September 21, 2012 12:40 PM ET
Philip Anschutz
Stephen Dunn/Getty Images
If billionaire Philip Anschutz sells his Anschutz Entertainment Group ? which controls portions of the Lakers and Kings sports teams as well as Los Angeles' Staples Center, London's O2 Arena, 98 other entertainment venues and the Coachella music festival ? he could drastically change the modern concert business. For the past decade, the company's aggressive executives have been a thorn in the side of competitor Live Nation, the world's largest promoter, by signing not every major tour, but certain key winners ? Prince in 2004, Bon Jovi the last several years, Justin Bieber in 2010 and Taylor Swift in 2011.
"I've been accused of being a cherry-picker, sometimes, for the tours we buy. I can live with that," Randy Phillips, chief executive for AEG Live, the company's entertainment division, told Rolling Stone in 2010, claiming robust sales while many of its competitors were plagued with empty seats and canceled tours all summer. "We'll buy everything we believe in, and we'll work our asses off to make it work."
Reps for AEG ? which sold 12.2 million tickets to its events last year, compared to Live Nation's 22 million, according to Pollstar ? did not respond to requests for comment on a potential sale. The company's availability was made known on Tuesday.
AEG's approach, while providing a key Number Two for Live Nation in the concert business, may not be profitable forever, according to promoters and artist managers. These days, touring stars such as Jimmy Buffett have enough leverage to negotiate 110 percent of the overall ticket sales, leaving promoters to cover their own expenses through service fees, beer and parking ? costs that have ballooned in recent years and irritated music fans. Plus, the biggest, most reliable stars, from the Rolling Stones to Madonna, are aging, and few have emerged to replace them in arenas and stadiums.
John Scher, a veteran New York City promoter who frequently bids for shows against AEG and Live Nation, estimates concert-business profit margins at three to five percent. The famously reclusive Anschutz has not explained his reasons for selling AEG, but such margins may be too low.
"There's not a big upside to being in the concert business," Scher says, adding that Anschutz may be thinking, "I'm not necessarily sure there's much growth here . . . Probably my millions of dollars that are invested in this can be put to better use to make more money. Let me sell it while it looks like a good business."
Possible buyers for the Anschutz Entertainment Group, according to reports and concert-business sources, include Live Nation itself and music companies such as the Universal and Warner record labels; private-equity firms such as Thomas H. Lee Partners, Bain Capital and Colony Capital; and wealthy businesspeople like Patrick Soon-Shiong, Liberty Media's John Malone and longtime concert-promotion investor Robert Sillerman.
When Anschutz offered AEG for sale Tuesday, the company stipulated that it not be broken up into pieces ? which suggests, sources say, that top executives such as Phillips and AEG President Tim Leiweke could stay in their existing positions even after the sale. Reports have estimated the company could draw between $6 billion and $8 billion, which could put the company out of reach for entertainment-only entities such as Live Nation or Universal.
AEG's recent bad press regarding Michael Jackson's final days may be an additional reason for its sale. During preparation for Jackson's O2 shows in 2009, Phillips told reporters Jackson was in great health; however, a few weeks ago, the Los Angeles Times printed emails that indicated Phillips knew more than he was letting on. "MJ is locked in his room drunk and despondent," Phillips had written to his boss, Leiweke. "I [am] trying to sober him up." The emails came out after two insurers sued AEG, trying to nullify a $17.5 million policy the promoter reportedly took out on Jackson.
Some in the concert business speculate Anschutz, a deeply religious billionaire, may be embarrassed by what has come out ? and may still come out ? regarding the Michael Jackson tragedy. "He's a guy that doesn't like the limelight," says a source.
But Gary Bongiovanni, editor-in-chief of concert-business magazine Pollstar, disagrees, recalling AEG's bookings of morally questionable pop stars such as Marilyn Manson and Rob Zombie.
"Anschutz is supposedly a highly religious man, a very conservative billionaire," he says. "However, he has not let his politics influence the operations of the company, as far as I can tell." In the end, Bongiovanni knows exactly who will buy the company: "It's going to have to be somebody who can write an enormous check."
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