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

All right. Great. We'll get started. I'm very happy to have back at the conference, Joe Berchtold, President and CFO of Live Nation. Thanks, Joe.

Thanks, David.

All right. Joe, why don't we just kind of start with where -- what's top of mind for investors right now, that's the macro. I'm curious to kind of know about current state of fan demand. Your Q1 earnings, you noted concert ticket sales up, it was 20% each for March and April, that's relative to '19. I know we're not quite through May. So I want to see if you had an update on there, or really any other relevant indicators you track for demand as it relates to concerts and sports events?

Yes. No, absolutely, David. I think to misquote somebody, rumors of our slowdown have been greatly exaggerated. That hasn't been what we've seen, not at all. I think quite to the contrary, as we look at the quarters through mid-May, so I guess April and half of May, our concert ticket sales are up, for that period, 28% relative to 2019. So actually, we've seen some acceleration of our ticket sales as we're heading into the summer. On a slightly more specific basis, we ran our summer sale again this year that we did back in '19 at full scale. Back then, we sold tickets for $20 a piece. This time, we sold them for $25 a piece. We sold the same number of tickets over that week long period, a couple of million tickets. So what we're seeing is that was every bit as robust as we had in '19 at a higher price point. And then looking more specifically, just in the past week, the Kendrick Lamar tour blew out, the Harry Styles tour blew out. Just saw last night, he added 5 more Madison Square Gardens 5 more forums. So we got him playing 15 Madison Square Gardens and 15 forums, records all around. And then if we look at the Ticketmaster side, so slightly more broadly than just our own concerts. Right now, we expect May to be one of our top months ever in North America. So we're seeing continued strength at both Ticketmaster broadly and the concerts more specifically.

Got it. And then maybe to follow up on that. I think we saw some press reports coming out of Europe, something about weakening consumer confidence around festivals. So we could touch upon festivals. Obviously, that's the summer. But how is fan demand internationally, are you seeing there?

Yes. Yes. Again, I think some things were taken out of context and then blown up. And then Google helps blow it up and blowing it up and created something out of nothing. If I look at Belgium, where those comments took place over 3 weekends in Belgium at the same site, we're having 3 festivals. Right now, we've sold 450,000 tickets for those 3 festivals, which is up 25% relative to where we were in 2019. So I think they were simply saying after having that many tickets sold for 3 festivals on the same site, having another festival during that exact same 2.5-week period just didn't make sense. But in the context of the volume that we've sold already there, holding up very strongly. We continue to expect that -- again looking at the Ticketmaster numbers last night, both the U.K. as well as Europe more broadly expect to be up double digits in terms of our ticket sales for the year. So overall, continued -- looking like Europe is coming out strongly. U.K., which was with the U.S. early on, continuing to perform very strongly, and we expect a large number of our festivals have record years this summer.

And at this point, COVID restrictions have largely lifted across that region, right, APAC maybe something but [indiscernible]?

Yes, APAC is still the laggard in opening, which, again, is part because of the lead time that we have in planning things. So it's just -- it's easier. If you're a U.S. artist, you're saying, well, I'm just going to start in the U.S. because I know it, and it's easier. And then I'll go to Europe because that's the more known quantity. So that's what you're seeing in terms of sequencing of timing. We're already seeing things start to line up for '23. Again, we announced our Springsteen stadium tour for Europe, I think it was last night or day before yesterday. So you're seeing things for '23 also start to come to live and expect that will be massive demand when that on sale happens over the weekend.

We just touch upon that for a second. I think at the end of the prior call, someone asked Michael about 2023, and he had mentioned something about 60 tours. And I thought it was interesting because historically, you wouldn't usually give a lot of context on the out year?

You guys don't stop asking.

Okay. But I guess can you contextualize that number? I mean is that an unusually large or?

Yes. I'd say it's certainly 2x of where we would normally be. We wouldn't normally be putting them on sale also this early on, that's pretty unusual that a year out you're putting and before we get through the summer, that you're putting your stadiums on sale. But we think there's strong demand. And we think there's going to be a lot going on in '23. So it's -- the artists are smart. They're saying if there's going to be a lot going on, we're better off spacing it out a bit. So you buy the Springsteen ticket today. You're buying another artist in 2 or 3 months. The fans can certainly afford to buy more if it's spaced out a bit overtime.

