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VIDEOThe 1.3 Billion Customers Live Nation Can't Reach
By
Justin Rohrlich
Sep 01, 2010 2:30 pm
While others look to China for growth, Live Nation finds itself shut out of the world's biggest market.
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Some perspective:
Yum Brands (YUM) operates 18,000 restaurants in the United States and 3,500 in China. However, those 3,500 locations account for fully one-third of Yum’s profits.
Caterpillar (CAT) CEO Doug Oberhelman recently told analysts and investors that the company will “win in China” and promised to make it the number-one brand in the category by 2015.
Air China just agreed to buy 15 Dreamliner aircraft from Boeing (BA) that will expand the carrier’s fleet capacity by 11%.
And today, H.J. Heinz (HNZ) reported a 13% rise in fiscal first-quarter net income, thanks in large part to increased sales in China.
Live Nation (LYV), however, which currently boasts an embarrassingly low 2.6% operating margin -- dead last in the entire film and entertainment industry -- won’t be able to boost those numbers anytime soon by betting on China.
Though Live Nation CEO Michael Rapino explains away the oligopoly’s anemic financials with boilerplate statements about “the impact of the uncertain [US] economy on consumers,” he attempts to assuage investors’ doubts by insisting Live Nation will “offset in part by our efforts to aggressively promote, price, and expand access to concerts across our global platform.”
However, as reported last week, “a bet on Live Nation is in many ways a bet on its ability to execute on a planned expansion overseas.”
And, that “global platform” as well as any “planned expansion” doesn’t -- and won’t, anytime soon -- include the world’s most populous nation.
In 1956, Chairman Mao proclaimed, “If we do not know how to listen to foreign music or how to play it, this is not good.”
Thirty years later, in 1985, China’s leaders opened the door to foreign music as Wham became the first Western pop group to tour the country, after an arduous 18-month struggle by the band’s manager, Simon Napier-Bell.
But, Western acts were, for the most part, frozen out of the Chinese market following the Tiananmen Square protests of 1989, and were kept away from the country for several years.
Gradually, the Chinese government started to loosen restrictions on potentially “subversive” entertainment, and, with album sales floundering just about everywhere in the world, (and virtually non-existent in China, where 90% of all CDs are pirated and a reported 99% of online music is downloaded illegally), China again represented a gigantic source of new revenue for bands.
By 2007, Beyoncé, Eric Clapton, Nine Inch Nails, Avril Lavigne, Sonic Youth, Linkin Park, the Yeah Yeah Yeahs, and others all made tour stops in China, often playing sold-out stadiums.
Enjoying the show, gents?
“China is on the tip of everybody’s tongue,” said Peter Grosslight, worldwide head of music for the William Morris Agency. “There’s 1.3 billion people there. It’s becoming a much wealthier place. How can we ignore that?”
Michael Arfin, Linkin Park’s booking agent, spoke of China as an opportunity to “break the band wide open in a brand-new frontier.”
Then, in 2008, the door slammed shut once again.
Why?
In a word (or, name, as it so happens), Björk.
A few months into the year, just shortly after artists were beginning to crack China’s nascent appetite for rock, Björk offended Chinese censors by performing “Declare Independence,” an “unapproved song,” before making matters worse by screaming, “Tibet! Tibet!” as the number drew to a close.
Tibet has been ruled by China beginning in 1950, and the territory has been in dispute ever since.
The Chinese Ministry of Culture issued a statement, saying the "political show has not only broken Chinese laws and regulations and hurt the feeling of Chinese people, but also went against the professional code of an artist.” The ministry also said that, "Any artistic group or individual who have ever engaged in activities which threaten our national sovereignty will not be allowed in," and it would ban acts who "threaten national unity," "whip up ethnic hatred," "violate religious policy or cultural norms," or "advocate obscenity or feudalism and superstition.”
Jeffrey Wu, of the Taiwan-based promoters Brokers Brothers Herald, told the Guardian newspaper that "What Björk did definitely made life very difficult for other performers. They are very wary of what will be said by performers on stage now.”
Lo and behold, it became very difficult for performers to play China post- Björk -- who was permanently barred from the country, herself. Lyrics were scrutinized for inappropriate language or ideas. Band members’ past activities were investigated.
In 2009, Oasis, which was planning two shows in Beijing and Shanghai, had its performance licenses revoked after Chinese authorities discovered that Noel Gallagher had performed at a 1997 Free Tibet concert in New York City.
Unfortunately, it doesn’t seem as if things are going to change anytime soon.
In April, a planned swing through China by Bob Dylan was called off by the Ministry of Culture after deciding it was uncomfortable with his status as an “icon of the counterculture movement.”
Fact is, in the hunt for profitability these days, it’s all too easy to forget that China is still a communist country that does what it pleases, when it pleases, how it pleases.
Of course, there’s a bright side to the whole story:
At least Bob Dylan is still considered countercultural somewhere.
No positions in stocks mentioned.
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