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Tomorrow’s report should provide important insight into the touring industry amid the coronavirus pandemic.
Few earnings releases are as anticipated as Live Nation’s first quarter report coming Thursday — that should provide a valuable snapshot of the live music business during an unprecedented economic slowdown. It’s not hyperbole: business closures throughout the Americas and Europe have shut down live concerts (and with it many music workers’ main source of income), pushing venues into financial uncertainty and causing widespread layoffs and furloughs among promoters and agencies.
Live Nation suspended its concerts on March 13, helping to bring the $15 billion U.S. touring market to an abrupt halt. Since then, Wall Street has soured on companies reliant on entertainment. Ratings agency Moody’s downgraded Live Nation’s debt rating on March 19 due to increased financial risk created by an uncertain concert season. For similar reasons, S&P downgraded the debt ratings of agencies Endeavor on April 13 and CAA on May 4. All three companies, as well as agencies UTA and Paradigm have already cut expenses through layoffs, furloughs, pay reductions or some combination.
The financial data in Thursday’s earnings report won’t answer the most important questions since concerts stopped five-sixths of the way through the concert season’s slowest quarter of the year. But Live Nation’s top executives will address questions and provide their assessment of the challenges of touring in 2020. Here are five topics that should be covered:
What’s the reasonable expectation for tours to resume in 2020?
What other question matters more right now? The touring business depends on, well, touring, and touring requires that artists can perform without endangering themselves, staff and fans.
Even if tours return in the second half of 2020, local closures would affect what cities and venues artists could play. Live Nation has the benefit of owning and operating thousands of venues that could host its concerts. But independent venues are struggling to remain in business. “We’re still trying to figure out how we are going to save ourselves financially,” Steve Severin, owner of 650-capacity Neumos in Seattle, recently told Billboard. “Nobody has even thought about what it is going to be like to reopen, let alone announcing shows.”
Doubts surround the 2020 concert season. Multiple sources — but not all — have told Billboard that no major tours are expected and artists are now looking to reschedule to dates in 2021. If promoters follow the same timeline as sports leagues, at a minimum, concerts are unlikely to commence before Thanksgiving — although many tours will have been pushed to 2021. And if a second wave of the coronavirus hits the U.S. and elsewhere, an outcome many experts believe is inevitable, public gatherings could be limited to small groups of people. And then will the touring business be back to square one?
What is the status of Live Nation’s liquidity?
Every canceled and postponed concert drains Live Nation’s liquidity, the amount of cash the company has on its balance sheet or can quickly access. Liquidity is like air in a scuba tank: the more you have, the longer you can stay underwater while the storm passes. Live Nation has built a high-capacity tank: on April 13, the company had a total liquidity of $3.8 billion consisting of $940 million available in a revolving credit facility, $914 million of free cash and $2 billion in event-related deferred revenue (ticket purchases for future events that are classified as liabilities on the balance sheet and recognized as revenue when an event occurs).
In anticipation of a difficult year, Live Nation has implemented a plan to lower expenses and conserve cash: reduced executive salaries, issued furloughs, renegotiated rents and lowered discretionary spending, among other measures. Also, it plans to use fewer contract workers and is reducing cash outlays by giving artists and ticketing clients smaller advances this year. The expected gains in 2020: $500 million in reduced spending and $800 million in the amount of cash saved or deferred to 2021.
What are the expectations outside the United States?
Markets will open at different times according to their recoveries and politicians’ approvals for mass gatherings. Because European countries were affected by the coronavirus before North American markets, countries in Europe are at different stages of allowing their businesses to open. As of Monday, about 4.5 million people had returned to work in Italy, the hardest hit European country and the global leader in deaths per 100,000 people. Germany opened all shops on Wednesday (May 6) and green-lighted the return of the Bundesliga professional soccer league. Some small businesses will reopen next week in Spain, second to Italy in COVID-19 deaths in Europe. But the pertinent question for the concert business is when will music venues open, not when local retailers can resume operations. And that remains a big unknown.
Can social distancing be implemented at live events?
In the “new normal,” people could work, dine and play with greater distance from each other. Venues could follow suit, spacing out seating rather than selling tickets until hitting capacity. For the foreseeable future, governments may demand social distancing in all public places to lower the coronavirus’s infection rate. Some distancing might be mandatory to attract fans given half of all consumers surveyed by MRC Data want music venues not to be filled to capacity.
A fascinating experiment in fan spacing will take place at a May 15 solo acoustic concert by Travis McCready of the rock group Bishop Gunn at TempleLive in Fort Smith, Arkansas: 229 patrons — 80% of capacity — will sit six feet apart in “fan pod” groupings that of two to 12 people. The gig could be an advance look at a bizarre future of wide swaths of empty space separating groups of friends to provide limited contact with other people.
The larger question is the financial impact of hosting concerts while keeping the venues well under capacity. How long concerts follow social distancing guidelines also impacts the revenues of the live music supply chain: promoters, venues, staff, artists, managers and agents. It’s too soon to know what level of distancing will become the new normal. But it’s not too soon to ask about its likelihood.
Are there plans to provide other health safety measures at shows?
Taking health precautions might be both prudent and required by local or state governments — and for the best. An MRC Data survey found 35% of Americans want the venue to check concertgoers’ temperature upon entry. That measure, along with the wiping down of touch points, will take place at the May 15 show at TempleLive in Arkansas.
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