Live Nation Entertainment, Inc. (LYV) Earnings Call Transcript & Summary

Good morning, and welcome to Live Nation's Investor Presentation where we are webcasting live from our New York City office. I'm Amy Yong, Investor Relations for Live Nation, and on behalf of the entire team, thank you for joining us today. This morning, we're going to kick off with a video -- a brief video. And following that, our President and CEO, Michael Rapino, will share his vision for our company and key growth drivers over the coming years. After the presentation, we will take questions from our analysts. Our President and CFO, Joe Berchtold, and executives from each division will also be available to answer your questions. Before we begin, we would like to remind you that today's presentation will contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties that could cause actual results to differ. Such forward-looking statements include, but are not limited to, statements regarding projections of Live Nation's future financial results, business strategies and expansion plans, roadmap, competitive position in the future developments of markets and market opportunities and similar matters. Please refer to the full presentation slide relating to these forward-looking statements as well as Live Nation's SEC filings, including the risk factors and cautionary statements included in the company's most recent filings on Forms 10-K, 10-Q and 8-K for a description of risks and uncertainties that could impact the actual results. Live Nation will also refer to some non-GAAP measures during this presentation. In accordance with the SEC Regulation G, Live Nation has provided definitions of these measures and a full reconciliation to the most comparable GAAP measures in our presentation, which also contains other financial or statistical information to be discussed today. The reconciliation can also be found under the Financial Information section on Live Nation's website. [Presentation]

