Live Nation Entertainment, Inc. (NYSE:LYV) – June 2016

Article Title: “Live Nation: The Best Way To Invest In Live Entertainment, But At What Cost?”

Summary Bullets

Strong tailwinds in the demand for live entertainment will drive continued strong industry

growth

Live Nation’s unique ecosystem of venue management, ticketing, and event promotion

best positions the company to capitalize on the growing demand for live shows

Questionable accounting practices and a high valuation multiple have created cracks in

the bull argument that potentially make Live Nation uninvestable or even an attractive

short

Live Nation is likely slightly over valued at these levels but is probably not a short due to

its structurally growing end markets and monopolistic industry position

Live Nation is Benefiting from the Growth in Live Entertainment

Live Nation is the global leader in live music. The company is vertically integrated to manage

the entire live music ecosystem from artist and venue management to ticketing and promotion.

This live entertainment ecosystem is extremely well positioned to benefit from ongoing trends in

the music industry and the desires of fans to experience live entertainment.

Trend #1: Music artists increasingly rely on playing live shows to make a living

The advance of digital music has disintermediated the record industry. First Napster and iTunes

reduced the price of a song to 99 cents. Now with music streaming, musicians make less money

than ever from recording music. According to Nielsen, album sales for the first 3 quarters of

2015 were down 6.4% which can be attributed to the 96% growth in music streaming (source:

http://www.billboard.com/biz/articles/6722602/q3-soundscan-report-taylor-swift-and-bruno-

mars-dominate-streaming-surges).

As a result of this shift, musicians are recording less music (source:

https://www.pwc.com/gx/en/global-entertainment-media-outlook/assets/2015/music-key-

insights-1-growth-rates-of-recorded-and-live-music.pdf) and scheduling more tour dates (source:

http://blogs.wsj.com/speakeasy/2014/01/10/concert-industry-hit-new-highs-in-2013/). For

example, according to Billboard, Taylor swift made $61 million from touring in 2015 compared

Capitalization Financials Valuation

Market Cap $4,515 2015 Sales $7,246 EV/2016E Sales 0.7x

Cash (1) $1,699 2016E Growth % 5.8% EV/2015 EBIT 36.5x

Debt $2,037 2015 EBIT $146 EV/2016E EBIT 32.0x

Enterprise Value (2) $5,337 2015 Margin % 2.0% Price/2016E EPS N/A

Note: Capital IQ as of 6/27/16. Based on analyst consensus estimates.

(1) Includes client cash of $663 million.

(2) Includes minority interest of $484 million.

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to $600k made from streaming (source:

http://www.billboard.com/articles/news/list/7356755/billboard-top-40-money-makers-rich-list)

Trend #2: In the experience economy, music fans will go to more shows

As disposable incomes grow, a greater share of incomes are being devoted to experiences rather

than manufactured products. According to research from Eventbright, Millennials are the largest

generation by population and are more likely to spend money on experiences vs. physical goods

(source: https://eventbrite-

s3.s3.amazonaws.com/marketing/Millennials_Research/Gen_PR_Final.pdf). According to the

report, there has been a generational shift in attitudes regarding what makes people happy. For

younger generations, happiness isn’t as focused on possessions or status but rather on living a

meaningful and interesting life full of adventure and social interaction.

Key findings from the report:

- More than 3 in 4 millennials (78%) would choose to spend money on a desirable

experience or event over buying something desirable, and 55% of millennials say they’re

spending more on events and live experiences than ever before

- More than 8 in 10 millennials (82%) attended or participated in a variety of live

experiences in the past year, ranging from parties, concerts, festivals, performing arts and

races and themed sports—and more so than other older generations (70%)

- Nearly 8 in 10 (77%) millennials say some of their best memories are from an event or

live experience they attended or participated in. 69% believe attending live events and

experiences make them more connected to other people, the community, and the world

- Nearly 7 in 10 (69%) millennials experience FOMO. In a world where life experiences

are broadcasted across social media, the fear of missing out drives millennials to show

up, share and engage

- Since 1987, the share of consumer spending on live experiences and events relative to

total U.S. consumer spending increased 70%

Trend #3: The internet has globalized music culture and improved ticket distribution

Among other changes inflicted to the music industry, the internet has globalized music culture.

While there are still regional pop stars, the biggest music stars are famous everywhere and fans

across the world want to see their live performances. 30% of Live Nation’s revenue is from

outside the U.S. and this business is growing faster as a result of a growing number of tour dates

being scheduled internationally.