And anything notable to point out on the per cap side. I know we're really early in the AMP and festival season. It's going to be a small sample size. And then can you kind of remind us how per caps trended at U.S. clubs Q1?

Yes. Yes, you're right. It's a small data set so far. Every data point that we have is looking good. I think we've had 40 amphitheaters out of 1,000 play off. Food and beverage on sales were up over 20% for those handful. I was at Electric Daisy [indiscernible] over the weekend, 165,000 people a day in Las Vegas. We had record levels of bottle service that we had at that show. So the high end is definitely spending. Spending very well. Our per caps were up around 30% as of the end of the quarter for our clubs and theaters and our festivals. And the only thing I know anecdotally was when I looked at our April results for our U.S. concert business, which again would have been heavily club and theater driven. Our outperformance was really driven by the per caps. So everything we're seeing is continued strong consumer demand at the show.

And I'm asking this all the time, but the kind of core drivers of the per caps. How much is your initiative. People are going to say, "Oh, is this pent-up demand" for -- you want to get the bottle service.

Yes. Yes, I don't buy the pent-up demand for us in the sense that we've had a trajectory of growth in our on-site because we've been very focused on the fan experience. We broke it down -- last year was a funny year because it was a shorter year, stub year. We had some changes. Some of it was structural by not having our big concert week. Some of it was structural because of a shift to cash. But I think what we're seeing now is, now, it's people are buying more. People are buying more VIP product. People are availing themselves of more upsells. I think on those 40 amphitheaters, our upsells were up 50%. So all of that goes into our per fan revenue on site. It's not one thing. It's not just all of a sudden they're buying an extra beer. It's a number of different levers that we're seeing getting pulled that's driving that consumer behavior.

That's sort of the, hey, you bought the ticket, come to the show, VIP Parking, yes.

Yes. And the good thing is, because there is generally a timing difference, you bought your ticket a couple of months later, you're going to the show. It's not on your same credit card statement. You've already expensed that concert ticket a while ago that's gone. So now you're there. And now it's, okay, it's my night out. Concert ticket paid for. Now, I know I'm going to spend a little money if I'm going out and I'm going to the show. And I'll often want to treat myself, I'll get the shot of Clase Azul instead of bottom shelf Tequila.

Got it. We've spoken a lot in the past about how concerts are fundamentally a supply-driven market. I think it's an important dynamic to understand at this time. So how does that play into your long-term growth outlook relative to, say, economic factors?

Yes. I think that it's what's really driven the TAM of our business is the globalization of live music and the fact that it's supply-driven. And it all comes down to these digital platforms, the same digital platforms that disrupted, recorded music of the same digital platforms that, first of all, created the Spotifys which instantly democratize and globalize the distribution of music. So every -- trust me, everybody in the world was listening to Harry Styles as a new album the other day. It wouldn't have happened 40 years ago. 40 years ago when it was a record, the record company would have had the marketing, it would have been in L.A., New York, London, now major city. No, no, no Spotify, it's Bogota [Indiscernible] to every place. And at the same time, you've got Instagram, you've got TikTok, you have Snap. You've got all these distribution platforms that are truly global. So when Harry wants to market his music or market his tour he's able to do so on a truly global basis. So he is a global phenomenon in a way that an artist never was 40 years ago. So that makes the addressable market for us doing the live concerts that much larger. And so our focus is most -- 90% of the world, therefore, was underpenetrated because it wasn't the focus. So over the past 5, 10 years, we've spent a lot of time talking about our hyper local strategy, our global strategy. But it's a step at a time because we're analog, right? Because live music is analog, well, it has to grow at an analog pace. We can't grow at that digital pace. So every year, we're adding more markets. We're adding more cities. We're adding more venues. We're continuing to grow to go after the TAM, and we've made great progress. We've grown from 40 million fans in 2010 to 100 million fans in 2019, but we're still maybe 30% of the market. And I think that's conservative when you go back to the fact that it's supply driven. So as the artists want to tour globally, the market is only going to continue to grow because they're creating the market by showing up. So when Harry Styles wants to go to Latin America, once to play 50 arena is down there, he'll be able to. Now that market doesn't exist today.

Right. So the example would be you enter Latin America through -- you get a promoter in Argentina, but then you figure out where is the latent demand pockets, right?

