Live Nation Entertainment Q3 2022 Earnings Call Transcript

Quartr
Provided by Quartr
November 3, 2022

There are 10 speakers on the call.

Operator

Everyone. My name is John, and I will be your conference operator on today's call. At this time, I would like to welcome everyone to Live Nation Entertainment's 3rd Quarter 2022 Earnings Conference Call. Today's conference is being recorded. Following management's prepared remarks, we will open the call for Q and A.

Operator

Instructions will be given at that time. Before we begin, Live Nation has asked me to remind you that this afternoon's call will contain certain forward looking statements that are subject to risks and uncertainties that could cause actual results to differ, including statements related to the company's anticipated financial performance, Business Prospects, New Developments and Similar Matters. Please refer to Live Nation's SEC filings, including the risk factors and cautionary statements included in the company's most recent filings on Forms 10 ks, 10 Q and 8 ks for a description of risks and uncertainties that could impact the actual results. Live Nation will also refer to some non GAAP measures on this call. In accordance with the SEC Regulation G, Live Nation has provided definitions of these measures and a full reconciliation to the most comparable GAAP measures in their earnings release or website supplement, which also that contains other financial or statistical information to be discussed on this call.

Operator

The release reconciliation and Web website supplement can be found under the Financial Information section on Live Nation's website at investors. Livenationentertainment.com. It is now my pleasure to turn the conference over to Michael Rapinoe, President and Chief Executive Officer of Live Nation Entertainment. Please go ahead, sir.

Speaker 1

Good afternoon and thank you for joining us. Live Nation delivered the biggest summer concert season in history drove a record quarter. These results demonstrate the ongoing and increasing demand for live events globally, with attendance up at events of all sizes from clubs to stadiums. Fans around the world continue prioritizing their spend on live events, particularly concerts. Despite varying economic headwinds, including inflation, we have not seen any pullback in demand as on sales, on-site spending, advertising, all of their operating metrics continue showing strong year on year growth.

Speaker 1

With this demand, revenue was up over 60% relative to 2019 with each division up at least 30% and AOI up 45% to 621,000,000 with with all divisions up at least 25%. As we expected, our performance this quarter was led by our concert business, which held 11,000 concerts and 44,000,000 fans across 50 countries. As a result, we generated over $5,000,000,000 of revenue and 281,000,000 shows of all types continue having strong demand with double digit attendance growth across all venue types, including clubs, theaters, amphitheaters, arenas, stadiums and festivals. Stadium had a particularly strong quarter with fan count more than tripling to nearly 9,000,000 fans, driven by the global demand of the top acts across to a number of genres and audiences such as Bad Bunny, The Weeknd and Red Hot Chili Peppers. We delivered double digit attendance growth across established and emerging markets around the globe from North America to Europe to South America, showing our long runway of global growth.

Speaker 1

Our Venue Nation division hosted more fans with attendance up 14% relative to 2019 to 19,000,000 for the quarter and 38,000,000 fans year to date. Based on our current pacing, we expect to host more than 50,000,000 fans at our Venue Nation and Festival division. As we have grown attendance, we have also continued driving greater market pricing for our concerts and now expect to transfer over $550,000,000 of additional payments to ARTIS this year, continuing our effort to help ARTIS

Speaker 2

to get the full value from their shows.

Speaker 1

And over the course of the summer, we continue to see strong on-site spend with no reduction in consumer buying habits. Ancillary per fan spending was up 20% to 30% year to date in our operated venues across the U. S. And Europe. The consistent theme is that fans are eager to enhance their experience and we continue elevating our hospitality operations to provide more premium options.

Speaker 1

We still have tremendous room to expand these high quality experiences throughout our venue portfolio, which includes over 400 venues and festivals globally with almost 40 new venues in the pipeline. Band demand for live events was also clear in our ticketing business. We transacted $6,700,000,000 of fee generating GTV and 71,000,000 tickets, up 69% 42% respectively relative 2019. This demand remains strong throughout the quarter as 2 of the 3 months were amongst the top 10 transacted GTV excluding refund months ever. At this point, all top 10 months occurred within the past year.

