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

All right. Great. Let's get started with our next session for today. Thank you, everyone, for taking the time to join us. We're excited to welcome to the Communacopia Technology Conference, Joe Berchtold, the CFO of Live Nation. Joe, thanks for being back with us today.

Thanks, Stephen.

All right. Maybe to start for those either newer or just revisiting the Live Nation story, I thought it would be good if we could start with some of the longer-term outlook for the live music industry. It's grown from a relatively small industry thinking back 20 years ago, it's just $5 billion in total revenue. Today, a much different picture. It's the driving force behind the entire music industry really as a whole, $35 billion in revenue last year. Maybe just give us an update looking ahead, where you see the industry growing from here, now that it's more mature, some of the secular growth drivers? What's new, what's different? What will continue on in the next 5, 10 years?

Yes. I think it's been an incredible run for the last 20 years. If you look at it, it's basically grown at about 8% compounded annual growth rate, which for any business over that length of time is pretty good. Over that period, we've grown our business from about 30 million fans to over 150 million fans last year. So it's been something that we've been able to drive a lot of the market growth ourselves, frankly, by bringing the artists and the fans together. If you look at the evolution of that, and I think everything is just sort of ongoing trends. I don't -- there's no major leaps. In 2005, our business was about 70% North America. And if you look at it this year, we've sold, I think, 158 million tickets at this point. So let's call it, 160 million. It will be over half international fans this year. So we've done a great job growing the North America business. It's quadrupled roughly over the 20 years. But the international business, as it's truly globalized, is where you've seen the tremendous growth, eightfold increase. And I think if you look forward, we continue to believe there's still substantial growth in North America as we get more and more localized with bringing the shows to all the markets as we focus on really growing that mid-tier venue, 5,000 to 7,000 capacity. But even putting that growth aside, if you simply said the opportunity over the next several years, is for international to catch up to the U.S. because it is now fully globalized in terms of the demand, you've got a fivefold increase that you could grow our business or grow the industry. And I think that will be the major trend. I think we'll see more and more international as the core of how the industry grows and where artists are able to engage with their fans.

As you think about that international opportunity and maybe as it relates to Live Nation at a higher level, you have a target for double-digit annualized growth over the next 5 or so years over the medium term. What opportunities specifically to Live Nation's execution are must needs in order to execute against that double-digit growth opportunity?

Yes. I think number one is we grow our fan base. So what I was just talking about is we set the metrics, right? When we grow, our next target is we want to grow our fan base from 150 million to 200 million. And that will, I expect, be predominant -- the mix will be more international than North America. Number two is a real focus on the venue side. We've seen tremendous success by investing in venues, strong, averaging 20%-plus returns for the portfolio as we invest in those venues. And we get a double benefit of not only is that a source of good shareholder value creation, but it also creates the infrastructure that we need in some of these international markets to be able to deliver the supply to the demand. Then from there, you have some ongoing pricing benefits that accrue in the concert business. It's still underpriced, as I'm sure we'll get into. You continue to invest in the platform and Ticketmaster in those client tools, in that marketplace, that continues to grow and your ad business continues to grow. When you take each of those pieces, we don't need any of those pieces to leap, right? We need just year in, year out to make a bit of progress on each of those fronts. And we think, over the medium term, that means that we can compound at double-digit growth for the whole business.

You mentioned Live Nation creating a lot of the supply and a lot of the capacity in the industry over the last decade or 2. I guess specifically as it relates to supply, we've seen artists tour at such a robust clip coming out of COVID. And this year, in particular, on the stadium side, international side, North American side, incredibly robust. Is there any sign of that slowing as we look into '26, 2027? Or are there secular reasons why artist supply just continues to tick higher on a global basis?

Yes. I think it's -- I think we almost have to get away. I mean, we do it ourselves talking about U.S. versus international. It's simply a global business now. The DSPs distribution of recorded music is global. The social media platforms, so the TikTok, Instagrams and others, are global. So that fan base is global. 10 years ago, we were working with 3,000 artists. Last year, we worked with 11,000 artists. We had, I think, 100 artists sell over 250,000 tickets, 50% increase from 5 years ago. We're seeing, I think, 20% of our top 50 tours are non-English-speaking international artists, double what it was 5 years ago. So there is no change to that trend other than continuation and expansion of the relative importance and magnitude of what's going on in the rest of the world.

