Okay, great. We'll get started. Happy to have back, at the conference, Joe Berchtold, President and CFO of Live Nation. Joe, thanks for being here.
Thanks.
You recently reported results for Q1 that now provides investors a trailing four-quarter view into your business post-pandemic and how that looks relative to 2019. You know, when you look at trends for the industry broadly or Live Nation specifically, what kinda gives you confidence that you can now build off this foundation?
Yeah. I think every indicator, short-term, long-term, is this continues to be a solid growth industry, solid growth business. I always start looking at long-term trend lines. If you look over the past decade, this is a business where you've had global fan growth in the mid-single digits. You've had continued pricing. You've had Live Nation continuing to build market share on a global basis, which has translated into a double-digit, pretty solid, consistent business, which we think continues on for a long period. If you look right now, you've got a handful of factors that are continuing to drive us in 2023 and into 2024. The first is just on a macro basis, the consumer spend on experiences relative to goods is still trailing something like 20% relative to pre-pandemic levels.
As the dollar continues to shift from services to goods, we expect that to be a strong tailwind, and frankly, that kind of 20% number, we think is stronger than any economic concern. On the economic side, as we talk to fans, they tell us that going back to concerts is one of their top priorities, one of the last things they're going to cut back on. We expect that it has a lot of strength through any economic issues. Then we look at it again on a global basis, and if you compare it to even last year, which was 120 million fans, up over 20% versus 2019, we didn't have all of the world open for the entire year.
We didn't have Europe opening till into the latter part of the second quarter. Never really got Asia much open. As we said, I don't remember the exact numbers we said at the end of Q1, but we sit here now, we've sold about 100 million tickets for shows this year. That's as many tickets as we had fans for the entirety of 2019 sitting here in May. We have deferred revenue was up 28%, another leading indicator for us of how the fans are gonna be this year. You know, we're already starting to talk and look into what's going on for 2024. No sign of any of this letting up.
Okay. I mean, you partially answered it. Well, my next question. Two enduring questions we get from investors, regardless of how you might be performing at any given moment in time are: What's the sustainability of supply growth? Then how might demand respond to a softening economy? I know you can always provide-
Yeah.
A six to 12 month view based on the pipeline
Yeah.
Forward sales.
Yeah.
Just like longer term, what should investors keep in mind when it comes to the supply and demand points?
Well, I think on the supply side, I was getting that question in 2011. What happens when the Eagles retire?
Yeah. Right.
What happens when the Rolling Stones stop touring? Well, they're both still touring, but the reality is today on the supply side, you're seeing artists able to emerge, develop, and build global followings in a way that could never happen historically. I mean, we're very thankful for the Spotifys of the world. We're very thankful for the Instagrams and TikToks that let them build global brands. I don't think most of us would recognize, you know... We certainly wouldn't have heard three years ago a lot of the biggest artists that are out there today. Bad Bunny last year, Karol G this year. You've got a Mexican rapper who's the number one artist streaming on Spotify these days. The global build of supply is happening in parallel to the global build of demand.
You know, again, we saw it, you know, K-pop a few years ago. K-pop is as strong as ever. You're not hearing about it as much just because it's continuing to build and well beyond just BTS. You're getting lots of other sources of music that maybe once were regional are now going global. Maybe even regionally were selling out mid-sized buildings, now they're selling out stadiums. You're seeing that supply continue to build. I don't see any letup in that.
On the demand side, you know, again, you know, Howard Marks said in a paper I read recently, "We have to remember on demand that at all times you're either in a recession or on your way to a recession." If you live your life paranoid about the fact you're going to be in a recession, at some point, you're probably right. You need to figure out what's the strategy you're gonna have for your business, that you're gonna grow it over the next several years. You need to watch all of your indicators. How are the on sales going? How are shows closing? How are the per caps? You need to be ready to shift tactically if you start to see any softening in any of those signs, which will be temporary.
