The following session is not open to the press. 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 plus Technology Conference, Joe Berchtold, the President and CFO of Live Nation. Joe, thanks for being with us.
Thanks, Stephen.
Great. It'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 that the industry's 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 you think we're in
Yeah
in the industry, and as we look ahead, what are the key growth drivers you think investors should be mindful of?
Yeah, I think if we start with just the industry as opposed to us, I think we are absolutely still in the early innings. I think most of what we have seen in the last couple of decades is still largely a U.S., Western Europe phenomenon. If you look at the drivers of how we have been growing and what there is ahead of us, every one of these factors is still as strong or if not stronger than it has been. Just starting with the globalization of both supply and demand, the shift of spend from goods to experiences, where live events, concerts, and sports sit in that hierarchy of priority for people to spend on experiences are all still very strong. 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.
Put it the other way, right? The 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 is still 1/10th 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. Again, this year has been a great year for that. So, we think that there is 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
Yep
for this year compounding AOI at double-digit rates, as you
Yep
look out over the next number of years, continuing that degree of growth. What are the few things that Live Nation can execute again specifically
Yeah
to put together a growth algorithm, multi-year growth algorithm at that double-digit rate?
Yeah. So first is just for us, it's always continue putting on more shows for more 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. Then it's deploying capital on our Venue Nation 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.
that lack a modern arena infrastructure that can deliver the grosses the artists 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. And big cities. Rome, Istanbul, Frankfurt in Europe. It's Seoul, Tokyo, and Manila in Asia, Latin America. You've got São 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.
It's a great way to set the stage, and I do want to dive deeper into a lot of those drivers. But 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 artists tour at an incredibly robust clip over the last three- four years. Would just be curious to get your sense to the extent of if this is slowing at all, or if you see the supply side of the market continuing to scale over the next number of years.
No, I think you'll see it's the same globalization, right? It fundamentally changes the business. There's not an artist out there who's not using the social media platforms, the TikTok, YouTube, Instagram to develop their brand. 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. Number one artist post-COVID has been Bad Bunny, selling out stadiums globally. You've got, obviously, K-pop has been a huge phenomenon. Latin in general. Number two genre in 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. Pre-COVID, I think 8% of our top 50 tours were by non-English speaking artists. Today, it's 30%.
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 easy for them. And I'm amazed. I look at all of our shows down in L.A., number of artists who I've never heard of who are 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% much more effectively than you ever could before, because there's always one person in the group who's the fan, who's following the artist, who learns about the show and the social media, who shares the music with their friends and brings them to the show.
It used to be much harder to cut through. 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 this supply.
Maybe a near-term supply question. Investors and analysts often focus on the near-term mix of touring, the geography of that tour, 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? As we look into 2027, any early thoughts on how that could shape up?
Yeah, 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, amps, arenas and stadiums are all up at least mid-teens globally. We're continuing to see very strong performance across all venue types. Notwithstanding reports to the contrary, our amphitheaters continue to do great. We've already sold 10% more amp tickets this year than we sold all of last year. We're having no drop off, Stephen.
Okay.
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. The U.S. has been very strong across the board. 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 three, has come from international markets. 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 and fan count's 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 at 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. I think international markets will lead our growth, but I think that's going to start to be an irrelevant statement. 10 years ago, we had five arenas. Now we're operating 25 arenas. 85% of those fans are in international market. The vast majority of our Venue Nation strategy with the arenas and other large venues is in international markets. 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. Unfortunately, not all trackers get that.
People, you have to take with a grain of salt. Yeah, 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. We're having a bit of that debate at the moment this week. Things like tariffs, inflation, potentially a slowdown in the job market. Just would love to get your latest sense on what you're seeing out there on the demand side, things like ticket sell through and per caps.
Yeah. 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 toward that 175 number that I talked about earlier. We've seen no deceleration whatsoever. I think 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. People are continuing to spend when they show up. 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. Pricing at our venues is up since 2019, about 20% versus inflation being up 30%. Artists are very cognizant of, in the K-shaped world, there are fans that can only afford a certain price. 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 grosses 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. I think there's a lot going on under those macro numbers that are very sensitive to the fan base and what they 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 three 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 nothing. And again, on a global basis, every week we get 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 Venue Nation. It's an increasingly important part of the Live Nation investment narrative, the Live Nation story. Would love just at a high level, Joe, if you can maybe talk a little bit about the strategy behind Venue Nation, talk us through the opportunity that you see out there and why you think it's a good use of capital.
