Courtesy of Bob Lefsetz mailbag that just came into my mail box. This is in regards to the article he wrote about U2 selling all of their Live Nation stock. This letter comes from someone inside the business who basically confirms that both AEG and Live Nation are financial disasters. Sure, you see Bon Jovi, Bruce Springsteen, Kenny Chesney, etc making boatloads of money, but these mammoth promoters are overpaying. I'll be amazed if either or both of these companies exist in their current format in five years.
From: Tom Bunch
Subject: Re: U2/Live Nation
Hi Bob.
I have been earning a good living this year consulting for financial investment companies that have bought Live Nation and/or Ticketmaster stock.
As I have told you before, I promoted concerts and owned venues in Texas and Louisiana 1983-1997 and managed The Butthole Surfers, Toadies and 3 music producers 1989-1999.
My company TAB Management (tabmanagement.com) was independently owned and operated. I funded it with my own money (started with $2000) and I was the president, CEO or whatever you wanted to call it. AT my peak I had 10 full time employees. My main markets were Houston, Austin, Dallas, San Antonia and New Orleans.
I operated in the time when a promoter would go out of business with 4 or 5 bad shows in any year or season. My company succeeded because of my personal relationships with the acts, managers, agents and record labels. If I lost money, everyone in the equation felt it and they didn't want any of the people they were working with to be in a loss situation. Everyone cooperated, worked together and were fairly honest with each other.
Bands, agent and managers see Live Nation and the major labels as corporate entities with no personality and deep pockets and if they lose money, no one cares.
I knew Robert Sillerman's plan was doomed to failure when he announced it and I told anyone that would listen, but most of my friends were lining up to take his money. He paid many, many times what each company was worth and put people together that hated each other. Why would a promoter that was just paid 40 million dollars go to work for $200,000 a year and work with people he fought tooth and nail with for the last 20 years. The only person that made money out of the SFX deals was Sillerman.
Before the SFX rollup, there were about 400 concert promoters in the US. Yes some of them just booked Oldies shows in the city park or booked a season at a specific place, but they were making money and adding to the music business economy. Some were Cellar Door, Pace, Delser, Avalon, BGP, etc.
Some of these promoters made $125,000 a years, some made $10 million a year, but if you averaged this out, each promoter made in the area of 2 million a year or a little more, so the concert promotion business was earning a profit of half a billion to a billion dollars every year, in profits, not gross.
Now you have Live Nation and AEG doing the vast majority of the concerts in the US and each lose money each year. OK, AEG may have a year or 2 when they made a little, but not much. No one really knows what they make as they are a private company and don't have to publicly report their income, but they are making and/or losing a few million dollars a year.
The merging and conglomerating of the concert business has taken a business that made a half billion dollar+ a year to a business that loses money each year. It has not worked for anyone and has all but killed the business.
I have many long time relationships with people that work or have worked for Live nation and AEG and I have direct info about how they operate, coupled with an extensive knowledge of how the music business and fans operate.
You are right, The Wall Street analysts don't have any clue about Live Nation and that has been good for me as I have worked regularly giving very accurate and insightful advice to companies that have bought Live Nation and/or Ticketmaster stock or who were considering it.
