Liberty Media is too important a company to ignore. But the Q1 earnings statement out this morning is a jumble after it spun off Starz and formally took control of Sirius XM. It reports net earnings of $8.1B, up from $151M in the quarter last year — almost all of the gains from transactions — on revenues of $789M, up 2,154%. Operating income, a more revealing measure in this case, came in at $160M, up from a $32M loss, while cash flow was +$288M to $271M. Basically the results reflect the generally upbeat Q1 performance of Sirius XM, which reported its results last month. In addition, Liberty says its holdings in Live Nation appreciated 35.2% since the end of 2012 to $668M, while its Barnes & Noble investment was +5% to $275M, and other investments were +7.5% to $887M. CEO Greg Maffei says that Liberty is “extremely pleased with the operating results of our newest subsidiary, Sirius XM, which grew its subscriber base to over 24M.” He adds that following Liberty’s May 1 acquisition of 27.3% in Charter Communications — giving it four board seats there — “we look forward to working with [CEO] Tom Rutledge, his team, and our fellow board members.”
Liberty Media owns about 27% of the live entertainment power, so it’s not surprising to see its CEO at the head of the table. Live Nation CEO Michael Rapino says that Greg Maffei — a former CFO at Microsoft and Oracle — can help “as our team executes on the three-year plan, driving profitability and shareholder value.” This is the latest of several recent changes in the Live Nation board room. Irving Azoff, who had been executive chairman, resigned at year end and Cablevision CEO Jim Dolan followed in February. Live Nation shares are up 26.5% over the last 12 months, closing Thursday at a 52-week high of $11.88.
This isn’t a complete surprise following the announcement late last month that Madison Square Garden Executive Chairman Jim Dolan resigned from the Live Nation board. MSG had 3.9M Live Nation shares — about 2% of the total — and says this morning that it sold all of the stock for $44 million. That comes to about $11.28 a share, below yesterday’s closing price of $11.63. The sale follows the surprise year-end resignation of Irving Azoff, who was Live Nation’s executive chairman. He’s close to Dolan and manages the guitar-playing cable exec’s blues band, JD And The Straight Shot. MSG said it wouldn’t comment on the transaction. Live Nation shares are down 1.9% in early trading.
The announcement, in a Live Nation SEC filing today, offers no explanation for the resignation that it says was tendered Friday and was “effective immediately.” But it follows the surprise year-end resignation of Irving Azoff, who was the entertainment company’s executive chairman and is close to James Dolan. (Indeed, Azoff manages the guitar-playing cable exec’s blues band, JD And The Straight Shot.) Dolan was elected last year to a three-year term on the Live Nation board that was due to expire in 2015. And in 2011, Live Nation made special accommodations to bring aboard Dolan — who’s executive director of Madison Square Garden as well as CEO of Cablevision. Live Nation freed him from any obligation to present corporate opportunities to the company “except in limited circumstances.” It also said that, with a few exceptions, he had no obligation “to refrain from competing with, investing in competitors of, or negotiating on behalf of other entities against, Live Nation.” In another quirk, Dolan was not named to any board committee.
Madonna Comeback In Music, TV, And Film: 3-Album Deal With Interscope Worth $40M; First Album In 5 Years Coming Early March; Single Timed To ‘W.E.’ Film And Superbowl
EXCLUSIVE DETAILS: Hollywood knows that, when it comes to Madonna, never count her down and out. Because few performers are as shrewd about their careers as this 53-year-old multi-hyphenate singer, actress, producer, and now film writer and director who has stayed buzz-worthy for three decades. I’ve learned that Interscope Records is releasing her new CD in late March – her first album in 5 years. And “Gimme All Your Luvin”, the first single, is coming out the last week in January just prior to her upcoming Super Bowl XLVI halftime appearance on February 5th. I’ve learned that’s the same week her upcoming Weinstein Company film, W.E., is now scheduled for a wide release on February 3rd. So it becomes clear why Harvey Weinstein delayed Madonna’s movie from December 9th in NY and LA: to take advantage of the early 2012 promotional hype which will surround her and provide him with free marketing. That’s especially useful after reviews of the film she directed and co–wrote about American-born Walllis Simpson’s historic affair with Britain’s King Edward VIII have been lukewarm at best and lousy at worst in the U.S. and UK. Weinstein cancelled its Oscar push. I can also reveal that the 3-album licensing deal which Madonna and Live Nation Entertainment just inked with Interscope Records is valued by my sources at $40M. It’s one component of a broad career comeback developed by Madonna, her long-time manager Guy Oseary, and Live Nation Entertainment executive chairman Irving Azoff.