Good morning. Welcome to our day back live. It's been a couple of since we've seen you. I appreciate all your patience through the last couple of years. Today, we're going to take you through what we think is probably a story you know well. Our strategy for the last 10 years has been fairly consistent, just been about execution against what we think is an incredible industry, and I think we learned that the last couple of years. We've talked a lot before COVID about the experience economy, how important Live is to the customer, ranks continually pre-COVID, and now after COVID as one of the top entertainment options, experienced options. Ask anyone, this always ranks in the top 3 of things they want to do this year. It's memory-making. So we're glad, coming out of COVID. It's bigger than ever, and consumers are going to get back to that show and have a social along with their friends. I think you heard us talk about it yesterday, and the numbers are proving that. We're going to see a very big 2022, even though we're kind of not open for business as of January 1. It took a few months to get through all around the world. But starting the springtime, we will be open pretty much everywhere in the world. Australia, a little bit of the Pacific Rim still laggering behind. But obviously, the U.S., Europe being the big businesses for us, the U.K., Canada. Latin America, we start a show, a co-play to or a stadium to March 18. That one, we're thrilled, but that's on plan for Costa Rica and onward. So we think we have a fully-open business by the summertime on a global basis. We used to talk this slide all the time about -- this is just a good industry. It's got incredible global tailwinds. This is an industry that has been growing at 8% compounded annually for many years. We think, obviously, the next 2 years, 3 years are going to have a much higher growth rate. But regardless of how that bubble kind of works itself out, we think this is an ongoing 8% to 10% compounded business. So as long as we're growing with that growth, we think we can continue to have incredible earnings. Again, this is a business why we talk about its global growth, still a business that's underpenetrated in most of Latin America, most of Eastern Europe, most of Pacific Rim, they're still just building arenas. The drakes are just starting to go to those markets, so why we've always said that this is a global business, an incredible global opportunity, and we think this will continually be an 8% to 10% compounded annual growth business that we'll be able to capture. I think you've seen the flywheel for many years. We've talked about it. We think our secret sauce is our concert flywheel, one of the largest flywheels in the business. But that flywheel then let us get into 3 other huge TAMs. We think the combined TAM is about $150 billion. We'll take you through each of these now. The most important business that we're in is the concert business. It's the heart and soul of what we do. It's those 42 countries where we put 40,000 shows a year on that make the machine work. That's the secret sauce. That's the hard part of the business having 30,000 employees in 40 countries, 100 offices. It's a local, national and global business. Sometimes you're buying a tour on a global basis. Lots of your businesses on a local basis. Lots of execution happens local. You buy Drake, but you got to have boots and hands on in Milan to Cape Town, to Singapore. So we think it's a very unique model we've built over the last 15 years, assembling all of these pieces, all of the festivals, the employees, the production, like the marketing expertise on a global basis is what makes us very unique. Obviously, the $6.5 billion we spend with artists annually, make us one of the largest financers for the artist community. They are our core customer, and we spend our days figuring out how to continually be in business with them, whether it's the existing Rolling Stones and U2s to the Olivia Rodriguez (sic) [ Olivia Rodrigo ], our job is to continually, from 500 seats to stadiums, put artists on that stage. We think this business continues to grow $25 billion TAM today. As I outlined, 8% to 10% annual growth, lots of global opportunity. It continues to be a great industry growing up to $40 billion in the next potential of foreseeable future. And obviously, if we're at 100 million, we're going to get to 125 million fans as our next lever, and then we'll continue to grow from there. This chart is Amy's chart. We think this is so powerful. We get asked all the time, inflation, ticket prices. Can you -- where is the ticket price going? Do you have any opportunity left in the ticket price? Concerts are still one of the most underpriced greatest assets on the market. Our first slide told you, it's the #1 consumer experience that they want to attend, but it's priced below what others are on that chart. You look at obviously the best priced ticket. Again, sports completely underpriced. And Knicks, there's 40, 60 home games a year. There's only one Billie Eilish show every -- maybe 3 years in The Garden. So scarcity is incredible to mention you're paying that much for the Knicks. But we think, obviously, this is a business that is underpriced. Secondary business continually shows us, even when we continually elevate the Platinum, the VIP and push the P1s, the secondary market is still commanding a high premium for those tickets and experiences. So this says two things. One, we got at least $100 million in opportunity on our side. It's $1 billion from an artist's perspective in terms of the gross. But the more we wake up every day and have artists price it better, price the front of the house, the P1s, the Platinums, the better, obviously, it is for the artists and the better it is for us. We talked yesterday about secondary. Our goal isn't to figure out how to sell a BTS secondary ticket. Our real goal is to figure out how to get BTS to price the Platinum and the premium to be more efficient. We do believe, obviously, with all the pricing tools we have now, the transparency in the marketplace, artists are going to and content are going to continually strive to be more efficient and priced at a higher price to capture those dollars for themselves, not someone else. So huge opportunity over the next many, many years is to get a more efficient market, price the product better, put more dollars into our side of the ledger. And we read about the beeps last year, obviously, Metaverse, blockchain, ticketing, NFTs, merch drops. This is a slide that just says, we have kind of separate departments working on all of these products. We look at the show ongoing is how can we expand it, whether it was VIP Nation we launched a few years ago. We've got an incredible one of the largest merchandise companies in entertainment that's dropping artists, ongoing merch bundles, terra merch, retail merch, taking advantage of that business. We got live stub. We just launched an NFT product, actually pretty excited about this. Every time you get a concert ticket, you're now going to get a visual ticket stub versus an e-mail. So you can save this, you can share this and it becomes an instant NFT in a gallery, and we think we can start adding value to that NFT experience. So the more stubs, the more concert tickets you keep in your wallet, the more value we can start to provide to you. So it's a baseline NFT program that we think could be a powerful loyalty program over time. At minimum, it takes -- what used to be a great ticket stub, which turned into an e-mail, takes us back to a beautiful ticket, a visual piece of art that can be shared on Instagram help us promote and brag about our experience and have that badge or that trading card to the experience again. So we think it's an interesting piece we're dabbling in. We've got metaverse ideas. We'll launch -- as everyone else has, we'll launch venues in the Metaverse. We'll continue to dabble in all those ways. All of these are just extensions to what we think is the real important piece is those two hours of magic that happened physically. That isn't changing. We think that's spectacular. It's not duplicatable. We learned that through COVID. As great as streaming is, you don't get goose bumps when you're sitting at home on a screen. The two hours of magic is spectacular. It's the hard part. All of these products, we think, are great extensions. They add flavor to our core business, and we'll continue to make sure we're active and innovating in them. Venue Nation, we talked about this in our last earnings call. We have a portfolio of about 320 venues. As you can see from 2015, it's been growing. We add somewhere between 20 and 25 festivals a year -- or venues a year. Most of them are operating leases. Someone's building something somewhere and has a 2,000 to 5,000 to 7,000, wants an operator like us to come in, takeover and power the building. We're seeing it, obviously, a boom. We're kind of the new movie theater tenant. Every developer around the world right now is calling us, saying, I'm building my retail environment, and I need a live venue. I want a 500 seat. I want an amphi seat or I want a 2,000-seat. So we have a full-time design development team that's got over 75 projects right now that we would be meeting with different developers, RFPs, opportunistic ideas around the world. It's fabulous to see live entertainment being so important to any development. You've seen lots of equity. You've seen lots of capital go into this business. So we happen to have the secret sauce, though. The hard part about building isn't building these, isn't designing them, it's programming them. So we have a great, great portfolio of brands, as you see on the side there. We're going to continue to expand opportunistically where we can put a Fillmore or Brooklyn Bowl, a House of Blues in amphitheater. We do that because over those 98 million people that went to a Live Nation show, where 41 million walked in a Live Nation owned or operated amphitheater, theater, club venue, arena. And it's obvious we have a much higher return when you walk in my building than someone else's, we get to capture all the revenue, all the sponsorship, [indiscernible] food, the beverage. So we see it as a great return on capital if we're managing that building where all the entertainment activity is happening. We're capturing not just the ticket, but all of the ancillary revenues, the power of that experience, the VIP, et cetera. And we see when we takeover any building -- existing buildings that are in the marketplace that come up available for sale, for lease, for operating, when we takeover, when we take our efficiency, our scale, our concert booking, our purchasing power, we can incrementally deliver a much higher return on that building, plugging it into our Venue network. So we are continually on the prowl on a global basis. We look at it, there's 100 cities in the world that matter. Every one of them is looking probably outside of America for a spectacular arena because they don't have an NBA or NHL team. We see those developments happening all over the world. We're looking at all those kind of markets. Everyone is looking for an amphitheater. Everyone's looking for a 2,000-seat. Every developer is looking for a 5,000-seat. So a real advantage for us. We're at the table at all those meetings and deciding which ones make sense for us to keep building out our global platform. One of the key parts of this business is, obviously, you got to fill the building. That's our sweet secret sauce. The second is then you got to maximize revenue when they walk in the door. That's been the heart and soul of what my Venue operations team has done for 15 years now. When you walk in Jones Beach, you walk in the Fillmore or the Irving Plaza, the goal is, one, put the show on to get you in the door, be spectacular at marketing and figuring out how to get the building filled. And then when you walk in that door, how do I monetize you? How do we make sure we maximize our revenue? Hospitality, food and beverage, VIP, bundles, all those ways that we've been able to grow on an annual basis $2 per year. We still think the industry is underserved compared to the sports and nightclub business that just says to you, we think we have a long runway of $2 per year doing a better job monetizing those customers to walk in our buildings. That's the concert business. Now Ticketmaster. Again, incredible story on this brand. I think we're very proud of the turnaround since we took this over 10 years ago, and the rebuild of this business to become this global strong brand. 