On the supply note, like one of the bigger debates this year, as people look ahead into 2026, is the World Cup. You'll be hosting 104 games next year across 16 stadiums in North America. It's a lot of capacity that will be restrained or is coming offline for at least a part of the summer. Just talk a little bit more about how Live Nation is navigating this. And as you look forward to the stadium slate in '26, is it possible for us to see growth in show count on the concert side as you maybe move where that supply goes on a global basis?

Yes. The team has done a great job in the past 3 or 4 months of getting out ahead of what we knew was going to be an issue with these 16 venues being shut down for a chunk of time with the World Cup. So I think they've done a very good job of scheduling before the time period, after the time period, figuring out how to route around it. At this point, we're probably roughly halfway done booking our large venues for next year, which would be the stadiums, arenas, amphitheaters. And we're every bit in line with where we were coming into this year, which was a great start in terms of the bookings. I think that our great scenario would be that we can deliver U.S. stadiums consistent with this year and then get some growth from the international markets, as we've talked about. It's certainly possible. Again, we're halfway through. So the good news is we've seen good news so far, we still have a ways to go. But we're feeling much better about the scale of activity that we're seeing at this point than probably I was a bit more concerned 6 months ago just in terms of how we were going to deal with it, but I give credit to that team of really getting on it early and getting the tours booked.

It seems like the opportunity for stadium show count next year, nothing is precluding it from growing at this point.

Correct. Correct.

Maybe shifting to the demand side of the equation for the moment, every year, I feel like we have this debate on the consumer, how resilient demand is or how resilient it will be in the next economic downturn. We've seen a lot thrown at the consumer this year between tariffs, inflation, slowdown in the jobs market. I would just be curious to hear your latest on what you're seeing on the demand front as we came out of summer and we're heading into the early days of fall.

Yes. I think we really tend to get lumped at first glance into this highly discretionary big swings in demand bucket. And I don't think that's ever been our reality. The first thing is we're not dependent on you coming 7 times a week. We're not dependent on high frequency. All that we need is for 1/4 of you to go once or twice a year to a show and for that special out in that special event. And then the second half is all the focus is always because it grabs the headlines on the $800 ticket, the $1,200 ticket, the $2,000 front row. And that's just not our reality. We've talked long, 30% of our tickets are under $50, 2/3 of them are under $100. Even if you look at the stadium shows, I looked at a number of tours. And for Shakira, Blackpink, The Weeknd, Coldplay, Stray Kids; all five of those stadium tours, which are five of the biggest stadium tours. All of them had over 20% of their tickets priced at under $75. So it's just -- artists are very focused on their relationship with their fans, and they want to keep a lot of tickets priced so that anybody, any fan, who's making this a priority, can afford to get in and that they're not -- now by the way, on the other side, they'll take 10% of their tickets and they'll say, "Yes, those are the best tickets. And I don't want those tickets just being swooped up by the scalpers. I want to price those more in consideration of market value," still well below market value in most cases. But saying, "There's no reason for me to be giving all of that money away to somebody who's just going to come in, buy the tickets up and resell them." So overall, you see -- again, I look at long-term trends more than I worry about noise of what bounces around year-to-year, but you're seeing some -- you see prices grow at a handful of points above inflation because they're getting smarter and smarter about how they price the entire house. And pricing the entire house absolutely means a big focus on keeping a large portion of tickets available to all fans. So long wind up saying, no, we're not seeing issues. The on sales are continuing to go great. The Backstreet Boys just announced -- I saw this one the other day. Backstreet Boys, a phenomenal show at the Sphere, they just announced 14 more dates. All the -- so for those 14 dates, they had 10x as many people show up for the queue as were able to even get into the queue or even able to get in to buy a ticket. And then only 1/3 of the people that got into buy a ticket were able to buy a ticket. So you had 3% of the people that showed up able to buy tickets. This is a band that may or may not roll off your tongue, is the hottest thing, but it's a phenomenal show, by the way. But no, there is absolutely very strong demand from the biggest stadiums for these incredible events at the Sphere to what's going on in our clubs and theaters. Festivals continue to perform well. So no, we're not seeing any issues with consumer demand.

