‘Peak Bleak’ and the ‘Margin Call’ of Live Entertainment

Since my last scribblings Post-Lockdown: Remote-Experiences; the ‘Gig Economy’; Follow the Mon€y & the Disruption of Live some industry colleagues have remarked that perhaps my perspective is a little dark, overly simplistic or even negative with regards to the abilities of the live entertainment sector to eventually bounce-back, with renewed enthusiasm and energy.

We are only a few weeks into this lockdown, and all having to adapt to an evolving environment, with imprecise and isolated information and so it is difficult to be certain, but the outlook is not good.

I will obviously be very happy to be ultimately proved wrong, but in the current environment of a deadly pandemic with an associated economic downward-spiral of furloughs, layoffs, zero commercial activity, and no immediate horizon for an improvement, arguably it’s going to get a lot worse for the live industry before whatever level of relaunch happens along.

Stock Markets


And the timing of any recovery? Don’t be mistaken in thinking it’s going to be anything other than a painful and difficult process and take longer than many currently imagine (Why The Global Recession Could Last A Long Time – Peter S. Goodman, New York Times).

IMF Blog

So that is the current and future macro-economic reality for the live industry, but more specifically.


‘Peak Bleak’

Last week Variety reported (‘Concert Industry Hits Peak Bleak as Artist Guarantees Disappear, Refunds Get Complicated’ – Shirley Halperin, Jem Aswad) that across the live music industry there was an urgent recalculation of the supply-side economics with artist guarantees likely to all but disappear in the near-future and negotiations with promoter-producers would likely involve some form of shared-risk becoming the preferred format for anyone willing and able to tour.

It was further reported that any 2020 events not yet announced were effectively cancelled and that the surviving, often already rescheduled, festivals were now offering a 35% reduction on artist fees: take-it-or-leave-it.

On the demand-side there was also reference to the apparent change in ticket agency refund policies, as reported by the New York Times and others (‘Angry Fans Say First the Concerts Were Canceled, Then the Refunds’ – Ben Sisario) stating that only events with full cancellation would be refunded.  But for postponed or rescheduled events consumers would be expected to continue to wait for further updates or event maturity.

This position immediately attracted the ire of consumer groups, politicians, and media commentators (‘Ticketmaster Quietly Changes Its Refund Policy (TL;DR: You’re Screwed)’ – DigitalMusicNews + Ticketmaster, StubHub, Eventbrite Have All Changed Their Refund Policies – A Journal Of Musical Things), resulting in further policy clarifications and statements (Ticketmaster Clarifies US Refund Policy – IQ Magazine) which merely served to add to the noise and seemingly confirmed a business sector reverting to self-interested type and distancing itself from its consumer-facing moral if not legal obligations.

The Variety article also examined the role played by the self-styled ‘Global Taskforce’ (Statement From Live Nation, AEG, CAA, WME, Paradigm And UTA) the largest live entertainment agencies and promoters, who previously (March 12th) collectively coordinated and then presented a halt to concerts until the end of the month.

But unstated was that the joint-industry conference calls had obviously continued.

And not just to discuss the conflicting future logistical demands of routings and timings for artist and venue availabilities, but also if/when the pandemic should recede sufficiently for the live music industry to make any form of meaningful return.

However, the live sector isn’t the master of its own destiny with the U.S. (still its dominant market and economic driver) experiencing mass unemployment (22M Out Of Work In US As Coronavirus Takes Heavy Economic Toll – The Guardian) , and corporations across all industries desperately attempting to save cash, cutting costs, refinancing debt or pivoting operations to manage the economic fallout.

The Federal Government’s ‘gating criteria’ for the re-opening of venues effectively passed responsibility for the implementation of any timetable to the individual States. And many Governors (New York Extends Stay-At-Home Restrictions Through May 15 – Billboard) and city Mayors (Coronavirus Could Halt L.A. Concerts, Sporting Events Until 2021, Garcetti Says – L.A. Times) across America have indicated that without meaningful testing and protection, and with an effective vaccine still many months away, there will be no large-scale sporting events or concerts permitted until 2021 (New York And LA Mayors Say Live Events ‘Difficult To Imagine’ Until 2021 – Billboard).

Against this background, there was suddenly a fundamental change in the dialogue between the leading live music organisations and its consumers, fans, and patrons.


The ‘Margin Call’ of Live Entertainment

Margin Call

(© Before the Door Pictures / Lionsgate / Roadside Attractions)

As you’re all be aware ‘Margin Call’ is a 2011 film written and directed by J. C. Chandor (  Essentially the story takes place over 24-hours at an investment bank during the early stages of the 2008 financial crisis and concerns the amoral decisions taken by senior executives to isolate and self-protect the company.

Substituting the above movie poster with headshots of the ‘Global Taskforce’Jay Marciano (Chairman and CEO, AEG Presents), Dan Beckerman (President and CEO, AEG & Board Member, ASM Global), Michael Rapino (CEO and President, Live Nation Entertainment), Rob Light (Managing Partner and Head of the Music Division, CAA), Marc Geiger (Partner and Head of Music, WME), Sam Gores (Chairman, Paradigm), Marty Diamond (Head of Global Music, Paradigm) and David Zedeck (Partner and Global Head Of Music, UTA) – would these executives now facing a similar global meltdown and potential fiscal ruin react in the same self-interested way?

