Live Nation Entertainment, Inc. ($LYV)

All right. Thank you, everyone, for being here. We are very excited to have Live Nation here for the first time at our conference. So -- thank you.

Thank you.

Joe, for being here, President and CFO.

So, Joe, there's a lot to unpack right now going on in your business, both from the operations side and of course, the legal updates following the recent verdict. But before we go there, let's start with the big picture. Stepping back first, if you can just talk -- what are you most excited about? I mean there's been a lot going on over the past few years. We've obviously come out of the pandemic very strong. Live Nation's position continues to improve within that. So as you think about the broader live entertainment ecosystem, talk to us about where Live Nation sits today.

Yes. I think what's amazing about our business is just every day, it's more and more global, right? This is something that is universal, right? Music, going to concerts is truly universal, and we're now at a point that's accelerated post-COVID, both the supply and the demand operating on a global basis. So the first thing you always love in any business that you operate in is do I have structural headwinds or tailwinds? What am I working with to start out here? And we have long had tailwinds in our business in terms of just the continued focus on experiences as opposed to goods and it's driven a lot of growth in North America and in Europe over the past years. But I think one of the fortunate things when Michael started the business 20 years ago, he was focused from day 1, on -- I want to be as global as we can be. And I think that's just paid off massive dividends now over the past 5 years post-COVID. On both the supply and the demand side, you've seen an acceleration of globalization. The fans are learning about music from social media platforms, TikTok, YouTube. They're consuming the music on the Spotify's, Apple Music platforms. So that demand is there, global latent demand. And the supply came out of COVID, I think, more informed really understanding the global nature of the demand, and we saw some early big successes with the K-pop, the BTSs who opened the door for the next 20 K-pops. The Bad Bunny, who's been one of our most active artists over the past 3 or 4 years, but it's not just Bad Bunny. Again, he's opened the door for the next Karol Gs and Peso Plumas and everybody else. So you've got all the artists see all the other artists operating on a truly global basis. So now we look at the business, I think, very differently than even 7 or 8 years ago because we're not obsessed with, "Oh, you have to make this town in the U.S. work." We're looking at it as, no, we just -- we did the deal in Milan. We did the deal in Paris. We did the deal in Guadalajara, right? So we're looking at this and saying, what matters is the market, but it's the 200, 300 markets globally that matter, not looking narrowly at the U.S.

Okay. That's a helpful setup. So when you talk about the secular demand, nice tailwind behind you. How much do you attribute to just the overall live experience and especially when you think about the younger demographics and where they're deciding to spend their money?

Yes. Well, I think that -- I don't think it's a younger demographic thing in the sense that you go back music -- gathering around live music has been around since caveman days. Like this is one of the most durable experiences that has -- we've ever known as civilization. So I think it continues. I think one of the things that absolutely helps us is we are the antidote to technology, right? For as much time as you guys are all staring at your screens even right now, at some point, people are social animals. People need to gather socially. And I think that concerts and probably sports are the two things that we come together and there are as much social gatherings and tribal as they are just going to that event. When you go to a concert, you don't go alone, right? You go with your wife, you take your kids, you go with your buddies. You're going there to have a good time socially. The artist matters a lot. You're going to listen to music tonight. I'm going to see Bruce Springsteen tonight, right? I love the music, but I'm going with some buddies. And that's an important part of this. And I think the more you spend time on screens, the more you need that alternative that, again, were another tailwind for us.

Okay. There's been a lot of press and discussion around this Blue Dot fever recently. So maybe just help us in terms of bringing that secular tailwinds. What are you seeing today in terms of the overall live demand? And maybe talk about cancellations -- that.

Sure. Yes. I mean I give credit to the scalpers. It's a good marketing program they have. We'll get into it a bit more, but I think it's heavily driven by scalpers who are frustrated by the fact that artists are much more effectively pricing tours and they want to try to scare them that if they continue to price their tours efficiently, oh, you're not going to sell tickets, it's going to be embarrassing. I saw one of the news reports the other day was talking about Blue Dot fever, 6 shows have canceled. Well, we did 50-odd thousand shows last year. So everybody likes the headline, nobody likes the context. The reality is that our cancellation rates this year are running probably same or a little better than last year, which are in line with historical numbers. You always have a few shows that ultimately get canceled. There is absolutely no data that supports any issues. We've sold more tickets. We talked about that. We sold double digits more tickets at this point. Deferred revenue on both concerts and ticketing, which are just signs of how well our ticket selling and Ticketmaster says that for all live events, not just concerts, are pacing north of 20% up. Our sell-through rates, when I look at whether it's amphitheaters, arenas, stadiums, sell-through rate, which is so what percent of your tickets versus available tickets have sold, they're all doing as well as they were last year when we were having none of this discussion. So -- no, we're not -- we have no concern at all. Again, it's a nice catchy phrase that is absolutely devoid of facts.

