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

All right. Great. Let's get started with our next session. Thank you, everyone, for taking the time to join us today. My name is Stephen Laszczyk and I cover entertainment. -- here at Goldman Sachs. We are excited to welcome back to the Communacopia and Technology Conference, Joe Berchtold, President and CFO of Live Nation. Joe, thanks for being with us. .

Thanks, Stephen.

Grit's always good, I think, to start these conversations at a high level. And as we look out on the growth outlook for the live music industry, I think it's impressive thinking back over the last number of decades, the industry has compounded at a high single-digit growth rate for a number of years. Would just be curious to get your take at this point in time in terms of what inning of growth do you think we're in the industry. And as we look ahead, what are the key growth drivers? Do you think investors should be mindful of?

Yes. I think we start with just the industry as opposed to us. I think we're absolutely still in the early innings. I think most of what we've seen in the last couple of decades is still largely a largely U.S., Western Europe phenomenon. If you look at the drivers of how we've been growing and what there is ahead of us, every 1 of these factors is still as strong or if not stronger than it has been. Just starting with the globalization about supply and demand, the shift of spend from goods to experiences, the were live events concerts and sports sit in that hierarchy of priority for people to spend on experiences, all still very strong. I mean if you look at it, using us as a bit of a proxy, over half of our fans today are our international markets outside the U.S. But put the other way, right? U.S. is 5% of the global population still has half of our business. Latin America is up for us 15x in the past 10 years. it's still 1/10 the level of activity as the U.S. is. Japan, huge market is 40% of the activity level of the U.S. on a per capita basis. even Western Europe can grow another 25%. So I think as we focus on this as a truly global business, it has tremendous runway. And at the same time, the U.S. continues to grow. U.K. continues to grow. The so-called developed markets have demonstrated very nice growth this year has been a great year for that. So we think that there's an extremely long runway ahead of us.

You touched on this a bit, but maybe for Live Nation in particular, as you think about the growth opportunity for the company itself, you have a target for this year, compounding AOI at double-digit rates. And as you look out over the next number of years, continuing that degree of growth, what are the few things that Live Nation can execute against specifically to put together a growth algorithm, multiyear growth algorithm at that double-digit rate.

Yes. So first is just for us, it's always continuing to put it on more shows from our fans, right? We'll be at around 175 million fans this year, good growth off of last year's base towards the target we set last November, $225 million. So we're making good progress in that direction. Second is continuing to figure out how do we optimize the shows, how do we maximize the sell-through? How do we maximize the grosses of the show, deliver more for the artists, create more encouragement for them to be out there on the road, going to more markets. And then it's deploying capital on our venunation strategy. which has the double benefit. I know we'll get into the double benefit of in and of itself, it provides attractive returns. It also provides the infrastructure in a lot of these markets outside of the U.S., the lack modern arena infrastructure that can deliver the grosses the artist need. So we look at the top 75 markets and 47 out of the top 75 markets internationally don't have the modern arena infrastructure, don't have enough of it in big cities. Rome, Istanbul, Frankfurt in Europe, it's Seoul, Tokyo and Manila, in Asia, Latin America, you've got Sao Paulo, Rio, Lima, so very, very big cities. I'm not kind of trying to cherry pick these 47 cities you haven't heard of. These are big markets that lack the infrastructure. So as we look to opportunities to either acquire or build arenas, modernize them, we think that can help drive our overall growth in terms of bringing more fans, driving more sponsorship, driving our ticketing business, and fueling the overall system.

Great way to set the stage. And I do want to dive deeper into a lot of those drivers. Maybe as we think about the supply side of the market, maybe to start, -- we talk a lot about the live music industry being a supply-driven market. We've seen artist tour at an incredibly robust clip over the last 3 to 4 years. I would just be curious to get your sense to the extent of if this is slowing at all or do you see the supply side of the market continuing to scale over the next number of years.?

I think you'll see it's the same globalization, right? It fundamentally changes the business. So there's not an artist out there who's not using the social media platforms the TikTok, YouTube, Instagram to develop their brands. They're obviously using the DSPs to democratize the distribution, so you can have fans everywhere. This is far and away from the old U.S., Western Europe, U.K.-dominated artists out there. #1 artist post-COVID has been badging selling out stadiums globally. You've got -- obviously, K-pop has been a huge phenomenon. Latin in general. Number 2 is Jenrin Brazil is country music. So you're seeing the explosion of artists what used to be a local or regional genre is now truly global. So pre COVID 8% of our top 50 of our top 50 tours were by non-english speaking artists. Today, it's 30%. I don't think we're going to be -- it's not going to be that long where I'm sitting here saying and now over half of our artists are not U.S., U.K., English-speaking artists. It's just it's easy for them. I'm amazed. I look at all of our shows down in L.A. A number of artists who I've never heard of but were selling out arenas, even stadiums in L.A. But if you think about it, if you're an artist of a very specific genre, you only need 0.1% of the population in L.A. to be your community, right? So really, what's happening is they're able to reach that 0.1%. And much more effectively than you ever could before because there's always 1 person in the group who is the fan who's following the artist who learns about the show and social media shares the music with their friends and brings them to the show. It used to be much harder to cut through, how do you -- with a relatively limited ad budget, how do you reach those people in a big market. I think now with the digital media platforms that's much easier and really fueling a lot of the supply.