Even at the low-end amps, theaters, smaller price...

No. Again, you have to -- you just have to be aware that you can't have a one-size-fits-all in our business any more than any other business. It's why we have a summer sale where we sell tickets on the lawn for $25 all in because you know that you need to give an attractive price point in order to get some people off the couch and go. And so you have a limited period of time promotion, the same as you do in almost any other industry because you're going to have segments ranging from the major fan who's going to plan their life at the day of the on sale to getting -- to wanting to come to the show to the people who 2 weeks out are casually deciding, "Do I go to dinner? Do I go to a movie? Do I go to a show?" You have to reach all these different populations. And part of it is using pricing to do that. But no, we're still seeing people go to our show.

That's great. Maybe pivoting a little bit and discussing some of the ways you're investing in the business. You mentioned venues creating capacity, the Venue Nation strategy early on. It's been a big focus of yours over the last year. I think, at this moment in time, you have over 40 venues around the globe in construction, 10 major venues that to come online next year in 2026. Can you maybe just spend a little bit of time talking about the opportunity ahead of Venue Nation? Where you see some of the greatest opportunities for venue expansion? How quickly that venue comes online over the next several years? And if there's maybe an opportunity to ramp the velocity of venue investment from here?

Yes. I'd say our #1 priority is looking at international markets at the infrastructure of arenas. They don't have the benefit that you have in the U.S. in terms of NBA, NHL, the arena infrastructure that's been created to support the sports teams here. So if you look at the top 75 markets, you probably half of them are lacking a modern arena. So we have teams now, teams that have been built in Latin America, in Europe, in Asia, all focused on how do you develop those markets, how do we get traction? How many projects can we get going? In the U.S., I'd say, it's a slightly different focus, which is more on that 5,000 to 7,000 capacity theater, sweet spot in the middle that we see there's not enough of them. And also, for sports owners who are looking at renovating their arenas or stadiums, they're often looking at a broader entertainment complex. You saw it with the Battery Park in Atlanta. We worked with the folks at the Red Sox put in the MGM Theater there. We worked with Kroenke and the team in L.A. on the YouTube Theater. So in a host of markets, we just announced Utah the other day, they're all looking at how do I create that entertainment complex around my main building? Restaurants, bars and music is a key part of that. We're now getting that first phone call saying, "We know Live Nation is in this business. How do we work together? What's the role that we each play? How do we build that?" And then to your point on accelerating, part of the way that we look at accelerating is we're not married to building everything. We're also -- we're open to a range of things. We recently bought at the start of this year, the Arena in Lisbon, and we'll put some money in that. We'll bring that up to more modern standards. That will be a great asset. In Helsinki, where the ownership, Russian, had to turn it over to a trust; there wasn't an opportunity to buy it, but we do a long-term operating agreement there. So we're very flexible as we look at the markets, what is the make opportunity, what's the buy opportunity, if the buy opportunity is to buy and refurbish or how exactly do we play it based on just what's available in that market. So I think you'll see bits and pieces here and there, where you see us accelerating just the natural time that it takes to get things built for big venues in most cities these days and using some of that investment to augment it.

You mentioned earlier the returns that you're seeing on or expect to see on this venue investment north of 20% returns on invested capital. I think there was over the last year, a fair amount of investor debate around if this was achievable to what extent as Venue Nation scales, if these returns would stay on that level. What are you seeing in this, I guess, first vintage or first ramped vintage of venues that gives you confidence in that 20% return figure and gives you confidence as the strategy scales that, that continues?