36 countries, I think we were in maybe 14 when we took over or 12 with multiple platforms. I think we have 14 platforms at the time. So we've been working hard to get a single global platform and globally expand. 500 million tickets, we see huge GTV. And our app has exploded as the business moved from online to mobile, and we've been able to make that transition. If you look at the global business, it's about a $100 billion business. Again, this is because -- this slide looks a little bigger because sports is such a big part of ticketing versus music. So on a global basis, it's a $100 billion business. If you look at all-in arts, theaters, sports, small festivals, big festivals and music venues on a global basis, we think this is our biggest opportunity. Outside of America, we have huge growth opportunities. There are some markets that we're in where we might have just entered the markets, like Germany and Italy and other markets like the U.K. and Canada, where we haven't upgraded our software, haven't been as aggressive as we've been in America in rolling out our features and products. So we think between entering new markets, building on existing markets. We have a $100 million opportunity alone, just on rolling out this global brand on a global basis. And obviously, every time we add a new ticket to our concert pipe, it's a Ticketmaster billed extra ticket of 25 million fans at $75 million AOI. So the more we scale our flywheel, Ticketmaster gets the direct benefit. We'll talk about why do we get -- why does Ticketmaster continue to excel. Why is it having its boom right now in the last couple of years in terms of signing clients, accelerating its global client list. Two reasons. One, it has the best enterprise product in the market. None of the strategy you got to do is delivering a great enterprise platform for the client, whether it's a 500-seat venue, a festival, an arena, GA are reserved. It's a complicated stack to deliver. It's easy to deliver a GA ticket. It's easy to deliver a secondary ticket. The hard part is delivering a global ticket, high demand, 10 a.m. to reserve customer in an arena, high-demand customers, lots of features and functions they want, lots of customization needed to handle. So being able to deliver them a GA and a reserve ticket on a global basis and handle that demand at 10:00 a.m. when BTS has millions and billions of lots coming at you being able to deliver that ticket, delivering an end-to-end delivering it on an analytical perspective, given CRM, all the tools that these clients demand now. We've been able to deliver and build that over the last decade. So by far, full stack solution to give it a sales force, if you're a client and you're a venue, and you need a full enterprise platform to manage all of your ticketing needs, charity, single tickets, multiple tickets, season tickets. Now my season tickets have to turn into single tickets, have to analyze and flex ticketing by the minute, have to deliver. Now we got a new product called an [ end aisle seat]. Its different than a single seat. A preseason -- presale is different than an AMEX presale. I got to integrate it now with all my other CRM partners, all of my API capability. So proud that the team has worked hard over the last decade to make this platform very versatile on a global basis. The second great success we've had is when we separated Ticketmaster into enterprise and marketplace is really focusing on both ends that are important. So it is, again, what you Ticketmaster has unique. You can power your client needs, and it could be the best place to sell the ticket. Our marketplace by far is the #1 marketplace in ticketing on a global basis. It delivers the most tickets, the most GTV, the most conversion. And it does that because it's incredible end-to-end. You can buy your ticket today on the -- you can discover your ticket purchase it, see 3D seats, all the different technology and innovation features you'll want to figure out what seats to get. You can transfer it. You can resell it. You could pay for it over time, all of the payment options we've added. And obviously, when you enter, it's an access point, you can have an upgrade all the things you need end to end. So this is really the only end-to-end reserve GA app in the business marketplace that can deliver both pre during and after primary and secondary. And we're just continually elevating this business. We're adding new features ongoing insurance, bundling, hotels, all the ways you can think about you would add value to that experience. So I want to go to a show, I'm going to the show. I'm at the show, I'm leaving the show, all the ways we're integrating partners into that value chain in that cycle, that's how we think we'll continually add AOI to this experience. And one of the things that I think has probably been the most paramount to our strategy over the last 10 years was opening our platform. Ticketmaster for many years, before we arrived, was a closed platform. We've been an open platform for many years. customers want us to be their enterprise platform. They want us to sell tickets at ticketmaster.com, but they also say, I have other partners that I have to satisfy and I want to allocate tickets to them, can you power that. We do that every day of the week. It does two great things. One, every day reconfirms how powerful Ticketmaster is because a lot of people think they have audience, but an audience doesn't translate to the way you buy a concert ticket. So that's helpful to us because every day when a client says, let me put some tickets over here, we say, great, and they see the conversion at Ticketmaster versus there. It's a great validation of how important it is when you buy tickets. Tickets aren't an impulse decision. So you don't actually -- it's not the checkout line, and you think I want two BTS tickets while I'm walking up the door, I haven't thought of that. Ticketing is usually a 2-week process, lots of involvement. I got to ask your friends. I got to make sure you got everyone got the night off. I got to make sure they got -- what kind of tickets they want. It's kind of a research and development project. So consumers tend to go to the ticket sites that have the most access dig into those deep to figure out what they want. But in many cases, a lot of these partners like Snapchat, Bandsintown, absolutely bring us incremental customers that can help us deliver incremental eyeballs to the show and our incredible marketing assets for free in theory because they're just taking our ticket value proposition and delivering it to a wider audience. So we wake up every day, whether it's our Live Nation customer, whether it's the NFL, whether it's the Madison Square Gardens whatever their latest sponsors, their partners, whatever their needs are, we can open up API and deliver those tickets on a seamless transaction flow to them to help them deliver. Bigger eyeballs, more ticket sales. And the last big part of our business is the sponsorship division. Again, another incredible business. We're probably, I guess, in theory, the largest entertainment agency. If you looked at it that way, over 1,000 sponsored brand partners signed up to Live Nation and see. Why? Because we have a very unique proposition. We have incredible on-site scale physical reach, captive audience. As you know, brands today are struggling, how do I connect with my customer Digital has its advantages, but it's very neutral. Brands look at us and say, you have a captive audience for 2 hours, sometimes 2 days on a festival, who they are, what type of age, demographics. I can reach them, I want to look at those 5 billion impressions that you can deliver very on-site on a consistent basis, night-after-night, market-after-market. And obviously, because of your digital reach, I can amplify that on a digital platform, too, and buy and access your digital reach. So we think we have a very unique proposition for the NFL, if you want to call it for Live. So if you're a brand and you figured out some sports strategies, you're doing your NFL deal, your NBA deal, then you say I want some music. I want to understand the customer. I want to reach 19 to 29-year olds. I go to the Live Nation. They're the NFL of the music business that will help us deliver scale, credibility, results and analytics. We've shown that over the last multiple years. This continues to be a double-digit growth business. We still are under service. The music business is always kind of a smaller piece of the business compared to sports. But even the music pie of a $6 billion TAM, we can still keep delivering better products, upgrading our experiences and growing at double digits for years to come. And once we obviously have that big audience, it's just about developing new ad products. And that's really what we've been able to do continually, continue new ad units online. So we're continually reinventing our app, our in-app and web experience and adding those units that matter there, trade in a bit of a marketplace for all of these brands, these sports to advertise on our platform as well as we've been able to, as I mentioned, in that end-to-end experience, add and integrate credible products, brand partners into those. So every time these brands come to us and say, "I want to be part of that." Obviously, fintech, big piece of the business right now. crypto, you accept crypto will you use my payment options? Can we use those options? Can you book a hotel while you're there? All of those integrated ideas that are AOI ideas, really helps spike our business. Insurance being really, really the star in our portfolio when we started that multiple years ago. We thought it was a neat idea that's now been incredible multimillion dollar AOI business for us on a global basis, and we're rolling that out. So the more ideas we can do like that to power that experience with brand partners that are also end up being AOI partners. We think that adds incredible opportunity on that side. And the new categories are open up every day. As you know, none of us looked at fintech, on crypto, like we do today a couple of years ago, brand-new categories undersold. We'll announce some of those deals over the next while as we're looking at our partnerships. So every day, we're seeing brands looking at the music business, not as a music business, but our business as a business with a scale customer, an attractive customer. So whether it's beauty, whether it's crypto, whether it's fintech or insurance, we have that kind of 15 to 50-year-old customer at scale, multiple dimensions, we can reach them in different ways. So our job is to deliver that audience to that brand and convince them why our customer can deliver against their needs, and lots of opportunity left in categories that are untapped. You put all those 3 pieces together and you look at our history of this management team of delivering annual AOI free cash flow growth, we think we're going to have a continual '22 onward path of incredible growth. I think you've seen today you're going to add up a whole bunch of hundreds of millions of ways we're going to add to our bottom line. You can add also the $200 million fixed cost. We talked about coming out of COVID on how we end up delivering that piece, regardless of -- as we said yesterday, yes, we got some increased labor costs, and we've got some increased insurance costs. All of those, though, are still netted out to make sure we deliver a $200 million plus on top of our AOI delivery. So we're excited that the industry is back. We're excited that consumers' pent-up demand is showing everyone that this is a space that they're dying to get back to. It's a big part of life, a big part of making Kodak moments, and we think we have the machine that can continually tap into that growth on an annual basis. So are we going to do Q&As now or Joe? I think you all know who's here with me. All right. Were you going to do anything on the cost insurance or part of...

