A day after Live Nation $LYV reported 2017 Q2 earnings, news spread that Amazon $AMZN may enter the US electronic ticketing business, due to partnership talks with TicketMaster breaking down over the issue of who controls the user data (Amazon vs TicketMaster).
Amazon has been operating an e-ticketing business in Europe for a while now, and works with TicketMaster to sell tickets on Amazon’s platform as well.
On the news, investors immediately saw $AMZN as a major threat to the TicketMaster business but also in general to Live Nation’s business. $LYV’s stock price dropped on the “Amazon Effect” which is a term used whenever Amazon becomes a competitor in an industry they haven’t been in before, disrupting existing business models in the process. It’s a term that’s been picking up steam as Amazon expands it’s reach to other industries.
However, it’s good to be aware of several key items which makes TicketMaster so dominant to begin with. Understanding this may also explain why $AMZN hasn’t gotten into the US e-ticketing business yet, even though they have possessed the technology for a long time:
- Any sports leagues/clubs may not switch from TicketMaster for the very same issue of user data. TicketMaster provides the clubs/artists/venues with valuable user data to help them figure out their clients/customers behavior.
- TicketMaster Affiliates business also help venues/teams/artists to sell & market tickets on non-TicketMaster channels (Facebook, Groupon, Amazon, etc.). It’s unlikely Amazon would be willing to help sell tickets on a non-Amazon platform.
- Venues and sports clubs, will likely find themselves unable to fill their venues during the off-season and off-times with any Live Nation events. The economics of not being able to fill the venue during off-times may kill any savings that $AMZN may be able to offer.
- Amazon would probably not have access to sell any tickets for Live Nation artists or events.
- Cross-selling tickets with merchandise (CDs, shirts, etc), may not be as valuable as Live Nation’s ability to up-sell the artist’s next concert (in addition to managing and promoting the event). With the introduction of digital media, Artists’ main source of income is no longer radio play or sales of music. They make most of their money now from live performances & tours, which is why there has been an acceleration of growth in artists touring than in the past.
Malone’s businesses are not so easily disrupted. Live Nation’s business model centered around the concert flywheel has been very successful, and they have very good relationships with the artists they work with. The network effect and relationships $LYV has worked hard to build is not likely easy to replicate, even for Amazon. Also it’s overhaul to TicketMaster’s business when they took it over, has also helped to give them a competitive advantage with their clients (although it hasn’t been able to change it’s image with ticket buyers much). Looking back, Live Nation was actually the disruptor in their industry, and that mentality has helped make them so strong.
Live Nation’s Q2 earnings call transcript on SeekingAlpha, has really good information regarding the ticketing topic. I encourage investors to read it, to understand why $AMZN may not be as big of a threat as people are painting it to be, unless they get into the entire industry completely.
I think if $AMZN wants to really compete on the same level they need to grow the promotion of concerts and festivals, as well as artist management. They basically need to replicate the entire Live Nation business to cross-promote tickets/events with the same level of dominance. Whether or not Amazon has any interesting in doing so is another story.
That disruption would really be interesting, and a company like Amazon would be one that may have the best chances to succeed. If it does, it does not necessarily mean Live Nation’s business would deteriorate either. There may actually be co-existence, just as there will be for bricks & mortar grocery stores after $AMZN’s purchase of Whole Foods $WFM.
Unfortunately, tickets may not actually get cheaper for us consumers either, as artists have started to realize the true market value of their events (tickets), particularily when scalpers and secondary sites like StubHub are able to sell tickets for higher prices, with fans still gobbling them up! One initiative I do find encouraging is TicketMaster’s Verified Fan product, where they work with and enable artists to distribute tickets to actual fans. That’s an issue and area that Amazon would also have to deal with. $LYV has reported seeing success in reducing the number of tickets sold on secondary sites, with more of them going to actual fans.
Disclosure: I’m long $LYV.
Thanks and Happy Investing!
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