You don't change your strategy based on the notion of a short-term economic fluctuation. You build your strategy that makes good business sense, is enduring, and then you adjust as you go along. We're seeing none of those indicators, to be clear. We continue to look at them every week. We're not seeing them. We're paranoid, so we continue to look at them on a pretty detailed basis. We're not seeing anything that gives us any pause.
Got it. At earnings, you noted, I think 90 million tickets for shows this year, up 20%. I think before, you just gave a 100 million number. I think a lot of that, or at least at earnings, reflected scaling in your larger venues, some of which we saw reflected in Q1 results. Can you maybe just provide some more color around that kinda 100 million figure or any other kinda forward metrics?
Yeah. Again.
Yeah.
It is absolutely being heavily driven in this year at this point by a phenomenal stadium year, for the reasons I talked about. The artists that you have that you didn't hear of three years ago are now selling out stadiums and in tremendous volume, a very strong arena year on a global basis. One of the things about both stadiums and arenas is these buildings have a lot of capacity. You're able to scale up on them pretty quickly, which is what we've been doing. They also, just from the cycle on a planning basis, tend to be the buildings that go on sale with the most advance. The productions are larger. The artist has more planning to do. You get those on sale, and we're just continuing to see that they're selling incredibly well.
Got it. For Venue Nation, I think you recently noted new venues will host three million fans at 1,000 shows this year. Should investors view this as all incremental in the sense that your physical build-out is now creating shows simply where they weren't possible previously?
No, 100%. We've been in venues for a long time.
Right.
We kinda codified it, called it Venue Nation, as we separated it out from the promoting business, give it more focus, make sure we have management that is strong in thinking about the development of buildings, the running of the buildings, which is a different skill set. We're continuing to do that. As you said, more and more of a focus as we think about the buildings is how do we use these buildings to really create incremental capacity in the industry. Simple way I think about it is you have a global latent demand business. Because of the reasons we talked about with the artist brands, they're able to build up fan base. Our job is then to work with artists and create the supply.
There are some situations where you need that infrastructure in the middle to maximize the amount of business you can do. I use Austin as an example. Great market, lot of music demand, not really the infrastructure. We'd put a handful of shows in there every year. We worked with Oak View. We put a building and University of Texas. We put a building in Austin, new arena. We're putting 50, 60 shows in.
Right.
That's a home run. It's great from the simple economics of the building as the venue, but it also drives our flywheel. A lot of our venue focus now is whether it's a, whether it's a 5,000 cap theater, an amphitheater, an arena of that level, particularly internationally, how do we continue to make sure we're putting in infrastructure where it can help to build our business.
Got it. I would assume that, right, by building these out from scratch, that allows you to kind of, you know, maybe execute the venues in a way that are more efficient in terms of per caps, VIP offerings.
Absolutely. Yeah. Huge focus on hospitality. Absolutely. How do you create the high-end experiences that fans want? Huge variation so that if you want fans want to just be in the, in the building in GA and get a beer, that's great. If they want a more premium experience, we're able to do that. We're also focused. We're not trying to compete with the NBA buildings, right? Steve Ballmer can spend however many billions he wants to build his building. That's great. We'll fill his building. We're not looking to build an arena in L.A. That's not the business. We're looking at markets that don't have it, where in the low hundreds of millions you can build a building and get a tremendous return off of that while still providing a fantastic fan experience.
I mean, you mentioned K-pop before.
Yeah.
You just announced an arena partnership in Busan, right?
Yeah. Yeah.
Yeah. Okay. I guess that.
Yeah, no, that's another global example of that's one we're operating.
Yeah.
Again, Also, when we talk about Venue Nation, I know some people get concerned about, "Oh my god, what's the capital implication of that?
Right.
It's a pretty broad definition. That's an example that I would put under our Venue Nation umbrella, but we're operating it. We're not.
Right.
We're not building it. We're going in, as a partner there, and I think it has great opportunity, and we'll continue to build our Asia business.
Got it. Maybe just sticking with concerts. You know, one of the factors that I think limited on-site spend contribution to AOI last year was inflation, supply chain issues. You indicated a couple weeks ago expense growth for your amps and festivals, at least should underpace inflation. Can you just provide more incremental detail around that? Where are you, where are you seeing the relief?