Yes. Michael talked about costs, and I know there were some questions yesterday in terms of labor costs, and so I wanted to give just a little more specifics on that to frame it. So I'll use this a typical amphi show just to simplify it and give you the numbers. For a typical amphi show, our labor for that show runs about 6% of our revenue for that show. A 5% increase in our costs of that labor, so you can do the math on whatever version you want to do, would increase our costs by 0.3%. So if you look at the revenue base for an amphi show, you increased it by 5%. That's a 0.3% increase, yet relative to the overall revenue in a show. So when we talk about the fact that we think that it's a manageable cost and something that as we drive per caps and as we drive pricing, that we're very comfortable we're going to be able to easily cover it and continue to grow our CM per fan. I just wanted to give you guys more specific so you have some comfort with that number. On the insurance side, again, just to frame it on the overall -- insurance, yes, is higher this year, still running in kind of the 1% to 2% of our variable cost range. So it's not a major driver of our cost structure as we put on the 40,000 shows this year. That's not what we look at to drive our costs. We think it's a manageable number. We expect it to continue to be a low portion of our overall variable costs.

Let's introduce quickly, and then we'll -- we have our team here with us. You know Joe. Michael Wischer runs Ticketmaster. Chris Loll runs our sponsorship. Jacqueline Beato is now running our Concert division also. All right. Fire away. Go ahead. Sorry. I'm sorry. I'll let Amy do the moderating.

We'll take our first question from David Karnovsky, JPMorgan.

I just have a few on menu Nation. Can you talk a little bit about where the demand is coming from in those 75 venues? Is that from municipalities, property developers? Maybe you can speak to how the economics work. We see the press releases sometimes you're an owner, an operator, a part owner. Maybe you can walk through the various models. And then is this an opportunity primarily for North America, or is it also for the U.K. where you have a venue base or Mexico?

