Live Nation (LYV) Madonna Deal Conference Call: Notes

Live Nation executives are hosting a call to explain the thinking and financials behind their recently announced $120 million (or so) deal with Madonna. On the call: LYV CEO Michael Rapino, Michael Cohl, who runs Live Nation's "Artist Nation" unit and Arthur Fogel, who runs global music for the company. We'll update throughout the event - though we've already been prepped for disappointment since Live Nation just said they won't discuss specific financials.

Rapino: Live Nation is really big, and deals with lots of fans. They'll get into ticketing soon as well. Madonna's a huge star - sells more records internationally than she does in North America [this isn't news - read this is as a response to criticism that Madonna doesn't sell many CDs anymore]. They've got rights to nearly everything she will do. Advances aren't specific to revenue streams: I.e. there isn't a specific amount for albums, a specific amount for tour, etc. Deal will pay for itself, but will get more valuable as Live Nation lures more artists with similar ventures.

Cohl: Handled the Rolling Stones Steel Wheel tour, and everyone said the Stones were too old to play then. And Madonna's even younger. [Read: Critics of this deal are shortsighted]. Says her last 3 albums sold 21 million copies, then argues that that's $10 per album to Live Nation/Madonna. [Again, our understanding is that Live Nation will gross significantly less per CD]. Goes on to break down the reach of his division, which will sell any and everything Madonna. Message: Artists, come work with us and we'll make you a mint.

Fogel: Madonna's last three tours generated $500M in revenue. She's a bigger star outside the U.S. then she is here [again]. She has been able to "regenerate her audience" throughout her career. "The Madonna franchise is as strong as ever."

Q&A after the jump:
First album within two or three years (she owes Warner Music Group another album first). Tour within 18 months. What about returns? Well, one-night stands at Madison Square Garden is a low-margin business. But with scale, we can make lots of money from multiple revenue streams.

How much competition was there? We're told we weren't the highest bidder. Are there other artists lined up for similar deals? We work with 1,000 artists already, so we have established relationships already. Not every deal has to be a 10-year Madonna-like deal. How will CDs get distributed? Will you handle directly? Put out for bid? Etc? All of the above. We didn't used to be in the DVD business either [this is Cohl speaking] but we sold a lot of Stones DVDs.

Return on capital is 6% companywide - how do you improve on that with this deal? What are margins for each component? And what are upfront costs? Not going to be very helpful here - respect for artists' confidentiality. As far as return, we'll beat that. Everything in this deal better than our blended margin of 4%.

Can you explain economics of last 3 Madonna tours? Nope. But: In 2006 we made 5,6% Ebitda on tour business.

How will costs/advances be recognized? Amortized over length of deal.

Why Madonna instead of little bands? Why not? We can sell 100,000 seats at one venue instead of 100 shows at 1,000 each.

How will ticketing and distribution work? More later [translation: look out, IACI]

Summary: Not a lot here today -- Live Nation officials insist that their deal will be profitable, but won't break out their assumptions: Trust us.


Related: Live Nation's $120 Million Bet: Breaking Down Madonna Deal
Bye-Bye, Madonna: Warner Music Dodges A Bullet