The New York Times on April 16th first revealed (‘Concert Giant AEG Offers Frustrated Fans A Refund’ – Ben Sisario) that AEG was to offer a rolling 30-day refund period for all Coronavirus rescheduled events:

AEG’s refund window will work like this: On May 1, fans will have 30 days to request refunds for shows that have already been rescheduled. After May 1, they will get 30 days from the time new dates are announced.

This policy was consistent with the measures first taken by AEG / Goldenvoice following the original rescheduling of Coachella to October (It’s Official: Coachella Has Been Postponed Until October – L.A. Times), and importantly, this wider ticket refund statement had been agreed in advance with the various major talent agencies, all members of the ‘Global Taskforce’ and therefore under negotiation for some time.


Twenty-four hours later (April 17th) there was a follow-up article, again in the New York Times which revealed (Under Fire, Live Nation Outlines New Ticket Refund Plan – Ben Sisario) the response from Live Nation.

Like AEG there would be a rolling 30-day refund period for all Coronavirus rescheduled events, starting May 1st.  Additionally for Live Nation promoted events there were a number of incentives offered to consumers to hold on to their tickets, including the issuing of customer credits worth 150% of the tickets’ value to use on future events (albeit the program only applied to the U.S.).


Pushed or Jumped?

In the days surrounding these announcements, two members of the U.S. Congress – Representative Katie Porter and Congressman Bill Pascrell – had called on Live Nation and Ticketmaster to refund fans’ money for postponed as well as cancelled events:

‘With Americans weathering the brutal and continuing impacts of this global crisis, your decision to confiscate their money is reprehensible and should be reversed immediately’ –

Additionally, NY Senator James Skoufis had requested the New York Attorney General open an investigation into the practises of Ticketmaster.  A spokesman for the Attorney General had declined to discuss but added ‘We are already looking into the matter.’

Ticketmaster had previously denied changing its refund policy, saying that it only clarified language on its website, but Jared Smith (President Ticketmaster) now stated (April 17th):

Ticketmaster, with the support of our clients, intends to honour our longstanding practice of allowing refunds on cancelled or postponed shows

The post further detailed that there were approximately 55,000 events on the Ticketmaster system between March 1st and the end of 2020, but that 30,000 had already been postponed or cancelled as a result of COVID-19.

Of those 30,000 events, over 12,000 have already been cancelled and Ticketmaster is actively issuing refunds to every one of the purchasers of those events.

A further 5,000 events have been rescheduled, and organizers have now authorized the issuing of refunds to consumers who request them.

Of the remaining 14,000 events – including sports, concerts and theatre shows – event promoters are apparently still considering options of rescheduling or cancellation, but as soon as Ticketmaster has confirmation of those decisions they would be passed onto consumers, with associated refund or ticket retention instructions.

The post confirmed that it is the standard business practice of the Ticketmaster platform to dispatch revenues to event organizers on a weekly basis as tickets are sold.  And Ticketmaster had apparently already distributed approx. $2Bn to those event organizers ‘making it impossible to issue refunds to fans before recouping sales receipts from the organizers, as we’ve done in the past.’

But that ‘Ticketmaster intends to refund as many tickets as possible in as timely a fashion as is feasible.’


The Liquidity of Live Nation / Ticketmaster

In preparation for the rolling release of ticket refunds for postponed and further cancelled events, Live Nation (including Ticketmaster) had announced four days earlier (April 13th) ( an amended credit agreement, an increased revolving credit facility and the targeting of approx. $500M in cost reductions during 2020.

After speaking to ‘Joseph Bagodonuts’ (a former accountant for one of the ‘Global Taskforce’) and a number of other industry colleagues, but without issuing a formal disclaimer (‘Past performance is not necessarily indicative of future results. All investments carry risk and all investment decisions of an individual remain the responsibility of that individual’), the following points are intended to prompt further discussion, and should only be interpreted as opinion, for which apologies in advance for any technical errors.


The amended credit agreement ensured that Live Nation was granted relief from the debt covenants for Q2 2020 and Q3 2020, because their bank realised due to the cessation of events, that there was likely no way to meet them.

Before this action, Live Nation was annually paying approx. $140M in debt interest with, as of December 31st 2019, approx. $3.4Bn in debt and $2.3Bn in operating leases (Live National Entertainment, 2019 Annual Report:

Live Nation has successfully negotiated an additional (or higher) $120M line of credit, increasing its available borrowing to $940M – $400M from the debt facility and $540M from the revolver.

As part of cost reduction efforts Live Nation will implement salary cuts for senior executives, hiring freezes, reduction in the use of contractors, rent re-negotiations and furloughs with Live Nation indicating its intention to utilize the robust payroll support programs offered in the UK, Germany, Italy, France, Spain, and Australia to mitigate a substantial portion of employee costs.  Additionally, in the U.S., Live Nation expects to receive payroll support under the Employee Retention Credit for employer’s program established as part of the 2020 CARES Act.