I'll start and then Joe will, and Jackie will jump in. I mean, I would just say the opportunity is everywhere. And I say that in the sense of every major city around the world wants to be an entertainment capital. So you probably have every major city looking and saying, I don't have an arena, how are going to hold arena. So that's why you see us in São Paulo, you see us in Cape Town and Milan and these places where you can build an arena at a much lower cost than the NBA arena. So you're not building a $1 billion luxury suite like that. You're going to build a $300 million arena. In Holland, we have one in the ZigoDome. We have 1 in Dublin. So if you can be the only arena in town in a market, a major market, it's a great return. So we see that around the world on an international basis. As far as an amphitheater of 5,000 and 2,000 similar. Other than maybe New York, Los Angeles and a few of the main markets, most markets really -- there was that 20-year era where there wasn't live music. As you remember, it was disco, it was house music. The old live music venue kind of got faded out. And all of a sudden in the last 10 years, there's been this new resurge. You've seen the Webster Hall rebuild, our Irvin Plaza, where live has become fabulous again. But a lot of those cities, those venues weren't built were run down or mothballed. So most cities, you look across America, they probably don't have a great 5,000-seat venue. We think that's a real sweet spot, probably got an old 2,000-seat theater. So you see us do a lot of those take over, a 2,000-seat theater given a facelift with VIP and turn it into a film more. So we're seeing from Sydney to Toronto, Vancouver, Montreal, major cities, probably lots of theater, club amphitheater development. Arenas probably outside of America or Austin, which we're very proud about. That's going to be just a home run arena that we're doing, again, a main market that didn't have a good arena, upgraded it there, and will deliver incredible return. And Joe will take you through our own operator lease.

So in terms of our models, historically, the primary model we had was you'd have a landlord we go in, we lease the building, we put in a little bit of capital to just build out the building. And the issue is, is that landlord would then take our lease, he'd go to the bank, he financed the entire project, almost no equity in. And then, over the course of our lease, they'd end up owning the building basically off of the back of us and our commitment. So we look at that in some way very simply and say that should be our money. How do we extract more of those economics? So how do we figure out models where we can either in partnership with some of them or we get our fair share of the economics or we go in earlier and were the ones who were actually more substantially involved in the development of the building. We are the one looking at different financing opportunities, using more asset-backed financing on some of those, and we're extracting those economics. So that's the part of the theory on as we look at this, we can be doing more of the -- we can be operating more as we operate more, we can go in earlier and extract more of the economics, either in partnership with the developer or having -- basically being the developer ourselves. Depending on the situation, we've obviously done a lot in the U.S. in partnership with Oak View, some of the major buildings like Austin and other...

If you look at Austin, as an example, typically in arena, we're putting content in we're getting paid the ticket fee and maybe we're getting a partnership rebate if we put a lot of shows in a venue, but we obviously don't capture the sponsorship or the food and beverage. If you look at a place like Austin, we went in with a partnership with OVG. We're going to operate and consolidate that business. Combined, we then took debt against that building. I think our equity checks were in the...

Yes, low tens of million.

$10 million to $20 million equity check. We think that building gets billed for about $320 million. We think it pays itself off in 5 or 6 years, incredible return on that building. and we will own the VIP, the sponsorship, the ticketing machine. So with the low-cost debt available out there, there's we'll look more and more at opportunities if we can write a small equity check and own all of the revenue streams. We'll take that versus, as Joe said, what we learned over the last 5 to 6 years was the landlord wanted a higher lease from us to take that piece of paper and refinance it. So in many ways, we'll look at theaters and clubs if we can maximize the revenue from our pure content that's making -- that's powering that building, then we're better off.

We're going to take our next question from Stephen Laszczyk, Goldman Sachs.

I was wondering if you could elaborate more on the opportunity in OCESA and in Latin America more broadly, looking out 5, 10 years from now, how large can that platform come from you come for you in terms of attendance, maybe revenue and AOI contribution? What are the main goals? And what are the key drivers there in terms of organic and maybe the opportunity for M&A?

Yes. I mean, we'll start with, one, we have a big opportunity Latin America, too. It's untapped. That's what you saw with our recent bad money announcement, we're excited. So I would say that there's a big opportunity that we don't even talk about in America because we have not been very well represented in that gene. So we're ramping up our Latin Nation division. The more shows we do also unlocks a lot of sponsorship in that space. We haven't been servicing. So one, Latin America, you've seen us launch some festivals in the last few weeks. Really going to make sure we don't fall asleep at that space, big business here. Mexico has been a great partner, third largest promoter in the world. So we love being in business with those guys. We already have Ticketmaster Mexico that we were a minority partner in. Now we get to -- and they still have an old platform. So overnight, we're going to get the new platform there. We're going to do secondary platinum tickets, all of the good upgrades that will make that a much more profitable business. So we think that business is well run. We think we can add our annual kind of growth numbers to Mexico. But it does open up Latin America. As you said, we've got some pieces in the pie in Latin America. We bought Rock in Rio, which was a big statement in Brazil. We have operations in most of the markets. We stand cold plays going to play most of those markets. I think I've said it before, we look at the business in cities, a main city like Chicago, São Paulo, Mexico City. If you have a main city and you have a great sponsorship division and you have a few buildings that you're leased or managed and you have a festival like Chicago, a main city like that is a $50 million AOI kind of business. We have all the pieces in the market. So we look at those markets down there, and there's 5 or 6 big cities where we have some pieces. And now we have a huge piece of distribution through Mexico on our tours. We're now kind of legitimized. Historically, when we buy a world tour, we'll try to bid for Latin America, but we don't really have much credentials historically. Now when you have that Mexican piece of the business, and you start building out your Latin piece, you're going to do the coal plate Latin American tour, you hadn't done before. So we think that's a -- Latin America is a huge opportunity. It's -- we think it's somewhere in the $750 million business over the next few years as we continue to build it out and spend more energy there. And it back flows back to America because more credentious you deliver there, the more business you're in with the bad bunnies and some of those kind of artists, you can bring them back into the U.S. and extend that relationship. And Jackie has obviously been working hard in her new role in concerts looking at all of these opportunities.

