Live Nation Hands A Juicy, $4.8 Million Options Package to Top Executives…

The question — for investors, employees, and competitors — is whether Live Nation is getting looted before our very eyes.  Which brings us to a very sizeable options handout to a small group of top Live Nation executives.  This was first tipped to Digital Music News late last month; now we have the official documentation that confirms those reports.

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According to the paperwork, a group of five top Live Nation executives have been awarded performance-based options valued at approximately $4.8 million, with president and CEO Michael Rapino and Ticketmaster president Nathan Hubbard grabbing the juiciest chunks.

All of these shares have a $0 strike price, which is impossible for any outside investor to obtain.  The options start to vest next year, at which they can be exercised, or ‘purchased’ at the $0 price tag.  So, it’s sort of like your grandfather handing you a bunch of free stock (for being such a great guy).

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February 26th, 2013: “Somebody Please Save Live Nation Entertainment…

In terms of the performance component, that also appeared in the paperwork, though sources were unsure of what the specific benchmarks would be.  One guessed that the bar would be ‘laughably low,’ which translates into a free handout, though there is the possibility (however remote) that these are difficult performance goals designed to motivate a comeback at the troubled, debt-heavy company.

Rapino, who saddled nearly $12 million in compensation in 2011, is the biggest beneficiary with 150,000 options granted.  That translates into an estimated value of $1.8 million (using an approximate share price of $12).  Rapino scored nearly $16 million in compensation in 2010, despite extremely heavy losses in both years.

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Hubbard, president of Ticketmaster, received nearly 126,000 options, according to the SEC paperwork.  That translates to about $1.5 million, using the same formula.  Hubbard received compensation of $4.1 million in 2011, and $5.6 million in 2010.

Live Nation has posted losses totaling roughly $775 million since 2008; its current debt level is approaching $1.8 billion.  Live Nation has not responded to an inquiry related to executive compensation.

14 Responses

  1. juan adams

    so that’s where all those ticket monster service fees are going…

  2. Wall Street Guy

    This company is a sitting duck for the next banking crisis. It’ll get wiped out, choppedup in days.

    • Paul Resnikoff

      There’s actually a considerable amount of discussion on this very point, one that goes far beyond live, music, and entertainment. Specifically, that companies running extremely large debt balances will have little chance for survival if there’s another banking crisis or major (or even minor) financial meltdown. Others who know more on this topic have told me that many corporations are working diligently to reduce standing balances, because banks will be unable and unwilling to extend any credit if (or maybe, when) there’s a crunch (of any variety).
      Actually, if you read through financial filings from LYV, you’ll notice that large debt levels are already a serious problem, and cramping the company’s ability to expand. The reason is that there are so many resources (financial, other) dedicated to servicing this debt, which reduces available capital for other endeavors.
      Which raises serious questions related to management compensation and expensive expansion decisions. Yes, it’s apocalytic-sounding, indeed, except that economists and corporate executives now seem to think another crash is likely, which introduces a myriad of complicated ‘what’s next?’ scenarios. Hate to be so dark, but I think it will difficult to sell another large-scale bailout.

      • matthew king kaufman

        This firm is about owning venues NOT promoting shows. As all things musical got corporate, the concept of “promoting” shows some how got lost, and “producing” shows became the product of this public company, that was formed by borrowing money to buy out local promoters and venue contracts. This has always been a heavily leveraged company, even it’s predecessor, sfx, was heavily burdened with debt. The final reackoning has been postponed by raising ticket prices while attendance declined, accounting moves and raising ticket service prices has been a finger in the dyke. it’s only a matter of time till the sh*t hits the fan.

  3. McCabe

    Its too bad that everyone seems to be playing music for the short term gain and not trying to build anything. This is just one example. Just check out the plans at Spotify, Universal Msuic or Pandora, because everywhere you look it’s not about building something long term. The Live Naton guys are obviously saying to themselves “pay me now” and “get out” instead of thinking for the long term.
    Steve Jobs paid himself $1 and his company is still the most valuable in the world after his death. Anyone not willing to put that much skin in teh game deserves to be fired.

  4. Visitor

    The saddest part of this story is that it’s not suprising at all.
    People have gotten so used to seeing companies that have failed or are failing hand out lotto sized paychecks to the excutives before it all disappears that this story is a yawn-next.

    • Adam Smith

      Makes me wonder if the only reason they start these companies to begin with is to attract a bunch of investment money, then cash out. On to the next wierd money deal.

      • Invisible Hand

        ….and to add insult to injury the fund managers/vc advisors who recommend investing in these businesses don’t end up jobless or at the very least embarrassed. They receive hefty bonuses at the end of the year.

  5. Ritch Esra

    This story joins a very long list of executives who have been allowed (by their Boards) to take enormous sums of money while the company continues to lose Billions.

    We saw it with EMI, back when Charles Koppleman ran it (into the ground) and escaped with 38.5 million in compensation while the rest of the company was let go.
    Or how about the greatest payout ever – Mike Ovitz who after only 18 months of work at Disney was given an exit package of $94.5 million (and they were letting him go!)

    The problem here is that there’s no incentive in any of these packages to do a great job, because failure pays so well – contractually speaking.

    On a deeper level though, these kinds of payouts are allowed by the boards who run these companies because they truly believe that the executives running them are the ONLY ones they can find who have the talent, skill and necessary relationships to do the job – so we had better give them the moon, the stars as well as a piece of the universe as well. Until they let go of this type of delusional thinking this will continue.