Okay. You talked at the beginning about this worldwide phenomenon that's going on. And you've provided us this longer-term target of the 225 million fan count. So any updates on how to think about that from a regional basis? Or how the economics really differ between North America and outside of the U.S.?

Well, the #1 driver of our economics is going to be where are we operating the venues, right? Because when we're operating the venues, we're not just the promoter with the promoter margin. We're also selling you the beer and getting parking and doing a whole host of other activities that let us make that money that way as well. So that's -- it's not an international North America question. I think that if you look at this year, it's kind of a good indicator where we're at. The U.S. has added more fans, but international is growing faster. And it's just because of the relative size of the market. So I would expect over the next 5 years, absolutely, the majority of our growth comes from international markets. We look at the how underpenetrated we are globally. And just -- I think Mexico is a great example. Last year, we did stadium dates with [indiscernible] 20-odd stadium dates. That ended up being in 8 different cities. And so I think even for our OCESA guys who are world-class, they said, "Wow, there's actually a lot more demand, not just in Mexico City, but in all of these other markets." So now they're very focused on, "Okay, how do we now activate those 8 other markets in a way that they can be ongoing destinations for tours," which led to our Guadalajara venue, right? So we're looking at all of these markets and saying the number of -- what are the number of cities with 5 million-plus people throughout Latin America, throughout Asia, throughout even parts of Europe that we haven't gotten into. Let alone, maybe not in 5 years, meaningful, but certainly, as we think strategically about the business, Africa, India, huge swaths of the population are relatively untapped, certainly massive underpenetrated relative to North America. So I expect that's really where the bulk of the fan growth over the next 5 years will come from.

Okay. You started to mention some of the trends that you were highlighting on the earnings call. So let's go a little bit deeper to this year. There was a lot of worry coming into the year about what the World Cup impact was going to be. And again, it sounds like we're in better shape than at least those initial fears. So maybe just help us understand how much of this year gap filling, if you will, is onetime in nature versus are there lessons learned that you've built around this World Cup that can translate into better performance for the years to come?

Yes. Everybody is always, well 1 year. Well, next year can't be like this year, right? I have been hearing that for at least 5 years. No, I think what -- I think the learning is simply that start -- if you start early and you get things in place and then you have time, there's still -- there's plenty of supply. There's as much supply as almost we have time to work with to figure out how to schedule how to route, how to make happen, right? Where we ended up this year because we were so paranoid on the World Cup, we got started very early and very focused on, okay, how do we do things before they take over the stadiums -- after they take over the stadiums, how do we do a big run right after they're gone? How do we do more in soccer stadiums, how do we do more in baseball? So there was an early obsession, and then we got -- so we got ahead of the curve and we did well. But then because those teams got started earlier, then they had more time to say, okay, now let's also make sure we're going deep on arenas and deep on amphitheaters. I certainly didn't enter this year frankly, or maybe 6 months ago, wasn't thinking, wow, we're going to be up in all 3 of those categories while I'm sitting here in May. So no, we're delighted. But I don't think there's anything structural with our learnings so much as let's get going early and make sure we're getting all of the artists who want to be out there touring that we've worked through with them. What's the right geography? Which markets do you want to go to? What's the routing? How do you make it all happen?

Okay. Just on that geography point, you talked about fan attendance expected to grow high single digits. So is there a geographical breakdown that you can help frame for us in terms of North America with the World Cup versus everything going on outside?

Yes, they'll both be strong. I mean it's going to be strong globally. As I said, we got ahead of it in the U.S., that helped. Latin America is doing great. Europe, fantastic. So it will be all of those.