And I think there's also just the space of U.S. tours that we have over here that if you think about adding those stops through Mexico alone is a huge opportunity and a pretty quick one that we can roll out.

We'll take our next question from Stephen Glagola of Cowen.

Appreciate it. I want to ask a lot of the buckets you laid out again today, similar to last year, the Liberty Investor Day in 2020, the AOI incremental AOI growth is coming from adding 25 million fans. I wanted to get a sense of, have you ever quantified how many total fans there are on a global basis that you can go after above 125 million? And Also, you grew your fan growth at a CAGR -- excuse me, from 2014 to 2019 at around 11%. Now with the focus on sort of integrating more venues into your operations or taking operational control, do you think that CAGR can go higher than what you've seen over the prior 5 years in terms of driving fan growth higher on an annual basis?

So on a global basis, we think there's probably 400 million to 500 million fans. It depends a lot on how you count things that happen in the small clubs, and it's hard to track in a lot of the developing markets. We also believe that there's a lot of latent demand that exists. This is a supply-driven market. So when you bring the tours that Jackie is talking about to Mexico, you're bringing the supply to match the late demand you're growing the market. So we think it's continued to be a strong growth market from there. In terms of our expectations over the next 5 years. I think at this point, we're just -- we're saying we believe we can continue to be a double-digit growth business. And we're not trying to give you an exact model or exact numbers, you can work from. Michael talked at the beginning about we think it's a high single-digit growth industry between the increase in supply-demand dynamics, a bit of increased pricing that takes place in the market as we continue to take share. And as we continue to take more of the economics up and down the value chain, all of that brings us up into a double-digit ongoing growth -- long-term growth rate.

So would you say that the venue growth is going to be greater going forward than it was in the past. Has the focus changed there on your end focus change there on your end?

Yes, focus has changed, for sure. Absolutely. Focus has changed to, what I said, which is to extract more of the value out of the value chain and bring that to us. I'd say, we're not looking to give you exact long-term growth rates. So it's going from 11% to x over 5 years. We're not we're not trying to give you exact projections. We're trying to give you an explanation on why we're a double-digit growth in the business.

And I would say, just to be a fine line on focus. So part of running Live Nation since we started this is always about you're building this core business, if you listen to my presentation 15 years ago, I probably just talked about concerts. And my job is to always figure out where are the -- I hate to use this example, but the Amazon Prime or the Amazon Server business, right? We have big businesses within our businesses that have naturally started to grow. My job is I always try to extract those out because I know they're going to grow better on their own if we give them better focus. So venues have always been in our business. There's nothing new to this story. We've been running, managing, leasing, sometimes writing checks for venues since we started. Promoters started this business with Ron Delsener buying the Jones Beach amphitheater. Promoters were smart as I was back then. They knew if you own all the revenue streams, you're going to make more money. So there's nothing new here. The newness is every now and then, what I notice is if I leave my businesses running the way they were, they don't get the focus they tend to. So I've, over the last few years, absolutely taken Venue Nation out of the promoter P&L, put its own P&L, put its own management team in now. We're also realizing design and building as a big part of what we do. We've been doing it forever. We've been building amphitheaters and designing them forever with Genslers and everyone else. We want to get better at it, though. We're proud of our collaboration with Drake in Toronto, where we took a 2,500-seat instead of just doing a traditional business. We went to Drake, said, can we make this something unique? Can we collaborate with you? So we have a brand and a design that's better than ever, and we love that idea. So the only difference in what we're doing, adding the 20 buildings a year, lease buy, manage is we have a division now focused better on two things. We got to get more innovative around design, so you're going to see that, brand and design. We got to keep pushing our -- all of our partners on what's the new 500-seat venue look like, what's the next 2,500-seat. What's the VIP really mean now? How do we elevate it? Just like every new arena from -- arena used to be $300 million. Now you've got those NBA owners building $1 billion arenas with 17 different ways to monetize lounges. So venues are about design, building better and more lucrative buildings, honestly. The smarter we build them, the more ways we can VIP them, get better experiences, we think that's a big opportunity. And two is we got to run them better. We've got to be a better hospitality company not just a factory. So why we bought Dave Grutman a few years ago and why we look at the hospitality part of our business. We think, as an industry, we're still not great at it. So why I focus on here on building a real hospitality division within our venue division. And if you're going to hire those kind of great people, they don't want to work for a promoter. They want to work for a division that's got that inherent DNA. So why we call it Venue Nation and broke it out and have its own P&L, its own management team and its own focus now is to say we actually have always been in this business. We probably haven't been the best of design. We probably haven't spent enough energy being the best of hospitality. We got to get better at that. why we think there's such a great opportunity. So this new division, if you want to call it, is a lot of the same people reconfigure with the new leadership, more focus around what is the innovative and ideas on site? How are we doing better on hospitality? How do we make Jimmy Buffett's bar in Vegas -- or again, Vegas, which is #1 grossing bar in America at $52 million because people buy the $14 Hurricane drink, right? So I tell my team all the time, where is our $14 Hurricane drink? How do we -- do we keep elevating the experience that Jimmy has done so well at Margaritaville? So that's all. We think it's a fabulous business. It's a business that you couldn't be on your own. You don't want to just be a venue company. But because we have all this content that is powering it, we think it's a spectacular way to make sure we get better at delivering the full experience and all the revenue streams within it. So I don't think you'll see a change in the balance sheet perspective on anything we've already been doing. You'll see us more just on a global basis, taking some shots at some arenas that we haven't been as aggressive on historically just because that seems to be a new developer, someone asked where the demand is coming from. It's city and developer is where it starts. Every city right now wants a new venue and/or a developer is building their own the L.A. live, right? Everyone wants a development around their sports entity. So that's where it starts. The NBA owner calls us and says, I'm building new arena. I've got 100 acres. I want to build their Battery Park, right? Why in Battery Park? We have our 5,000-seat venue and a 200-seat. Everyone wants that model. So every developer -- billionaire sports developer calls us and says, I got a plot. I'm going to have restaurants, bowling alleys, and I need live venues. Could you come in? Do you want to build it? I'll build it. You build it? What's the deal you want. We need you. It will drive traffic. So now instead of walking and going, great, you go build it, charges a crazy lease number, but we fill your building. Actually, we'll put $12 million in, we'll build it. We'll have a low-cost lease, and we'll have a much better return. Those are those different examples of kind of how it comes to life.

