New holding - Live Nation Entertainment

Written by Gareth Campbell

Last week we built a new position in Live Nation Entertainment. The business, as it’s known today, was created in 2010 when Live Nation, the world’s largest concert promoter, merged with Ticketmaster, the world’s biggest ticketing business.

The result is a high-quality business model, which we believe has significant room to grow.

Attractive industry dynamics

The live music industry is an attractive area for investment. It’s grown at 8% a year for almost 20 years, and we think it’s well placed for future growth, although there are no guarantees.

It benefits from barriers to entry because technology can’t replicate the experience of going to see your favourite singer or band play live. That’s unique within the consumer business sector, where existing businesses are fighting to stay relevant amidst the onslaught of tech disruption and competition.

The industry has also benefitted from a change in how artists are paid. Historically they used to make money from album sales and royalties but now over 80% of their income comes from touring, where there’s big money to be made. Ed Sheeran’s 2018 tour, for example, grossed $432m.

Unsurprisingly, these sums ensure there’s a constant stream of artists who want to go on tour, so you can stop wondering why Rod Stewart, at 75 years young, will be performing at 20 venues across the UK in 2019.

Live Nation’s strong position

Live Nation’s events attract four times as many fans as their nearest competitor, meaning artists call Live Nation first when they want to tour or promote a show. By attracting superstars, who sell the most tickets, Live Nation can afford to invest in cutting edge technology to create the best experience for fans, which leaves them wanting more from artists who, in turn, ask Live Nation to set up more shows.

And demand for live music looks set to stay. In fact, this year’s Glastonbury sold out in just 36 minutes. As consumer spending continues to shift from ‘things’ to experiences, supply of concerts and events can’t keep up with demand. Which suggests the number of fans attending Live Nation events should at least grow in line with what we’ve seen over the years to this point. Although there are, of course, no guarantees.

And importantly for us, we believe the profit per fan will increase as Live Nation adds new ways to improve its merchandising and advertising business.

Not just the ticket

Ticketmaster is the largest ticketing platform in the world with 30% global market share. Over the last 8 years they’ve expanded from 15 to 25 countries and have consistently increased market share thanks to their best in class product and services.

At times ticketing businesses have been criticised because of their role in enabling ticket touts to inflate prices and take large fees in the secondary market. We believe Ticketmaster will be seen as the solution to this problem as digital ticketing makes it easier to link a ticket to the individual who bought it, limiting the ability of touts to fleece fans. Because Ticketmaster receive servicing fees every time a ticket is bought or sold, this change is good for both consumer and Ticketmaster.

Scope for growth

Live Nation has a huge advantage versus other consumer businesses looking to expand into international markets as the local demand for their product already exists. They don’t need to promote the Rolling Stones or Madonna or Drake, they just need to organise the event and bring the artist.

Once they have enough events in one country they can lease a venue, acquire local suppliers, bring in their own ticketing operations and begin to recreate their business model at a local scale. No other competitor can replicate this currently. That’s why we see Live Nation as a long term winner in this industry. Like any stock market investment, the fund will rise and fall in value so you could get back less than you invest.