Speaker 1

GTV growth was strong across both primary and secondary, up 61% 132% respectively. Conference drove 80% of the growth in primary GTV, while concerts and sports together accounted for over 90% of our secondary growth. Globally, new venue clients continue to seek out Ticketmaster's service due to its effectiveness of our enterprise software platform, driving venue revenue combined with our leading online marketplace. As a result, we contracted 19,000,000 net new tickets so far this year on a global basis. At Ticketmaster, we continue to advocate for fee transparency in live event ticketing.

Speaker 1

We advocated for all in pricing mandate passed in New York early this share, which requires face value prices and fees to be shown upfront and so we support the FTC mandating this nationally. We operate ticketing marketplaces in more than 30 countries around the world and have seen all in pricing adopted successfully in many countries when mandated across the board. This sponsorship had its biggest quarter ever following our previous record last quarter, driven by the strength of our festival and online partnerships. Our performance drove AOI of $226,000,000 56 percent higher in 2019. Our sponsorship revenue growth has been broad based with North America up 48% and international up 93%.

Speaker 1

And we see strong demand both on-site and online, up 64% 63%, respectively, this year. And our unique Yale live events platforms continue to attract new brands and expand relationships with current partners. Festival sponsorship has been our largest growth driver to date as we have effectively leveraged record festival attendance this year and compounded this growth with double digit increases in per fan sponsorship. Platform integrations have been a great growth driver with online partnerships. As we continue to drive value and monetize opportunities via Ticketmaster's purchase process with non service fee revenues up double digits relative to 2019.

Speaker 1

2020 2 has been an incredible year of returning to live events and we expect to finish strong. Ticket sales for concerts this year were up 34 set for the quarter and now stand at 115,000,000 tickets sold for the shows this year, up 37%. And more importantly, momentum is strong with early signs pointing to continued growth in 2023 across our businesses. Ticket sales for shows in 2023 are pacing even stronger than they were heading into 2022, up double digits year over year, excluding sales from rescheduled shows. In our sponsorship business, confirmed commitments for 2023 are up 30% from this time last year, showing the resiliency and long term commitments the brands have for our business.

Speaker 1

Beyond these specific leading indicators, going into 2023, We expect we will drive growth in our concert business by adding more venues to our portfolio, continued increase in ancillary per fan revenue and further in our efforts to deliver market value for the shows to the artists. And in ticketing, we expect to also benefit from these market pricing trends, while continuing to globally add new clients to our world class platform. With that, I will turn it over to Joe.

Speaker 3

Thanks, Michael, and good afternoon, everyone. As with last quarter, 2019 is the best comparison for us in terms of understanding our results. So most of our discussion will be relative to Q3 of 2019. For the company, our reported revenue of $6,200,000,000 for the quarter was $2,400,000,000 better than Q3 2019 or an increase of 63%. On a constant currency basis, Our revenue was $6,400,000,000 for the quarter, so there was roughly a 3% impact due to strengthening of the U.

Speaker 3

S. Dollar. This was a record quarter for revenue for the Q2 in a row and bested our Q2 figure by 39% and our reported AOI of $621,000,000 for the quarter was $194,000,000 better than 2019, up 45% and led by an improvement of over $86,000,000 in concerts and $81,000,000 in sponsorship. On a constant currency basis, our Q3 AOI was $645,000,000 The FX impact of negative $24,000,000 or 4% was largely driven by the devaluation of the euro and the pound. And year to date, we have converted roughly 76% of this AOI to adjusted free cash flow of $996,000,000 Let me give a bit more color on each division, then I will give you more on leading indicators.

Speaker 3

1st, in concerts, our AOI was $281,000,000 for the quarter, which compares to $194,000,000 in Q3 of 2019, an improvement of 44%. U. S. Concert's strongest quarter ever, far surpassing the previous record of $200,000,000 AOI in Q3 of 2018. It was a stellar summer season for concerts.

Speaker 3

We had over 44,000,000 fans in the quarter, the most ever growing 40% sales compared to Q3 of 2019 when we had close to 32,000,000 fans. Looking a bit deeper at our fan metrics, stadium attendance more than tripled to 8,700,000 fans in Q3 of this year and festival attendance was 6,500,000 fans in the quarter, up nearly 40% from Q3 of 2019 with premier events including Rock in Rio, Rockferter, Reading and Lollapalooza. Pricing has been a key part of our strategy in 2022, capturing market pricing for the best tickets, while maintaining an affordable entry point for all fans. For tickets sold to shows at our amphitheaters, arenas and stadiums globally this year, front of house pricing increased for each by double digits relative to 2019. While starting prices for all shows in the U.

