Wednesday, January 2, 2013

Irving Azoff's Exit: The Invisible Hand of John Malone

The exit of veteran music manager Irving Azoff as executive chairman at Live Nationcomes two months after another media veteran, Mel Karmazin, stepped down as chairman and CEO of SiriusXM Satellite Radio. 
The person they have in common? 
Veteran media investor John Malone, who in the last few years had become, respectively, each company's largest individual shareholder. 
Liberty Media's highly desirable A shares have been skyrocketing since the end of May when they were selling for $82.34. On Dec. 31, the day Liberty acquired Azoff's shares in Live Nation, it closed at $116.01. 

With the legendary risk taker Malone in an even stronger position, Live Nation may finally become the Wall Street darling its architects envisioned when it split off from Clear Channel in December 2005. An entrepreneur at heart, Azoff made no secret of the fact he did not enjoy running a public company.
Liberty Media, one of Live Nation's largest shareholders prior its acquisition of Azoff's 1.7 million shares, will now have a 26.4 percent stake in the concert, ticketing and management behemoth. In 2011, Liberty Media A shares roses 54%, and in December financial analysts stated it continues to trade at significant high multiples compared with S&P 500 companies.
Could Live Nation, which has bounced between $8 and $11 over the last 52 weeks, finally see the stock price rise to levels expected when the merger was struck? Malone is always unemotional about achieving his return on investment, sometimes through very complex financial engineering. His recent interest in the music space will be no different.
Liberty Media chief executive Greg Maffei told Billboard in November, "We think the music space is a great space and there will always be an enduring interest in music."

But arguably the interest in music is coincidental rather than strategic. The bigger picture for Malone and his lieutenant Maffei is that both Sirius and Live Nation (post-merger) are near-monopolies in their respective markets. In fact, Sirius has no U.S. competitor in satellite radio. And Live Nation is the strong market leader of a duopoly with AEG in live promotions, while Ticketmaster is completely dominant in its space.

This is the attraction to the man who made his wealth inventing regional cable TV monopolies from scratch.

Sirius, with Liberty owning 49.77 percent, and Live Nation "have found interesting ways to grow. Just because music is popular doesn't always mean it's possible to make money from it," he said.
Malone has been bullish on Live Nation since its merger with Ticketmaster, purchasing 34.5 million shares of Live Nation Entertainment the day after the merger was approved in 2010. At the time, Liberty held a 30% stake in Ticketmaster, which dropped to 15% after the merger.
But last year Malone also supported the idea of taking the company private as its shares underperformed, with the business struggling through a weak economy that kept fans from attending some bigger events.
And, to be clear, Azoff is still going to be working with Malone in some capacity. He will be on the board of Malone's soon-to-be spun-off cable network Starz. Azoff confirmed to Billboard he will still be joining the board and said he had enjoyed working with Liberty Media.

Indeed, if Azoff is ever looking for financing for expanding any of his proposed new ventures beyond music, he could always turn to Malone.
Malone built a fortune in his cable television company TCI, selling it to AT&T for $54 billion in 1999. A master at acquisitions -- he is the largest land owner in the U.S. - he has battled with the like of former Vice President Al Gore, Viacom's Sumner Redstone and the man with whom is most closely associated (sometimes as friend and others as an enemy), Barry Diller, the man who handed over the reins at Ticketmaster to Azoff.

Less than three weeks ago, Malone's Liberty Interactive purchased Diller's 4.8 million shares inTripAdvisor, the nation's largest travel advisory site. In some ways the Live Nation deal feels like history repeating: Diller's Citysearch concept in the 1990s owed to the combination of consumers desiring tickets and travel destination information.
While Malone has publicly stated that the sports industry is out of control in terms of costs, Liberty is interested in looking at some of the holdings within Phil Anschutz's Anschutz Entertainment Group, whose assets include Los Angeles' Staples Center and AEG Live, the No.2 live entertainment business after Live Nation.
"Phil Anschutz has built a very interesting portfolio of businesses and assets, some of which fit in with our existing businesses," Maffei said. "But I'm not sure if we'll have the ability or rather be allowed to buy some of those assets that fit in with Live Nation, because of the regulatory scrutiny which it already faced during the Ticketmaster merger."

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