S&P Global has revised its outlook on Live Nation Entertainment to negative from stable following the antitrust lawsuit filed against them by the U.S. Department of Justice.
The rating agency also lowered the company’s management and governance score to moderately negative from neutral. However, it maintained all of its ratings on Live Nation, including its ‘BB-‘ issuer credit rating, which is on the low end of its speculative grade, meaning it “faces major ongoing uncertainties” that could impact its business.
“The negative outlook reflects our view that the heightened regulatory scrutiny, financial costs, and potential disruption of Live Nation’s competitive position in the live events industry from the antitrust lawsuit could impair the company’s creditworthiness and thereby potentially result in a lower rating,” the agency wrote.
The agency added that it may lower the rating within the next 12 to 24 months as potential consequences of the lawsuit become clearer and it can assess whether it will impact the company’s business.
After a long investigation, which began after the trouble with the sale of Taylor Swift concert tickets, the DOJ filed suit against Live Nation on May 23, alleging that the company had used its position as a concert promoter, ticket seller, and venue owner to undermine competition. The claims include making venues sign long-term exclusive ticketing contracts, acquiring smaller companies to cut down on competition, and retaliating against competitors.
The DOJ is seeking a court order to break up the company, or as they say, a “divestiture of, at minimum, Ticketmaster.”
In a statement, Live Nation said that the DOJ will not win this argument in court. “Calling Ticketmaster a monopoly may be a PR win for the DOJ in the short term, but it will lose in court because it ignores the basic economics of live entertainment, such as the fact that the bulk of service fees go to venues, and that competition has steadily eroded Ticketmaster’s market share and profit margin.”