Vertical integration has been around since the days of Carnegie Steel in the 19th Century when the steel giant controlled both the mills where steel was manufactured and the mines where iron ore was extracted. Live Nation's (NYSE:LYV) approval from the U.S. Justice Department for its merger with the entertainment ticketing and marketing company Ticketmaster Entertainment (Nasdaq:TKTM) is a modern day example. Let's take a closer look to see if fans and shareholders will benefit from this consolidation of live concert promoter and the all access ticket supplier.
IN PICTURES: Eight Ways To Survive A Market Downturn
On the merger approval, Live Nation's stock jumped over 15% on Tuesday, January 26 to $12.15. Before investors eyes glaze over with envy, let's pause and take a look back to a time when Live Nation's stock traded above $21 a share in late 2007 just as its Artist Nation unit began signing deals with top-shelf artists like Jay Z and Shakira. Live Nation stock fell along with the rest of the market last year as low as $2.58 on March 11, 2009, and recovered to just below $9 before the end of the year.
Stock and Revenue Drivers
Live Nation reported revenue growth of 14% to $1.8 billion for the third quarter of 2009, driven largely by a 12% increase in attendance at is live events. Live Nation's international music segment also benefited handsomely from the reopening of the state-of-the-art O2 arena in Ireland, and strong stadium shows from its global touring artists Madonna and U2.
Other Live Entertainment Providers
World Wrestling Entertainment Inc (NYSE:WWE) also reported an increase in revenues for the third quarter ending September 30, 2009 to $111.3 million over the prior years quarter revenues of $108.8 million. WWE also pointed to international events in the Asia Pacific region as a driver of revenues.
Carnival Corporation (NYSE:CCL) reported a 14% decline in revenue from the previous year's same quarter for its third quarter ending August 31, 2009. In CCL's case, a mixture of depressed ticket prices due to the economy, a rising U.S. dollar against the euro and warnings against travel to Mexico due to the H1N1 virus combined to depress revenues. Royal Caribbean Cruises (NYSE:RCL) also reported a drop in revenue from $2.1 billion to $1.8 billion during the same time period due to currency fluctuations.
The problem with monopolies is the threat of rising prices and poor service due to a lack of good old fashion competition. Concertgoers fret over the prospects of higher ticket prices as a result of the merger approval, and artists including Bruce Springsteen share the same concerns. Investors will have to pay attention to the response of ticket buyers and artists in order to get a clear view of the benefits from Live Nation's new vertically integrated posture.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!