Liberty Media (Nasdaq: LMCA) is the Pac-Man that keeps chomping: The acquisition-hungry company has announced it has increased its stake in concert promoter Live Nation Entertainment (Nasdaq: LYV). Liberty now owns a full 25% of its target -- up from the former 20% -- and said it's received regulatory clearance to increase that holding to 35%. It looks increasingly as if Live Nation will become another majority-owned holding in Liberty's ever-growing portfolio of companies.

Adding to the collection
Liberty loves to invest in vaguely entertainment-related entities. It owns 100% stakes in assets as disparate as the Atlanta Braves baseball team, the Starz cable-channel operator, and Leisure Arts (a "publisher and marketer of needlework, craft, decorating, entertaining, and other lifestyle interest 'how-to' books," according to the company's literature).

It also has substantial pieces of several publicly traded big names, including satellite-radio broadcaster Sirius XM (Nasdaq: SIRI), in which it owns 41%, and 17% of Barnes & Noble (NYSE: BKS). As if that wasn't enough, it has toehold stakes in massive stocks such as Sprint Nextel and Time Warner.

That's an eclectic mix, to put it mildly. But there's a determined strategy behind the apparent randomness. The game is to build up a strong enough position, no matter how many years it may take, to grab control of a choice company. Witness its recent moves with Sirius XM. In 2009 it had a 40% stake in the satellite-radio broadcaster; it was only a few weeks ago that it unveiled another 6% or so of ownership. Before the recent announcement, it petitioned to effectively take control of the company, but it was rebuffed.

That's probably the same pattern it'll follow in its stalking of Live Nation: 25% today, possibly 40% or so in the next months or years, perhaps an additional cluster of shares to gain a near or actual majority -- and then a strike at the company's heart.

Concerts are sexy
It's easy to see why Live Nation looks pretty in the eyes of a potential acquirer. It's far and away the top live-entertainment producer, and it also has a complimentary and formidable command of event ticketing following its 2009 acquisition of Ticketmaster.

With the collapse of the recorded-music industry, live concerts are an increasingly popular and lucrative business, as is that extra cut of revenue from the ticket segment, particularly considering that Ticketmaster charges hefty "convenience" and "processing" fees that can add nearly 20% to the cost of a ticket.

None of this has shaken down into profits, though. Live Nation has posted net losses in its most recent fiscal years and quarters, the latest being a $69 million shortfall for Q1 2012 on revenue of $868 million. The market had been expecting worse, but that's not exactly encouraging news. Fiscal 2011, meanwhile, saw mere 6% revenue growth (to $5.4 billion) and a bottom-line loss of $83 million. That red ink wasn't as bloody as that of 2010, when the company lost $228 million, but it's a loss nonetheless.

In the ticket sphere, Live Nation also faces determined competition in the form of eBay's (Nasdaq: EBAY) StubHub resale site. The second-hand market is a thriving one, and eBay capitalizes on it by taking a cut of every sale from both the seller and the buyer. By contrast, a Ticketmaster purchase results in a commission from only one source. Although eBay doesn't provide details of StubHub's results, it did reveal in its most recent 10-K that "the increase in net transaction revenue and gross merchandise value, excluding vehicles, was due primarily to improvements in the shopping experience, foreign currency movements relative to the U.S. dollar, and continued growth at StubHub."

A seasoned acquirer like Liberty Media probably looks at Live Nation's underperformance, at great odds with potential, and figures it could do a lot better steering the ship.

And it knows what's it's getting into. For years it's had a fine top-down view of the company -- Liberty's chairman and guiding light, John Malone, was Live Nation's interim chairman for nearly six months.

Choosing the right buy

Liberty Media likes potential, which is probably why it (apparently) isn't rushing to boost its stake in Barnes & Noble. Save for the popular Nook reading device, that company hasn't been performing well. Barnes & Noble received a nice jolt from a $300 million investment from Microsoft, but that still leaves current shareholders with a large and uninspiring core asset.

Live Nation, by contrast, has possibility. It has a strong, defensible market position, and a business that could probably perform better if under the right managerial regime. Keep an eye on the concert promoter; Liberty Media is far from done with it, and until it gains control of the company, its target's shares will have a strong supporter with deep pockets.

These companies are good to watch, but neither offers dividends. We have a line on a bunch that do, with solid businesses to boot. Find out who this generous gang is by reading our free report, "Secure Your Future With 9 Rock-Solid Dividend Stocks."