Okay. And so a lot of what you guys have disclosed on the last earnings call is already essentially booked for this year. Help us think about like what some of these unknowns could be as we think about the second half of the year. Is that potential upside as we think about this in terms of where we are today? Or are there risks on the table that we should be factoring in?

Well, the biggest unknown sitting here in mid-May is always just what's going to happen on site. What are the per caps going to be -- we've done a lot on figuring out how we merchandise the different shows based on the audience. So you have a different mix of alcohol you're selling for the country versus the more female skewed, younger, older. So we've done a lot of work there. We've rolled out additional premium opportunities. But until you get into the year, again, no issues. The first shows are all fine. But that -- I'd say that's the unknown. And then the other unknown is just what other tours we can still pull out for the remainder of this year. So we talk about being close to done in terms of our bookings across now all of our stadiums, arenas and amphitheaters. But certainly, the upside opportunity is if we find a few artists that we can get a back half tour in with, then that's additional activity, additional growth.

Okay. You also alluded to at the beginning, the whole idea of Venue Nation. And I think that's something that we've spent a lot of time focusing on. I know investors clearly see that as a unique opportunity for your company. So as part of earnings, you talked about there were more shows than expected at some of your initial venues. Can you help us understand the conservatism baked into that 20% IRR? I know it's -- you don't want to have those public negotiations...

No, no, no. 20% is a threshold. It's not an expected outcome. It's not -- oftentimes, you hope to get better. So that's -- when we model, we don't like to fail. So [Technical Difficulty] and we want to hold people accountable for delivering what they say they're going to deliver. So yes, I think that in general, we've been more likely to outperform than underperform as we've seen those venue opportunities. I think we've talked a lot, the venue opportunity has exploded post-COVID for two reasons. One being what we've talked about just the supply-demand dynamic. Just there's more activity, there's a lot more activity out there, even independent of us, right? I think we've enabled a lot of that additional activity because we're the primary funder of the risk capital in the industry, right, over $16 billion effective of liquidity that enables the shows take place because we're guaranteeing the artist. So it's a combination of that additional activity and then our continued improved performance on site of monetizing the fan experience by doing a better job of giving them what they want, eliminating friction. So those two things together have resulted in a more venue opportunities because you're -- the revenue side is unlocked further, but it also has led to more upside surprises because we didn't model in this continued level of growth in activity. nor the continued improvement in our on-site performance. So as those play out, and I think there's a good chance they continue to play out, that just gives us upside from our venue strategy.

Okay. You've also been pretty helpful and specific in terms of some of these longer-term targets around Venue Nation. So 48 venues in 5 years, $600 million AOI run rate by 2032. So just help us think about how much of all of that is under your control, the company's control versus what's subject to these macro pressures.

I don't think -- I'm not worried about macro pressures. It all comes down to execution and just what's enabled in what markets and what time frames, right? I mean the reality of building anything substantial in the U.S. or in most of Europe is it's not easy. And so there's a time frame and a process to build things. Now that's part of why you see us building in other markets, right? Latin America, you can build a lot faster. It tends to be less expensive. It's also why you're seeing us acquire right now, right? So when we acquire a Paris [indiscernible] we acquire other things. So those complement. And then we're building Madrid, and we're building Munich. So I look at it as there's a portfolio of build and buy, there's a portfolio of different markets. There's not a macro that's, I believe, that's going to impact that on a global basis. Does one project stall out because of something in a given city? Sure. But we're taking a portfolio approach and you have a high volume of these opportunities. There's way more than 48 opportunities out there. It's not like I got to go 48 for 48, I got to go like 48 for 100 in order to get that level of activity. And then it's just our organization ability to go and drive it all. We've got great teams now. We have a North America team, a South America team, a Europe team, an Asia team. But we're still -- we're doing a lot. And so we'll continue to build those teams, but that becomes a piece of it as well.

Okay. And when we think about the premium hospitality piece within this, I know it's small to start, but it seems to be a growing focus as some of these other venues start to roll out, and that goes back to your build versus buy, right?