Speaker 3

S. Rose just 6% and remain under $35 on average. And giving you more details on ancillary per fan revenue by venue type. In our U. S.

Speaker 3

Amphitheaters, ancillary per fan revenue was $38 an an increase of $8 per fan over 2019 levels or close to 30% growth. At our major festivals globally, increased spending on concessions, camping and VIP experiences drove ancillary per fan revenue up by nearly 30%. And at our theaters and clubs in the U. S. And the U.

Speaker 3

K. Ancillary per fan revenue increased by over 20%, driven by higher concession sales, Fast Lane entry, night of show upgrades and the move to cashless payments. On the cost side. As indicated before, increases continue to impact us primarily in the venues we operate, amphitheaters, theaters and clubs and festivals. But in all cases we are delivering double digit growth in profitability per fan due to increased ticket sales and ancillary revenue.

Speaker 3

Next, ticketing had another successful quarter delivering $163,000,000 in AOI, nearly 30% higher than Q3 of 2019. Q3 was our top quarter ever in terms of reported ticket sales in GTV, and it was our 2nd highest quarter ever in terms of transacted ticket sales in GTV behind only Q2 of this year. When we look at the year to date performance of our ticketing business, The numbers reflect the incredible demand we've had. Through September 30, we have sold 197,000,000 fee bearing tickets, up 38,000,000 tickets or 24% compared to 2019. GTV for the 1st 9 months is $19,000,000,000 up $6,300,000,000 or 49% compared to 2019.

Speaker 3

As a result, Revenues are close to $1,600,000,000 for the 1st 9 months of the year, which is up almost $500,000,000 or 45% compared to 2019. And with all this, we drove AOI to $600,000,000 up 71% as we deliver strong operating leverage. Across both sporting and concert events, ticket buyers continue to prioritize purchasing the best seats available, driving a 17% average price increase in the primary market year to date relative to 2019. Secondary pricing has risen by 10% on average, with sales volume up as well. With these increases, the average secondary ticket price in the U.

Speaker 3

S. Remains almost twice that of a primary ticket demonstrating additional opportunities for market based pricing as well as a large buffer from any demand shifts. Quarter. For those of you focused on margins, as we have indicated previously, it's difficult to evaluate based on a single quarter. Q3 margins were impacted by our mix of clients and shows along with technology investments.

Speaker 3

All of this is as expected and in line with our full year margin expectations in the high 30s as we have been indicating over the past 2 quarters. Finally, growth in our high margin sponsorship business continued this quarter with revenue up 59% relative to Q3 2019 and now up 64% year to date. We once again had high growth in both on-site and online sponsorship, driving record Q3 AOI of $226,000,000 56 Percent Higher Than Our Q3 2019 AOI. Looking back at sponsorships growth through the 1st 9 months, we have seen our festival business nearly double and our platform integrations more than double. Our strategic multi year, multi asset sponsors now generate $0.75 of $1,000,000,000 in revenue for us.

Speaker 3

Back in 2017, we have 56 such clients, representing approximately 2 thirds of our total sponsorship revenue. Today, that number has grown to over 100 such partners that account for 80% of our revenue, growth in both the number of partners and the level of their spend, which demonstrates the value we deliver and the importance they place on our unique on-site and online scale platforms. As we look to the remainder of 2022, starting with our leading indicators through late October, all relative to 2019, concert ticket sales are over 115,000,000 tickets for events this year, up 37% and 20% higher than our full year 2019 fan count. 2nd, Ticketing has sold over 200,000,000 primary fee bearing tickets for events this year, up 27% relative to 2019 at this point. Related to this, we had $1,900,000,000 in event related deferred revenue, consistent with our levels in Q3 of 2021, despite the deferred shows in last year's numbers.

Speaker 3

Excluding deferred shows from last year's numbers, we would be up 35% year on year. A few other points on 2022. Given our presence in the UK and Mainland Europe, we've experienced FX headwinds and through the end of September, our AOI has been negatively impacted by $47,000,000 This was almost entirely in the second and third quarters as the U. S. Dollar strengthened significantly against the euro and British pound.