Yes. I mean we look at things, we've had a handful of amphitheaters we brought online this summer. Because we were able to develop them from the fan experience from scratch in those situations, we see we're delivering on-site spending double-digits growth relative to the comps of existing buildings because you're doing -- you have more flexibility in how you do your point of sale, how you sell your products as well as how you do your premium. So we know we're driving more revenue than in our existing portfolio and frankly, more than we had in a lot of our business plans because we didn't know how much that uplift would be. And then the second thing is just it's all about -- it's really about utilization then. If you look at our utilization in our amphitheaters today, it's up 15%, 20% from 10 years ago. So if we can drive the utilization of the venue, we can operate it reasonably effectively from an on-site hospitality standpoint, manage the costs like the same as anybody else, assume no better. Then we can deliver superior returns because, again, because we're involved in that utilization, we're able to bring the content to those venues in a way that maybe others couldn't and again, grow the market. It's all part of the same story, right? It's all part of the -- okay, how are you growing the business? You're growing the business by international. You're going in, you're investing in venues. You're bringing them up the world-class standard. And then you're bringing more shows, which supports both the artists, giving them more opportunities as well as the fans in those markets by expanding the marketplace.

That utilization point is interesting. You mentioned programming. Do you feel like the reason you're getting an uplift in utilization, the type of acts that you're bringing into these markets, maybe you're selecting better markets to begin with, quality of the venue...

Again, you go back to what I said earlier, 11,000 artists' working with instead of 3,000 artists. You've got 20% of your major tours are international artists. You have artists in general because they can, are doing longer tours. So all of that helps drive your utilization.

On per caps, you mentioned up double digits at amphitheaters, large amphitheaters again this year. Talk a little bit about the trends you're seeing both this year and then as you plan ahead to drive per cap spending higher across your portfolio of owned and operated venues.

Yes. Operating venues is the same as -- we can talk about a number of different aspects of the business. You have to understand the world is changing. If you try to say, "Hey, I ran this playbook 10 years ago. Why aren't I being successful today?" It's the world evolves. You're not going to build your per caps if you think you're just going to be selling a lot more beer to a 20-something year-old audience that has a much more diverse pace. So really, our focus this year has been twofold. One is to do a much better job of segmenting audience types based on the show, figuring out what are the products that, that audience is going to want to consume, making sure that it's readily available at a large number of points of sale. So a country show, which is heavy beer drinking, still is going to be very different from a show that is a younger audience or a female-dominant audience. So you have to have the products, the ready-to-drink [ high noons ]. Gin and juices are going to be very popular with those demographics. So you have to think through what is it that you're selling to the audience, who, in all cases, want to show up and spend money and have a good time. This is a social night out. So it's our job to figure out how do we make it easy on them. And then Michael has talked a lot about this notion of 30% of our audience should have the opportunity to have some sort of premium experience. And that premium experience, again, will differ by who the audience is, it will differ by what the situation is of the fan. "Am I going with my wife and other couples? Am I going with my buddies, Am I taking my kids?" You may have different situations. You want to offer different premium experiences. So through both of those, yes, we think there's continued growth opportunities. Looking out over the next several years, we think that our current portfolio of venues still has work to do to catch up. And we think that the new venues that we're adding on, which will bring up your average, will do a better and better job at that as well.

Maybe on the international front, earlier this summer, you increased your stake in OCESA to 75%, which is the largest concert promoter ticketer in Latin America. Maybe you could just spend a few minutes talking about the opportunity ahead in Latin America now with this increased ownership stake. How much is ahead in that business? And then as you look more broadly within the realm of concert promoter M&A or maybe even ticketing M&A internationally, where the frontier is?

Yes. Obviously, Latin America has been a huge success story for us. We've talked a lot about tripled the number of fans with OCESA in a very short period of time, incredible success, just a fantastic management team there that they've done in terms of really growing the market in Mexico. You see some interesting things this year with stars like Shakira, who's very popular there, doing stadium shows in 12 different cities in Mexico and a home run number, I can't remember, 12, 14 stadiums in Mexico City. But to me, the really interesting part is they're following the U.S. version of the hyperlocal strategy and really getting into what are all the cities that can support major events. And then you take that and you start to extrapolate that into the other major markets in Latin America, we may have 15 million fans there now. It could easily be another 100 million fans as we develop that market over the next several years, as we bring more artists globally down there as we go into more markets, as we develop more artists in those regions, bring them across the region, bring them back to the U.S. and Europe and so on. So we've got great teams in place now. I am very confident we'll be able to continue to grow as we have been. I think there's something like a dozen venue opportunities we're looking at down there. So it will play very nicely into the venue side as well. And then the other opportunity, again, consistent, I think, with what we've talked about is Asia. And now that we have a foothold in Japan, I think we feel much more comfortable that we've got the potential of the two pillars of Japan and Australia. We need to certainly build out our capabilities more in Japan. But at least for now, we have the ability to come in, be promoting shows there, start to drive scale, figure out what other markets in the region we can develop. That's one where, again, I think we think our penetration is almost nothing today in Asia outside of Australia. It could be a couple of hundred million fans. Again, incredible opportunities in Japan on the promotion side, the local artist side, exporting the J-Pop, the venue side. And it will be more like our experience in Germany, where we have to build the pieces over time, and it's going to take a few years. But as a market, it certainly has as much or more opportunity than any other in the world.

