AEG on the rebound after a rough year
Last year, Los Angeles entertainment giant AEG weathered a major corporate shake-up, endured a six-month trial spotlighting its role in the last days of Michael Jackson and fell short in its efforts to bring L.A. a pro football team.
Even so, the company — owner of Staples Center, L.A. Live and the Los Angeles Kings hockey team — seems to be on the rebound.
Although AEG has taken a decidedly low profile in Southern California in recent months, the company has seen most of its worldwide operations surge.
Founded by Denver billionaire investor Philip Anschutz just 14 years ago, Anschutz Entertainment Group now has 27,000 employees in 17 countries and continues to grow. One of its biggest new fronts is China, where the company operates arenas in Shanghai, Beijing and Dalian.
“We’re coming off our most successful year in 2013,” said President and Chief Executive Dan Beckerman, an AEG veteran who took over after former CEO Tim Leiweke left about a year ago.
In addition to noting the company’s solid growth, AEG executives also expressed relief that its high-stakes legal battle with the Jackson family ended in October with a courtroom victory.
In an interview, Beckerman and Ted Fikre, AEG’s vice chairman, discussed company efforts to secure its position as a global sports and entertainment juggernaut.
“We’re really focusing on countries and cities where we have strong existing bases,” Beckerman said.
The company is private and does not disclose financial data, but it owns, operates or manages more than 125 facilities, including arenas in England, Germany, France, Sweden, Turkey, Australia and Brazil.
The “overwhelming majority” of company profits come from the handful of arenas that AEG owns, Beckerman said, including the O2 Arena in London, where AEG spent $1 billion to renovate the former Millennium Dome. The facility was built by the government to mark the turn of the century but was widely considered a white elephant until AEG bought it and made it into an entertainment venue in 2007.
Before founding AEG, Anschutz earned a fortune investing in oil, railroads and real estate. He has a reputation for building and selling successful companies. Now 74, Anschutz tried to sell AEG last year and still may want to find a successor or try again to cash out for billions of dollars. He declined to be interviewed for this story.
Anschutz abruptly canceled his announced plan to sell AEG in March 2013 and vowed to more actively manage the company. Despite having residences at L.A. Live and in the Palm Springs area, however, he is rarely spotted in public.
“He’s committed to the business,” Beckerman said. “He is investing significant capital in new projects and new growth.”
AEG’s influence in Los Angeles reaches far beyond its headquarters at L.A. Live. It has been one of the key actors in the renaissance of downtown Los Angeles over the last decade and a half. Staples Center and L.A. Live brought life to bleak blocks near the Convention Center and have attracted billions of dollars’ worth of residential, hotel and retail construction by other developers.
“They were the great catalyst for reinvigorating the economy, drawing new investment toward the east side of the city and downtown in particular,” former Los Angeles City Councilwoman Jan Perry said.
AEG has also been a major presence in civic affairs, including its highly watched campaign to bring pro football back to Los Angeles, in a new stadium to be built on its downtown land called Farmers Field.
But AEG’s public profile took a big hit after the charismatic Leiweke’s surprise departure as CEO. Also leaving the company last year was Randy Phillips, CEO of the company’s live entertainment arm AEG Live — the division that hired Jackson for a 50-concert comeback tour.
The tour sparked a lawsuit against AEG by the Jackson family seeking hundreds of millions of dollars in damages.
The family accused the company of negligence for hiring Dr. Conrad Murray, who gave Jackson a fatal dose of anesthetic. A jury found AEG was not liable for the singer’s death. A judge recently ruled that the Jackson family will have to pay AEG’s attorneys’ fees if the family’s appeal of the verdict fails.
AEG all but disappeared from the news in Los Angeles after the trial, but the company hasn’t slowed its growth.
One of the keys to profitability is multimillion-dollar sponsorships of AEG arenas, events and sports teams.
British mobile phone provider O2 agreed to pay AEG $11.3 million a year to have its name on the O2 Arena, just as office products company Staples, automaker Mercedes-Benz and other major businesses have bought naming rights to AEG facilities.
Nutrition company Herbalife pays an undisclosed amount to put its name on the jerseys of AEG-owned soccer team the Los Angeles Galaxy and keeps its world headquarters in offices at L.A. Live rented from AEG.
“We’ve sold naming rights on every continent,” Beckerman said.
AEG also provides ticketing services and promotes musical tours and sports events that keep arenas active.
The company’s immediate plans include an expansion in Las Vegas. AEG had been planning to develop an arena there with MGM Resorts International as early as 2006 but shelved the project as the economy tanked. Now the 20,000-seat arena — about the same size as Staples Center — is back on track, with construction to start May 1.
Nor has AEG thrown in the towel on its bid to bring NFL football to downtown Los Angeles. City Hall approvals to develop a stadium, secured by Leiweke, don’t expire until October.
“It remains one of our highest priorities, and we are continuing to work on moving it forward,” Fikre said.
AEG is on the receiving end of some community frustration that the nation’s second-largest city has not had an NFL team since 1994. Other targets of blame include the NFL, football team owners and city leaders.
But AEG earned goodwill by delivering on its promises to build Staples Center and L.A. Live. Both were considered highly ambitious, financially risky projects that weren’t universally supported or expected to succeed.
Both received some public financial support in the form of tax reductions, but Anschutz put millions of his own dollars on the line to fund the projects — which developers are typically loath to do.
AEG is still expanding its horizons downtown. It will be a financial partner in a planned Renaissance Hotel on Olympic Boulevard, across from L.A. Live, and is contemplating potential development for a garage rooftop it controls near the Harbor Freeway.
The company has also begun managing the Los Angeles Convention Center on a five-year contract and vows to improve food and beverage services there.
“AEG has made a huge investment in Los Angeles,” said downtown booster Carol Schatz, president of the Central City Assn. “It really helped to create life in the city.”
Twitter: @Roger Vincent
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