I mean, first of all, in our indoor buildings so far this year, we're actually getting our cost per fan down, so not just fighting inflation. We haven't launched our outdoor festivals-
Right.
Amphitheaters really yet. I'm trying to be judicious, not having actually experienced the cost yet.
Got it.
We're absolutely seeing that the pressure on increases in labor costs are way down. We're seeing in the U.S. certainly that supply chain with the planning that we've been able to do this year substantially mitigate the cost increases. Some of the costs and supply chain issues are still prevalent in Europe. In part, a lot of the things that we use when we build a festival are unfortunately things that you need when you're fighting a war. There's more competition for some of that. In aggregate, when we look at the per fan profitability and how are we getting more money on site, how are we continuing to use pricing to be efficient, how are we looking at sponsorship levels? The per fan profitability of the business continues to grow.
Great. Maybe moving to ticketing, you know, from your results, and forward commentary, I think pricing continues to be a nice tailwind. Maybe you can speak to the actions that artists are taking to kind of realize more value out of their primary tickets. Is that a kinda lean in on Platinum?
Yeah.
Of the tools that you give them?
Again, I think What artists are generally saying is, the increased press and focus on pricing and secondary has them saying, "I don't want somebody getting between me and the fan. I'll take one of a handful of paths." First of all, most artists are saying, "I want all my fans to be able to get in the building." While it doesn't get the press, there certainly is much focus on what's the pricing to get into the building, the back of the house, how do we keep that affordable for everybody? Absolutely a focus.
They're saying, "Well, for the front of the house, I don't want these scalpers getting all the money, so either I'm going to get this money through Platinum, or I wanna do something like The Cure did or others are doing, Pearl Jam, where I want some sort of face value only exchange, and I want some control over those tickets." Our job is to say, "Great." We're providing the tools to do both of those. We want to make sure we're supporting the artist's agenda and what they want, and neither is right or wrong. Every artist is different in terms of where they're at in their careers, how they wanna interact with their fans, and we'll support them both.
Now, as it turns out right now, particularly because you have a lot of stadiums, a lot of arenas, you have big growth in the Platinum activity this year.
Yep. Since coming out of the pandemic, you've also highlighted new venue client signings, mainly in the international markets. I'm interested in the dynamics that are driving that. Is that kind of in what you're bringing, or is that kind of what Michael, I think, alluded to on the Bob Lefsetz podcast about, you know, some of those venues in Europe now moving towards the exclusive model?
I think first of all, it's Ticketmaster just has the best ticketing platform in the world. We invested a lot during COVID on integrating on a global basis our platform, and I think we're seeing the benefits of that on a competitive basis as we continue to win more business. A very effective B2B tool working with the venues, and a great marketplace to sell the tickets. I think the combination of those two is leading to a lot of wins in the international market that tend to still be very feature-driven. You know, as Michael said, the venues are realizing as they're having to put in more money internationally to build their buildings, they need that revenue source.
They're looking to get more of the service fee, which often translates into either a higher portion of the allocation or exclusivity. I mean, you know, we talk in general, international as non-exclusive. That's not really true. A lot of international markets are exclusive. There are some, the U.K. is the biggest example of non-exclusive, but even in the U.K., the venues, they're not going exclusive. They're taking a bigger share. They're seeing that that's part of the way they cover their costs. It's all, you know, we've been talking about this in the press recently. It's all interrelated, right? If the artist wants most of the ticket revenue, the artist doesn't wanna pay the venue much of a rent.
If for the venue to give the artist the building for no rent, they need to have other revenue streams. They have expensive buildings in many cases, so they need beer money. That's great, and they also need service fees. The venues are keeping the majority of these service fees. They're ultimately setting the service fees, and they wanna work with Ticketmaster 'cause we're gonna sell the most tickets and be the most effective at it. It's not like you have Ticketmaster over in the corner doing all of these things themselves.