Yes. I mean premium is a multiyear activity. We'll figure out exactly what the people are going to want. And we're deploying a number of vinyl rooms this year. We'll see what's working in which markets, what isn't working, continue to adjust. By the way, it doesn't stay static. What works today, is not going to work 5 years from now. But it's just -- it's all part of our fundamental view that if you think about the fans attending, there's a real segment of fans that are looking for a differentiated experience, want to spend the money for that differentiated experience. Our job is to eliminate friction in the ecosystem that keeps them from spending the money they want for the experience they have. That's all premium is to me. So you got to figure out -- and it means different things in different settings. AMPs are different than arenas, different than stadiums, different than a 5,000 capacity theater. So I think we still have we're very early days, I think, in a structural premium offering. We've got some great ideas now with things like the vinyl room, but it's still pretty early in the process.

Okay. That was a good segue for what's to come. Shifting over to Ticketmaster and just overall consumer dynamics. So as we think about the balance between the artist monetization and then this obvious consumer perception of the higher prices on these bigger global tours. How much do you think about the ticket affordability as a political issue, political visibility versus that monetization lever that you're trying to pull?

Well, I think from our perspective, whatever version of K-shape or just different segments, I mean that is our reality today across any, call it, retailer or service provider. You need to think about there are going to be different fans that are looking to have a different trade-off in spend versus experience, that's the reality. It's -- and that's going to continue, maybe increase, it's not going to decrease. So if you're an artist or you're the promoter who's taking the risk on the show. What you want to do is you want to figure out how do I make sure I have a high number of tickets that are affordable for any fan to be able to come and enjoy the show. And how do I take the best tickets and make sure that the artist is the one benefiting from the value of that seat instead of scalpers coming in and taking that arbitrage and making the money off of it. And then it's the accumulation of that back and forth with the artist on, okay, how much money do you need to make on the show that covers the cost of your trucks and all your people that you have out on the road with you, what's that number? And then that just translates into an aggregate set of ticket prices, right? Because it's just math from a guarantee down to a ticket price. So everybody is obsessed with making sure that every fan can afford to get in. But again, our artists are similarly focused on. I don't want the scalper to make all the money off my show. So you're seeing higher prices and those tickets are still selling. Maybe they don't sell at the on sale, but they're still selling, right? And then what happens is you get the bad press on either the high price or the bad press that I see a lot of times is the artist gets blamed for the price in the secondary, which is truly just shows how little they understand it, right? But the reality is, for us, our get in price, so the average price to buy an entry-level ticket is up less than 3% this year, less than inflation. If you go back to 2019, it's up dramatically less than inflation since 2019. So we and the artists have been very focused. And it's not political. It's just -- it's practical. It's you want your fans to show up and be there. And we're like everybody else, right? We had this concert week sale over the past couple of weeks or concert weeks now maybe, right? $30 all-in ticket, we're like every other retailer, right? When you have more tickets and shows are going to happen and they're either going to be full or not, let's see if we can't sell tickets to that casual fan who wasn't sure if they wanted to go or not. So we'll continue to be very focused at getting better at pricing. We unabashedly believe that the artist deserves as much of the value of their show as they want. They're the one -- it's their art. They're the ones that are doing it. and we'll continue to evolve that. But I think being very mindful of both the entry level and the top tickets is critical.

Okay. Just following up, you mentioned the scalper activity. And clearly, you guys have been focused on reducing that. So just help us understand what the long-term vision is for the secondary market for Live Nation.

Well, so secondary market, you got to first split. They're sports and concerts, and they're very different businesses. Sports is a distribution model that's the disaggregation of the season tickets since most people aren't going to 40 Knicks games anymore, right? So Knicks are bad example because Jim really hates the brokers coming in and getting the season tickets. But most other teams are using brokers to disaggregate the season tickets and putting them on secondary. So it's a liquidity issue. In concerts, most of the activity is not liquidity, it's price arbitrage. So what we are just trying to do is to say to every artist, we have tools that can help you reduce that price arbitrage to the extent you want to use these tools, great. If you don't want to use these tools and you're happy for some brokers to end up with some tickets, that's fine, too. That, again, to us is the artist decision, and we've developed and tried to continue to improve things like our face value exchange for those artists that are very focused on reducing the broker activity and are willing to accept some friction for their fans in order to get more of them tickets. So our job is to create the tools to educate them and let them decide how they want to manage it. But I think over time, you're seeing the backlash now, right? A lot of the most egregious activity, the spec ticket selling. There are now a number of bills going on with that. All-in pricing is now generally required. You're seeing some markets talking about price caps, which are just a reaction, right, to the frustration of the abuses that have taken place in some of the secondary markets.

