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Putting a price on AEG Live's concert talent

The value of the entertainment division may lie in those who run it rather than ticket sales

September 19, 2012|By Randy Lewis and Alex Pham, Los Angeles Times
  • Country music promoter Louis Messina, who formed a partnership with AEG Live, has handled tours for Taylor Swift and Kenny Chesney. Above, Chesney performs last month in East Rutherford, N.J.
Country music promoter Louis Messina, who formed a partnership with AEG… (Michael Loccisano, Getty…)

Billionaire Philip Anschutz's plan to sell off his AEG entertainment division raises a major question about the fate of the company's AEG Live subsidiary, the concert industry's No. 2 powerhouse.

The multifaceted AEG owns, operates and exclusively books dozens of venues across the country, controls stakes in the Los Angeles Lakers and Kings sports franchises and promotes hundreds of concerts and other live entertainment events each year. Industry veterans are speculating whether AEG will remain as a single entity under new ownership or be split into several pieces and be sold off.

Among AEG Live's most prized concert world components are Staples Center in Los Angeles, the O2 Arena in London and the Coachella Valley Music and Arts Festival in Indio, of which it shares ownership with festival founder Paul Tollett.

Since AEG Live was launched about a dozen years ago, it has become the closest competitor to the concert business' leader, Live Nation. Last year, AEG Live sold 12.2 million tickets to events it produced and promoted worldwide, compared with 22 million tickets for Live Nation-sponsored shows, according to Pollstar, the live entertainment industry tracking publication.

Two Wall Street analysts, who declined to speak publicly, said it is difficult to put a price tag on privately held AEG Live.

But others said the value of the company's concert division has less to do with ticket sales or gross revenues than with the people who run it.

"You're buying their expertise and their relationships with all of the artists," Pollstar editor Gary Bongiovanni said. "If you bought Coachella and you don't have Paul Tollett, what do you really have? You bought the name but not the people who bring in the talent."

He also cited Brian Murphy, the head of AEG Live's West Coast office, who has close ties with Katy Perry. John Meglen and Paul Gongaware of AEG's Concerts West division worked with Celine Dion. Louis Messina, one of the nation's biggest country music promoters who formed a partnership with AEG Live, has handled tours for Taylor Swift and Kenny Chesney.

Chesney's summer stadium tour with fellow country star Tim McGraw sold more than 1 million tickets and grossed more than $96 million over 23 shows, making it the most popular and highest-grossing concert tour of the year, according to Pollstar figures.

"These people have very strong relationships with talent," Bongiovanni said. "The value of the company will depend on whether these people will stay."

AEG Live had about 650 employees and generated about $1 billion a year in ticket sales as of 2011, according to AEG Live president Randy Phillips, who on Wednesday declined to comment for this report. AEG President and Chief Executive Tim Leiweke also declined through a spokesman to comment beyond their statements in Tuesday's news release announcing the sale.

"We run this like a business," Phillips told The Times last year. "Even though AEG Live is a strategic play to protect AEG's venues, we need to make money as a stand-alone business."

AEG Live did turn a profit in 2010 and 2011, Phillips said, with last year being its most profitable year ever. He declined to state how much money the division made.

Even if AEG had disclosed its performance, its businesses are too tightly intertwined to easily separate the pieces, said John Tinker, an analyst at Maxim Group.

AEG Live can get a good rate for the venues it owns (take Staples, for example). Otherwise, concert promotions is a low-profit business, with margins averaging 1% to 4% of revenue, Tinker said.

"If you don't control the building, you're just another guy without an angle," Tinker said.

To AEG, however, the concerts business helps the company fill its stadiums and concert halls in between the sports matches of teams AEG owns or has a stake in.

"It's the whole package that's interesting. The concerts business by itself is not," Tinker said.

The prospective sale also raises questions about the future of AEG's individual components.

"I don't think it will have any impact on day-to-day business, unless a new owner comes in and starts selling pieces off," said a veteran concert promoter who has dealt with AEG and Live Nation who asked for anonymity. "Its business is fractured: it has sports arenas across the country [and] a lot of little businesses that somewhat complement each other, but I don't know if they're enmeshed.

"Coachella is a stand-alone," the promoter said. "But they've also got clubs at L.A. Live, they've got sports teams. I think someone will come in and buy the whole thing, but buy it for something they really want. Like [billionaire Patrick Soon-Shiong]. He wants to be in the sports world and made a play at the Dodgers. He'd like to hang his signature on Staples and have the sports teams. But it's going to be hard for someone to step in and run the whole thing."

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