Yeah. I think 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. 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. 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? It's silly to have a 20-minute beer line. People are not going to buy the beer. How do you have more points of sale?
Those pay for themselves in three shows. You have long lines of bathrooms. People don't have time during that break between artists to go to both buy a beer and wait in the bathroom line. Put in more bathrooms, make the bathrooms nicer. You have people that everybody's getting the same experience. Well, nowhere does everybody get the same experience. How do you create more premium offers so people can have. 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. Over a decade or so, we got a lot better. Now our per caps are $47, $48.
We've gotten to the point where I think we're a pretty good operator. 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. We've got a combination of two 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.
One of the primary economic drivers of a return is going to be what its 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. 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'd mentioned earlier, 47 out of the top 75 markets don't have all the arena infrastructure that it needs. That's a decade long runway of just the top 75 markets. Forget the fact that there's easily the next 75 after that. We think it's a long-term opportunity. It grows the market. 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 our mantra, right? This is not a zero-sum at all. That's one 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 what's your race, to see how much money you can give to folks in competing with them. So every signal that we've seen says that the first steps of this have gone well. It gives us confidence to continue to invest. I think we'll be incrementally growing this over the course of time. 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 five 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 Venue Nation attendance. Is that something that could continue? 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?
Yeah. No question, arenas or things like arenas are our number one priority. So arenas, particularly in Europe and Asia, Latin America, you have some of these venues that are a little bit more like a Estadio GNP Seguros, 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, I think we've basically doubled our operated fan count being about 75 million now. 70% of that growth has come because of the international markets, heavily driven by those arenas I talked about. So I think next year, we'll see. I think 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 I'm 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.
Very good. I do want to pivot to the ticketing segment for a moment. Joe, Ticketmaster in the second quarter posted some pretty impressive growth, mid-teens year over year. Could you unpack the drivers of the growth that we saw in the second quarter and year to date? How much of that activity was specific to what we've seen so far this year versus maybe more structural underlying growth in Ticketmaster that you would expect to come over the next couple of years?
First and foremost, excuse me. If you look back over our commentary on Ticketmaster for a while, a lot of its global growth has come because there are more concerts globally. This year's tremendous performance, when I rattle off that amps, arenas, stadiums are all up mid-teens plus globally, that's going to be very beneficial to Ticketmaster. Ticketmaster sits in a great spot with it's the beneficiary of the tailwinds that the concerts business is the beneficiary of. First and foremost, it will benefit as we grow to 175 million fans. We've also been adding more clients, particularly internationally, and we expect that to continue. We're going to be selling tickets in Japan around the end of the year. I give great credit to Samo and his team. He's added some tremendous engineering and product folks.
They're able to move a lot faster than we ever could before in terms of moving in, and Japan's a complicated market. It uses retail distribution. It's not just a matter of bringing in people into Ticketmaster. Oh, just drop in a marketplace. It's easy. It's a lot more than that. The whole venue ERP side that has to be tailored to that market. You have a very different distribution. You obviously have characters and other things that complicate it. I see continued growth in our international markets. That'll position us well as we continue to expand our concert business, not just in our own venues, but in third-party venues. Continued big investment in B2B tools for our client and content partners, helping them on pricing, on marketing, how do they optimize the show, how do they get better and better intelligence out of their data.
We have more of the data than anybody else. We now have, I think, the capability to build the tools. I think that'll continue to be a nice growth area for Ticketmaster. The whole fan experience, fan marketplace. I think we're as good as anyone out there in the ticketing realm. I don't think that's necessarily saying a lot. I think there's a lot of opportunities to increase sales, reduce fan friction, support better discovery for fans, while also continuing to figure out how do I make it a great ad platform that feeds our sponsorship business. I think with the capabilities we have now with the product and tech teams there, I'm very optimistic about their ability to drive the growth of the business beyond what I would've thought a year ago.
