Live Nation Entertainment
I added the link to the Porter Analysis and Rubric.
Content of the paper
Introduction: Clear and concise. 1 page maximum to include company and industry information.
Analysis is concise, detailed, thorough; accounts for all five forces.
– Each Porter force is discussed and applied to the assigned company and industry
– Each force rating (e.g. high, moderate, or low) identified for each five forces category
– Includes a minimum of two five forces characteristics applied and explained for each of the five forces
Structures the paper in a readable and professional style, with section headings, including each of the Porter five forces applied to your assigned company
Conclusion: summarizes key points of paper and provides an evaluation of the company’s five forces strengths in relation to the industry as a whole.
|
42.0 to >0.0 pts Full Marks |
0.0 pts No Marks |
42.0 pts
This criterion is linked to a Learning OutcomeIntroduction/Conclusion
– Introduction: Clear and concise. 1 page maximum to include company and industry information
– Conclusion: summarizes key points of paper and provides an evaluation of the company’s five forces strengths in relation to the industry as a whole.
16.0 pts
Full Marks
0.0 pts
No Marks
16.0 pts
This criterion is linked to a Learning OutcomeResearch element
Research elements
Research sources are thorough and appropriate for business analysis; -. – must include Porter article reference and a minimum of 6 additional research sources from on the company company and industry.
Note: textbook and company website may be used, but are in addition to the 6 research sources.
In other words, Porter paper, textbook, and firm website are in addition to the 6 required research sources.
|
12.0 to >0.0 pts Full Marks |
12.0 pts
This criterion is linked to a Learning OutcomeFive Forces graphic
Prepares five forces graphic that clearly ties in with analysis
-graphic is specific to and presents highlights of key aspects of student’s analysis
-Ratings (e.g. high, moderate or low) identified for each Five Forces category
– At least two reasons for the student’s rating in each category
Hint: the graphic should be able to stand alone as a summary of your findings
|
10.0 to >0.0 pts Full Marks |
10.0 pts
This criterion is linked to a Learning OutcomeWriting style: concise, clear, masters-level, APA format
Business style writing
– writing is concise, clear, master’s-level, APA format, e.g. would be comfortable submitting the paper to senior-level leadership.
10.0 to >0.0 pts
Full Marks
0.0 pts
No Marks
10.0 pts
This criterion is linked to a Learning OutcomeWriting Mechanics
Flawless spelling, punctuation, grammar; Business-style writing
10.0 to >0.0 pts
Full Marks
0.0 pts
No Marks
10.0 pts
Total Points: 100.0
Please review the Porter paper grading rubric below. Use the rubric to review the preparation of your paper and to evaluate your paper prior to submission.
Guidelines for the paper (also review the grading rubric)
1. Provide a brief introduction to your assigned company (e.g. what is its business, in what market is it, how long has it been in business, etc.)
2. Apply each of Porter’s five forces to your assigned company, indicating the threat level (e.g. high, moderate or low), why you have made this assessment.
3. Do NOT make recommendations for addressing these threats; only provide your assessment of the threats
4. Include a graphic of the Five Forces model that provides a bulleted synopsis of your assessment for each of the five forces.
Resources:
· Porter, M.E. (2008).
The five competitive forces that shape strategy (Links to an external site.)
. Harvard Business Review, 86(1), 79-93. Retrieved from Business Source Ultimate, via the Wilmington University Library online resources.
1
Live Nation Entertainment
Emmanuel Kpartor
Business Strategy MBA 8800
Porter Five Forces Analysis Paper (Draft)
Wilmington University
11/24/2020
2
Live Nation Entertainment
Introduction
Live nation entertainment Incorporation is an entertainment firm that got created in 1996.
It has its headquarters in Beverly Hills, CA. The firm operates in the media industry which
contributes to at least 632 billion dollars to the US economy which is a third of the global
industry. The firm deals with production, marketing as well as sale of live concerts for artist
through the global concert line. It functions through various segments that includes sponsorship
and advertising, ticketing, and concerts.