Right. Right. I think Latin America was called out as a strong contributor in the first quarter. Wanted to see if you could check on OCESA generally, maybe specific to the ticketing part of it, where you are in sort of upgrading the team in Mexico.
Yeah. OCESA's killing it. You know, it all starts, we've got a great business there that we acquired. We got a fantastic management team. Really the best people, not only in Mexico, but in all of Latin America, I think. We've done what we said we were gonna do, which is we've worked with them to do the simple thing first, which is just increase the content flow to Mexico. We said, you know, for a long time, we didn't really have the motivation to drive putting shows into Mexico when they were friends of ours. Now that we're all under one roof, just helping drive content that way is a quick win. Having them work with our sponsorship team, figure out what either regional or global partners we have that can help build their business is great.
Yeah, upgrading their Ticketmaster platform to be consistent with the U.S. platform in terms of its ability to do dynamic pricing, have Platinum tickets, to sell insurance, to do a number of these things, I'd say are just starting to bear fruit. It took us, you know, a year or so. We're getting most of the features in place over the course of this year. We'll see some benefit this year. I expect full benefit from that next year.
Okay. Just following up on LATAM. You know, Brazil appears to be a region where you've sort of hit a critical mass. You just launched ticketing operations there. You added a sizable festival. You know, what do you kinda see for that market?
It's, you know, it's what the, you know, one of the largest countries in the world, an incredibly music-oriented fan base. Some of the largest events we're doing, I can't, you know. We just launched The Town, a new festival this year, which will be in the off years relative to Rock in Rio. I don't remember the exact number. Something like, you know, 600,000 tickets sold for the festival in the first week of the on sale. Just massive numbers, massive levels of demand. Every artist that we bring down there is doing multiple stadiums, and all of these cities are huge cities.
I think that, it's absolutely a major priority and a major source of growth for us, as we look over the next few years, is how we continue to build up Brazil, Argentina, Mexico with OCESA, and a handful of the other markets down there.
Okay. You've also been consistently noting revenue from non-service fees-
Yep
Which I think doubled in the first quarter. Is there any way to frame how much this business is a contributor to your growth or overall ticketing? Where are the opportunities in terms of the upsells and the integrations?
Yeah. I look at this business as how we turn Ticketmaster into its own flywheel and how you use the volume on your platform to figure out how you continue to create secondary and tertiary profit streams off the business. It's an important contributor at this point. It's not the primary driver.
Right.
That's still the service fee. I think you need to be innovating and coming up with new ideas. The digital ticket has enabled another level of unlock because you have that one-on-one relationship, and we've talked for a while, that we're now at scale, able to connect brands with fans. We're able to market shows more effectively. All of that translates into non-service fee revenue. I think that'll continue to be a growth area for the next several years.
Well, I'd be remiss at this conference if I didn't ask you a question on AI.
Since we're talking ticketing, that's probably the best place to do it for Live Nation. Are there use cases
Yeah. No, absolutely. I will say that I am far from an expert on AI. My son tells me that. We have a lot of areas in Ticketmaster where we use what used to be called machine learning, right?
Right.
Where we used to take a lot of data inputs and use to figure out how do you make life easier for everybody. To me, it's more of an infrastructure component that runs throughout Ticketmaster that can make our lives easier. From the simplest, we have a building that wants to create a new show. If you can use AI to do 80%, 90% of that work and populate it and let them edit it, that makes life a lot easier. Clearly, as we think about marketing shows and using AI to be much more efficient and targeted in terms of how we market. Pricing is another one. As we continue to think about how you optimize pricing and move even more towards a one-on-one relationship with fans, will be extremely important. Customer service is an area.
Ticketing is a complicated customer service because when fans have a need, they usually have a need right now. It's probably like airlines where I can't wait till tomorrow because I've got a show tonight or I've got an issue that has to get resolved. The better we can get at customer service and using AI to help inform that will be great. Again, it's things that I think all help us because they help us either get more efficient or more effective at our job. We're obviously investing and continuing to roll out new things.
Got it. Maybe it sounds wrong. It sounds like you know.
Yeah.