Maybe a near-term supply question, investors and analysts often focus on the near-term mix and the touring, the geography of that toward the venue type year in and year out, the cadence of the mix shift. How would you characterize this year's supply side cadence and mix? And as we look into 2027. Any early thoughts on how that could shape up?

Yes. Obviously, overly focused on month-to-month some of our folks do. It's been a great year. We've said it consistently. All of our major venue types, Amyris and stadiums are all up at least mid-teens globally. So the -- we're continuing to see a very strong performance across all venue types, notwithstanding reports to the contrary, our amphitheaters continue to do great. We've seen -- we've already sold 10% more AMP tickets this year than we sold all of last year. So we're having no drop off, Stephen. And we're continuing to do well on the stadiums. We talked about we've figured out how to work around any of the timing or availability issues in the U.S. So U.S. has been very strong across the board. And even with the strong U.S. performance, I'm going to probably bore people today with the comments on international, 2/3 of our growth in large venue types, those 3 has come from international markets. So that's just really where we're putting a lot of our emphasis behind driving a lot of the growth, while U.S. continues to do well. Everybody's looking for a glass half full version of those comments. Timing, again, consistently, I think 2/3 or so of our growth in fan counts coming in the second half this year. It doesn't mean anything. We don't worry about quarter-to-quarter. We're trying to continue to build make the full year successful lay the foundation for the long-term growth. Looking to next year, I think we'll be having a similar conversation. I think that we're going to see a lot of the growth out of the international -- in international markets will lead our growth. But I think that's going to start to be an irrelevant statement. 10 years ago, we had 5 arenas. Now we're operating 25 arenas, 85% of those fans are in international market. The vast, vast majority of our venue nation strategy with the arenas and other large venues is in international markets. So we are very focused on that being a primary growth area for us, and I expect while the U.S. will be fine, it's going to be the international markets, again, that we're going to be talking about. So unfortunately, not all trackers get that. people you have to take with a grain of salt. But yes, no, we feel great about how the supply continues to line up.

That's great. Maybe shifting to the demand side of the equation. I feel like every year, there's a point in time where the resiliency of the U.S. consumer, the global consumer comes into focus revenue a bit of that debate at the moment this week. -- things like tariffs, inflation, some potentially a slowdown in the job market. Just would get your -- I would love to get your latest sense on what you're seeing out there on the demand side, things like ticket go through and perhaps .

Yes. Just I mean, empirically, again, I always start with -- the big numbers are the best indicator. We sold over 155 million tickets. We're still up 12% year-on-year towards that 175 million number. that I talked about earlier. So we've seen no deceleration whatsoever. We have these conversations every quarter. Our sell-through rates are very consistent with our sell-through rates last year. Our cancellation rates are very consistent with our cancellation rates, historically, no increases there. on-site spending, we've talked about is up in our amphitheaters, is up in our international arenas. So people are continuing to spend when they show up. I think it's -- so the numbers are all good. I think there's no doubt it sharpened everybody's focus on making sure that we keep a certain portion of the tickets affordable or getting pricing at our venues is up since 2019, about 20% versus inflation being up 30%. So artists are very cognizant of there are -- the shape world, there are bands that can only afford a certain price. So we all work together to make sure that there's a reasonable number of those tickets available. At the same time, there's a lot of great tickets that continue to be below the market value. Artists continue to get educated on basically using the pricing on the front of the house to enable them to have lower pricing on the back of the house and still get the gross as they want and not leave the money to the scalpers to come in and take the tickets and increase the price and put them on secondary. So I mean there's a lot going on under those macro numbers that are very sensitive to the fan base and what may can afford. But we're not seeing -- again, I think that concerts remain a very high priority for people in the terms of the type of experience they want to have. And we're not asking people to go 3 times a week, right? This is a couple of times a year experience and the cost can be managed to whatever level they want to spend.

Any reason to believe that strength wouldn't continue into 2027?

We've seen no -- and again, on a global basis, I mean, we look every way the numbers U.S., U.K., Mexico, Latin America, we're not seeing any real issue that would say that we've got any macro problem at all.