Okay. So when we think about Ticketmaster's growth overall, there's a lot going on, on the product road map side. So maybe just help us understand a couple of features that you're most excited about or do you think that can move the needle over the next year or 2?

Yes. I think -- so first is the fan experience, the on-sale -- the high demand on-sale. I think we've been making progress to try to get more tickets to fans, some of the artists sign up, some of the tools we're using to try to identify more bots. There's more to be done there. It's still frustrating for the fan, and I understand it. I log in at 9:30, sales is going to start at 10:00 am. I'm [ 167th ] in line. There's no way I'm getting tickets. And so I'm kind of going, okay, well, is it better to tell you you're 167th or just say, you have a long ways to go. Is transparency better, but then they get pissed off of transparency? Or is it general. But in any case, we need to figure out how we can continue to have tools that provide transparency and do a better and better job of putting fans at the front of the queue versus brokers and bots. And believe me, there's billions of dollars at stake. So the scalpers -- it's worth it for them to invest in tools that try to fool us to think they're fans, right? They have a lot of money at stake. So it's a back and forth perpetual battle. We try to identify and they try to stay hidden. So there's more to be done there. There's more on the B2B side, the tools for teams, for artists, helping them by having better packaged tools to understand pricing, to think about marketing how they can more effectively sell tickets and get the best price for their tickets. It's still a universal need to continue to do better, and we're focused on tools to do that. And then the other area that we're very focused on and is a big area, obviously, we're using AI extensively in our development now is figuring out how to get faster and faster deploying to new international markets. A huge amount of the growth for Ticketmaster in the next 5 years is going to be from international markets, which shouldn't be surprising as we talked earlier about the concert growth coming from international markets. So it's natural that you expect that. So we'll be selling our first tickets in Japan this year on Ticketmaster. Japan is obviously, it's a totally different alphabet. It's a very different way that people buy tickets, tickets are distributed. It ties in with retail. This is something that would have taken 3 years historically. Some will come in figuring out, I'm going to change our product development processes, how we organize to do it and use AI tools. You need both of those. Otherwise, it just -- it would have been more of the same, and we're getting this done in a year would have previously taken 3 years.

Okay. That was going to my AI question, but you hit on it.

Yes. I mean -- by the way, using AI tools to try to help identify bots and identify humans. We did that. Recently, we had some -- we had an on-sale -- the high demand on-sale. And for some situations where we thought it might be a bot instead of a person, we pop up this ID, you got to turn on your camera. You got to hold up your ID. You got to prove you're a person. Very effective, right? So it's -- there are tools throughout the chain that we're deploying AI. And [ Samuel ] has been fantastic with really changing the culture and getting much more aggressive at Ticketmaster in terms of changing how we operate and changing the mindset in terms of what we need to do and just do it fast, try it out, keep moving, don't have a long cumbersome development process.

Okay. So we've gotten this far without talking about any legal update, but let's go there. So obviously, after the jury verdict, the judge made some additional rulings last week since you reported. So -- if you could share with all of us updated thoughts and really more about the timing impact.

Yes. He clarified the process now we'll be following. So it's a relatively sequential process, which we think is the right way to do it. First, he's going to rule on our -- we have a couple of motions having to do with one of the experts and having to do with the level of evidence provided. First, he's going to rule on those, which we think is right because before you start talking about whether or not the DOJ settlement is in the public interest or whatever remedies there might be, you got to figure out and define what's the scope of really what happened at the trial. And then there's a process to review and confirm that the Department of Justice settlement is in the public's best interest. We absolutely believe it is. It substantively addresses the two issues that the two issues really in the trial are the exclusivity and ticketing and the fact that our AMPs were closed to rival promoters. The DOJ settlement on the nose addresses those two issues. Now we live in a very politicized era. And we've, for some reason, become a little bit of the first step of -- and then we have Nexstar and Paramount right behind us, but we've become the poster child in the short term of some attacks for political reasons. So everybody should expect that for the same political reasons, there will be a lot of cries. You got to break them up. You got to break them into 8 pieces. You got to do this, you got to do that. There's going to be a lot of political noise I expect through that process. We'll see what happens. And then there is a trial and assessment of the remedies. Now the good news is the judge has publicly stated that he thinks the DOJ settlement is a good framework. So we'll see what happens. Again, we're not naive. We know political pressures impact everybody. So we'll see what happens. But that's then the next step. And then following that, if we don't think that it's ultimately been a fair resolution, then we have the option for appeals.