All right, I wanna touch on the regulatory environment. There's been a recent push at the federal level for legislation that would require all-in ticketing and ban speculative selling. At the same time, there's been some movement at the state level to enact rules that would, I think, restrict the ability to venues to classify a ticket as a license and then by extension limit its resale opportunity. There's a lot to keep track of, and I think either way it looks like regulation is coming to this market in a way that it hasn't been in the past. How do you see the landscape changing? What do you think from your conversation lawmakers are most focused on?
You know, as painful as the last six, eight months have been in some regards, I think it's been helpful because it's shown much more of a light and made more transparent what goes on in ticketing. It's obviously telling when you have senators asking in the room, "Well, who sets the ticket price? Is that the artist or is that the Ticketmaster?" Right? I mean, just the level of lack of understanding of the industry very recently is astonishing to somebody who lives in the industry but is probably a better representation of how everybody understands it. I think that the amount of tension, press, conversation has made more transparent how it works.
That transparency is good for us 'cause I'm very confident that the things that we do, we start with the artist, as I talked about earlier, we serve the artist, and I don't think that ultimately that's going to be found to be wrong. Most of the bills that we've had introduced or likely to be introduced are things that are very aligned with what we've said we believe should be happening. What's happening at the state level is obvious that the scalpers have figured out they're losing the federal battle.
They're trying to go and run around the states and hope that they can sell a bill of goods to some senators who don't understand the full picture, and you get some bills pop up. Vast majority of the time, pretty simple conversations by sports teams, by artists, their representatives explain reality, and they get killed.
Yes.
It's a bit of a whack-a-mole there. One of the things that we'll see how it plays out is the question of do any of the laws coming out of Congress have federal preemption to override those state laws? That obviously would make life easier.
Right.
Life usually isn't quite as easy as you'd like. That's fine. We'll continue to deal with those on a state-by-state level. I think it's important to understand also, as people talk about these things in relatively ominous terms, our position on transferability and the artist or the team ability to set the rules is because we believe we serve content. We serve those artists and those teams, and we think they should have those rights. It doesn't actually impact Ticketmaster's business model where we can't do that. It simply is against our culture and our interest in what we want. I don't... I worry about it from the standpoint of I don't like it.
I don't like taking those rights away from the content owners. I also don't have the concern that somehow it's going to be a fundamental risk to our business model. That's simply not the case.
Maybe on that point, I'm curious about all-in pricing and the impact of that, right? Technically, the price of a ticket wouldn't be changing...
Yeah.
What a consumer would see upfront or in a search result would be somewhat. Is there some sort of aggregate demand effect for the industry if you went to all-in?
Yeah.
ticketing, it had an impact.
Yeah. Well, again, I always go back. All pricing discussions I start with, we have a $5 billion secondary market in the U.S.
Right. That's right.
Clearly, there's not so much sticker shock on anything that people aren't spending a lot more.
Yeah.
When they go, and they look at the secondary. I have zero concern about the primary market. All-in, I think, is the best consumer experience everywhere. I don't worry about that. Secondary, does it at any point of the pricing create more sticker shock, and the secondary folks have to adjust a bit to take that into effect? I don't know. Maybe, maybe not. I don't, I don't worry about it because that's not ultimately what's going to flow down to the artist or the venue or for Ticketmaster's bit of it.
Got it. Maybe sticking with regulatory. You have acknowledged a DOJ inquiry.
Yeah.
If that's the right term to use. I wanted to see if there was any update you could provide to investors on what that process has looked like so far, potential paths it could take from here.
Yeah. Look, I. Again, my view on this is pretty simple. You had a lot of very powerful senators who are constantly clamoring. Those guys must be doing something wrong. I think some senators come at life from a viewpoint of they view success as coming from leverage and power as opposed from building great businesses.
Right.
They assume with that lens of perspective that others must achieve success the same way. Obviously, we have a very different view. We're very confident that we're not a monopoly. Our market share doesn't justify it. Certainly, our economic relationship with both venues and artists doesn't justify it. We don't think that there's a real issue there. We've talked a lot about the consent decree. We don't think we've had any violations. We set up a mechanism to resolve violations. We're now almost three years into this reestablished consent decree. You haven't heard us announce any violations.