Speaker 3

Based on current forward rates, we expect a 4% impact to AOI in the final quarter of this year. Due to some delays in construction projects as a result of supply chain disruptions, Our 2022 capital expenditures forecast is now approximately $300,000,000 with roughly 2 thirds allocated to revenue generating projects. We expect the key revenue generating projects which are delayed will still be completed early next year, so don't anticipate any impact next year on the return from these projects. We expect free cash flow conversion from AOI to be in the mid to high 50s for the full year. We ended Q3 with $2,600,000,000 of available liquidity between free cash and untapped revolver capacity, giving us sufficient flexibility to continue investing in growth.

Speaker 3

We are comfortable with our leverage with over 85% of our debt at a fixed rate and our average cost of debt is roughly 4.5%, positioning us well in this interest rate environment. Quarter. In addition, the majority of our debt is long dated with only our 2023 convertible debt maturing within the next 2 years. We will continue to optimize our capital structure based on market conditions. With that, let me open the call for questions.

Speaker 3

Operator?

Operator

Thank you, sir. At this time, we will now be conducting a question and answer session. A confirmation tone will indicate that your line is in the queue. For pressing the star keys. One moment please while we poll for questions.

Operator

Our first question comes from the line of Brandon Ross with Lightship Partners. Please proceed with your question.

Speaker 4

Hey, everyone. At this point, most investor focus is on 2023. So I wanted to dig a little more there. And I know it's hard to determine the demand side for the full year, but can you speak maybe quantitatively and qualitatively about the supply side for next year. I think last year you gave that kind of top touring acts for the year ahead and what that looked like year over year.

Speaker 4

How is that trending? And then what's your view on the quality of the supply next year versus this current year.

Speaker 2

I'll start on the quality. We're seeing a really good pipe for next year. I would say there would be no difference in 'twenty three to 'twenty two in terms of quality. If you were a stadium act, a large selling arena act, you probably debated whether you went out in 'twenty two or you went out in 'twenty three. So Lots of great artists in the pipe from clubs to stadiums to arenas.

Speaker 2

It will look like a similar year in terms of quality. 2nd piece, Joe? Yes,

Speaker 3

just a few other specifics. As Michael said, our sales for next year are up double digits. And if you want to take these to be so called quality references. We're most up in stadiums, which by their definition, are going to be the largest artist that can sell the most tickets. So that would indicate we're off to a good quality start.

Speaker 3

The other is if we look at tickets sold per show that we have on sale for next year from A. M. Serena Stadiums, Festivals, in all cases, our tickets sold at Beyond sales are up relative to what they were at this point last year for 2022 shows. So I think those are all good indicators of both the breadth and the depth of

Speaker 4

Great. And then keeping on 23, you said your book sponsorship is, I think up 30% year over year. And that's kind of a different story than we're hearing across the ad and sponsorship universe. Have you seen any recent slowdown there? And why generally do you think your trends in sponsorship are different than what we're seeing?

Speaker 3

Yes. We haven't seen any slowdown. I think it's different pools of money, it's different strategy. The sponsorship relationships with us are not decided week to week, month to month based on what they're trying to get out of performance marketing. These are long term commitments by major brands.

Speaker 3

Michael gave you the stats. It's really being driven by these big multi year, multi asset, multimillion dollar Chip. So we're up 30% with over half our book of business for next year already filled and not seeing any slowdown. So we're feeling very comfortable with it.

Speaker 2

Brandon, for comparison, if the NFL was a public company or NBA, I'm Sure. Gadell would be reporting record sponsorship also. So we can't put ourselves in that league, right? He's not having any pullback. If you've got associated with, and they have longevity to them.

Speaker 2

So we haven't seen any slowdown talking to the NBA and NFL. We haven't seen it over there either. So I think those are the comparables for

Speaker 4

you. Okay. And then just finally on the regulatory front, there's noise as kind of their oasis. What would I know you went on the offensive on the ticketing transparency, but What would be the fallout if there are changes to that law for you? And is there any other potential pressures, regulatory pressure that you're Seeing or otherwise contending with right now.

Speaker 3

Yes. We don't believe there will be any impact whatsoever if there is a nationwide mandate for all in pricing. We think it makes sense. It just has to be done collectively at the same time. And if you look back and you listen to the comments, the comments were all about transparency, which is really all in pricing.