Exactly Coldplay is doing a whole tour of Latin America right now. Maroon 5 doing a tour of the Middle East. I mean these things wouldn't have even been contemplated [indiscernible].

Got it. We've gotten this question a bunch lately, so I figured I'd ask you. Basically, how did live perform in the last recession. My recollection from reading the transcripts years ago, was you sort of came through 2009, okay, but then there were headwinds to attendance in 2010, but there were a lot of unique dynamics related to the Ticketmaster merger at the time.

Right. right. Yes, the Ticketmaster merger closed in January of 2010. So there was a lot of focus on getting that merger done. But also fundamentally -- so yes, 2010 attendance was down. In 2011, our AOI for the company exceeded 2009. So it's brief. During 2010, the per cap, the on-site spending, all of that stayed up fine. Sponsorship continued to grow. And I think that the fundamental difference that exists now is our understanding of that supply-demand dynamic and our understanding of pricing. And really, when people -- you get this, multitude versions of the question, where you're asking about what happens in a recession, what happens with inflation. Usually, what you're asking is, what's going to happen to demand from the bottom quartile of the income range when they're adversely impacted by some factor. And I think that's why we've been so focused in staying attentive to pricing and having an average ticket price globally, that's less than $35. And having an entry ticket price less than $35 and entry ticket price less than $30 for amps and clubs, is to make sure that everybody who wants to go to a show is going to be able to afford to go to the show.

And right. And just going back to that in 2010, your platinum ticket program would have been a lot less built out, so your sort of flexibility would have been [indiscernible]?

Again, start with it, we've got the best data set today of almost anybody in the call the secondary market. And the secondary market wasn't as robust, it wasn't as transparent, it wasn't as online in 2010 as it is today. So now we have the best read one could have of what is that supply-demand dynamic. And unabashedly, right, our strategy is to use platinum market-based ticket pricing in the front of the house. So the artist gets those economics, which we believe they deserve, the people that want to pay for those top seats for themselves, for their kids, whatever, they should be paying the artists, not paying somebody in the secondary. And while at the same time, every artist is cognizant of, I want to make sure I'm pricing the rest of the house at a point where I can fill it with fans. And if we hit a point where there is any stress on that fan demand, the fact that we've got that $30, $35 entry price makes it possible. So I see us as very well positioned again, then you have the macro factors, continued shift of spend from goods to experience, which is actually even kind of reaccelerating because you had a bit of a shift the other way during the pandemic. The level of demand that exists for concerts and the priority that it is coming out of the pandemic. You have a whole host of what I would argue is macro factors, even though the bottom quartile is being impacted, they are some of the biggest beneficiaries of increased wages. Some of the biggest beneficiaries of increased wealth accumulation because the government over the past couple of years. So we are paranoid and wildly attentive to all of those factors. And at this point, we haven't seen anything that's any indicator of any pullback in the ticket purchase increased, as I said, upsells fairly dramatically or in terms of the behavior once they get to the show.

And what's interesting on the pricing is you kind of look at the size of the secondary market and you're leaning into better solutions for the artist and the secondary market just keeps growing.

Yes. And again, it just shows you that in elasticity at the front of the house that the people who have the money and who have a priority to go to the live events are going to spend to go. And it's concerts, but it's not just concerts. It's also sports, it's other things that are going to be a priority and live events are a high priority where people want to get out and go. And it's not just, "Oh, we're coming out of the pandemic here. I'm sure that helps. But it's been the same fundamental trajectory that we've seen for the past decade. So I would argue it's pent up, it's just a catch-up. So where we were in 2019.

The artist probably still has a multiyear period, right? I mean, like as long as that secondary kind of GTV as above.

Absolutely. You can go back to people, again, not to keep using the same example, but Harry Styles just say, I'm going to price my ticket so people can afford it. I'm going to do 15 Madison Square guards. So they're saying -- and others who are -- Garth Brooks is famous for it, where you're saying, I'm going to do enough stadiums there enough arenas to let everybody in the market who wants to go to my show go. And that, plus the globalization that we were talking about, yes, they can play on multiyear runs because the addressable market is so huge now. And we're in a position to help them make the market because we can work with them as their promoter more and more globally.

