Friday, April 1, 2011

Live Nation and Warner -- boom, like that?

by Emmanuel Legrand

So Live Nation is apparently interested in acquiring parts of Warner Music Group… 

The first question that pops to mind: Where’s the money? The world’s largest live music company is crippled with debt and its share price has seen healthier days.

But if you read the bottom end of the Post story, it tells us that in a February interview with Bloomberg, Live Nation Entertainment’s Chairman Irving Azoff said that he was teaming with Liberty Media Corp’s chief John Malone and looking for potential targets. Malone has the money and the clout to leverage even more money, so with that configuration (Azoff spending Malone’s money) it is not impossible to imagine that anything is possible.

The other question is, why would they only be interested in the recorded music side of Warner, as implied by the piece in the Post (but also mentioned in the Wall Street Journal)? Have they have not learned yet that the best way to securitise any acquisition in the music biz is through the publishing unit? And Live Nation, which makes the bulk of its revenues from, well, live performances, should know that performances are a big part of music publishers’ revenues. But then it’s only one story, and they may have it wrong.

If you think about it, a combo of Live Nation, Ticketmaster, Front Line Management and Warner Music would create the real 360-degrees company, and a real force in the business. The new company would be loaded with debt, but its own existence would completely reset the centre of gravity of the business around one key player, and leave the others – Universal included – trailing behind.

Unless Universal and its parent company Vivendi react even more swiftly and boldly and make a bid for Live Nation. That too, would make sense. In a market where all the players need to redefine their business models, combining the largest music company with the largest live/artist company would give Universal incomparable power.

That, of course, is only speculation, but 2011 is the year where we will see the shape of the industry change seismically. With both EMI and Warner up for grabs, the games’ open. And you cannot expect Universal, with Lucian Grainge at the helm, stand still and do nothing.

To paraphrase Mark Knopfler, anything can happen, boom, like that.

“It’s dog eat dog/rat eat rat/kroc-style/boom, like that”. 

Update (21 September 2011)
Universal Music and Live Nation Entertainment announced on Sept. 19 that they were forming a joint venture to manage artists. The venture will function under Live Nation's Front Line Management Group. We are certainly far away from a take over by Universal of Live Nation, but this is a first attempt from these two key players, and leaders in their respective fields, to work together. History will tell if these ties will get tighter to a point when the two companies will consider merging. But it is certainly a step in that direction...

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