Speaker 3

The commentary was not about fee levels or any of the other issues that some people have brought up. That's been looked at and we feel comfortable with what our business model is in that regard. So I think that We'll work with the FTC, we'll work with the DA in the State of New York and we're very supportive of that and some other shifts to make ticketing more transparent and a better consumer

Speaker 2

earnings. Just a couple of points to jump on. We tend to do better as regulation comes into play in this space. A lot of our business has been chasing the secondary business for years that's kind of unregulated. We would love spec selling to be outlawed.

Speaker 2

We love better rules on bought ticketing. We love all in pricing. We're adhering to all in pricing in New York right now. I I think we're probably the only ticketing company actually adhering to those regulations right now. So we like Sunlight coming to the business.

Speaker 2

The most part of the business has been unregulated and most of the noise is generated from the secondary business. So that we love regulation puts us on an equal footing ground. Right now in our secondary business, we don't do spec selling. That's probably 30% to 40% of what inventory sits on secondary sites. We don't price below face value.

Speaker 2

So we actually operated at a disadvantage right now because we are operating at a higher standard. So we'd love more transparency. We'd love to have the fees more transparent upfront, all in pricing. We just have to make sure everybody plays by the same rules, but we're going to lead those pieces. As far as the fees, just to remind you, it's the venues that set the fee and take most of the fees.

Speaker 2

So I think if you bought if you build multi $100,000,000 arena or stadium. I think it's your prerogative to decide what is the fee you want to charge on your sports and music tickets. We got a piece of that, but those are set by the venue and monetized by the venue. So just kind of some of the ongoing transparencies

Speaker 5

of the business we got to

Speaker 2

do a better job explaining.

Speaker 4

Great. Thank

Speaker 2

you.

Operator

And our next question comes from the line of David Karnovsky with JPMorgan. Please proceed with your question.

Speaker 6

Maybe I'll flip Brandon's first question around and push on the demand side. But you've been able to maintain AOI growth supply, but given that uncertain demand environment, how do you think about some of the other factors in your control on revenue but costs that can

Speaker 2

I'm going to let Joe jump in, but I just want to make sure, don't discount the supply side, right? That's like talking to Disney and saying, if you only have Marvel movies, how's your demand going to be? It's going to be great. Supply and content drives the demand. So if you got a lot of great, great quality supply, the demand is a little easier.

Speaker 2

So I don't want you to discount that. We're very proud that We work with the best artists in the world. We have the best global platform for those artists and attract them to our platform. That's what you have to make sure first half. So we have the blockbusters top to bottom.

Speaker 2

That's going to drive the demand. Now Joe will take over in terms of explaining The demand strength so far we've seen.

Speaker 3

Yes. So again, just I mean, repeat the numbers, which are the mix of supply and demand, which is that our tickets sold for the shows that we have on sale for next year are up consistently across all venue types relative to a year ago. So The demand is absolutely coming for the supply that's showing up. Now on a broader basis, you're right. We've consistently if you looked at 2010 to 2019.

Speaker 3

We've consistently grown our business double digit AOI. 2011, we grew our business double digit AOI while fan attendance was down. So we do have a number of other levers and Michael spoke to those as part of his commentary. We're continuing to grow our venue base and fans that go to shows in our venues are much more profitable than others. We continue to have increased on-site spend.

Speaker 3

We continue to have pricing as a lever, which drives through both our concerts business and our ticketing business, continuing to add globally Ticketmaster clients. And then I've given you the numbers on sponsorship, which we think continues to be a double digit growth business into the future. So all of those levers on top of the supply demand dynamic is what gives us confidence as we continue to look to our future of the growth potential.

Speaker 2

And Joe, just to jump in on the demand in terms of How the demand is spread, there's certain thesis that like to get spread. Our demand is overall concert ticket is still a really affordable ticket. Most majority of the tickets are sold are $50 to $75 So although we have a great premium business and that does attract a high end customer or someone that's a Rapid fan. Our business is split from clubs to theaters to stadiums. We're seeing demand strong on all levels, Whether it's a $19 ticket, it's filling up the clubs or the premium at the stadiums and arenas.

Speaker 2

So we do think we have something for everyone. It is a very accessible ticket even in a pullback time and we're seeing that the demographic of our buyer It's very, very wide and split across all sizes.