My last question on the macro. At Q1 earnings, you quantified an expectation for higher per fan costs at our venues, variable costs at the festivals, albeit lower than your revenue per fan growth. Can you just kind of walk through where you're seeing this expense pressure, wages, cost of goods? And can you put it in context rate, how elevated did these increases relative to what you had seen a normal year?

Well, normal year, we've been running very low single digit, right? I mean 2%, 3% increases. Now you're seeing mid. I think we gave 7% for our festivals. First, it starts with labor -- low-end labor costs, for sure, gone up. And then for Festival, you're seeing some of the other called supply chain-related costs, your cost of fences, your cost of flooring, your cost of stages, that all goes up. But in this case, separate -- you have 2 different general issues you're dealing with. One is the impact of inflation or recession on demand, as we talked about. The other is inflation on costs. And the way I think about inflation on cost is what is it you have to pay versus what it is you're able to drive your revenue. And because we're able to drive ticket pricing, we're able to drive our on-site. And we're able to drive sponsorship per fan. All 3 of those, and they manifest themselves differently, whether it's a festival fixed cost business or one of our arena or amphitheater shows that are more variable costs. But in all cases, we're able to drive substantial increases in per fan profitability through this because we're able to drive our revenue streams.

Got it. Let's step back from the macro. So as we kind of fully kind of pivot out of the pandemic period, hopefully, how are you thinking about the scope of revenue opportunities for Live Nation now kind of relative to where you were at the end of '19?

Bigger. We went through this in -- it was late January when we had our investor session and we had our investors session and we laid out our opportunities. I think those opportunities only continue to grow. They continue to grow 2 reasons. One is because I don't want to beat it in the ground, but because our addressable markets continue to grow. So as our addressable market grows as fast or faster than we grow then Matt says there's more and more opportunity from just continuing to execute the playbook that we've been executing for the past decade. And the other is what are the additional revenue streams that we're adding. And since 2019, because of the success of our on-site execution, we've seen that operating venues is a very attractive opportunity for us. We've been increasingly focused. We talked about our pipeline of 75 venues that existed at the end of the quarter. And that's a way that we're going to continue to spin our flywheel. We opened the Austin arena, which we think is building a great opportunity. If you look at North America, the landscape has historically been driven or led in arenas by the NBA arenas. And we're not going to compete in the $1 billion plus NBA space, but you can go into an Austin. It's a non-NBA market and a relatively low cost, build a great building that can hold a lot of concerts in it. If you look around the U.S., there are actually a lot of markets today that don't have those buildings where you can add an arena. Internationally, even more so. Europe, we've had great success with the Ziggo Dome and others where we're able to operate it and drive great economics. And because they don't have the same infrastructure in Europe, we think there are a lot more arena opportunities over there. So the those are going to be additional add-ons, and we're going to continue to grow. I think long-term business continues to be a double-digit growth rate opportunity for us.

And the 75 opportunities, right, you kind of described the pipeline a little bit. It seems like 2,000 up to 10,000 type structure. And then from an operating standpoint, right, is there a variance in the types of deals that you do?

The deals are all over the map. It's all situational. I think the key is, we're getting much more proactive. We're no longer waiting for the developer to come to us and say, what are you -- we're building this space. Are you guys interested, this is the space you can have, take it or leave it. We're now more proactively identifying and what markets, what do you need? Priority is generally going to be what's that 4,000 to 6,000 capacity theater, large ballroom, what's the amphitheater and what's the arena? Those are going to be the buildings that are going to really drive our AOI. Yes, we're doing club level and all of that because it's part of the comprehensive being in a town. And if you have top to bottom, you can generally drive disproportionate market share, but your focus is going to be on kind of those mid- to larger buildings, getting proactive, going to different developers in those markets, trying to figure out how do you create a district that might have 2 or 3 of those. We'll be doing that more and more. And then again, getting more proactive in Europe, particularly around some of the arena opportunities that exist there.

Got it. And you own several event brands now, right? You have legacy names like House of Blues and Fillmore, but you picked up leading nightlife brands like Live and Story. How do you think about deploying those across the network?