Concerts segment includes promoting live music activities in the operated or owned and
in rented third party locations, sponsorship and advertising section provides sales force which
generate and maintain good rapport with the sponsors via a combined national, local, and
international opportunities which enable the businesses to reach out to the consumers through
venues, concerts, ticketing assets, and festivals. The ticketing section involves sale of event
tickets on behalf of customers and retains a fee or service charges. The concert segment accounts
for 80 percent of the firm’s revenues while ticketing contributes about
15
% and the sponsorship
and advertising segment offers 5% of the aggregate revenues.
It operates in more than 80 international centers that generate at least a third of its
revenues. The firm spent about 452.7 million dollars, 443.2 million dollars, and 378.1 million
dollars on promotional and advertising expenses for the years 2019, 2018 and 2017 respectively.
In the past 5 years, the firm’s revenue has been growing as the supply and demand in live
entertainment grows due to large strategic sponsorship and festival attendance. (Hoovers, 2019).
The company had losses in 2015 and 2017 but recorded profits in 2018 and 2019. The demand
Dr. John A. Hoehn Adjunct Professor
5803000000000723
7
Use citations as soon as you provide information that is not considered to be common knowledge. Don’t wait until the end of the section. I also look for balance in the paper. If there are more pages of background than forces analysis, I get concerned.
3
for live events increased in 2019 which pushed the revenue growth by 7% to 11.5 billion dollars
from 10.8 billion in 2018. The net income was 69.9 million dollars in 2019 to 60.2 million
dollars in 2018.
Body
Threats to New Entrants
The firm has a larger market share from its activities such as concerts, representation of
artists, advertisement management and ticketing. At least 50,000 promoters are available in the
US which means that barrier to entry is minimal. Despite the minimized barrier to entry, owning
a larger share of the market creates the barrier. Most of the promoters lack adequate capital to
lease or own venues across the globe and this generates a monopoly factor in the industry where
live nation and few other giants enjoy. It is hard to attain economies of scale in the industry
which enables the large producers like live nation to have cost advantages. This is a threat of
entry to new entrants due to expensive production and thus the force is made weaker or low.
Also, there is high product differentiation in the industry and no standardized products. The
consumers will look for differentiated products. Also, strong advertising and consumer service is
of essence which makes this force low in the industry.
Additionally, the government polices and regulation in the industry calls for strict
licensing as well as legal needs to start selling within the industry. This is a barrier of entry and
thus the force is weaker. (Parker, 2020). The industry has easier access to distribution networks
with few retail outlets selling given product types which means that new entrants can easily get
their products in the shelves. This feature makes the force high or strong. However, the general
rating of this force is low in this industry.
Dr. John A. Hoehn Adjunct Professor
58030000000007237
This is good – mention all the barriers you can.
Dr. John A. Hoehn Adjunct Professor
58030000000007237
Dr. John A. Hoehn Adjunct Professor
58030000000007237
Citations are inserted in the body of the text before the end of the sentence punctuation.
Dr. John A. Hoehn Adjunct Professor
58030000000007237
Porter’s Five Forces would be your heading here. Give a brief intro explaining what it is and why it is used. 1 or 2 sentences is sufficient.
Dr. John A. Hoehn Adjunct Professor
58030000000007237
larger compared to what? new entrants are not always known.
Dr. John A. Hoehn Adjunct Professor
58030000000007237
4
Threats to Substitutes
It is a factor that has no existence in the industry because there are no substitutes for live
music. Customers can switch over to bar shows, night clubs as well as televised events online but
this is not an actual substitute in the live music industry. To minimize this threat more, live
nation has collaborated with yahoo in offering recorded events of concerts to the consumers.
Live nation products experience less substitutes within the industry. besides, the few substitutes
available are also offered at weak profits earning industries. Therefore, there lacks a ceiling on
maximum profits that companies can get in the industry in which live nation operates in. all of
these variables make this force a weak or a low one. Besides, the available few substitutes are of
high quality but they are more expensive. Also, firms offering products within the industry sell at
lower prices than the substitutes yet at acceptable quality. Therefore, the buyers will less likely
switch to substitute items. The force is further weakened.
