Putting a price on AEG Live’s concert talent

Billionaire Philip Anschutz’s plan to sell off his AEG entertainment division raises a major question about the fate of the company’s AEG Live subsidiary, the concert industry’s No. 2 powerhouse.

The multifaceted AEG owns, operates and exclusively books dozens of venues across the country, controls stakes in the Los Angeles Lakers and Kings sports franchises and promotes hundreds of concerts and other live entertainment events each year. Industry veterans are speculating whether AEG will remain as a single entity under new ownership or be split into several pieces and be sold off.

Among AEG Live’s most prized concert world components are Staples Center in Los Angeles, the O2 Arena in London and the Coachella Valley Music and Arts Festival in Indio, of which it shares ownership with festival founder Paul Tollett.

Since AEG Live was launched about a dozen years ago, it has become the closest competitor to the concert business’ leader, Live Nation. Last year, AEG Live sold 12.2 million tickets to events it produced and promoted worldwide, compared with 22 million tickets for Live Nation-sponsored shows, according to Pollstar, the live entertainment industry tracking publication.

Two Wall Street analysts, who declined to speak publicly, said it is difficult to put a price tag on privately held AEG Live.

But others said the value of the company’s concert division has less to do with ticket sales or gross revenues than with the people who run it.

“You’re buying their expertise and their relationships with all of the artists,� Pollstar editor Gary Bongiovanni said. “If you bought Coachella and you don’t have Paul Tollett, what do you really have? You bought the name but not the people who bring in the talent.�

He also cited Brian Murphy, the head of AEG Live’s West Coast office, who has close ties with Katy Perry. John Meglen and Paul Gongaware of AEG’s Concerts West division worked with Celine Dion. Louis Messina, one of the nation’s biggest country music promoters who formed a partnership with AEG Live, has handled tours for Taylor Swift and Kenny Chesney.

Chesney’s summer stadium tour with fellow country star Tim McGraw sold more than 1 million tickets and grossed more than $96 million over 23 shows, making it the most popular and highest-grossing concert tour of the year, according to Pollstar figures.

“These people have very strong relationships with talent,� Bongiovanni said. “The value of the company will depend on whether these people will stay.�

AEG Live had about 650 employees and generated about $1 billion a year in ticket sales as of 2011, according to AEG Live president Randy Phillips, who on Wednesday declined to comment for this report. AEG President and Chief Executive Tim Leiweke also declined through a spokesman to comment beyond their statements in Tuesday’s news release announcing the sale.

“We run this like a business,� Phillips told The Times last year. “Even though AEG Live is a strategic play to protect AEG’s venues, we need to make money as a stand-alone business.�

AEG Live did turn a profit in 2010 and 2011, Phillips said, with last year being its most profitable year ever. He declined to state how much money the division made.

Even if AEG had disclosed its performance, its businesses are too tightly intertwined to easily separate the pieces, said John Tinker, an analyst at Maxim Group.

AEG Live can get a good rate for the venues it owns (take Staples, for example). Otherwise, concert promotions is a low-profit business, with margins averaging 1% to 4% of revenue, Tinker said.

“If you don’t control the building, you’re just another guy without an angle,� Tinker said.

To AEG, however, the concerts business helps the company fill its stadiums and concert halls in between the sports matches of teams AEG owns or has a stake in.

“It’s the whole package that’s interesting. The concerts business by itself is not,� Tinker said.

The prospective sale also raises questions about the future of AEG’s individual components.

“I don’t think it will have any impact on day-to-day business, unless a new owner comes in and starts selling pieces off,� said a veteran concert promoter who has dealt with AEG and Live Nation who asked for anonymity. “Its business is fractured: it has sports arenas across the country [and] a lot of little businesses that somewhat complement each other, but I don’t know if they’re enmeshed.

“Coachella is a stand-alone,� the promoter said. “But they’ve also got clubs at L.A. Live, they’ve got sports teams. I think someone will come in and buy the whole thing, but buy it for something they really want. Like [billionaire Patrick Soon-Shiong]. He wants to be in the sports world and made a play at the Dodgers. He’d like to hang his signature on Staples and have the sports teams. But it’s going to be hard for someone to step in and run the whole thing.�

Earlier this year, Phillips spoke of modestly optimistic expectations for the concert business in 2012, projecting perhaps a 3% increase over 2011. He noted that AEG Live had begun rolling out AXS, a ticketing system of its own, devised as an alternative to Ticketmaster. The Access system is

being implemented gradually in arenas and other concert venues across the country.

Phillips also suggested that the public’s appetite for music festivals has yet to be sated, and that after cloning Coachella across two weekends last year and seeing more demand than tickets available for its country cousin, Stagecoach, he envisioned that “there may be room for a couple of new festivals, if they’re carefully vetted and the location is great.�

Beyond Coachella and Stagecoach, AEG Live, which bills itself as “the largest producer of festivals in North America,� oversees the staging of the Hootenanny roots-rock festival in Irvine; the New Orleans Jazz & Heritage Festival; Bayou Country Super Fest in Baton Rouge, La.; Edgefest in Toronto; the Mile High Music Festival in Denver; and several others.

The company also produces Las Vegas residencies of entertainers including Celine Dion, Rod Stewart, Cher, Barry Manilow and Santana, and will produce forthcoming stands with Guns N’ Roses, starting next month at the Joint at the Hard Rock Hotel and Casino, and in December with Shania Twain at the Colosseum at Caesar’s Palace.

Phillips came to AEG in 2000 to create AEG Live, after Leiweke and Anschutz bought Concerts West, a boutique concert touring company, and were looking to expand the business as a way to help fill otherwise vacant nights at the venues AEG owned or operated.

Phillips leveraged his relationships with Britney Spears, Toni Braxton and other performers to build AEG Live from the ground up.

Whereas Live Nation covered the entire spectrum of live concerts, AEG Live carved out its place in the fiercely competitive promotions business by cherry-picking performers who are most likely to bring in large audiences.

Phillips and Leiweke have been in the news recently as part of the ongoing investigation into the 2009 death of Michael Jackson, who had been rehearsing for a ballyhooed AEG-backed comeback engagement in London at the time of his death, which may have factored into Anschutz’s decision to sell AEG.

E-mails between Leiweke and Phillips concerning Jackson’s health and state of mind as the high-stakes engagement drew nearer have gone public recently and show that Jackson’s condition was far worse than the AEG team had expressed immediately before and after the singer’s death.

“My gut feeling when you look at someone like Anschutz: He is so private in his business, yet every time you open the paper lately AEG is in the headlines,� the veteran concert promoter said. “He doesn’t want his business in the papers. They’re having problems with the NHL, there’s the Michael Jackson thing.... He has to be thinking, ‘Why bother?’ I’m 80 years old. I’ll just drill holes in North Dakota and pump stuff out for the rest of my life. Who needs this?’ �

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