The trading day ended with a thud. The benchmark Standard & Poor’s 500 wound up -2.1% as word spread that Germany might balk at a proposal to help bail out debt-laden members of the European Union including Greece and Portugal. That affected media stocks; the Dow Jones U.S. Media Index fell 3%. Disney was the hardest hit among the Big Guns, with shares off 3.2%. It was followed by News Corp (-3.1%), CBS (-3%), Comcast (-2.9%), Time Warner (-2.7%), Viacom (-2.3%), and Sony (-2.1%). Newspaper companies were big losers led by McClatchy (-10%), New York Times (-7.3%), E.W. Scripps (-6.5%), and Gannett (-6.3%). But others weren’t far behind: Cablevision (-6.1%) hit a 52-week low. The losers list also included Crown Media (-6.6%), AOL (-5.9%), DirecTV (-4.7%), Live Nation (-4.4%), Barnes & Noble (-4.3%), TiVo (-4.2%), Sirius XM (-4.2%) and Dish Network (-4.2%). Today’s few gainers were led by Coinstar, up 7.8% on a report that its Redbox unit will team up with Verizon to offer an online video service. Martha Stewart Living Omnimedia was up 1.7% the day after J.C. Penney said it bought 16.6% of the company. And Madison Square Garden was up 1.7%, hitting a 52-week high, after Morgan Stanley’s Benjamin Swinburne changed his recommendation to “overweight” from “underweight” following the resolution of the NBA lockout.
The federal government will have to slash $1.2T in spending, mostly beginning in 2013, if the 12-member congressional Super Committee can’t strike a deficit reduction deal soon. They still appear split — even though, as a practical matter, they have to reach an agreement by midnight in order to have something ready for the official Wednesday deadline. That drove most company shares down, with a late uptick possibly softening the blow. The Dow’s U.S. Media Index was down 1.2% about 20 minutes before the end of the trading day. Disney was hardest hit among the industry’s biggest players: Its shares were -3.5%, followed by Sony (-3.4%), CBS (-2.3%), Viacom(-2%), and Time Warner (-1%). Comcast was up about 0.5%. Among other media companies, Cinedigm (-8.8%) and RealD (-7.2%) took the worst beatings. Others down at least 4% include E.W. Scripps, Entercom, Crown Media, Netflix, National CineMedia, Live Nation, LIN TV, and Dish Network. Gainers include Westwood One, Barnes & Noble, Sirius XM, Radio One, McClatchy, and McGraw Hill.
Investors seemed to like what they heard at today’s annual confab for John Malone’s Liberty Media. Shares of the hodge-podge of companies it either owns or controls were up on a day when the market was shaken by new fears that the European debt crisis will widen. Liberty Starz ended the day +1% and Liberty Capital was +0.5% after their parent said it will combine the two tracking stocks into a single asset-based security. But Live Nation was +6.7%, Barnes & Noble was +5%, and Sirius XM was +4.8% following CEO presentations to the Street.
Malone was more subdued than usual. But the executive who became a billionaire on the back of his devilishly complex deals — often to help him avoid paying taxes — got a chuckle in his response to a question about whether the changes in his tracking stocks will make their businesses confusing for investors. “We’ll get as complicated as we need to get to highlight value.” he said.
Sirius XM’s Mel Karmazin won the biggest laughs, though, with
Live Nation sure made it hard to find the good news in its 3Q report. The basic data looks terrible: It had net income from continuing operations of $63M, down 3.1% from last year’s 3Q, on revenues of $1.79B, down 2.5%. The revenue figure was far less than the $1.91B that analysts expected. And the continuing operations delivered 27 cents a share while analysts forecast 38 cents. So where’s the good news? The concert business was more profitable than expected, helping the company to deliver adjusted operating income of $203.6M — up 6.8% from last year and beating the $197M that the Street forecast. “It was a huge relief” says Maxim Group’s John Tinker — especially since lots of investors figured the concert business would be one of the first victims of a weakening economy. Live Nation shares were flat in after-hours trading. “Concerts and sports, the core of our business, have both held up,” CEO Michael Rapino told analysts in a conference call. Still, there are a few potential problems ahead. The company says it might lose $10M in adjusted operating income in 4Q due to the NBA lockout. Also, big acts including Van Halen, Neil Diamond, and Jimmy Buffet have deferred their tour plans, and The Eagles reduced their schedule — although the company says that Diamond and Van Halen will be back in next year’s 2Q.