CEO Michael Rapino commenting on this trend at an investor conference on September 28,

2015: “Thanks to Facebook, Internet, YouTube, et ceteras, the gatekeepers are unlocked now. So

when we look at a Rihanna tour going out next year, we can take Rihanna to Colombia now and

sell out a stadium and make the same economics as we can in Detroit. Why? Because that 19-

year-old in Colombia, on YouTube and et cetera, now knows who Rihanna is, knows her on

Facebook, follows her. So you got a global consumer base that the demand has grown.”

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The internet has also enabled the industry to sell more tickets cost effectively. Historically as

much as 40% of concert tickets went unsold. A big reason for this is lack of consumer

awareness. In many cases fans just didn’t know a band they liked came to town. Through social

media and mobile technology, Live Nation has an opportunity to greatly improve sell-through

rates. This represents a significant growth opportunity in developed markets.

Live Nation Company Overview

Live Nation operates four business segments which all work synergistically together: Concerts,

Ticketing, Artist Nation, and Sponsorship & Advertising.

Revenue Mix EBITDA Mix

Concert67%

Ticketing22%

Artist Nation

6%

Spon & Ad 5%

Concert8%

Ticketing53%

Artist Nation

4%

Spon & Ad 35%

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Concert Segment

The concert segment is involved with the global promotion of live events at Live Nation’s

owned/operated venues. As of year-end 2015, the company operated 167 venues including 36

venues outside of the United States. Some of Live Nation’s owned venues and festivals include

The Fillmore, House of Blues, Bonnaroo, and Lallapolooza.

The concert segment is the anchor to LYV’s live event ecosystem because it ensures that the

company can book artists, manage ticketing, and sell advertising at its operated events which

represent a significant share of venues in North America. However, the venue management

business is a tough business because it is expensive to maintain sites and put on shows and as a

result the segment is not profitable but serves as a loss leader for the company’s other profitable

segments.

Over the past 5 years the segment has posted strong top-line growth despite uneven growth in the

number of events per year. Even with this solid growth, the segment has been unable to

meaningfully narrow its operating losses. Given the high fixed costs and discretionary demand

drivers for spending on concerts, the segment could be a huge cash drainer during a down

market.

The current outlook for the segment is overall mid-single digit growth with 20%+ growth in

international shows.

Concert Segment Historical Financials

2010 2011 2012 2013 2014 2015

Revenue $3,438 $3,506 $3,870 $4,517 $4,727 $4,965

Growth % 2.0% 10.4% 16.7% 4.6% 5.0%

Direct Expenses $2,910 $2,946 $3,275 $3,830 $4,017 $4,221

SG&A $525 $536 $570 $633 $666 $690

EBITDA $3 $24 $26 $55 $44 $54

Margin % 0.1% 0.7% 0.7% 1.2% 0.9% 1.1%

D&A $139 $132 $146 $132 $115 $147

EBIT ($136) ($108) ($120) ($78) ($71) ($93)

Margin % (3.9%) (3.1%) (3.1%) (1.7%) (1.5%) (1.9%)

Corp. Adj. $14 $41 $10 $55 $57 $75

Adj. EBIT ($150) ($149) ($130) ($133) ($129) ($168)

Key Operating Metrics

Total Events 21,090 22,244 21,938 22,850 22,801 25,519

Growth % (2.8%) 5.5% (1.4%) 4.2% (0.2%) 11.9%

Revenue / Event $163,032 $157,624 $176,423 $197,689 $207,310 $194,561

Note: Adjusted for non-recurring charges.

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Ticketing Segment

The ticketing segment sells event tickets for Live Nation and third-party clients and charges a

service fee. Live Nation is the global #1 ticketing company selling over 530 million tickets in

2015 with a gross total value of ~$11 billion. Approximately 70% of ticket sales are for events

not managed by Live Nation itself.

The ticketing segment is the crown jewel asset of the company. The segment was formed when

Live Nation acquired Ticketmaster in 2010 for $1.4 billion, paying approximately 4x EBITDA

before synergies. This acquisition was highly synergistic to the concerts business and has

allowed the company to develop a strong technological infrastructure for managing and

promoting events.

At the time of the acquisition, Ticketmaster had experienced several years of declining profits

and 1 year of declining sales. LYV’s management helped to turn around the business by

transforming it from an enterprise management service for venue operators into a consumer

facing online brand for promoting live events. LYV then rebuilt the Ticketmaster technology

from the ground up to make the platform internet centric and mobile friendly.