Maybe just to round out the concert segment AOI margin trends for the year. I know you don't particularly spend a ton of time looking at margins, but it's a helpful tool, I think, for investors to gauge the business and to think about the puts and takes. You mentioned some of the strong demand trends earlier in the conversation. Curious if you're thinking about the puts and takes of the concert segment margin profile for this year, how you would encourage investors to maybe think about it?

Yes. I think what we've said is we expect our margins this year to be pretty consistent with what the margins were last year. We're benefiting from growing our venue portfolio. We're growing our non-venue promoted side rapidly as well. But I think that the success of the venue portfolio, also, when you have the stadium shows just from a scale standpoint because you have so many fans, you get some benefits of scale there against your cost structure. So that's helping us a bit this year. But I think the main thing is, as I said earlier, I think we're nearing 160 million fans, expect to be up -- have nice growth in the fan count this year, which is really just what sets the basis for growing the entire business.

Maybe pivoting to ticketing and Ticketmaster on the primary side, it's been a great growth story for -- of yours over the last couple of years, 17 million enterprise tickets added to the platform already this year. So maybe just talk a little bit about the growth looking ahead, international versus U.S. And then we've seen some competition come in over the last couple of years, [ ASX ], SeatGeek, some others out there have spoken about wanting to get larger in the primary ticketing market. How do you view that competition and where Ticketmaster is competitive edge?

Yes. I mean just to start, it's a very competitive industry. All the industries we're in are very competitive. I don't -- there aren't a lot of industries that aren't highly competitive these days. So we always wake up assuming that there's going to be a lot of competition, but that ultimately, if we can deliver to the best of our capabilities, then we can be successful. And we need to focus on delivering to the best of our capabilities. At this point, we're up over 20 million net new tickets signed for the year, 70% of them international. So empirically, we're -- we've been successful growing, helping build the markets internationally. Ticketmaster's technology is a point of differentiation, particularly its ability to sell single event tickets. It's pricing capabilities, it's marketing capabilities, the effectiveness of the venue-based tools; all help it to continue to add new customers. We expect that to continue to happen internationally. I mean you look at the overall growth profile of the business, again, it's a fantastically situated business, is a leader in the category globally, delivering robust margins, long-term contracts on the venue side, certainly in the U.S. and then internationally, more mix between the venue and the promoter, but still a lot of long-term venue contracts that exist there. It will continue to benefit, number one, from our concert side as it grows from 150 million to 200 million tickets, that will deliver natural growth to Ticketmaster. We're adding other clients, as I just mentioned, another 20 million tickets. It will benefit as well from some of the general pricing trends that we've talked about. And then its services. It's been very successful creating pricing and marketing services for event organizers that it can charge for, and I expect that will continue. And Ticketmaster is an ad platform, money that shows up in sponsorship, not in our ticketing segment, has also had great growth over the last several years. You layer into that some of the things that are going on today with AI and some efficiency you should see over the next several years, whether it's from coding or customer service or venue support, the effectiveness that you expect to see from using the intelligence you have and an incredible database we have on our fans, all of that points to continued real success globally for Ticketmaster.

On the secondary side of Ticketmaster, I know it's not a particular main focus of yours, but it does drive a sizable amount of service fee revenue for the platform. It would appear that competition in the secondary space has ticked up, particularly here in the U.S., over the last year or 2. What are you seeing in the secondary marketplace? Has it gotten more competitive? And is there anything you're looking to do to stabilize some of that market share, some of the performance trends out of secondary?

