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LiveNation Entertainment Drops on Concert Woes

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CNBC.com

Live Nation Entertainment shares continue to fall— off some eight percent mid-day Friday after losing 11 percent Thursday.

Shareholders are clearly spooked by the company's Investor Day presentation Thursday, addressing concert business declines.

The pullback in consumer spending has slammed the concert business, and though Live Nation Entertainment is experimenting with new ticket-pricing models, that's not enough to assuage concerned investors' fears.

Ahead of the Investor Day presentation I spoke to CEO Michael Rapino, who told me that their ticket sales dropped five percent, compared to the 17 percent declines the rest of the industry suffered in the first half of the year. But the company's gross ticket revenue was down 9 percent to $822 for those six months, as it's brought ticket prices and fees down.

The real concern — Rapino tells us that there's no indication that the concert-goer is rushing back. Ticket volumes in the second half of the year could be down as much as 15 percent.

LiveNation Entertainment stock has been under pressure over the past few months as big acts like U2 and The Eagles have cancelled or postponed shows. U2's postponingits tour will push $6 million in revenue expected this year to next year. But Rapino says that the focus on concert delays and cancellations is overblown, saying that this year some 3 percent of shows have been moved or cancelled, and every year that number ranges from 1 percent to three percent.

Rapino has been pushing to innovate the ticket-pricing model to rev-up sales in this weak consumer market. Since the merger, the company has five revenue streams — forty-plus percent of revenue comes from ticketing. Rapino says that the company's invested in enough other pieces of the concert business that it can afford to take lower margins on tickets, in order to pack theaters and drive more sales of merchandise, food, etc.

Consumers are accustomed to fixed prices for concert tickets, but LiveNation is trying to introduce pricing that looks a lot more like airline seats, or even retail. Now prices for a certain seat in an auditorium will fluctuate depending on the popularity of the event or how close to the date of the event you're making the purchase.

Retailers discount coats to clear out inventory and airlines discount tickets to make sure they don't fly an empty plane. Rapino figures he can apply the same model to the archaic ticketing business and customers will eventually be grateful. But the billion-dollar question is whether this flexible model can draw a reluctant consumer.