Irving Azoff Leaves Live Nation
Three years shy of his tenure with Live Nation, executive chairman Irving Azoff has called it quits. He was reportedly frustrated by the constraints of working at a public company, which he deemed as stifling to his entrepreneurial spirit. As Azoff moves forward, he is taking some of Live Nation’s biggest clients with him. Live Nation may be well served to reflect on Azoff’s departure as a signal to focus on creative innovation and keep up with the changing times.
Background
Azoff, who came primarily from a management background, joined Live Nation as a result of two mergers, the first being between Front Line Management Group and Ticketmaster in 2008. Azoff founded Front Line in 2004, and grew the company into arguably the world’s largest artist management firm. Front Line boasts a roaster of over 250 artists including Christina Aguilera, the Eagles, Seal, Van Halen, Neil Diamond, Fleetwood Mac and Steely Dan.
In 2008, America’s largest ticket sales and distribution company, Ticketmaster, purchased the majority share (30%) of Front Line Management for $123 million – a move that lead Azoff to become CEO of Ticketmaster. Azoff steered Ticketmaster through a second merger with the world’s largest concert promoter, Live Nation, in 2010. Azoff was appointed Live Nation Entertainment’s executive chairman in 2011 before his departure at the end of 2012. 1
The Ticketmaster/Live Nation merger has been successful. The share prices of both companies rose by approximately 15% soon after, and the deal itself was reported to be worth $835 million.
Live Nation Entertainment poses a triple threat combining three companies at the top of their game: Front Line in artist management; Ticketmaster in ticket sales and distribution; and Live Nation in concert promotion. Azoff himself states that Ticketmaster has done well since the merger with Live Nation and that its prospects look promising.
Resignation
So why leave, one may ask? Azoff claims he was discouraged in his efforts to reform the concert business. He had planned to use the Ticketmaster/Live Nation merger to fix problems plaguing the concert business such as rapidly rising ticket prices and widespread scalping. He also wanted to kill service fees and create a long-planned online market to bundle T-shirts and downloads.2
However, despite his best efforts, Azoff’s plans of reformation faced an impassible wall. He attributes his frustrations to the struggles of running a public company. He felt that the board was constricted by the treasury and institutional shareholders, making innovation difficult.3
Conflicting interests between managers and promoters within Live Nation was also a key factor in Azoff’s departure. According to Azoff, he could not achieve cooperation within the industry to institute paperless ticketing, dynamic pricing and all-in ticketing – three things he believed to be important for artists and consumers.
Repercussions
In fact, one of the concerns caused by Azoff’s departure from Live Nation is the likely power shift between managers and promoters. Azoff came from the management side of the business and looked out for the artists’ best interests.4 When Azoff was with Live Nation, artists usually won financial negotiations with promoters. However, with Azoff’s departure, it is predicted that Michael Rapino’s promoters will try to seize power within Live Nation. Rapino, the CEO at Live Nation, is from the promotion side of the business and is believed to be more concerned with the interests of Live Nation’s venues rather than those of the artists. This shift in power from managers to promoters could end up hurting artists.
Another concern is the loss of previous and potential revenue from Azoff and his management clients. As one of the most powerful managers in rock music, Azoff is now a free agent. In leaving Live Nation, he takes with him some longtime clients including Christina Aguilera, The Eagles, and Van Halen, costing Live Nation revenue.
The Eagles, for example, focus heavily on touring and grossed $173 million from tours between 2008 and 2011. In addition to ticket sales and merchandise, The Eagles can command top dollar for VIP sales and private events. Van Halen grossed $54 million from its 2012 tour.
Live Nation will receive favorable treatment when dealing with Azoff and has secured the right of last refusal to promote at least 75% of his artists’ concert dates in 2013 and 2014. Nevertheless, Azoff’s retention of these clients allows him to explore other options outside of Live Nation, including Live Nation’s largest rival, AEG Live.
Moreover, although Azoff has a two-year non-compete agreement with Live Nation, he is allowed to work on projects including recorded music, TV, movies and publishing. For example, Christina Aguilera reportedly earned about $10 million from the last season of “The Voice,” representing a huge chunk of potential revenue that Live Nation will not have a stake in.
The 1976 Copyright Act provision, which allows artists to reclaim ownership of post-1978 works 35 years after their creation, comes into play here. The departure of The Eagles will cost Live Nation revenue from the band’s recording and publishing catalogs, especially given that the band is set to take ownership of the rights to their 1979 release, “The Long Run,” next year. Van Halen also has four albums that are eligible to revert back to the band’s ownership in the next five years under the same provision.
There is also another potential power shift to consider as a result of Azoff’s departure. Liberty Media, one of Live Nation’s largest shareholders, will buy 1.7 million of Azoff’s 2.6 million shares representing a 26.4% stake in Live Nation.5 Some sources predict that Liberty Media’s John Malone will expand his presence within the company, possibly resulting in layoffs and other corporate cuts.
Live Nation will need to adapt to the loss of its leader and rethink some of its practices in the face of change. The company could struggle without a veteran closer like Azoff to sign major tours because of competition from AEG Live. Nevertheless, there is some good faith surrounding Live Nation’s future as evidenced by a 4% rise in shares occurring shortly after Azoff’s departure. Still, uncertainty looms over the company, who has yet to clarify who Azoff’s successor will be.
By Annette Atieno Oduor
Endnotes
1. Halperin, Shirley & Masters, Kim. “Irving Azoff on His Hasty Live Nation Exit: It’s Obama’s Fault,” The Hollywood Reporter, Dec 31, 2012. http://www.hollywoodreporter.com/news/irving-azoff-his-hasty-live-407357
2. Knopper, Steve, “Irving Azoff’s Live Nation Exit Leaves Many Questions Unanswered,” Rolling Stone, Jan 4, 2013. http://www.rollingstone.com/music/news/irving-izoffs-live-nation-exit-leaves-many-questions-unanswered-20130104
3. Waddell, Ray. “Irving Azoff on Leaving Live Nation, What’s Next and Why He Regrets Ticketmaster Merger,” Billboard Magazine, Dec 31, 2012. http://www.billboard.com/biz/articles/news/1483611/irving-azoff-on-leaving-live-nation-whats-next-and-why-he-regrets
4. Peoples, Glenn. “Business Matters: How Much Will Irving Azoff Be Missed on Live Nation’s Bottom Line?” Billboard Magazine, Jan 2, 2013. http://www.billboard.com/biz/articles/news/1510522/business-matters-how-much-will-irving-azoff-be-missed-on-live-nations
5. Sisario, Ben. “Irving Azoff to Leave Live Nation,” New York Times, Feb 4, 2013. http://mediadecoder.blogs.nytimes.com/2012/12/31/irving-azoff-to-leave-live-nation/
