Business Matters: Looking Forward to Live Nation and Warner Music Group's Earnings Releases

Live Nation, WMG Optimistic Ahead Of 2nd Quarter Earnings Reports
Both Live Nation and Warner Music Group report second quarter earnings on Thursday. What can you expect?  

Live Nation will be helped -- or at least not hurt -- by the generally positive feeling about the concert business this year. Unlike the past two years, this year has been free of decreased demand (in 2010) and concerns about discounting (in 2011). A continually mediocre economy and sustained unemployment in many parts of Europe has been countered by an emphasis on value and putting the rights acts in the right venues.
 
Live Nation's first-quarter earnings release offered a positive outlook for the full year. The company expects high single-digital growth in its concerts segment, improvement in the ticketing segment, and low double-digit growth in operating income in the sponsorships and advertising segment. 
 
Anecdotal evidence and Billboard Boxscore data backs up Live Nation's outlook. "After a dismal 2010, the concert business regrouped, retooled and rebounded nicely in 2011, and could well be on its way to logging the record numbers that began this millennium," Billboard's Ray Waddell wrote in Billboard's mid-year touring issue.
 
Live Nation CEO Michael Rapino told Waddell that 2012 "is shaping up to be a great year for live concerts, with strong growth throughout our business." John Reid, Live Nation's London-based president of concerts for the United Kingdom and Europe, said concert and festival business in Europe has been "very encouraging."
 
The company's key tours have met or exceeded expectations: "The Wall" by Roger Waters, Madonna, Kenny Chesney and Lady Gaga. And it has remained active in acquisitions, purchasing Cream Holdings in May and Hard Events in June. 
 
The good earnings report of a recorded music and publishing company goes something like this these days: overall revenues down, digital revenues up and, if all goes well, a small improvement in operating profit. Warner's fiscal third quarter (the period ended June 30) should be judged against just such a measure. 
 
Warner is coming off an uneventful quarter impacted by what it termed a "light release schedule." Revenue declined 8% but operating income (before depreciation and amortization) grew 4% and net loss improved 5%. The company, now fully owned by Access Industries, reports earnings for debt holders but has not historically provided guidance.
 
The company had a mild release schedule in its fiscal third quarter. Linkin Park's Living Things should be a strong title but will have limited impact in the quarter because it was released in the last week of June. B.o.B's Strange Clouds has had success in the U.S. and was responsible for 3.2 million track sales to date. Flo Rida's single "Whistle" picked up steam after June and "Wild Ones" has sold well. The track "We Are Young" by fun. has continued to sell well.
 
Warner's competitors have had mixed results lately. Sony Corp's music division posted a 39.6% decline in operating profit and a 10.1% decline in revenue in the second quarter. Universal Music Group's revenue was up 9.1% in the first quarter of the year (parent company Vivendi will not report second-quarter results until August 30).
 
Deezer Gets Access Industries Investment
Spotify gets most of the attention -- especially here in the U.S. -- but don't forget about Deezer. Access Industries, owner of Warner Music Group, has invested in Paris-based music subscription service Deezer, according to a report at the New York Post. An Access spokesperson had no comment on the Post's report.
 
Deezer had been seeking between €50 million and €100 million Euros at a €500 million Euro valuation, according to a February report at Les Echos. Deezer already has received an investment by mobile carrier Orange and bundles the service with Orange mobile subscriptions in France and the U.K. The company has raised funding from AGF Private Equity, CM-CIC Capital Privé, Dotcorp Asset Management and Xavier Niel, the founder and majority shareholder in French ISP Iliad. 
 
Deezer has 23 million users worldwide, according to its Facebook page, but has steered clear of the world's two biggest music markets, the U.S. and Japan. (The company does not break out the number of subscribers from total number of users.) Based in France, Deezer expanded to the U.K. and elsewhere in Europe. It launched in Canada, Australia and New Zealand in April and debuted in 35 Latin America countries in June. ( New York Post)

U.K. Digital Sales Top 100 Million
U.K. digital album sales have topped 100 million units just two years after surpassing the 50 million mark, according to the BPI. That news pretty much ruins the "nobody buys music any more" and "the album is dead" storylines that are often heard the press and by so-called thought leaders. By now it should be pretty clear that purchases, streaming and piracy are common consumer behaviors that aren't going to die out in the foreseeable future. ( BPI press release)