Morningstar Analyst Down On LNE


LOS ANGELES (CelebrityAccess MediaWire) — A investment anaylst at Morningstar Equities recently sold all of the Live Nation Entertainment stock from the portfolios he manages on behalf of Morningstar and in an customer newsletter, he discussed his reasoning.

The analayst, Paul Larson, expressed concerns that the concessions Live Nation Entertainment agreed to in order to merge have left the company less competitive than both Ticketmaster and Live Nation had been previously.

Portions of the assessment were posted on Digital Audio Insider and stated:


I've always liked Ticketmaster's ticketing business; I figured that any business that could frustrate its customers but still keep them coming back is a business with a competitive advantage. Unfortunately, the merger with Live Nation greatly diluted the attractiveness of the overall company.

First, to get the merger past the antitrust hurdles, the company had to agree to license its ticketing software, providing a potential bridge across the moat of the ticketing business. Yet even if the ticketing business retains its moat (something with decent odds of happening, in my view), Live Nation's other operations are quite unattractive. It owns several concert venues, a business with a high degree of rivalry and modest barriers to entry. (This is almost the polar opposite of International Speedway ISCA, which essentially has mini-monopolies in any given city.) Live Nation is also involved in promoting concerts and managing artists, businesses for which I fail to see a moat. The old Live Nation generated an operating loss in four of the past six years, and the combined entity will also have to deal with roughly $1.5 billion in debt.

In sum, Live Nation is a financially levered firm with a declining moat and a management team that have done a good job destroying value. No thank you!
(Morningstar uses the term "economic moat" to describe how well a company can hold off its competitors.)