Speaker 3

Yes. Michael, sorry, just to jump back in on you. Again, counter to some of the commentary that I've heard out there, we're also we're not dependent on acts that have been around for a long time. If you look at how vibrant The new artists are, I mean, I look at our top artists that we've had this year, the Harry Styles, Dua Lipa's, Billie Eilish, Bad Bunny, Morgan Wallen, The Weeknd, Olivia Rodrigo, these are all artists that are at the early stages of their career across as Michael talked about all genres, most of those are obviously in arenas and stadiums, but these are tremendous talents that are just showing the breadth of supply that we have in our business.

Speaker 6

Okay. And then I had a question on online sponsorship, which is really starting the quarter. How do we think about the driver of growth here in terms of fan or traffic increases at your website or apps versus actions which are more in your control like the platform integrations you mentioned. And then how much kind of room is there to grow some of these sponsorships?

Speaker 3

Yes. Our focus this year has obviously been on the ladder of how do we create new assets on this Ticketmaster platform that can continue to drive the economics. And then as you improve your volume of tickets or improve your site visits, then that's just additional growth on top of that. So we view like we would view any other platform in its own way, just a counterpart to the On-site. We have people's attention through a period of time.

Speaker 3

We have them going through a purchase process and all of that is something that we can monetize. We saw great progress on the platform integrations, particularly around the checkout this year. We think there's earlier upstream. We think there's advertising dollars that can still be significant that we can drive from it. And we're focused much more on how do we use Ticketmaster as a platform to drive its own set of non service fee revenue streams, and we think that has a long runway.

Operator

And our next question comes from the line of Steven Lazycak with Goldman Sachs. Please proceed with your question.

Speaker 7

Hey, great. Thank you. Maybe one for Michael on pricing. I was wondering if you could talk a little bit about some of the advice you're giving to most artists with respect to pricing their concerts next year. Is your messaging more that maybe there's still some opportunity to take price given the strong demand that you're seeing this year or is maybe at 23% a year where artists need to be a little bit more So on selling out rather than taking price.

Speaker 2

Yes. I wouldn't say 'twenty three, our conversation is any different than segment in any year. We have an incredible great pricing team, a lot of data scientists that are talking and analyzing the business with our managers and agents. So as you know, there's no one paintbrush, depending what artist, where you are in your cycle and what your demand is. So I just saw some counts this morning for Shania Twain went up, upsell today, big, big numbers out of the box.

Speaker 2

He's an iconic artist. So you're not worried about pricing if you're talking to Shania and how she prices her tour, if you're a little baby going on tour next year, you have a younger demo, you're building your audience, Maximizing your growth isn't your priority. It's getting to as many markets and fans as you can. So I wouldn't say 23% is even in my buyers' minds right now. What is in their head is over the last few years is just better pricing dynamic strategy from day 1 on the market.

Speaker 2

Price is different on a Friday than a Tuesday. The aisle seats worth more than the middle. The front is always underpriced. We've yet to see anything get close to secondary demand yet. So most of our shows are still going to be underpriced in the front.

Speaker 2

So our job is to do what we can to upsell the front, so we can lower the price in the back, get sell through all the way through. So I wouldn't say that any artist or manager is having any panic or talking to me about demand for next year. They know The Taylor Swift ticket verified fan that went up this week that's probably going to break all records. I mean, artists are seeing the demand is there. If you price it smart, you've got to the right markets.

Speaker 2

You've been out of the market maybe 3, 4 years. We're not feeling the demand from inflation or 'twenty three pressures that are driving strategy. It's just overall us being better at what we do today than we were last year or the year before on pricing strategy per market live artist for Territory.

Speaker 7

Got it. That's helpful. And then perhaps somewhat related to that, secondary GTV grew more than twice as as is primary GTV in the Q3. Could you just comment on some of the key factors driving that outsized growth in secondary? And is this something you think you can continue in light of the pricing strategy you outlined?

Speaker 7

Yes.

Speaker 3

I think as Michael talked to you, 1st and foremost, our strategy is to help the artist get paid market value for their show, and we are spending more and more on having the people and They want to build their brands, so they're leaving money on the table. And we're continuing to see that just almost insatiable demand in the secondary market. I talked about average price of a secondary ticket still almost twice that of a primary ticket. So that continues to grow and We continue to price a little bit trying to catch up to that. So we don't see the secondary market going away anytime soon, and we're going to be active participants in it.