And maybe taking that all together for this year, you have targets for Ticketmaster AOI growth of about mid-single digits.
Yeah.
I think as you look ahead over the next couple of years, any updated views as to how fast you think Ticketmaster could grow or net new fee-bearing tickets added to the platform?
Yeah, I think that's sort of the base case, and I think there's upside from there if we can solve some of these B2B and B2C product issues, improve the fan experience, reduce friction, figure out how we can use some of the tools that are developing rapidly, right? The daily announcements on some of these personal agents and whatnot, and use some of them for long-tail discovery. I mean, right? That's moving at such a pace. I think that my personal view is you think about these agents or AI tools that help with discovery. If you are selling a commodity, you have a problem because then it's just the race on price. If you're selling unique products, unique inventory, then it helps you because it can promulgate discovery on the long tail.
And if you're the only one who has the product, the ticket, and the primary, then that's great because you sell that incremental ticket. Again, the pace of these tools, I think over the coming year, it's going to start to unlock.
On the secondary side, it's never been the main focus of Ticketmaster, but it still drives a notable portion of your service fee revenue.
Yeah.
Would just love your updated thoughts on how you're thinking about the role secondary plays within the Ticketmaster platform, and then any levers that still remain out there for Ticketmaster to bring some value capture, some of the value capture that exists in the secondary market back to primary.
Yeah. As we've talked about, we see secondary as a feature, not a standalone product. We think it's important to be in it, for a couple of reasons. One is sports are very different than concerts on the secondary. Sports are a tool that are heavily used by sports teams to disaggregate season tickets, right? Most sports teams today don't have enough folks that want to go to 41 basketball games or 82 baseball games. So they sell a large portion of their tickets to brokers who then disaggregate them and put them on the secondary. It's good for them because they get the money up front. They get the certainty. They can budget. They can plan. They're willing to give up a little money to an intermediary to be able to do that. No different than a lot of other businesses.
It is, in my mind, it's a liquidity market. It's a liquidity function in sports. Concerts are very different. There is no liquidity function because you're buying that concert. The secondary exists in concerts because people see a price arbitrage. Our philosophy is always, we start by working with the artist, or other content owners. What's their agenda? How do they want to see their tickets sold? If that means they want to price them closer to market value, we support that. If that means they want to give value to the fans, we support that. If they want to have it so that it limited transfer, so that it really is only their fans, then we'll support them in that.
But as long as it is still legal and it is allowed, our view is, as a primary marketplace, you do not want to basically send all your customers away, say you are closed for business, send them over to StubHub or SeatGeek that are going to run wild and not adhere to any of the artists' demands. So we are trying to figure out, and it is an imperfect science on how do you balance the ability of fans to still shop for secondary tickets on the same platform. But in terms of how it can help, primary helps primary just because it exists.
So you are telling people, "Hey, come and be aware you can always get a ticket here." It helps because we have found when you show primary and secondary together, your primary conversion goes up because you see, oh, primary tickets do still exist, and I will often make the price value trade-off of shifting to primary. Having it obviously gives us a lot of intelligence in terms of market value for the conversations with the artists. So we will continue to offer it. I have talked about, I think concert secondary now is a mid-single-digit portion of Ticketmaster's GTV. It is not going to drive our growth, and if we continue to ratchet down and it is flat or down a bit, it is also not going to impact our ability to grow the business.
That is helpful. Maybe touching on sponsorship and the long-term-
Yeah
growth opportunity on that side of the business. I think it is still one of the more underappreciated parts of the Live Nation business model. But that business has compounded AOI low to mid-teens for the last decade.
Yeah.
Talk a little bit more about the main drivers of that business looking ahead. I think we spent some time thinking about
Yeah
law of large numbers. But on the Venue Nation side, it seems like there's a lot of capacity
Yeah
coming down the pipe.