Yes. I mean, no doubt, we've had players that are very focused on driving share in the secondary activity. It's also just this year, not been a great secondary year on the sports side. You've had some events that you didn't comp, other sporting events that just didn't have the same level of fan interest, either small market teams or just the same teams back again. So sports has been a bit lighter. Concerts, we've seen a number of artists continuing to take out some of that value. I talked earlier about getting 10% of those tickets priced closer to market value. Our obsession is not to drive our secondary activity or secondary share. We're in it because we know that fans want to have a single place they can come to buy ticket. And our focus is much more on working with all the event organizers to understand -- so they understand what's the value of every seat in that venue. And then I can make a decision as the event organizer, how much of that value I want to leave for my fans and how much of that market value do I want to capture for myself? I think if we continue to do that effectively, then we'll be successful. And I simply -- we don't even report secondary versus primary broken out other -- I give you guys occasionally it's sort of a low teens portion. But we don't break it out because we don't talk about it. We don't think about it that way as being a priority to grow independently. I'd rather grow the primary at the expense of secondary.

Maybe taken all together then primary growth, secondary for Ticketmaster as a whole, how should investors think about the growth profile of the business, either at a revenue or AOI line over the next couple of years?

Yes. I think, again, we lay this out every fall with our investor presentations. I think what we've said in those is that Ticketmaster is probably -- a baseline case would be a mid-single-digit growth rate over time, historically, what it's done with upside potential from some of these things that I've talked about using AI tools, figuring out how to really build on the international markets, growing some of the non-service fee revenue opportunities. So I think there's upside potential to unlock, but a pretty robust steady-state growth that we've been able to consistently deliver over the long term.

Understood. Maybe just to round it out with sponsorship. It's one of your most consistent double-digit growth businesses. It's the business I spend the least time talking with investors on, but I think certainly one of the more underappreciated businesses that you have. Maybe just give us an update on the sponsorship business as we look into the back end of the year, most of your sponsorship has been under contract in the '26 supply-demand.

Yes. Sponsorship has been a business that's just very consistently delivered that strong growth. This year, from a timing standpoint, it's a little quirky. It's much more Q4 weighted in terms of the growth than traditionally. just based on timing of signing some clients, delivery of assets, some of the digital campaigns, some of the Asia, Latin America business. But overall, we've talked double-digit growth over last year in terms of travel and entertainment, financial services, technology sectors. But more importantly, looking at it over a bit longer time frame, really since 2019, growth heavily driven on the festival and on the venue side. So I think as we continue to focus on our venue strategy, one of the absolute considerations is that is a key driver, more fans in our venues is a key driver for our Sponsorship; growth because the brands want to be able to engage with us in a way that they can tangibly interact with their customers and deliver some real value into their concert-going experience.

On Sponsorship, a big conversation we've been having this year is around the opportunity of super fan more broadly in the music industry, live entertainment, clearly a way super passionate fans interact with artists. Just curious to get your latest sense of how Live Nation and the live music industry as a whole could maybe participate in some of these new products or services that are being created around monetizing the super fan.

Yes. With the super fan, there's certainly a lot of talk about the fact that one of the differentiated assets that could be provided in some cases is tickets. That puts us in a great position. We have a lot of relationship with brands in terms of helping provide privileged access to tickets for those brands. And in this context, we absolutely see an opportunity to work with them. And if we can provide value for their super fans and they can be a key client for our sponsorship business, I think that could be fantastic for everybody.

Any sense of the timing of this opportunity if you think about over the next year or 2...

Yes. I expect it will play out. Everybody is trying to figure this out now, but I don't think it's going to take more than a year or so to figure out.

Last question for you, Joe. Just capital returns, capital allocation longer term and leverage, very reasonable, generating a ton of free cash. It feels like the Venue Nation CapEx envelope is pretty well defined over the next couple of years. Just thinking about capital returns, share repurchases, dividends.

Yes. It certainly -- over the next handful of years, certainly, our focus is going to be on the venue expansion side. And I expect that we've got a deep enough pipeline of both things building and potentially buying that, that will be where we'll deploy our capital.

Great. Joe, we'll have to leave it there. Thank you very much for being a part of the conference.