Speaker 3

I talked, I think a lot last quarter about the fact that we believe the shift to secondary tickets has helped us because it's just eliminated friction to use us as the secondary platform to buy and sell the tickets. As we get better and better with that Ticketmaster app, you can manage your tickets, you can sell them, you can buy segment. As all of that gets easier and easier, I think that just naturally continues to build the business with us.

Operator

And our next question comes from the line of Steven Glagoula with Cowen. Please proceed with your question.

Speaker 8

Michael and Joe, can you maybe just update us on I know you spoke earlier around the regulatory risk And concerns around on FTC regulation and all in pricing, but I think there's also investor concerns around the DOJ still. And I'm just updating us where things stand with your consent decree. And maybe also touching on in relation to that, client wins on ticketing have been very strong over the last 21 months, 36,000,000 tickets. So maybe the competitiveness of the primary ticketing market in United States

Speaker 3

As regards to the consent decree, we have an ongoing discussion. We have an external monitor who we have regular dialogue with. We I'm an internal monitor who oversees everything. We're very happy that we've got an active dialogue now, which is what was lacking in the 1st 10 years post merger. We feel good about all of those discussions.

Speaker 3

Don't think there's anything structural, substantive So we feel good about that process that we have with them. As we look at Ticketmaster, I think it's continuing to be successful because it's a very effective platform. I think if you look at again, we've talked a lot over the past few quarters both for the enterprise side as well as the customer side, particularly internationally. That's differentiated and driving a lot of wins internationally. North America, where it's more a mature market, you need to be able to compete on price in addition to features.

Speaker 3

And I think our business has shown that we can continue to scale that, grow it and do so very profitably.

Speaker 8

Thanks, Joe. And if I just have one more follow-up here on industry publications have reported a trend of tickets for top tier acting, strong demand and then the lesser known and emerging artists are struggling. I know you had some commentary today where that wasn't the case. But as you look out over the next 12 months or so. Does that are you seeing that potentially an impact on your business or trend?

Speaker 8

And Maybe can you just talk about both of those segments of artists in a recessionary environment and how they would hold up, the high end, top tier acts relative to the emerging artists and lesser known ones. Thanks.

Speaker 2

Yes. Just on a macro level, this is a business that overall We don't win most shows don't sell out. Majority of your shows don't sell out, always room for a few more tickets to be sold. So although the press always talks about the expensive tickets or the sold out tickets, that's not your real business. Your real business is night and day theater clubs, amphitheaters, arenas selling those tickets night by night.

Speaker 2

So most tours ultimately do well in the end. Artist makes money and we make money. There are some tours, a small percentage that just don't fill in up tickets. The demand isn't there. And the tour either gets canceled or The promoter and the artist lose money.

Speaker 2

So I mean, I have seen some of those publications where they want to grab those 6 tours or some that didn't make money and then try to extrapolate something larger. I just don't see that trend. We did over 8,000 club shows last year and 95% are going to Make Money and Do Well and the artist will deliver those 400 tickets or 1100 tickets as they're building their business and their costs are associated with it. It was a tougher year for all of the industry as the supply chain challenges, labor, Everyone getting back to work, getting the security guards. Everyone's costs were up this year.

Speaker 2

So that would have affected all artists on the road relative to their revenue. But those seem to have worked their way through the system. So I don't see any trends that the emerging or younger artists or having any harder time than any young emerging artists, when they're taking those risks building their businesses on the way up. Generally, majority are going to be okay in terms of selling enough tickets, paying the bills and building their business. So we don't see any trends on the bottom Any new trends that would suggest that the club and the emerging artist space isn't growing.

Speaker 2

There's more clubs opening up all the time, lots of demand in every market, lots

Speaker 1

of options for artists

Speaker 2

to play, 500 seats, 1,000 seats. We just know from our venue portfolio on the demand, on opening up and building theaters and clubs is bigger than ever. So that demand wouldn't be driven

Operator

And our next question comes from the line of Peter Cispino with Wolfe Research. Please proceed with your question.

Speaker 9

Hi, thanks for taking the question. First on Taylor Swift, I just want to say that my 16 year old daughter and I Are signed up for the presale and would very much appreciate your support on the 15th of the month. Moving on, in the press release, You highlighted that growth in your concert business in 2023 will come from adding more venues to your operated portfolio and increasing And Slurry per fan revenue. So we didn't see any mention of fan growth. And then in the discussion today, we've obviously heard a lot of talk about a robust first half of twenty twenty three.