Yeah. It's been a phenomenal business. Russell and the team have done a great job figuring out how to create assets and have really led the industry in thinking about how you unlock value for brand partners through the concert and ticketing ecosystem. Absolutely, as we look forward over the next several years, I think the number one priority for that team is to maximize the Venue Nation opportunity, figure out with all the assets that we'll be getting in these venues that we're going to be operating, how you, from name and title down to the VIP rooms and everything else, there's a whole industry into maximizing those venue sponsorships. Given the volume of venues we're going to open, given the number of fans we expect to go through those venues, we think that that'll be the number one driver.
The other, and I alluded to it earlier when we talked about Ticketmaster benefits on this side versus the Ticketmaster books technically, but everything that gets done on that Ticketmaster platform, that is an ad unit effectively. It is some ability to enable fans to spend more for some other related purchase is really flows through. Those are, again, more ads. If someone on that team unlocks more effectively the products, reduces friction, you are naturally going to drive more purchase, and the sponsorship team will be closely involved in that, figuring out what brand partners do they bring to bear to take advantage of those ad units.
Any specific verticals or categories within the sponsorship business that you feel like are executable or high on your list in terms of penetrating deeper into?
The team has done a pretty good job. Obviously, the announcement with Spotify this year is a great one. I think there is more work to be done with the DSPs in terms of growing that category globally. But in general, I would not say there is anything we are missing that is a big hole.
I want to touch on capital allocation returns.
Yeah.
But before I get to that, just on the regulatory side, we are now a few months removed from the March settlement with
Yeah
the DOJ and the April jury verdict.
Yeah.
Could you just remind investors where we are in the regulatory process today and how
Yeah
things could play out from here?
Yeah. The first is that the judge undertakes a review of the DOJ agreement. There was a public comment period that just ended. As you would expect, all of our competitors came out and said, "No, we would like you to cripple them more so that we can have an easier time competing." So that was all to be expected. The judge now is going to take all that into consideration, make some decisions about what that process entails. I expect that will continue on over the next two or three months. Then in terms of the post-trial with the states, we have a couple motions in front of the judge, because we do not think that on the facts, a lot of the case was proven. We will see what he decides on that. That will then set up the remedies trial that will take place next year.
We continue to believe that we understand that the states did an effective job with a trial to win over a jury, which is different in our mind than a trial to win on the facts of the case. We think the DOJ settlement was fully responsive to the facts of the case. So, we will see how the remedy process plays out next year, but we also continue to feel very good about our position, if it gets carried away, on appeal.
And then just because we get this question a lot on the-
Yeah
appeals process, if this goes next spring in a-
Yeah
in adverse way, how does the appeals process play out and sort of timelines from there?
Then you take it to the appellate court. That probably takes 9 months to a year, depending on what they do. And then you have an ultimate option of appealing based on that to the Supreme Court, which again, you hope you don't have to go that far, but given that this case involves some fairly novel interpretations of antitrust law, then it might be one that could be a reasonable candidate.
Last question, Joe, just on capital allocation-
Yeah
and potentially returns. You mentioned great underlying growth in the business.
Yeah.
It seems like the commitment in capital towards Venue Nation is starting to plateau. Could you maybe just talk a little bit about the balance sheet
Yeah
where you're comfortable with leverage, and if there is excess capital, perhaps opportunities to either continue to invest or return?
Yeah. I think in the next handful of years, there's plenty of opportunities to continue to invest. We also have the uncertainty associated with the trial. I don't think we're going to rush to do anything that's going to reduce our flexibility at a time that we have a lot of opportunities to deploy the capital. Comfortable with our debt leverage. We've created, with some of your colleagues, a pretty novel instrument on venue financing that allows us to pool our venue assets at a bit higher leverage and with a lower rate because of the pooling of those assets. The way I think about our balance sheet in my mind is a little bit bifurcated as we sort of have this synthetic venue co-structure and then a typical capital structure with the rest of the business.
I think our leverage may fluctuate a bit, as if we grow our venue business, you may actually get a bit higher leverage, but because a lot of it is in that separate vehicle, you have to kind of go a level down, I think now looking at our leverage and not just do it at a top level. But I feel very comfortable with our liquidity and our ability to keep investing.
That's great, Joe. We'll have to leave it there. Thank you for your time and thoughts today.
Thank you.