Okay.
We clearly don't have the lunatics running the asylum with rampant violations and terrible behavior. We're very confident in how we run the business, that we do it from a competitive but even playing field basis. We think that having the best services, the best products is still okay. The DOJ process will run its course, and we don't worry about it on a day-to-day basis. We continue to operate our business in exactly the same way.
Got it. We have about five minutes left. If anyone in the room has any questions, feel free to raise your hand. No? Okay. Just moving back to the business a little bit. Sponsorship, as you noted, in Q1 earnings, on track for another year of double-digit AOI increases. You know, when you think about the long-term growth here, do you kinda see this as something that's largely in your control in the sense that, you know, if you provide more inventory, more regions, then your strategic partners will follow you?
Yeah. No, 100%. More fans, more markets internationally, more creativity around what it is the brands can do to enhance the experience. Digital ticketing, as I talked earlier, I think unlocks a whole another level of direct relationships with fans. At this point, It's not putting the ad up, it's about how do you actually provide value to the fan who's going to the show. If you can provide value, the fan will invite you to participate in their experience. If you can't, it's gonna be an irritant. It's our job to make sure we're coming up with ways for great value for fans.
Got it. Just talking on capital allocation for a second. I think CapEx is expected to be $450 million this year. The business is starting to generate a lot more cash. How do you think about, you know, priorities of capital deployment from here?
Yeah. We've just talked for the past half hour about the great global growth opportunities in our business. Priorities one, two, and three are growth, and growth.
Right.
We think the global landscape continues to be robust. I don't differentiate in the same way that others do in terms of growth CapEx versus M&A versus investing our AOI in growth, it's all cash. Our business generates a level of cash, and it's our job to figure out in every instance, is the right thing to do, to do some M&A 'cause it's faster and it gets you established and gives you a scale? Or do we invest revenue-generating CapEx or what you don't even see is the AOI dollars that we invest to continue to grow the business. There's too many opportunities to invest to get good returns and returns the compound and build the business for that not to be the priority for us.
I think, again, I think we've got a track record now of over a decade of pretty effective investment and return on that incremental capital that gets deployed.
When it comes to M&A, are there particular regions that are a focus right now?
Yeah, sure. Asia, Latin America continue to be big investment markets for sure. There are pockets in Europe, probably a little more CapEx oriented in Europe than the others.
Got it. On APAC X Australia, we touched upon this a little bit earlier, but, you know, can you remind us of kinda your footprint in the region right now? Operations-
Yeah. I mean-
At a point where you can do a full leg of the tour?
No, absolutely. We're in, I think 10 markets in Asia now, including Australia and New Zealand, so eight other markets. We're absolutely able to go from Hong Kong to Singapore to Thailand, Malaysia. We can move around to a lot of the markets down there, definitely looking at tour legs, as that being another way for artists to get out and find new fans.
Okay. Maybe last one from us. You guys recently announced the launch of Vibee. That's an experiential offering providing immersive trips for music fans. I'm kind of interested in the background here. You know, was this sort of a known opportunity, but maybe COVID limited your opportunity to pursue that and, you know, what are sort of the key events or festivals that you'll build that on?
I mean, we've talked about it. We've been obsessed for a long time about the experience that fans have. A lot of it's focused on what we're doing at our venues, I think a natural outgrowth is, you know. You have festivals which are their type of experience. This is an example of where we'll work with artists to create destination weekends focused around those artists and provide the entire experience at different levels to fans that wanna go and follow them. I'm not sure which ones we've announced yet, so I probably shouldn't pre-announce our events. I think you'll see a lot of things from EDM to country artists to jam band artists, a lot of classic rock.
It's gonna be a pretty wide ranging, I expect, and will be another great leg of how we continue to grow the business.
Got it. Okay. Well, if there's none else from the room, I think we're just about out of time. We'll stop there.
Great.
Thanks, David.
Thank you. All right.
Thank you.