Live Nation: Breakup Sought by Department of Justice Probably Wouldn’t Affect Fair Value Much
While we think Ticketmaster would have slightly less value if it operated independently, we also see it as a valuable asset that would attract interest from other buyers.
Key Morningstar Metrics for Live Nation Entertainment
- Fair Value Estimate: $105.00
- Morningstar Rating: 3 stars
- Morningstar Economic Moat Rating: Narrow
- Morningstar Uncertainty Rating: High
The US Department of Justice, joined by most US states, filed a widely anticipated lawsuit against Live Nation Entertainment LYV, alleging that the firm’s ownership of Ticketmaster combined with its dominance in concert promotion suppresses competition. The lawsuit seeks to break up the company. We expect a resolution will take years, with many twists and turns along the way. The myriad ways the case could proceed and the relatively small negative impact we’d expect from the worst-case scenarios result in us maintaining our fair value estimate of $105 per share and High Uncertainty Rating for the firm.
We think Ticketmaster has significant competitive advantages stemming from its affiliation with Live Nation’s concert promotion business, contributing to our narrow moat rating. Some of those advantages are theoretically mitigated by the consent decree Live Nation has operated under since acquiring Ticketmaster in 2010. However, the DOJ previously accused Live Nation of violating the decree by requiring that venues use Ticketmaster if they wanted to host certain concerts. Ultimately, we think Ticketmaster would face greater competition if it was independent of Live Nation, and we’d expect the fees Ticketmaster charges would face pressure.
Ticketing made up only 13% of Live Nation’s revenue in 2023, though it did account for more than half of operating profit. This revenue base is the totality of the revenue that we think would face a slight headwind if Ticketmaster operated separately. Alongside the uncertainty concerning whether Live Nation will lose this lawsuit, there’s the question of Ticketmaster’s fate if it’s spun out. Management has said its business is very decentralized, implying it does not benefit from cost synergies between units. While we think Ticketmaster would have slightly less value if it operated independently, we also see it as a valuable asset that would attract interest from other buyers.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.