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Live Nation CEO Michael Rapino Gives up Salary, Top Execs Take Pay Cuts as Company Tightens Belt

Michael Rapino, President and CEO of
Paul A Hebert/Invision/AP/Shutterstock

In the wake of the steep challenges the live-entertainment industry faces due to the coronavirus pandemic, Live Nation CEO Michael Rapino will forego his 2020 salary and senior executives will see their salaries reduced by up to 50%, amid other cost-cutting moves and an amendment to its existing credit agreement that includes a new $120 million revolving loan facility.

“Given the uncertainty associated with the duration of current conditions globally, the company has launched a number of initiatives to reduce fixed costs and conserve cash,” the company said in a release accompanying a new SEC filing. “As part of these cost reduction efforts, the company will implement salary reductions, with salaries for senior executives reduced by up to 50%, and the company’s CEO voluntarily forgoing 100% of his salary for the duration of the salary reduction program. Additional cost reduction efforts include hiring freezes, reduction in the use of contractors, rent re-negotiations, furloughs, and reduction or elimination of other discretionary spending, including, among other things, travel and entertainment, repairs and maintenance, and marketing.”

The live-entertainment business — the primary revenue generator of the music industry — has been hit especially hard by the pandemic, with virtually every tour and concert taking place over the next few months postponed or cancelled. While touring-industry trade publication Pollstar projected a $12.2 billion year for the industry based on concert grosses from the first fiscal quarter of 2020 (which was largely unaffected by the coronavirus lockdown), those projections changed virtually overnight: It now lowers that estimate to $9.9 billion if touring resumes in late May, and $3.3 billion if the rest of the year is dark — the latter of which is “a worst-case scenario and certainly not expected,” the report asserts. Still, that worse-case scenario depicts a nearly $9 billion loss for the industry based on ticket sales alone.

Live Nation is the world’s largest live-entertainment company, and Rapino has made aggressive moves in recent weeks to bolster confidence and give support to the industry, ranging from purchasing $1 million in the company’s stock himself to creating a $10 million fund for laid-off concert workers called Crew Aid; he has also repeatedly assured the staff on conference calls that there will not be layoffs. However, even if quarantines are lifted by late spring, it’s hard to say when people will feel secure enough to return to mass gatherings.

According to the filing, Rapino’s pay will go from $3 million to zero, president Joe Berchtold from $1.3 million to $650,000; chief counsel Michael Rowles from $800,000 to $400,000, and CFO Kathy Willard from $950,000 to $475,000. The reductions in salary are in effect from April 16 “until such time as the compensation committee of the Company’s board of directors determines circumstances warrant restoring compensation to contractual levels.”

In the announcement, the company notes that it has had 8,000 shows impacted by the event stoppage starting in mid-March, with 15 million tickets sold for those shows. Of that total, 7,000 shows with 14 million tickets sold were postponed, accounting for 90% of tickets impacted. The remaining 10% of tickets, or 1.6 million, were for shows that were canceled. Refunds have been issued for tickets for all canceled shows, and the company expects to allow some refunds for postponed shows in the U.S. and select international markets as new event dates are set.

“For rescheduled shows that have offered refunds over the past month, 5% to 20% of fans have requested refunds while the vast majority preferred to hold on to their tickets for the future date,” the announcement reads. “Based on these trends, as well as an analysis of scenarios where refund rates increase above 20%, the company does not expect material declines in its event-related deferred revenue balances given the geographic diversity of the funds, the large portion of funds held by venues, and ongoing ticket sales for events in late 2020 and 2021.”

In the announcement, Rapino said, “The live entertainment industry has delivered incredible global growth for over 20 years, which speaks to the great passion and resilience of fan demand,” said Michael Rapino, President and Chief Executive Officer of Live Nation Entertainment. “With this additional liquidity, the flexibility in our debt covenants, and cost-cutting efforts, we believe that Live Nation has the financial strength to weather this difficult time. We will be ready to ramp back up quickly and once again connect audiences to artists at the concerts they are looking forward to.”