We'll take our next question from David Katz at Jefferies LLC.

So you indicated earlier about the differential between primary ticketing and secondary ticketing. Intuitively, that primary should have a relatively high ceiling by virtue of that. Can you just talk about how high, and how you capture that ceiling is and how the calculus between primary and secondary as you see?

Yes. As you see it, I feel bad that I'm just taking over here. So Michael Wischer, who runs Ticketmaster, and Joe, please lead now. Give me the hot one right away.

There we go, jumped right into it. Thanks for the question. I mean, listen. I think, first and foremost, right on the primary side, our job is a ticketing company right is to provide more and more tools and access to the content owner right to price their ticket more effectively, right? As Michael said, we don't wake up every day trying to sell a secondary ticket or maximize revenue in the secondary business, right? We're trying to price our tickets for our content partners, right, in the most effective way possible, right? Ultimately...

And Michael, this is a question. As you said that, I think in a lot of the clients you're renewing every day, I don't think might get more secondary money. They lead with how do I sell more tickets? How do I get more primary, and how do I capture more of this secondary. And then I know I can't capture it all, so yes -- and tell me how I can be part of it, but it is the tail on the dog, not the dog in every quiet conversation.

Yes, exactly right. And so were the week up every day is trying to think about better tools writing better services to help our clients price, right? That's ultimately what it is. And then how do we further deepen that relationship between the content partner, right, and their fans. So that's -- Michael mentioned earlier, right, different premium products and upsells and insurance, et cetera, that we're going to monetize and merchandise through our marketplace, right? So that's all part of the pot that goes into this. And it's all about -- we have a -- just like we have a flywheel at Live Nation, right, you think about sort of the ticket experience, right, and that purchase experience, right, as part of an overall strategy, right, that we're in partnership with our clients, right, and pricing is just one of those tools.

And just to be specific, right, the platinum tool is one that we have used and has continued to grow and, frankly, it's grown very rapidly over the past couple of years. So that's the idea that you take a number of the best tickets or even the best tickets in each section, and you market price those and you dynamically shift the pricing as you're watching the demand and anticipating the demand for that show. So a large part of the reason the stats I gave yesterday on the top 10 tours of this year versus the top 10 tours in 2019, and why that pricing is up is because we have substantially increased the allocation of tickets to platinum. And so I think as we move -- and still high single digits or mid- to high single digits at this point. So there's still a way to go in terms of working with the artists and getting more of those tickets to market-based pricing, which, by the way, it's not truly secondary pricing even in those instances, but it is more market-based, is going to be a tool that has a lot of room to grow, and we'll continue to use with artists.

Okay. We're going to take our next question from Mark Kelley, LightShed.

Just a couple for us. First, on Ticketmaster. It's been about a year or so since executive changes at Ticketmaster and the beginning of the globalization process. We'd love to hear from the Ticketmaster team just broadly on success thus far, and maybe expand on some of the near-term revenue and cost impacts beyond what was said in the slides. And more broadly, on ticketing, just what do you believe the pace of ticket prices increases will be going forward, it could be?

I'll take the first. On the first, I'll say, I mean, thanks for noticing. Certainly excited to be here today, and this has been a lot of fun, right? So as you said, around a year to 18 months ago, we made some changes, not just to the executive team, but really the overall structure, right? And that was to go from being basically mostly a regional and very local-focused organization to one that's focused first globally than regionally and also locally, right? And so just like a Live Nation, right, you have to continue to focus on those 3 levers, right? And balancing those is going to be something that we continue to struggle with, right, and to try to make the most opportunities within a daily basis, right? What this is all about, honestly, is about running our core operations more efficiently, right, which is what every smart company in the world is trying to do, right, so we can funnel more money and more investment into technology, product and investment, right? We're trying to become a more nimble, more dynamic company, right, on behalf of fans and our client partners, right, be that artist promoters, sports clients, et cetera, sports leagues. So it's really what this has all been about. And so that's incredibly exciting, right? So our job like every day, right, is to wake up and figure out how can I amortize, right, more of my investment dollars across cross more tickets, right, globally, right? So you reduce your fixed cost base to start with, right? That's the simple part, right? Then it's when are we going to prioritize, how am I going to innovate? How am I going to invest in the future, right? And how can I do that in a way that I can deploy, right, new products and features globally are on a faster basis, right? That's what the structure has been all about, and it's been incredibly exciting, I would say, and motivating for our team. On the second piece?