I want to pivot a bit and touch on Venu nation. It's an increasingly important part of the Live Nation investment narrative, the Live Nation story. With just at a high level, Joe, you can maybe talk a little bit about the strategy behind Venunation. Talk us through the opportunity that you see out there and why you think it's a good use of capital.

Yes. I think -- I mean all this, you go back a bit in time and how did we get here? We've obviously operated venues for a long time, operated clubs and theaters. We operated the amphitheater network in the U.S. And for a long time, it was fine. But I wouldn't say 10, 15 years ago, we were great operators. And we really started looking at our amphitheaters 12 or 13 years ago, I think we had a $16 per cap and it wasn't a great experience when you go there. And we got very focused on -- how do we create a great fan experience at our venues or at least the best that you can, given what you have to spend. How do you reduce friction? How do you -- it's silly to have a 20-minute beer line. People are not combine the beer. So how do you have more points of sale. Those pay for themselves in 3 shows. You have long lines of bathrooms. People don't have time in doing the break between artists to go to both by a beer and wait in the bathroom line, put in more bathrooms, make the balchrooms nicer. You have people that everybody is getting the same experience. Don't know where does everybody gets the same experience. How do you create more premium offers so people can have. Yes, if they want to go sit on the lawn and spend $30 and have a ticket, let them do that. If they want to spend more money, they want to have clubs, they want to have boxes. They want to have a premium experience. reasonable population wants to do that. So over a decade or so, we got a lot better. Now we -- our per caps are $47, $48. So we've gotten to the point where I think we're a pretty good operator. And as we've gotten to be a pretty good operator, we've seen that's enabled us to invest more in venues and drive the 20% plus returns that we've talked about. So we've got a combination of 2 things. One is, I think, our operating capability and the other is our ability to drive utilization at the venues. If you think about the venues, they're big fixed cost assets. So 1 of the primary economic drivers of a return is going to be what it's utilization. Because we promote so many concerts, we've got a better ability than anybody else, frankly, to make sure that utilization is higher and can generate a return. And we have a lot of confidence in understanding all the pieces of the model. I think we've demonstrated that it works. I think if you look at our return on incremental capital, as we've ramped up, it's been an attractive return. I mentioned earlier, 47 out of the top 75 markets don't have all of the arena infrastructure that it needs. That's it. decade long runway of just the top 75 markets, forget the fact that there's easily the next 75 after that. So we think it's a long-term opportunity. It grows the market. We're not -- our growth is not dependent on our taking share from somebody else. Our growth is based on expanding the global marketplace, working with more artists, bringing them to more markets. continuing to expand the opportunities for artists to connect with their fans. That's absolutely a month, right? We're not -- this is not a 0 sum at all. That's 1 of the things, again, go back to tailwinds -- it's great to be in a business that has the structural supply and demand tailwinds and your opportunity is to grow the overall pie, not to just have to compete away to see who can -- what's your race to see how much money you can give to folks and competing with them. So every signal that we've seen says that the first steps of this have gone well, gives us confidence to continue to invest and I think we'll be incrementally growing this over the course of time. We're not -- it's not going to double and triple and get bigger and bigger in terms of the capital that we outlay, but it will definitely be a continued focus over the next 5 years.

As you continue to focus on the pipeline over the next handful of years, I'd be curious just to get your sense of how you think about the incremental contribution of attendance or fan capacity over that period of time. I think this year, in particular, you called out double-digit growth for VenuNation attendance. Is that something that could continue? And then as you think about the cadence and mix of that contribution? Is there any venue type in particular that you feel like drives that added capacity?

Yes. So I mean no question, arenas or things like arenas are #1 priority. So arenas, particularly in Europe and Asia, Latin America, you have some of these venues that are a little bit more like a Stadio GNP that may be a little bit more of a hybrid amphitheater stadium that work well through those markets. So that's our priority. We're also continuing to do large theaters, particularly in the U.S., and those particularly in conjunction with team owners that are looking to have a broader real estate play around their stadium or around their arena. So we're in all of those conversations, less arena opportunities in the U.S. There's a handful of them, but because of the NBA, NHL, you've got a pretty established modern arena network here. As I said, we've gone from 5, 10 years ago to 25 arenas that we're operating now globally, 85% of that fan growth coming from the international market. So I expect that to continue. I think what have we done in that period, we've basically gone -- I think we basically doubled our operated fan count. It's being about $75 million now, 70% of that growth it's come because of the international markets heavily driven by those arenas I talked about. So I think next year, we'll see -- I mean we're going to start to unlock a lot more of the fan count from the arenas that we're just getting open, the arenas that we've announced that we're acquiring this year. So I don't think going to give an exact number today. But I think that, again, next year, -- at this point, we'll certainly be talking about the success of those arenas and how those have driven the operated fan count for next year.