Today, Live Nation is still investing in the platform to expand its scale and functionality. In

recent years, LYV launched TM+, a secondary market for selling tickets, to compete with

Stubhub. LYV has also invested in D-I-Y platforms to compete with services like Eventbright.

These new ticketing services are small but fast growing – the secondary business has had 8

consecutive quarters of 20%+ growth.

Some analysts view the emergence of DIY and secondary ticketing as disruptive threats to

Ticketmaster’s primary business. However, I believe these developments enhance the core

Ticketing Segment Historical Financials

2010 2011 2012 2013 2014 2015

Revenue $1,089 $1,319 $1,374 $1,408 $1,557 $1,640

Growth % 21.1% 4.1% 2.5% 10.6% 5.3%

Direct Expenses $513 $618 $651 $672 $763 $809

SG&A $362 $428 $434 $443 $472 $487

EBITDA $214 $273 $289 $293 $322 $343

Margin % 19.6% 20.7% 21.0% 20.8% 20.7% 20.9%

D&A $139 $158 $166 $191 $205 $184

EBIT $75 $115 $123 $102 $117 $159

Margin % 6.8% 8.7% 8.9% 7.2% 7.5% 9.7%

Corp. Adj. $4 $15 $4 $17 $19 $25

Adj. EBIT $70 $99 $119 $85 $98 $134

Key Operating Metrics

Ticket GTV $7,466,957 $8,441,230 $9,146,254 $9,352,673 $10,007,360 $11,008,096

Growth % 13.0% 8.4% 2.3% 7.0% 10.0%

Note: Adjusted for non-recurring charges.

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business for two key reasons. 1) DIY is growing the market by digitizing smaller events which

may have previously used paper ticketing. 2) The secondary market is helping to better price

original ticket sales which could help Live Nation generate more revenue from events.

Finally, Live Nation has a significant opportunity to improve the profitability of its ticketing

segment as it transitions its foreign ticketing technologies onto the Ticketmaster platform.

Currently Live Nation has 15 different ticketing platforms which it uses in different countries

that are mostly legacy systems from acquisitions. Over the next few years the company will be

migrating all of these platforms to Ticketmaster which will enable a lower cost structure and a

universal marketing platform. Management has not provided specific numbers for how much

cost savings exist, but European ticketing/live event peer CTS Eventim (XTRA:EVD) has

operating margins of 18% vs. 8% - 9% for LYV’s ticketing segment which implies significant

room for margin expansion.

From 2013 to 2016, LYV was able to reduce platform costs by $0.35 per ticket by re-building

Ticketmaster’s IT infrastructure. These savings are huge when multiplying that per ticket savings

by the hundreds of millions of tickets sold (~$150 million). Once LYV consolidates its foreign

ticketing technologies, the savings should also be quite material.

The current outlook is for the Ticketing segment is to grow by a mid-to-high single digit rate

over the next year as the company benefits from rapid growth from DIY and secondary ticketing

and the core ticketing business continues to benefit from increased demand for live events.

Artist Nation Segment

Artist Nation provides management services to music artists and other talent in exchange for a

commission on the earnings of these artists. The segment also helps create and sell merchandise

at live events and to retailers and direct to consumers online. Live Nation is the #1 artist

management company and manages many well-known acts including U2, Madonna, and Miley

Cyrus.

Artist Nation Segment Historical Financials

2010 2011 2012 2013 2014 2015

Revenue $362 $393 $400 $353 $389 $434

Growth % 8.6% 1.7% (11.8%) 10.3% 11.5%

Direct Expenses $233 $261 $264 $218 $212 $246

SG&A $94 $113 $100 $103 $138 $160

EBITDA $35 $19 $36 $32 $39 $28

Margin % 9.7% 4.8% 9.1% 8.9% 10.0% 6.5%

D&A $42 $50 $116 $43 $43 $55

EBIT ($6) ($31) ($79) ($11) ($4) ($27)

Margin % (1.8%) (8.0%) (19.9%) (3.1%) (1.1%) (6.2%)

Corp. Adj. $1 $5 $1 $4 $5 $7

Adj. EBIT ($8) ($36) ($81) ($15) ($9) ($33)

Note: Adjusted for non-recurring charges.