Bargaining Power of Suppliers
The main suppliers in this industry would be the artists themselves. Live nation being a
360-degree firm offering artists with management, tours, and venues, the bargaining power of the
suppliers is diminished. Artists may decide to work with other parties but most of these
businesses do not come up with a single package like live nation entertainment does to its clients.
The fact that live nation has a larger share in the industry reduces this bargaining power. Owning
the rights to book artists and own venues gives the firm a lot of powers in making decisions to
work with the firm since it offers third party firms a huge area to which they could have their
products marketed.
Dr. John A. Hoehn Adjunct Professor
58030000000007237
Check to see who actually books the artists. I think there are promoters and agents in the supply chain.
Dr. John A. Hoehn Adjunct Professor
58030000000007237
Put the strength of the power in each heading
Dr. John A. Hoehn Adjunct Professor
58030000000007237
Good
5
There are a lot of suppliers in this industry compared to the buyers which translates to
less control on prices by the suppliers making this force weaker or low. Also, suppliers offer
standard and not differentiated products and low switching costs which means that live nation’s
buyers can easily switch suppliers. (Swarbrick, Bosnyak, Livingstone, Bansal, Marsh-Rollo,
Woolhouse, & Trainor, 2019). Therefore, the supplier bargaining power is weakened. Also, the
industry profits are closely tied to that of the suppliers. Therefore, the suppliers have practical
pricing which makes the suppliers bargaining power weak. Therefore, the general bargaining
power of the suppliers is weak or low.
Bargaining Power of Buyers
This force is dependent on the incentives given to the buyers to attend a live event. For
instance, a buyer who is anticipating to attend a live concert for a given artist happening under
the artist nation, the consumer bargaining power is minimized because live nation will cater for
the artists venue location, and tour schedule. If the consumer wants to attend a live event for the
atmosphere, there are various opportunities available for with other promotional firms.
Ticketmaster has rights over shows and thus the buyers because it will be the only ticket seller. It
will thus sell them at whatever price the decide because getting secondary tickets by the buyers
will be expensive.
The suppliers in the industry are more than the firms manufacturing the products which
means that the consumers have limited companies to choose from and thus cannot really control
the prices. This weakens the buyer’s bargaining power. Besides, product differentiation is also
high and thus buyers cannot get alternative companies offering given products which also
weakens the force. Buyers incomes within the industry is also low which means the pressure to
buy at lower prices is there which increases price sensitivity among the buyers further weakening
Dr. John A. Hoehn Adjunct Professor
58030000000007237
6
the force. (Holmstrom, 2019). Buyers make regular purchases and will need quality products and
thus they become less sensitive to prices in the industry thus weakened buyers bargaining power.
Therefore, the general rating of this force for the industry and live nation is low or weak.
Rivalry
Some sections of the music industry are experiencing a lot of competition more so in
promotions. The social media industry is expanding which means the smaller firms can easily
advertise events at lower costs. AEG is a key competitor to live nation because the two compete
at acquiring smaller firms and rights to venues. In the promotion industry, having rights to own
venues is very key since it attracts more sponsorship and ticket revenues for a company. Live
nation is near monopoly with its proper horizontal and vertical integration strategies which
makes it a hard to compete with firm. It controls multiple segments which gives it a upper hand
in the competitive industry.
The industry has few competitors and the few available are large in sizes. Therefore,
firms will make moves and they will be easily noticed. Therefore, competition among the
existing firms is weakened. The few rivals in the industry have larger market shares thus they get
into competitive activities to acquire more position and be the market leaders. This strengthens
the competition among the firms. Besides, this industry is growing year in year out and it is
expected to have this trend over the coming years. When an industry has positive growth, it
means that rivals will not engage in too much activities that show rivalry since they do not to
acquire market share from each other. Therefore, competition is weakened within the industry.
The fixed expenses are high within the industry and this the firms will push to full
capacity. Therefore, when demand decreases, the firms are likely to decrease their prices.