The Dow Jones U.S. Media Index was down 3.5% today while the DJ Industrial Average was off 2.4% — and Goldman Sachs may have contributed to the imbalance: It downgraded the entertainment sector today to “neutral” from “attractive” saying that ad sales will be weaker than expected as the overall economy softens. That came as the market also reacted to Greece’s report over the weekend that it will fail to hit its deficit-reduction targets for the year — increasing the possibility of a default. CBS, -7%, was the biggest loser among the major media companies. It was followed by Viacom (-5.1%), Sony (-4.7%), Disney (-3.9%), Time Warner (-3.4%), and Comcast (-2.2%). In the broader media market, broadcasters Westwood One, LIN TV, Rado One, and Entercom were down by more than 10%. Pandora, Live Nation, Crown Media and Cumulus Media lost more than 8% of their market value. A few companies were up for the day including Yahoo (+2.7%), Regal Entertainment (+2.0%), Coinstar (+1.6%) and Time Warner Cable (+0.2%).
Media stocks suffered along with just about everyone else today after the Federal Reserve stirred recession fears by reporting “significant downside risks to the economic outlook” — and World Bank President Robert Zoellick warned that global economies are in a “danger zone.” The Dow Jones U.S. Media Index fell 3.9%, slightly more than the 3.5% drop in the DJ Industrial Average. Companies most exposed to advertising were hard hit. CBS led the pack among the industry’s Big Guns with shares down 7.2%. It was followed by Viacom (-6.6%), Disney (-5.5%), Comcast (-3.8%), Time Warner (-3.6%), News Corp (-3.3%), and Sony (-2.7%). Others falling at least 7% include Nielsen and Sirius XM. Those dropping at least 6% include Martha Stewart Living Omnimedia, The New York Times, Coinstar, IMAX, and Cumulus Media. Even in the battered market, a few media companies were up on the day including Live Nation (+2.1%), Barnes & Noble (+3.1%), Scholastic (+6.8%) and Westwood One (+20.8%).
Imax says in an SEC filing that COO Gary Moss will leave at the end of this month and not be replaced. Imax created the COO job, reporting to CEO Rich Gelfond, in 2009 when Moss joined. He had been a consultant and an executive at a concert promotion subsidiary of Live Nation and at EMI Group Canada. An Imax insider says that the company believes it doesn’t need a COO anymore. Over the last six months the large screen theater firm has bulked up its management ranks — for example adding a new chief marketing officer, SVP for human resources, head of strategy, head of business development, and CEO for Imax China. Moss was not listed as one of Imax’s five highest paid employees in its latest proxy statement.
Like other parts of the music business, there’s a lot of consolidation taking place in talent management — including this announcement today from feisty independent firms Primary Wave and Violator Management. They’ve chosen the unfortunate name of Primary Violator Management for the 50/50 joint venture. Primary Wave’s client list includes CeeLo Green, Ginuwine, Goodie Mob, Eric Benet, Cody Simpson, Case and GMD3. Violator adds Curtis “50 Cent’ Jackson, LL Cool J, Mariah Carey, Busta Rhymes, Q-Tip, Soulja Boy, and Diggy Simmons. Primary Wave CEO Larry Mestel will be in charge. Competition is intensifying: Yesterday, Live Nation Chairman Irving Azoff said he plans to announce a big music management acquisition soon. Here’s today’s release:
New York, N.Y. (September 16th, 2011) – Music industry veteran, Larry Mestel, CEO of Primary Wave Music, one of the largest independent music publishing, marketing, branding and talent management companies in the United States, announces a unique partnership with legendary music manager, Chris Lighty, Founder and CEO of Violator Management to create Primary Violator, a new powerhouse talent management firm. The new business venture will bring together Lighty and elite music manager Michael “Blue” Williams, uniting two of today’s most influential and successful talent managers in urban and pop music.