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While the segment is relatively small (<6% of sales) and unprofitable, the Artist Nation business

is another synergistic loss leader for the company because it manages headlining artists and

books them to perform at LYV’s owned venues where it profits from high-margin ticketing and

sponsorships. The key selling point for musicians is that Live Nation can guarantee bookings at

the biggest arenas and put together the most professionally produced live shows.

Artist Nation manages over 250 performers which on average will earn at a predictable level

year over year; however, total fees will depend on consumer demand for concert tickets which is

seasonal and cyclical.

Sponsorship & Advertising Segment

The Sponsorship and Advertising segment seeks to better monetize live events through corporate

partnerships. This segment is very capital light because it just requires a sales force to bring on

advertisers and as a result is highly profitable. The key selling point for advertisers is the live

events represent a unique and very engaging off-line channel for branding. Live events are

particularly valuable for their ability to reach millennial audiences.

Management sees digital distribution over the web and on mobile as a key new opportunity. In

recent years Live Nation has formed partnerships with Yahoo!, YouTube, and Vice Media to

craft new digital strategies. For example, in 2015, several Lollapalooza performances could be

watched live on YouTube. Another example would be at large music festivals where branded

mobile apps are used to help event goers view performance schedules and site maps.

The segment is expected to grow at a high-single digit rate over the next year as it continues to

benefit from increased monetization from digital channels and demand for live events.

Sponsorship & Advertising Segment Historical Financials

2010 2011 2012 2013 2014 2015

Revenue $200 $231 $248 $285 $300 $334

Growth % 15.3% 7.4% 14.8% 5.5% 11.1%

Direct Expenses $29 $34 $35 $45 $38 $48

SG&A $31 $33 $38 $46 $50 $58

EBITDA $141 $164 $175 $194 $212 $228

Margin % 70.4% 71.2% 70.6% 68.2% 70.6% 68.4%

D&A $0 $0 $1 $2 $4 $10

EBIT $141 $164 $174 $192 $208 $218

Margin % 70.3% 71.0% 70.1% 67.3% 69.2% 65.4%

Corp. Adj. $1 $3 $1 $3 $4 $5

Adj. EBIT $140 $161 $173 $188 $204 $213

Note: Adjusted for non-recurring charges.

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Financial Review

A deeper financial review brings to light questionable capital allocation decisions and

exposes accounting issues.

Live Nation’s financial picture is fairly mixed. On one hand, the company has had solid growth

despite FX headwinds (constant currency growth was 11% in 2015). On the other hand, the

company is not profitable on a GAAP basis and has tepid returns on capital. To me, this is where

the attractive growth story breaks down.

The low returns on invested capital have been driven by a steady stream of low return

acquisitions and capitalized expenses which have inflated the “invested capital” side of the

equation and have not been sufficiently exceeded by earnings growth. Diving deeper, this low

return on capital has revealed some significant cracks in the bull case.

Despite the incredibly savvy acquisition of Ticketmaster in 2010, LYV’s acquisitions have not

turned out great for shareholders because the company has prioritized market share growth over

profitability. Since 2013, LYV has spent over $400 million in cash on acquiring 14 venues and

tech companies. Over that same period, LYV’s EBIT only grew by $21 million (including

organic growth) while goodwill grew by $246 million. Management tells a good story about

making accretive synergistic acquisitions, but the results have not yet shown through.

Total Company Historical Financials

2007 2008 2009 2010 2011 2012 2013 2014 2015 LTM

Total Revenue $3,635 $4,085 $4,181 $5,064 $5,384 $5,819 $6,479 $6,867 $7,246 $7,333

Growth % 10.3% 12.4% 2.3% 21.1% 6.3% 8.1% 11.3% 6.0% 5.5% 6.9%

EBITDA $106 $123 $148 $326 $395 $417 $483 $516 $544 $546

Margin % 2.9% 3.0% 3.6% 6.4% 7.3% 7.2% 7.5% 7.5% 7.5% 7.4%

EBIT ($11) ($13) $2 $53 $76 $81 $125 $165 $146 $139

Margin % (0.3%) (0.3%) 0.1% 1.0% 1.4% 1.4% 1.9% 2.4% 2.0% 1.9%

Diluted EPS ($1.03) ($4.40) ($1.65) ($1.36) ($0.46) ($0.88) ($0.23) ($0.49) ($0.33) ($0.30)

ROIC (1) (0.5%) (0.6%) 0.1% 1.2% 1.8% 2.1% 3.6% 4.6% 3.6% 4.4%

(1) ROIC = Net operating assets including goodwill and intangible assets / tax-effected EBIT.