Dr. John A. Hoehn Adjunct Professor
58030000000007237
How do you know this?
Dr. John A. Hoehn Adjunct Professor
58030000000007237
Good section but one would expect to see at least one citation here. Review the rubric re: number of sources.
Dr. John A. Hoehn Adjunct Professor
58030000000007237
How do you know this?
Dr. John A. Hoehn Adjunct Professor
58030000000007237
Good
7
Therefore, rivalry is strengthened here. The industry’s products are highly differentiated which
makes it hard for firms to garner consumers to each other because of the unique products and this
weakens industry competition. (Nation, 2018). Production within this industry calls for more
capacity by increased margins. Therefore, the industry is prone to disruptions in the demand and
supply balance which results to over production. Overproduction means that the firms have to
cut down prices to make sure that the goods sell which strengthens competition.
Exit barriers with the live nation industry are higher due to increased investment needed
in assets and capital to function. Exit barriers are also up there as a result of government
restrictions, and regulations. This makes the companies within the industry not to leave the
business and thus production will even continue at lower profits and the rivalry is strengthened.
Besides, the industry firms have diversified strategies which makes each firm unique and this
strengthens competition.
Recommendations
When it comes to expansion of live nation, the firm should focus on exploring into the
international markets, investing more in secondary ticket market capitalization, and acquisition
of C3 entertainment to own more of non-EDM festivals in America. Investment in emerging
markets is the next big thing in the live music industry an example is the rock in Rio; brazil.
Such nations have no well-structured frameworks for mid-sized venues and lack a chance to
meet travelling musicians many times in a year. If live nation can manage to organize their
festivals with their own artists, the profit margins will shoot from the advertising and
sponsorship that will exceed the costs of expanding into the market.
Dr. John A. Hoehn Adjunct Professor
58030000000007237
Excellent section.
8
The firm has also not addressed the secondary ticket and it only owns about 12% of the
secondary tickets sales market share. Lack of promotion of secondary tickets on their sites has
prevented traffic on the site. After the ticket sales clients will be pushed to direct themselves to
particular secondary market sites like stub Hub. Unifying secondary and primary ticket sales is
not possible until the firm restructures their present ticket selling software. lack of updated
software will result in inaccessibility to sale tickets. The best method to succeed in the market is
by availing paperless tickets via the resale of the primary tickets. Paperless tickets are a growing
variable will ensure live nation’s sustainability in the industry. The need to make more
investment calls for more investment to allow the live nation sell secondary tickets at cheaper
rates than the rivals.
Acquisition of C3 entertainment would be the preferable growth strategy for live nation
to grow their market share and attain the number of fans it has set as targets. C3 is an Austin;
Texas based concert promoter which comes 3rd live concert promoter after live nation and AEG.
The current growth in the EDM festivals is adequate for live nation to invest in through the
sustainability of this segment is unknown. (Pitkänen, 2016). Therefore, if in the coming years the
segment fails the firm will have a lot of capital unutilized. Therefore, buying C3 will ensure
security of its investment because they stage diversified events that bring along diversified
crowds for a guaranteed long-term sale. C3 has control over Austin city limits, SXSW and
lollapalooza festivals and in aggregate these offer at least 600,000 individuals on annual basis.
Though sale of tickets is not an essential variable of acquiring C3 but more the addition of
advertising and sponsorships that it causes.
Advertising and sponsorship segment of the company has the lowest direct operating
expenses. Therefore, investing in this section of the business has low risks in relation to the C3
9
events history. The acquisition is viable and the long-term milestones the firm is making makes
the investment viable. It should also be known that C3 hosts at least 1000 shows on annual basis
with at least 30 managed artists which are excluded from the festival feature of the business. This
is key because during economic declines revenues are transferred to the middle sized to small
events as compared to festivals and stadium events. Therefore, acquisition of smaller sized
events will act as a safety net for the live nation in the future ventures. However, the most
profitable route the firm should take is to let C3 use its resources to avoid unnecessary restriction
issues that monopolies in the industry experience. During the Ticketmaster and live nation
merger, live nation entertainment went through vigorous scrutiny and going through this again
may cost the firm. Therefore, acquisition of the 3rd largest concert promoter firm is an issue to
live nation and will generate legal issues.