It's all portfolio. Again, our aspiration is very simple, right? We want to be the #1 promoter in every building size, in every genre in every market of the world. If we can just do that, everything else will take care of itself. So these are all brands that have different positioning largely in the U.S., some were taking global. And it's not just those buildings, right? Lollapalooza is a global brand. So of course, you know that history would say when you develop strong IP, you'll get disproportionate economics because of that IP as opposed to not having IP. So those buildings to me are IP or those brands are all IP, and they're part of a portfolio of IP that will continue to build, that will globalize. And we'll look to extract the economics from it.

During the pandemic, you announced plans to rebuild your Ticketmaster architecture to make it more aligned to across regions. And then at the same time, you reorganized the management structure kind of consistent with that, right, on a global first approach. So I'm kind of interested. How do these changes position you now to better go after that international ticket opportunity?

Certainly, you're right. It's the international opportunity. We had great success last year. We talked about the tickets we've added. We've added continued that success this year. I think through April, we've added about 8.5 million net new tickets up from the end of the quarter when we talked about it, over half of those tickets are in the international market. And I think what we're seeing now in the international markets, as we've moved to that single platform as we've deployed digital ticketing, that just further distinguishes Ticketmaster and its capabilities in the marketplace. I think at the end of this year, we'll be at a run rate where 80% of our entries are digital globally, which is up dramatically the U.S. We got off to a strong run in '18, '19. International was lagging that, but international is rapidly catching up. And that technology difference matters a lot internationally and opens up a whole host of things we can do with those clients.

Maybe sticking with the tech piece of that. You recently renewed your partnership with the NFL, the press release highlighted digital tickets, NFTs. What does Ticketmaster kind of -- or what did they bring to the table that kind of made you unique versus I'm sure competitors that wanted that deal?

Yes. Yes. NFL has been a great partner. It started with them, I guess, about 4 years ago when we did the last deal. And that last deal for us was all about digital ticketing. They're the league that has the most centralized decision-making ability to say we're going digital. The opportunity to work with them and empower that was great strategically for us. It was where they wanted to go. So we embraced it. Over the time, we've continued to add more. We've released NFTs with them last season. And it's been critical in the development of our secondary business. Because as we gone digital, the important thing is, now when you have your phone and you have your app and I'm a ram season ticket holder member. And if I want to sell those tickets because I can't go to a game, and it's digital, your path of least resistance, your lowest friction is to go on your wrap and say, I want to sell my tickets. Those tickets all go to Ticketmaster. 100% market share of those season ticket holder inventories. When it was your stock tickets, your physical tickets, you say I can't go, okay, what am I going to do with these physical tickets? Am I going to call -- am I going to try to figure out StubHub because I know that one best, am I going to call Barry's tickets, the local ticketing guy. What -- well, now because it's digital, you've got a path of least resistance. So we've been able to substantially drive our market share. We just had the scheduled release for the NFL. It was last week, again, up double digits in terms of our volume of activity. And I haven't seen the exact specifics, but I assume it's because the season ticket holders who look at it, "Oh, I'm going to be out of town that weekend or that's a birthday weekend or whatever it is, they instantly go to us. And the other thing that we've created with the NFL back a while back is they wanted to make sure the fans could have a great experience. So one of the things that we agreed we do is we'd also for those other marketplaces that wanted to be official NFL marketplace is fine. We still get all the season that can hold their inventory. That means they'll pay us and the NFL to validate their tickets, which is fine for us. That's a new revenue stream. So whenever you hear somebody say, "Oh, we've got this interval partnership and it's not us." Well, that means they've signed up to pay us money. That's a great model for me. So I certainly like that. So NFL has been a great partner. They've been strategic. They've been forward thinking. And they want to do a lot more, which is why it made sense to move early and get the extension lined up with them.

Got it. We're at less than 10. If anyone has a question in the room, we can get you a mic, raise your hand, not keep going. You recently highlighted the opportunity to better monetize your digital footprint, which you can just continues to grow naturally with your physical expansion. You've long sold online inventory and you've given kind of a view into that at a high level. So how should investors think about what's different now in terms of what you can do around e-commerce sponsor integration?