Yes. On the pricing, I mean, to us, we look at it simply, at the end of the day, the price that content should get is the market-clearing price for the ticket, which is currently defined by secondary. But we're not going to get there overnight. But over time, we've seen a lot of progress moving many hundreds of millions of dollars from the secondary ledger on to the content side of the ledger, both sports and concerts, and all the tools that Michael talked about, not just in the U.S. But on a global basis, we're making available to our clients, and they're deciding the balance they want to strike between getting all of that money and having a lower cost for whatever agenda they have for their fans, and how they want to service their fans. But ultimately, it's just timing in terms of the content we believe will ultimately extract those economics.

Great. And then just a quick one on the relationship between artists and fans going forward. So artists are increasingly favoring direct-to-consumer models, and utilizing things like cryptos and NFTs. And just curious what your view is of the future of that artist fan relationship and how you guys are going to go about helping to enable that future?

Yes. I think we -- as the promoter, I said this many years ago, the artists lived in a world for many years where everyone was in front of them, the gatekeepers, as they call it, the labeled, the MTV, the radio stations. And artists, over time now, have figured out they want to be in front. We always believe that we had a great advantage because the promoter has always been behind the artist. We're not in front. We don't have 7-year contracts. That's not the nature of our business. We've got to wake up every day and fight for the tour. And then we put them on tour, and they make, as we all know, 90-plus percent of the door. So we don't have those same challenges that the labels and Spotify get caught in all the time on. They're in front of the fan or in front of the artist and they're making so much of the money. Artist is making all the money on stage, Miami last night, whoever it is, they're driving the business. We're powering them to help them get on stage, globally tour and let them monetize their art. So we've always been behind them, and we believe that. And you are right, the artist is a direct-to-consumer business, much different than athletes or actors. I think the Kardashian's have proven that very well that you can be a great brand direct, have a big audience. And people like look at Rihanna, the success you have and with their fashion business. So the artist is a direct-to-consumer business. They have a to 200 million fans, and they will seek partners who are helping them deliver their part and commerce direct to their fans. We think we have been doing that for years. We do it with our merch division. We do it with our ticket division. We do it with our Concert division. We power a lot of their businesses, and we'll continue to do that for them. And we think those are the companies that will succeed in the future are those that are powering the Artist Direct relationship.

Before we conclude today's event, we just thought it would -- we should hit on ESG and some of the health and safety questions that I know a lot of you have been asking us on.

Yes. Thanks, Amy. This is a little bit of a discussion similar to what Michael said about venues. As a company, we've always been very progressive on ESG issues. It's something that we've always cared about, our artists care about it, our employees care about it. So sustainability is something we've been in the game through the Green Nation Charter for a long time. Diversity, even before there was requirements, you can see our Board has always had diversity. We've been very progressive on a lot of these things. One of the things that we've really focused in the past year is pulling that out of the decentralized way we manage it, and really creating an ESG steerco where all these great things that we've already been implementing on the field, we can make sure that we're actually doing it across the entire company and learning from these things. So we have Schneider Electric coming in to help us with our carbon kind of baselining and getting those targets reset. We have a lot of work on the waste side that we've done at certain festivals, liquid death is a big kind of push toward reducing waste, trying to get that rolled out uniformly across the company. Same story on diversity, health and safety, et cetera. So just a confirmation to everybody, we really do take this seriously, and are now in the process of formalizing a lot of the stuff that -- we've already had the groundwork and have been doing specific on kind of the health and safety part of it. Joe has been doing a lot of work on the security front.

Yes. We, in fact, here last week, had two days, we had everybody from our concert businesses globally, U.S. teams, Europe, Asia and Australia, even brought in the new team from Mexico, spent two days just on what's the health and safety protocols of our business, how are we making sure we have all of the right processes in place, how are we thinking about the use of technology to enhance safety and security at our shows, and how do we really continue to think about -- on a global basis, how we can consistently execute to a new standard on making sure we've got a great environment for all of our fans to come. So clearly, an area of a lot of investment and focus going forward. I'm personally leading the effort and we'll be spending a chunk of my time this year making sure we get that advanced. Sorry, before we go. I mean, you got to let Bazinet ask a question. We can't let him think of getting mad at him. So give him his question, come on.

All right. Our last question comes from Jason Bazinet at Citi.

It's a finance question, so I apologize to the broader group. Stock-based compensation, I think, was like $290 million or something last year, up a lot, at least relative to what we were expecting. Is that something related to the pandemic where you moved cash-based comp into equity to sort of reduce the burn?

Yes, 100%.

And can you talk a little bit about -- is that temporary? Is it permanent? Like, how -- can you just frame that for us?

So we absolutely, as we've talked a lot, been in a cash-focused position from 2020 and 2021. We cut $1.5 billion of cash in 2020 and over $1 billion of cash in 2021. So as part of that, we shifted a substantial portion of compensation from cash compensation, both on the salary level as well as the bonus level for all of our employees over the course of both years. So -- and most of our fixed cost is compensation-based. So that number still accounts to what, 6% or 7% of our total employee costs. So it was in the scheme of things, relatively limited, but it was 100% focused on during the pandemic, reducing our cash-based compensation, replacing it with some stock to get us through and leave us where we're at now, which is in a very strong liquidity position. I think we'll continue to assess what's the right balance of cash and equity going forward. So we may shift the bonus a bit, but it's not going to be anything like what you've seen. I also think you got to look at it over a couple of year basis because technically, the timing of when we made the grants in '20 versus '21, and I wouldn't look at all that as a 2021 cost. I know technically accounting you do, but I'd look at it spread a bit more than that. Yes. No, it was very deep in the employee base that we did that.

Okay. Well, thank you so much for everyone's time and interest in Live Nation. This concludes our event, and I look forward to catching up with a lot of you over the coming weeks. Thank you again.