Live nation can fight new entrants via the cost advantage offered by the economies of
scale it enjoys within the industry. Also, the firm should focus on product differentiation through
innovation. It should also invest in marketing to generate a strong brand. Through this, its
consumers will be retained and not get lost to new entrants. To address the issue of suppliers the
firm should get raw materials at low costs and if the products or costs are not favorable then the
firm should switch its suppliers since switching costs in the industry are cheaper. Also, in its
supply chain, the firm can also utilize more suppliers. For instance, live nation can acquire
different suppliers for different geographical regions. This will ensure efficiency in the supply
chain.
So as to attract more buyers, live nation should invest in differentiation and product
innovation. Quality and differentiated products are key to buyers within the company and the
industry. focusing in these key areas will enable the firm to attract more buyers. (Papies, & van
10
Heerde, 2017). Also, the company should generate a consumer base because the buyers
bargaining power is less. This can get achieved through marketing efforts targeting at building a
loyal brand. Also, the economies of scale it enjoys in the industry is key in reducing costs and
thus the firm can be able to sell at lower prices to the low-income earning consumers in the
industry. as a result, the firm will attract more buyers to the industry. live nation should aim at
offering higher quality items and this will make the buyers choose their items which offer
acceptable quality at lower prices as compared to the ones given as substitutes which offer higher
quality but at higher prices. Also, focusing on differentiated products will make sure that the
buyers see the products as unique ones and cannot shift to the substitutes that lack unique
features. This can be achieved by understanding the market needs through adequate research and
offering the consumers what they want.
Conclusion
The strategic planners of the firm can utilize the information presented in here on the firm’s five
force analysis to better understand how various variables under every of the five forces impact
the profitability of the industry. a stronger force generally means decreased profitability. Weaker
forces translate to increased profitability. From such an analysis, the a judgement on the
industry’s and firm’s profitability can get determined and get utilized in strategic planning. Live
nation entertainment is a near monopoly firm that is highly profitable and operating in a very
profitable industry. this is because the forces above have low ratings through the various
features.
Even the force that has a few features that make it a strong force, the aggregate features still
make the force weak. The force with a high rate is the rivalry in the industry. therefore, live
nation should be very careful in the way it addresses production and supply chain issues.
11
Therefore, it should benchmark with the industry rivals so that it can borrow those key features
that it can improve in its operations to acquire competitive advantage. Therefore, the firm is
doing well and should just utilize the recommendations presented in here to be the firm even
more profitable.
12
References
Holmstrom, E. (2019). Dancing in the Dark: An Analysis of the Live Entertainment Industry and the
Deceptive Market Practices of Ticketmaster and Live Nation. WJ Legal Stud., 9, 1.
Hoovers, D. B. (2019). Live Nation Entertainment, Inc. Company Summary. Retrieved on November, 6.
Nation, L. (2019). Number of Concerts and Festivals Promoted by Live Nation from 2008 to 2018. Last
Updated March, 5, 2019.
Papies, D., & van Heerde, H. J. (2017). The dynamic interplay between recorded music and live concerts:
The role of piracy, unbundling, and artist characteristics. Journal of Marketing, 81(4), 67-87.
Parker, C. (2020). Web. Music Fests Like Coachella Drive Concert Sales to New Heights, Phoenix New
Times.
Pitkänen, S. (2016). Ticket Sales Analysis for Live Nation Spain.
Swarbrick, D., Bosnyak, D., Livingstone, S. R., Bansal, J., Marsh-Rollo, S., Woolhouse, M. H., & Trainor,
L. J. (2019). How live music moves us: head movement differences in audiences to live versus
recorded music. Frontiers in psychology, 9, 2682.
13
Appendices
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
Concerts Ticketing Artist
Mangement
Sponsorship
& Advertsing
Revenue %
AOI%
14
15