Live Nation’s stock sinks on a possible antitrust suit — but Wall Street analysts aren’t worried

United States

Shares of Ticketmaster parent Live Nation Entertainment Inc. slid on Tuesday, following reports that it could soon be hit by a government antitrust lawsuit.

But analysts suggested critics of the concert-industry giant — who have long complained about its industry dominance — should temper their expectations.

Whatever the precise allegations might be in any possible suit, analysts say the odds of the company being broken up are low. And some say that Live Nation LYV, -7.58% has enough room to make concessions to appease regulators without significantly changing the way it does business.

Those assessments came after the Wall Street Journal and Bloomberg on Monday both reported that the U.S. Department of Justice plans to sue Live Nation on grounds that it hindered competition within the live-events industry.

The Justice Department has reportedly been investigating Live Nation’s business practices for months and, as Bloomberg described it on Monday, is looking into whether Live Nation “tied its concert-promotion services to use of Ticketmaster” and thereby ran afoul of the terms of its 2010 merger with Ticketmaster. That investigation, the Journal reported, intensified after Ticketmaster’s implosion ahead of Taylor Swift’s Eras Tour.

The Journal said the exact allegations in any suit weren’t clear. But it said that the Justice Department could take action as soon as next month.

Bloomberg, however, reported that a complaint could seek a separation between Live Nation and Ticketmaster, and said that several state attorneys general could join the suit. But the news outlet added that the timing of a lawsuit wasn’t set in stone.

“Based on the uproar around the country on ticket prices, you would assume that this case would focus on Live Nation’s ticketing practices and the use of its monopoly power to drive up prices in the primary and, more recently, the resale markets,” Bill Morrison, a partner in the law firm Haynes Boone’s antitrust practice group, told MarketWatch over email on Tuesday.

“This would undoubtedly include claims about Live Nation’s control of the concert venue, promotion and ticketing,” he said.

Any antitrust action from the government would likely arrive during an election year, and as the Biden administration tries to crack down on corporate consolidation and hidden fees that have pushed prices higher for consumers. And it would follow a boom in concert demand during the pandemic that has sent ticket prices soaring.

JPMorgan analysts, in a research note on Monday, noted that Live Nation executives have said they believed the Justice Department had been looking into the company’s business practices, rather than a breakup of its organization. The analysts said Live Nation was unlikely to agree to any structural changes.

“Given this backdrop, we think the more likely scenario is for the DOJ to ultimately present complaints to [Live Nation], and then for the entities to engage on a possible settlement that would involve behavioral changes,” the JPMorgan analysts said.

“For now, we stick by our view that there is room for Live Nation to offer adjustments that would be viewed as both pro-competitive, but not materially negative to the company’s long-run outlook, such as shorter terms of exclusive ticketing contracts, or allowing outside promoters to book shows at Live Nation amps or theaters,” they continued.

The JPMorgan analysts also said a settlement could involve an extension or changes to an agreement between the company and the Justice Department that runs through next year and was intended to protect consumers and concert venues.

When Live Nation and Ticketmaster merged in 2010, an agreement with the government barred the combined company from retaliating against concert venues if those venues wanted to work with rival ticketing companies. The Justice Department, in announcing an extension of that pact in 2019, alleged that Live Nation “repeatedly and over the course of several years” violated that agreement.

Morrison, at Haynes Boone, said the Justice Department’s challenges to the merger and that agreement hadn’t been effective, potentially making for a more vigorous attack this time around.

“This could mean that the DOJ is more aggressive with this litigation and its settlement demands (especially under this DOJ’s leadership) and that would lead protracted litigation with no resolution for the foreseeable future,” he said.

Benchmark analyst Matthew Harrigan said he wouldn’t be surprised if the Justice Department eventually sued. But he noted that when Politico reported in July that the Justice Department could bring an antitrust suit against Live Nation by the end of the year, no lawsuit emerged at that time.

He said steps to make ticket pricing more transparent and easier to understand could go a long way for the company.

“Eventual U.S. adoption of European all-in pricing models and better consumer awareness of secondary-market price distortions that arbitrage economics to resellers should alleviate regulatory angst, even if Ticketmaster is admittedly unlikely to ever be loved by consumers,” he said.