to be paid within the year. The long-term liabilities include a net long-term debt of $1,952,366, deferred income taxes of $137,635, and other long-term liabilities of $174,391.

Equity

Equity is composed of stockholder’s equity which includes preferred stock with a par value of $.01, common stock with a $.01 par value totaling $2,069, an additional paid-in capital of $2,374,006, losses of $(1,079,472) in accumulated deficit, $(6,865) in the cost of the shares held in the treasury and accumulated other losses of $(108,542). This brings the total equity plus noncontrolling interests to $1,418,144 and brings the combined total of liabilities and equity to $7,505,263.

Income and Expenses

The total revenue for the year ended Dec. 31, 2017 was $10,337,448, the highest of all time. The concerts, advertisement and ticketing recorded double digit growth. The overall revenue increased by $2 billion/23% compared to 2016. The concert segment had the largest revenue increase at $1.6 billion, a 25% increase compared to 2016. Concert attendance grew 21% and festival attendance by 14%. Sponsorship and advertising saw an increase in revenue of $67.5 million, an 18% increase from 2016. Ticketing increased by $315.9 million, a 17% increase from 2016. The operating income was $91,397. The concert segment operates year-round but gets higher revenue during the second and third fiscal quarters. The revenue and costs are recognized when the event occurs. In ticketing, if it is not a Live Nation event, revenue is recognized when a ticket is sold. If it is a Live Nation event, revenue is recognized when the event occurs.

The operating expenses include; direct operating expenses of $7,748,791 (an increase of $1,100,00 compared to 2016), selling and administrative expenses of $1,907,723, depreciation expense of $455,534, a loss on operating assets of $(969) and corporate expenses of $134,972. Direct operating expenses include the cost for the artist to perform, the cost to put on the production and marketing expenses. They have an interest expense of $106,722 and a loss on extinguishment of debt for $1,048. They experienced a net income loss of $(7,774) and a comprehensive income loss of $(75,939). They also had to settle a legal dispute and as a result, operation declined by $1,100,000. They use a multi-step income statement.

Live Nation employs 8,800 full time employees worldwide. There are 5,700 from North America and 3,100 international. They employ 8,600 to work in their operations department and 200 to work in the corporation department. They also employ seasonal and part time employees for concerts and festival. There are usually 12,500 seasonal and part time employees but they employed 28,000 in 2017. The employees are subject to collective bargaining agreements and the union agreement has a term of 3 years.

Ratios

Live Nation has a very low return on assets of .001%. This was computed by dividing the net income, $7,770,000 by the average total assets, $7,504,263,000. This shows that for every dollar Live Nation puts towards its current assets, they earn $.001 in revenue. This shows that Live Nation is receiving little income. They have a debt ratio of 81.1% for 2017. This was calculated by dividing their total liabilities, $6,086,119,000 by the total assets $7,504,263,000. The debt ratio is relatively high and shows that the company is leveraged and at more of a financial risk than they would be if it were lower.

The current ratio for Live Nation is 88.1%. This was calculated by dividing their current assets, $3,152,742,000 by current liabilities, $3,577,000,000. Since this number is under 100%, the current liabilities are more than the current assets and shows that Live Nation might not be able to pay off its debt if it were due right now.

Risk factors

Live Nation Entertainment is dependent on getting popular artists to perform at events. They might not be able to respond the consumer preferences for artists and if they don’t get the preferred artist, could have decreased demand for tickets. There are also some artists who don’t like touring, just like there are only a few artists that can headline a tour/show and sellout. If Live Nation is unable to come to an agreement with those artists, their business could be affected. If the artist doesn’t perform as frequently as they would like, they could lose money.

The ticketing segment completely relies on other parties to create the tickets and anticipate the demand the consumers will have for the tickets. If they incorrectly anticipate demand, there could be a loss in revenue. Ticket sales depend on online computer systems and if there’s an error or virus in the system, it could cause a huge backup and tickets would be unable to be sold, causing a decrease in revenue. Revenue also depends on the relationships between artists, agents, promoters, clients and changes in these relationships could affect the company’s financial conditions, operations and business. If there is high competition for artists, venues, etc. they may not be able get these artists or venues to increase revenue and might experience a loss. Security threats and breaches could cause a drop in revenue because people would be unwilling to buy tickets to an event that they feel unsafe at. There are also the risks of natural disasters and bad weather.