Does Live Nation Have a Bigger Problem Than the DoJ?

There are things that nobody likes.

Fleas, for example, likely have a total of zero fans. Hangovers, paying bills, and getting stuck in traffic are widely disliked for good reason.

Here’s another one — paying exorbitant ticketing fees when attending a concert.

If you’ve attended a live concert in recent years, you’re likely familiar with the pain inflicted by outrageous ticketing fees. This is particularly true if you’ve been forced to use Ticketmaster, which is owned by Live Nation LYV.

Last week, Live Nation and Ticketmaster, the country’s biggest provider of event tickets, were sued by the U.S. Department of Justice. The DoJ alleges that Live Nation’s exclusive deals with over 250 U.S. concert venues assure that those locations will use Ticketmaster’s services.

According to the DoJ, this synergy creates a monopoly, allowing Live Nation and Ticketmaster to charge whatever fees they deem appropriate. News of the lawsuit caused Live Nation shares to fall by 8% on Thursday (point A), but on Friday the stock rebounded by 2.7% (point B).

Judging by this two-day reaction, it seems that investors aren’t overly concerned about the DoJ lawsuit against Live Nation. The stock is drifting sideways, lodged between its 50-day (blue) and 200-day (red) moving averages. The shares have made little headway in the past 12 months.

Some investors may be buying Live Nation because they believe the company will prevail against the DoJ. That explains the stock’s 2.69% rise on Friday, a day when the S&P 500 gained just 0.7%.

What if Live Nation is facing a bigger problem?

My wife loves Cirque du Soleil, and we had tickets to attend a show next week. I was surprised to learn that the show had been canceled. While no reason was given, a quick check of the seating charts for the remaining shows indicated that ticket sales have been soft.

One Cirque show could be an isolated incident, but then came news that the Black Keys have canceled their entire North American tour. Again, the apparent culprit was soft ticket sales.

Jennifer Lopez recently canceled seven concerts. According to Variety, large numbers of tickets remain unsold for the remaining shows of Lopez’ This Is Me…Now tour.

To be fair, consumers will still pay for their favorite artists. Taylor Swift just completed one of the most successful tours in history. Blink 182, The Weeknd, Foo Fighters, and BlackPink are selling out shows. But these artists are the exception, rather than the rule.

Should Live Nation shareholders worry about the DoJ? Yes, but perhaps inflation, and its effect on disposable income, is a bigger problem.

As the pandemic ended, waves of musical acts hit the road. Consumers were excited just to get out of the house and do fun, normal things, like attending a concert.

Now, the focus has shifted. Many people are worried about how they’ll pay for basic necessities. For them, attending a concert has become a luxury they can’t afford — especially if Live Nation and Ticketmaster are setting the prices.

More Investing and Trading:

At the time of publication, Ponsi had no positions in any securities mentioned.