Yes, I think the way that I think about ticketing and Ticketmaster is, it's own flywheel version of what we started talking about with Live Nation 10 years ago. The service fee is great, but the service fee is what it is, and you've got a massive e-commerce platform. So the question is, how do you create additional revenue streams beyond just the service fee? Because the service fee gets semi-commoditized over time. So it is -- and you've seen some things. We talk about it a bit. In the process of the checkout, which is the great money point, how do you further monetize that? So insurance has been a great business for us to sell insurance as it is for other travel companies or the people that pay us for the positioning and whose cards we take and who's the official card. And now with fintech and crypto, it's how do you monetize that further. And then with digital ticketing, everything that it opens up, whether it's in the purchase process or after the fact, how do you use that connectivity to further monetize through upsells, which helps Live Nation concerts also helps tick. How do you use that relationship to serve sponsors and give them opportunities to spend money. So the digital ticket, the next generation of the Ticketmaster platform is all about how to use the platform to create additional revenue streams that are above and beyond the service fee. So again, this becomes critical when you think about the ticketing ecosystem, and you want to make sure that you've got a platform that is able to do all of that. Because if you have a platform that's only dependent on the service fee, well, that's not going to be the same level of a growth platform.

Got it. Maybe just kind of looking internationally. You've had [indiscernible] around, I think, it's 6 months. I'm wondering if you could speak to the opportunities you see from Mexico broadly, but then I'm wondering kind of specifically about extending some of your global sponsor relationships in the region. And then Ticketmaster Mexico, you always own 1/3 of it. I don't know what that actually entitled you to. But how do you kind of bring that more in line with the capabilities like what you just talked about?

Yes, I'll start with -- one of the great things about [indiscernible] is Alejandro and his management team are world class. These guys truly built one of the top promoters in the world, have run a tremendous business. So I do find that it's always easier to go in and build when you've got that infrastructure that already exists, the management team that already exists. That's why we talk about we want to buy and partner with A players. So we're in a great position to start there. As you said, we owned 1/3 of Ticketmaster Mexico. But the reality is when you own a third -- you're not really investing in the same level as if you're the true owner. They didn't have the digital ticketing. They didn't have the dynamic pricing. They didn't have all those tools that we've taken for granted here in the U.S. So yes, just including them in the global road map for Ticketmaster now, moving rapidly to give them those capabilities. Mexico is a huge market. You're going to see Ticketmaster improve dramatically there. And then just routing more of our tours. And I talked about the global addressable market, the global opportunities. We just now have an economic -- it's simple. We have an economic incentive to bring our tours into Mexico. So we're going to be bringing a lot more of them in. And the same is with sponsors. All of our global sponsors, this is now more fans. And if you're a sponsor, you're really focused on how do I drive -- how do I get reached? How do I get scale? The customer base that I want? How do I get it larger? It's why we're much more attractive at 100 million fans than we were at 40 million because you've got scale. Well, Mexico just brings us more scale. So -- and there are a lot of brands that are U.S. brands that operate there. So bringing them together figure out what's the value proposition we can create for Mexico. We're a facilitator of that, and that's a big priority for us. And then we'll do everything that you would expect us to do. Well, use Mexico then as the gateway to how do we do more Latin America tours because you're anchored by the volume of shows that you can do in Mexico. And then importantly, it wasn't as much of a focus when we started the deal, but it's certainly been an additional benefit is they've got a tremendous breadth of relationships with Latinx. Latin Music is one of the hottest areas in music today. So using their relationships to now figure out how do we bring more of those Latin artists into the U.S. and tour is just another benefit coming out of that relationship. So we're delighted with it.

Got it. And maybe sticking with this theme of bringing on great partners. You recently made a promoter acquisition in the Philippines, maybe not the biggest market, but kind of interested what potential do you see for the APAC region kind of building out another leg to the touring. And can you remind me of your footprint?

Yes, we're in 10 or 11 markets in Asia. So anchored by Australia, but then a pretty broad set. Korea has obviously grown to be a huge market with K-pop, a bit active, not heavily active in Japan. That's one of the markets I think that is a tremendous opportunity still. But just -- it goes to what I said earlier. Our aspiration over time is to grow and be in every market and be able to serve every genre, every building type so that artists have the ability when they work with us. They can go anywhere, perform. And these are all just more steps, more pieces along the way of getting there. And when we see the opportunity to work with a great partner like we have here in the Philippines, we jump at it.

Got it. All right. I think that's a good note to end on. We only got 30 seconds, Joe. Thanks for being here.

All right. Thanks, a lot. Thank you, guys.