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When asked about the company’s acquisition strategy at an investor conference on September

17, 2015, CEO Michael Rapino provided the following response:

“I'm a portfolio guy, so I don't think that, as I said to my Ticketmaster guys, there's a reason

there's, I don't know, 62 versions of Crest at this point, right? You can't serve just one product.

So Ticketmaster should've been in the portfolio business. We are a global ticketing company.

Our job is to transact that ticket. We're going to, obviously, through Ticketmaster, that's our main

scale platform, and we're going to improve and add more products and features all the time. But

we should have been -- we should have bought Eventbrite early. We should have bought

StubHub when it started. We should have a very robust portfolio. We should have bought

MovieTickets early.”

This aggressive stance on M&A is tough to digest. From a capital allocation standpoint, LYV

might have been better off using the $400 million to paydown some of the company’s $2 billion

debt load, buy back stock, or pay dividends. LYV hasn’t repurchased shares or paid dividends in

the past 5 years.

Some troubling accounting issues have also contributed to the low return on invested capital and

raise red flags. The most glaring issue is the $70+ million in annual capitalized expenses

associated with advances paid to music artists. Essentially LYV makes payments to musicians to

entice them to sign onto LYV’s management platform or make performances. These payments

bypass the income statement and are recorded as prepaid expenses and other long-term assets

which are amortized over the time period the artists are on contract.

Page 60 of Live Nation’s 2015 10K: “Ticketing contract advances, which can be either

recoupable or non-recoupable, represent amounts paid in advance to the Company’s clients

pursuant to ticketing agreements and are reflected in prepaid expenses or in other long-term

assets if the amount is expected to be recouped or recognized over a period of more than 12

months. Recoupable ticketing contract advances are generally recoupable against future royalties

earned by the clients, based on the contract terms, over the life of the contract. Non-recoupable

ticketing contract advances, excluding those amounts paid to support clients’ advertising costs,

are fixed additional incentives occasionally paid by the Company to secure exclusive rights with

certain clients and are normally amortized over the life of the contract on a straight-line basis.

Amortization of these non-recoupable ticketing contract advances is included in depreciation and

amortization in the statements of operations. For the years ended December 31, 2015, 2014

and 2013, the Company amortized $86.6 million, $79.4 million and $73.6 million,

respectively, related to non-recoupable ticketing contract advances.”

This strikes me as pretty aggressive accounting because I would consider payments made to

performers to be an operating expense that should be reflected in COGS or SG&A. By

amortizing the contracts and then using non-GAAP metrics such as Adj. EBITDA which also

add back $30+ million in stock based comp. and $10+ million in acquisition expenses, the

company has effectively inflated “core operating” earnings by over $100 million per year.

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For these reasons, I use EBIT and ROIC as my primary metrics for Live Nation’s valuation and

earnings quality. And according to these metrics, earnings quality is fairly poor.

There are some additional accounting headaches buried in LYV’s SEC filings. For example,

$663 million of cash listed on the balance sheet, ~39% of total cash, is actually “client cash” that

LYV is holding temporarily. Also, LYV has a good number of JVs with opaque earnings and

poorly explained cash transfers, but I think this is just par for the course with any John Malone

portfolio company.

Live Nation’s Valuation

Live Nation trades at 29x next-twelve-months EBIT vs. its peers at 21x NTM EBIT. On this

basis LYV looks expensive. Interestingly, at 8x NTM EBITDA, LYV looks cheap; however,

given the accounting issues related to LYV’s EBITDA that I pointed out in the prior section, I

am not willing to give LYV credit for its valuation on an Adj. EBITDA basis.

An investment case could be made that if Live Nation improved its margins it could drive

significant shareholder value. CTS Eventim, a very similar ticketing and live entertainment

company based in Europe, boasts 20% EBIT margins and an 18% ROC. Given LYV’s larger

scale, there is no reason it cannot achieve similar results. In my opinion, the culprit for LYV’s

underperformance is management’s prioritization of growth over profitability and return on

capital.

On the Q1 2016 earnings call COO Joe Berchtold gave the following response when asked about

the opportunity for margin expansion in the Ticketmaster business: “As you know, our primary

obsession is continuing to drive Ticketmaster's global market share in ticketing, which then in

turn, drives the top line of that business, the [Adj. EBITDA] and the cash generation. So we

talked a lot lately about how we're expanding in secondary, in Festival and do-it-yourself, all

businesses that have lower scale and, therefore, not yet the margin maturity of the core

Ticketmaster business.”