Right. I was going to ask, I mean, sitting here today is the likelihood of this appeal process just continuing to grow or really need to see how the next couple of months shake out then first?

Look, we knew when there was a jury trial. We never -- and I think we've stated publicly, we never had any great expectations. We were going to win a jury trial. I think the jury decisions were effectively made within 15 minutes of starting, and it's big bad Ticketmaster. They've got to be guilty, right? So hopefully, the facts will play a higher portion of the decision-making over the next round. But we're also paranoid. And so we simply remain of the view appeal is our right if we don't think that it's the right balance of facts versus politics.

Okay. So shifting back to the business. Sponsorship is also has been and should continue to be one of the most consistent and important drivers as you think about, obviously, your North Star of AOI and double-digit growth there. So you've outlined the $160 million growth opportunity. Maybe just help us with either specific examples of brand conversations that you've had? Or how we should think about how the path ahead is on continuing to grow this pretty meaningful business for you guys?

Yes. Well, I think over the past several years, the growth in sponsorship has really been driven by brands wanting to connect with fans on site at the event. And fans through all the surveys we've done have largely said that they give permission to brands to be present at live events as long as the brand is doing something of value. not just slapping your name, but doing something of value. So most of the growth we've had in the sponsorship business has been on the festival and venue side because that is the true, the on-site experience. So my expectation as we look out over the next several years, that it probably will be the venue side that is the greatest driver of our sponsorship activity. And the team that we've got has gotten great at figuring out how do I engage with brands, what are the different opportunities that I can give them on site to engage with fans. So that -- and so -- that also means it will probably be increasingly global international shift more outside of the U.S. to be on a truly global basis.

Okay. You came back to -- No, Venue Nation, which is where I want to go. Another really interesting thing that came out from earnings is your first creative use of the venue securitization. So -- if you just help us understand how important is this going to be as you think about off-balance sheet financing and how much you can even accelerate the pace of venue investments with this?

Yes. And so it's not off balance sheet. But it's -- because we don't want to do a REIT structure, right? We think that, that reduces flexibility too much. But at the same time, if you think conceptually about it, there is still a little bit of a PropCo and an OpCo here, right? And so and as you think about your balance sheet, your PropCo naturally tends to have -- can have higher leverage than your OpCo. So we're effectively synthetically saying, I'm going to split up the collateral of my company. And I'm going to take the real estate property, I'm going to bundle them and effectively securitize that, which I can do now at a higher leverage, lower interest rate because of the pool of those assets. And I can get really what it comes down to at the end of the day is lower cost funding to pursue our venue strategy, which is then a bit separate from the collateral that I deploy for the OpCo which will be more traditional leverage levels, more traditional constraints. So you'll keep that down in that 3 to 4 range. Over time, you have the flexibility, don't need to at anytime real soon, but we have the flexibility, you could go a bit higher leverage while maintaining low rates on the property side. So it's a great structure. I think it's the first time it's certainly been done in our business. And it just sets us up for the flexibility we want to have over the next several years so that when we see that great acquisition opportunity or we see the build opportunity that we're not constrained.

Okay. So I think we're slowly or quickly running out of time. But when we think about, again, everything that's happened over the past decade, with you and Michael driving this double-digit AOI growth and the whole team, turning Live Nation into this global live entertainment company. I'm curious if I could tap back into your former McKinsey self or your colleagues, what -- how would they capture -- or what -- how would you frame the opportunity ahead? Is -- are we just getting started? Or where are we in this life cycle?

I absolutely believe we're just getting started. And what's been happening over the last couple of years is just the front end of what was a U.S. European business to being truly global with structural tailwinds on demand, structural tailwinds on supply and a massive venue opportunity that brings it together for us and lets us continue to build the way -- the business in a way that delivers great value for our shareholders.

Is there one tour or artist that you want to flag for us to leave us with?

Well, you can't help but be excited. I mean, Jay-Z coming back, playing Yankee Stadium in July -- like that, that's going to be phenomenal, right? I mean pretty special shows, I'm sure he'll put on.

Hope to see you there. Awesome.

Thank you.

Thank you.