Don’t tell Live Nation executives that their concert acts are getting old. While one-time hitmaker Neil Diamond continues to hit the stage at age 70, Chairman Irving Azoff says that “every year there’s a Taylor Swift, or Justin Bieber or Lady Gaga.” He adds: “We’re managing all the winners of The X Factor. We predict the tour will be huge. It’s Idol plus The Voice plus Glee on steroids.” That kind of shameless self promotion was the order of the day this afternoon as Azoff and CEO Michael Rapino made the investment case for their concert venue, talent management, and ticketing colossus at the Bank of America Merrill Lynch Media Communications and Entertainment conference. Rapino says that “in an overall tough economic time, we’re thrilled that the industry came off a horrible year and stabilized…. We will finish the year flat to up as an industry and the early pipeline for 2012 looks good.”
Azoff says that Live Nation plans to take advantage of the crowds that will flock to Europe next year around the Summer Olympics in London. “The biggest names in the business will be on the road,” he says. “We’ll get a non-economy blip.” One of his mainstays, The Eagles, continues to tour and plans a Broadway show called (what else?) Hotel California. “No one knows whether the Rolling Stones are touring or not,” Azoff says. The execs say that they’re also making deals that could pay off — including …
No matter what the consumer will still get screwed. Anschutz Entertainment Group will roll out its much-hyped challenge to chief rival Live Nation Entertainment’s Ticketmaster this Saturday. So the battle is on. AEG has partnered with start-up Outbox Technology to form AXS with a plan to sell tickets through more than 100 arenas and theaters by the end of 2012. AEG — which owns L.A.’s Staples Center and London’s 02 Arena — was Ticketmaster’s biggest client, so not only will the loss hurt Ticketmaster’s bottom line but the new entity could challenge Ticketmaster’s dominance in this cutthroat biz. Turns out that a primary architect of AEG’s Outbox strategy is none other than Fred Rosen, who was Ticketmaster’s CEO in the 1980s and masterminded the company’s rise by creating a centralized ticket sales system used by the venues. The revenues came from service fees which, as anyone who’s bought a ticket to a live event in the past 20 years knows, have spiraled higher and higher. The AEG plan instead has the venues selling the tickets themselves via Outbox software that can be customized. AEG’s expansion into the ticket-sales business was seen as inevitable after the U.S. Justice Department approved the Ticketmaster-Live Nation merger in 2010. But as a condition for that merger, the feds insisted that AEG have the opportunity to license Ticketmaster’s software. AEG ultimately chose …
UPDATE 4:10 PM: The markets couldn’t sustain an early afternoon rally amid concerns that France might lose its AAA debt rating and that Spain or Italy might default on payments. The Dow Jones Industrial Average fell 4.6% while the S&P 500 dropped 4.4% and NASDAQ was down 4.1%. But media companies were mixed, with some showing big improvements from mid-day. Disney remained the hardest hit of the Big Guns with shares falling 9.1%. It was followed by Sony (-5.7%), CBS (-5.4%), News Corp (-4.7%), Time Warner (-4.6%), Comcast (-4.5%), and Viacom (-0.3%). Among other media companies, Crown Media, Westwood One, and E.W. Scripps fell at least 10%. Entercom, The New York Times, and Gannett were off at least 9%. And Martha Stewart Living Omnimedia, AOL, and LIN TV were down at least 8%. Some companies were up including Cinedigm (+8.7%), National CineMedia (+4.3%), New Frontier Media (+2.7%), DreamWorks Animation (+2%), Lionsgate (+1.8%), Pandora Media (+0.6%), and Coinstar (+0.1%).
PREVIOUS, 9:00 AM: Here we go again. Stock markets at mid-day have given up just about all of yesterday’s gains following the Fed’s pledge to keep interest rates low — and media companies are being hammered. The Dow Jones U.S. media index is -4.7% while the Dow Jones Industrial Average is -4.1%. Similarly the S&P media index is off 5.5% while the S&P 500 is -3.8% and NASDAQ’s media shares are -4.8 vs. the overall exchange which is -3.3%. Here’s how industry giants are faring at mid-day: Disney (-10.7%), CBS …
Curious that the press release (below) doesn’t explicitly say that Azoff is chairman of Live Nation Entertainment — the parent of Ticketmaster and the No. 1 owner of concert venues.
LOS ANGELES, Aug. 4, 2011 — Front Line Management and Syco Entertainment today announced a partnership which will see the future winning artist or group of the U.S. version of The X Factor managed by Front Line Management, the world’s leading artist management group.
Front Line, a division of Live Nation Entertainment, manages the careers of some of the world’s biggest-selling artists, including The Eagles, Miley Cyrus, Journey, New Kids on The Block, Christina Aguilera and Fleetwood Mac.