Speaker 9

And so if you'll forgive me kind of picking up this twenty twenty three topic again, I'd love to understand how much visibility the company has into the second half of the year. I think booking cycles for the big venues are 6 to 9 months out. So that's one question. And second one was just as strong as your fan growth has been this year, Does this change how aggressively you might go out and invest in new venues, possibly larger ones, even ones outside of the country? Thanks so much.

Speaker 3

So just technically, Peter, just to answer your first question, I think the way that we've laid out the story in the release and then Michael talked about it is, first, he talked about the fact that ticket sales He talked about the sponsorship growth and then he said in addition to those, there are a number of other levers that we have to continue to grow the business. So I don't think you ever said anything that said we weren't the fan growth didn't come into this. At this point, looking at 'twenty three, yes, we've got Some of the stadiums we talked about high growth in arenas, some of that booked. It's still somewhat early for the second half of the year. Macro in terms of our pipeline for next year, it would account for more fans than we had going into this year.

Speaker 3

The hard part that we have is just sorting out because of the shows that were rescheduled, trying to figure out how many of those were naturally flown into this year versus not. But we are feeling very good about the attendance levels for next year. Mike will talk about the venues.

Speaker 2

Yes, I think just on Joe's point, we are ecstatic to be sitting here. We knew the thesis that you could sell on was that there was an air pocket. We heard that comment a lot. 'twenty three was an exceptional year and it was. 'twenty two, I mean, an exceptional year.

Speaker 2

The idea that we were Able to grow this business for so long on our high double digits on our high single digits on our fan base and then to have a year like 'twenty two, We blow the doors off it and now we're going to be able to sit here and say, and we think we'll still grow on top. We're very proud of our business and our outlook given the headwind and the size of the gains we had this year. So we're looking into now beyond that and how we keep growing the business forward. Venues I've laid out over the last year or 2. We think it's a great business.

Speaker 2

We have 300 in our portfolio. It's a great way to obviously maximize that live event fully when you're vertical. So we like our global pipeline we have right now. We're seeing A lot of white space where our content can help drive that business case from arenas to amphitheaters to Big Ballrooms and Theaters. So you'll continually see us adding as we have been over the last many years to that portfolio.

Speaker 9

Thanks, Michael. Thanks, Joe.

Operator

We have time for one final question from the line of David Katz from Jefferies. Please proceed with your question.

Speaker 5

You made it under the wire. Thanks for taking my question. In the past, you've talked about The evolution of digital ticketing. And I know there was some commentary, I believe, in the spending To that end, an update on sort of how that's progressed, where it is and what we might expect in the near term and longer term would be helpful, please.

Speaker 3

Yes, I think digital ticketing at this point is nearly ubiquitous in North America. It is growing rapidly internationally. It's still a year or 2 behind. I'd expect this to be pretty much there sometime between next year and maybe the year after, just depending a bit by market. And as it's gotten established, it's already helped us in a number of areas.

Speaker 3

I talked about secondary a few minutes ago. So we're seeing some direct benefits as we continue to improve The ability in terms of how fans manage their tickets, I think you'll continue to see more products get added on to the app that continue to improve what the fan how the fans can manage their tickets. And then it sets us up for the advertising and upsells that we've been talking about. And we now have enough scale. We started doing some things this year at scale, working with sponsors who wanted to deliver value on-site to our fans, working with to the concert side of the business to enable direct upsells.

Speaker 3

I think all of those features that come from having a direct connection to the people Attending the shows will be a key focus for how we continue to drive our sponsorship business over the next few years.

Speaker 5

And there's a sort of clear quantifiable earnings benefit where the rubber meets the road from that, correct?

Speaker 3

Yes. And I think you see part of that as we talk about what is our non I'm taking master what's our non service fee revenue that we're driving and the fact that that's up double digits from 'nineteen. This is all a part of that. Understood.

Speaker 5

Thank you.

Operator

Thank you. I would now like to turn the floor back over to Mike for closing comments.

Speaker 2

Thank you, everyone. We'll see you at our Investor Day in Liberty in November.

Speaker 1

You can check our

Speaker 2

website for more details. Thank you.

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Earnings Conference Call
Live Nation Entertainment Q3 2022
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