Relative Trading Value Analysis

Enterprise Market Dividend EV / EBIT EV / EBITDA NTM Sales '16 EBIT '16 EBIT LTM

Company Name Ticker Value Cap Yield % LTM NTM LTM NTM Growth % Growth % Margin % ROC % (1)

Manchester United MANU $3,100 $2,588 1.1% 32.1x 27.8x 13.5x 12.3x 8.7% 15.4% 16.0% 5.1%

Madison Square Garden MSG $2,642 $4,093 N/A N/A N/A 28.6x 17.5x 3.4% (177.4%) 0.5% (0.3%)

CTS Eventim EVD $2,568 $2,933 1.7% 16.1x 14.0x 14.4x 11.7x (2.0%) 15.1% 20.2% 17.9%

Mean $2,770 $3,205 1.4% 24.1x 20.9x 18.8x 13.8x 3.4% (49.0%) 12.2% 7.6%

Median $2,642 $2,933 1.4% 24.1x 20.9x 14.4x 12.3x 3.4% 15.1% 16.0% 5.1%

Live Nation LYV $5,337 $4,515 N/A 38.5x 29.4x 9.8x 8.0x 6.4% 30.8% 2.3% 2.4%

Source: Capital IQ, Wall Street consensus estimates. Data as of 6/27/2016.

(1) Return on Capital = Tax-effected EBIT / (Total Debt + Total Equity)

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Live Nation Stock Price and Valuation Multiple Over Time

With the above chart of LYV’s valuation multiple over time, the stock appears to be roughly

fairly valued to slightly over valued. LYV has had periods where it traded for 40x+ EV/NTM

EBIT and has also traded below 20x NTM EBIT. I would be inclined to take another look if the

stock dropped below 20x EV / NTM EBIT, but the drop would need to coincide with a re-focus

on shoring up profitability for me to get really interested. This valuation of course would need to

be adjusted for “client cash” and a greater deal of comfort around the accounting issues

discussed.

Taking an EV/EBITDA approach to valuing the company, I adjusted the $5,337 million

enterprise value by the $663 million in “client cash” and adjusted the expected forward EBITDA

lower by $100 million for the amortized prepaid expenses. This resulted in an EV / NTM

EBITDA multiple of 10.6x which is lower than the publicly traded peers but not a screaming

buy.

Investors could be cute and take a sum-of-the-parts approach; however, I don’t think a SOTP

makes sense for LYV because all four assets are quite synergistic (2 segments are loss leaders)

and Live Nation will be a net acquirer at the end of the day unless there is management change.

Concluding Thoughts

Live Nation controls an interesting live entertainment ecosystem which has very limited

competition and wouldn’t be feasible to re-create. While the company appears to be extremely

well positioned to capture organic growth in the coming years, it boggles me that the company

isn’t run to be more profitable given its extremely advantageous competitive position. It’s quite

possible that live entertainment assets such as concert halls and artist management agencies are

low return propositions regardless of scale. It’s worth noting that SFX Entertainment, a close

peer to LYV, recently filed for bankruptcy, showing just how tough the live entertainment

industry can be.

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A major piece of the bull story that I did not spend time on is the involvement of Liberty Media

as the semi-controlling shareholder. Liberty owns 26% of the company and controls two Board

seats (including the Chair). Liberty is run by legendary media investor John Malone who is

known for investing in high quality assets and improving capital allocation. Many investors are

in Live Nation to be invested alongside Malone. That being said, I do not see strong evidence

here of great capital allocation (other than the Ticketmaster acquisition). John Malone’s empire

is sprawling and he likely isn’t very engaged at Live Nation. (link:

http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/telecoms/12010

847/Liberty-Global-snaps-up-Cable-and-Wireless-in-3.6bn-deal.html)

Despite the high valuation, low capital returns, and questionable accounting, I am not compelled

to make a short call on Live Nation at this point. The monopolistic competitive position in an

attractive market paired with the potential to make the Ticketmaster much more profitable is a

powerful combination. If industry tailwinds turned to headwinds or formidable competitors arise

(i.e. Stubhub takes market share in primary ticketing), the short story could be interesting. For

now, I think the best move is to sit on the side lines and enjoy the popcorn.