UPDATE, 1:30 PM: Fear that the economy may be headed back into recession seemed to grow in the last hour of trading. The Dow ended the day -4.3% at 11,383.68. It was the biggest single-day drop since Oct. 22, 2008 and took the Dow below where it was at the beginning of 2011. Similarly, the S&P 500 was -4.8% and NASDAQ was -5.1%.
Although most media companies remain well ahead of where they were a year ago, today’s losses still look ugly. CBS, down 9.3%, was the hardest-hit infotainment giant. Here’s how the other Big Guns fared: News Corp -6.7%, Sony -6.5%, Disney -5.6%, Time Warner -4.6%, Comcast -4.3%, and Viacom -3.4%.
Among other media companies, Comscore finished -38.3% and Westwood One was -13.2%. Sinclair Broadcasting and McClatchy each lost more than 9%. Cinedigm, Live Nation, TiVo, and Liberty Media fell at least 8%. And Yahoo, Best Buy, Barnes & Noble, The New York Times Company, Coinstar, and Dish Network lost at least 7%. Even World Wrestling Entertainment, which had been up earlier in the day, closed -1.4%.
The only company in the sector that gained ground today was Pandora Media. It ended +1.6% after Bank of America Merrill Lynch initiated coverage with a “buy” recommendation.
EXCLUSIVE: This is exactly the kind of information that shareholders of Big Media need to know but rarely see. It’s considered a red flag when any public company pays one of its bigwigs – usually the CEO – three times more than the average for the four other top executives which the SEC requires them to list. So I’ve taken proxy statements and done the computations and discovered that at least 16 of 35 companies failed that test. Often miserably. Nearly half of the media company compensation packages disclosed so far for 2010 show a startling degree of hero-worship as boards of directors pay their top dogs sums that far exceed what the pay was for other top execs in the company.
Stock grants accounted for big chunks of the compensation for those who top this list, including Discovery Communications CEO David Zaslav, Viacom CEO Philippe Dauman, DirecTV CEO Michael White, Nielsen CEO David Calhoun, and CBS chief Les Moonves. Radio station owner Entercom was off the charts: CEO David Field’s $9.1 million compensation was modest by media company standards but still 25.4 times bigger than average for the company’s other four executives. It includes $7.9 million from stock grants that only pay off if Entercom shares rise to hit certain target prices.
Still, corporate governance experts who focus on what’s often called “CEO centrality” say that an out-of-whack pay package is bad news for shareholders. It indicates that the board of directors may be in the pocket of a CEO – or believes he or she has near super-human power to help the company succeed. In either case, the board is likely to give the CEO all the credit when things go well, and blame others when they go badly. Research shows that usually hurts the stock price over time.
I’ll track this and other measures of lop-sided pay as other media companies release information for 2010. But there are a few things to keep in mind: The SEC reporting rules only cover the top-paid executives of publicly traded U.S. companies. That means we probably won’t know how much privately held Hearst pays CEO Frank Bennack, or how much Japan’s Sony pays CEO Howard Stringer. It also means that we’ll miss a lot of highly paid people who work at subsidiaries of a big company; Universal Studios’ Ron Meyer may be a big deal in Hollywood, but he was a relatively small fish last year at parent company General Electric.
To make comparisons in our list here as fair as possible, we looked at the compensation for the five most highly paid employees for 2010. Sometimes companies report the pay for more than five people — for example, when a top executive is replaced during the year a corporation will include the incoming and outgoing person’s compensation. And the pay data given the SEC can spike in a year when an executive cashes in stock or collects deferred compensation. So here’s how the companies stack up, with the top paid executive’s 2010 reported compensation and comparison to the average (median) pay for the four other highest-paid honchos:
1. Entercom: David Field. The son of company founder Joseph Field became CEO in 2002, about 15 years after leaving his job as an investment banker at Goldman Sachs. Field made $9.1 million last year – the total of his $791,723 salary, $444,308 bonus, $7.9 million in stock, and $28,000 in other perks including medical insurance premiums. That’s a 348% raise in a year when company shares appreciated 53.2%. Though considered a strong operating executive, his salary stands out because it’s 25.4 times higher than the $358,692 average for the four other top executives listed in Entercom’s proxy statement. Field’s salary and the $3.9 million paid to CFO Stephen Fisher accounted for 93% of the $14 million that Entercom paid to its top five executives.