Live Nation operating expenses are approx. $2Bn annually, so the next two quarters would normally see them burn through half of that, hence the need for $500M in costs savings – which should help see them through this year.

These actions would apparently raise the overall company liquidity to $3.8Bn.  But money received for events past February 29, 2020 are listed as event related deferred revenue which totals $2Bn and this may be a limiting factor.

Live Nation Cash


However, Live Nation expects that going forward not all customers will request ticket refunds (apparently over the last month only 5% – 20% of ticket holders for rescheduled shows have done so), with the vast majority preferring to hold on to their tickets for the future date(s).

Based on these trends, as well as an analysis of scenarios where refund rates increase above 20%, aided by the allowance that some international Governments including Germany, Italy and Belgium now permit the issuance of vouchers in place of cash refunds, and planned OnSales in late 2020 for events in 2021, Live Nation is confident it has sufficient liquidity:

‘… gives the company a total liquidity position of $3.8 billion. While event-related deferred revenue balances fluctuate over the course of the year, given the timing of shows in 2020 and expected substantial volume of on-sales for 2021 shows in the second half of this year, the company expects this number to remain above seasonally normal levels throughout this year.’


However, Live Nation ceased all concert activity in mid-March, and so the company’s Q1 2020 operating loss is expected to widen versus prior year with adjusted operating income (AOI) expected to drop from being in-line with 2019’s strong first quarter results to a loss, while revenue for the quarter is expected to be down approximately 20%.

Admittedly, Q1 2020 metrics do not tell the full story not least because it is typically the weakest of the year.  And in an interview with CNBC (, Joe Berchtold (President Live Nation) offered an positive tone for the company’s future resilience and remained cautiously optimistic for the remainder of 2020, whilst stressing the consumers appetite for live events would remain undiminished when they (eventually) return in 2021.  (A gamble but what is the guy meant to say?)

However, most of Live Nation’s direct expenses are artist fees. So, two big questions:

Firstly, does Live Nation have ‘Force Majeure’ coverage for the already cancelled or postponed events?  Presumably not, or not consistently across all events, otherwise this would have been a good opportunity to trumpet the fact that they will be able to recover some costs.

Secondly, will Live Nation be able to exert downward pressure on the cost of talent going forward to ease the recovery of live?  Should artists and their management expect tougher negotiations in the near-future?

Additionally, events that were originally scheduled for May, June and July 2020 are currently very uncertain if not already lost.  Given that Q2 and especially Q3 are the key quarters for Live Nation (in 2019 Q2 + Q3 revenues were approx. 60% of annual total or $6.9Bn) the fact that events for August, September and beyond may also need to be cancelled or postponed will impact future projections and overall sustainability.

An article published (April 18th) by Bloomberg (The Music Industry’s Lost Summer: No Bieber, No Swift And Mass Layoffs) suggests that most promoters are increasingly accepting that 2020 is indeed a write-off:

‘The live concert industry might be in the most difficult position of any industry in America. … They talk about airlines. They talk about the auto industry. But the reality is they’ll be back in business way before the concert industry is back.’ – Gregg Perloff, Another Plant Entertainment

Another problem for Live Nation is where it has successfully postponed or rescheduled shows.  Even assuming the proportion of customer refunds remain consistently low, then Live Nation still has a level of increased show costs (the extended ticket sales window and complications resulting from refunds and rescheduling, event re-marketing, revised production services and event logistics, venue cleansing & hygiene, incremental insurance etc.), for a reduced number of events, inevitably attracting fewer attendees, with arguably lower spending on incremental services (F&B, Merchandise etc.) as even those consumers keen to attend will have less cash.

Additionally, Live Nation will have impaired sponsorship and endorsement deals – historically only 5% of its total revenue, but it accounts for up to 45% of its AOI.  In a recent WSJ article IEG reported that a six-month shutdown of live sports and entertainment would put at risk approx. $10Bn of sponsorships – ‘Live Sports and Entertainment Are Shut. Sponsorships Are Taking a Hit’ (SubReq).

Lastly, the act of postponement of events to late 2020 or even 2021 will effectively push concerts, festivals and tours into a new extended timetable and possibly neither artist diaries or venues will be able to easily accommodate this shift without impairing events originally planned for next year – even assuming consumer disposal income, demand for, and access to events has fully recovered.

In 2019 Live Nation had a total annual revenue of $11.5Bn  ( but the full impact of COVID-19 will see that dramatically downsize this year and could also impact 2021 as the activities initially planned for 2020 effectively become split over two years, if not longer, and the cashflow impact is therefore extended for 12-18 months.

They can currently borrow approx. $940M but will have little-to-no revenue to cover any additional unplanned costs.  Add in their pre-existing debt service and unless there is a dramatic global breakthrough in vaccine and personal protection, they are at some point heading back to the ATM.

As previously outlined the live entertainment financial ecosystem as currently designed only works on velocity – covering one event reconciliation (debt) with the next Onsale (deal).

And it all stopped.  At once.  Dark enough for you?








By T_J_Chambers

Advisor / Consultant & occasional posts

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