Good day, everyone. My name is Hector, 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 third quarter 2021 earnings conference call. Today's conference is being recorded. Following management's prepared remarks, we will open the call for Q&A. 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-K, 10-Q, and 8-K, 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 contains other financial or statistical information to be discussed on this call. The release reconciliation and 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 Rapino, President and Chief Executive Officer of Live Nation Entertainment. Please go ahead, sir.
Good afternoon, and thank you for joining us. Live music roared back over the past quarter, driving all our business segments to positive AOI for the first time in two years, with company-wide AOI of $306 million. The 2021 summer concert season rebounded quickly, with 17 million fans attending our shows in the quarter as a return to live reflected tremendous pent-up demand. Festivals were a large part of our return to live this summer, with many of our festivals selling out in record time and overall ticket sales for major festivals was up 10% versus 2019. We had a number of our tours already sell over 500,000 tickets for tours this year, including sellout tours by Harry Styles, Chris Stapleton, and others.
In addition to increasing attendance, strong demand also enabled improving pricing, with average amphitheater and major festival pricing up double digits relative to 2019. At our shows, fans spent at record levels, with on-site spending per fan up over 20% in both amphitheaters and festivals compared to 2019. We delivered these results with an operating environment that required us to ramp up quickly, institute new health and safety protocols, and staff our front line in a tight labor market. On the health and safety front, we set the industry standard by requiring proof of vaccine or testing for our shows with no change in fan purchase behavior.
More importantly, our protocols proved effective at mitigating major COVID disruptions to our business in the U.S. and U.K. and allowed us to work in conjunction with local health officials to mitigate transmission risks from our events. On the labor front, we were able to set staffing requirements for our peak outdoor season without any show disruptions. We also saw strong fan demand in our Ticketmaster results. We delivered its highest AOI quarter ever. Q3 was Ticketmaster's fourth highest fee-bearing GTV quarter, excluding refunds, led by sports leagues restarting and concert onsales for 2022 wrapping up. In addition, Ticketmaster's secondary business delivered its highest GTV month in September, showing continued growth in the segment even as artists and content owners continue shifting more of the value to primary sales.
As the fans came back, so did our brand partners, who continue to seek to connect to the live music fan. As a result, our sponsorship and advertising business delivered over $100 million in AOI for the quarter, the first time at this level since Q3 of 2019. The return of sponsorship and advertising has been largely driven by historic major partners, along with the addition of new brands, including Truly Hard Seltzer, as well as Coinbase and Solana in the fintech segment. As we look forward to 2022, we are encouraged by all our leading indicators across each business. Through October, our confirmed show count across amphitheaters, arenas, stadium shows is up double digits relative to the point in 2019 for 2020 shows.
Through mid-October, we have already sold 22 million tickets for our shows in 2022. Demand has been stronger than ever for many of these onsales, with 1 million tickets sold for each of the Coldplay and Red Hot Chili Peppers tours, and several other tours already selling over 500,000 tickets. Ticketmaster's onsale for 2022 also reinforces this demand, which we expect Q4 transacted fee-bearing GTV to be at record level even after already selling 65 million fee-bearing tickets for events next year. Ticketmaster has also added clients representing over 14 million net new fee-bearing tickets so far this year, further accelerating its growth on a global basis.
Our sponsorship and advertising business had similar success, with confirmed pipeline for 2022 up double digits relative to this time in 2019 for 2020. At the same time, we are continuing our cost focus to deliver $200 million in structural savings from our pre-pandemic 2020 plan, making us more nimble and better positioned to invest for future growth. As we get close to turning the page on 2021, I remain more convinced than ever on the power and potential of live entertainment and the strength of our position. No industry was more impacted by the pandemic over the last two years, and no industry has so proven the durability of its demand in the face of such disruption.
I fully expect we will continue to have bumps in the road in the coming months, and it will take some time for international artists to be touring on a truly global basis. The fundamental strength of live entertainment and Live Nation has proven out and we expect we will only continue to grow from here. With that, I will let Joe take you through more details on our results.
Thanks, Michael, and good afternoon, everyone. Before getting into the detail on each business, a few points of context for the quarter. First, this is primarily a U.S. and U.K.-driven quarter. These markets accounted for 95% of our fans in Q3 versus 75% in Q3 of 2019, and they represented 90% of fee-bearing GTV in Q3 versus 80% in Q3 of 2019. Second, our concerts activity primarily ramped up in August, with 90% of our attendance for shows occurring in August and September. Let me now go into more detail on the divisions. First, concerts. As Michael noted, pricing and on-site spending was up for both our amphitheaters and our major festivals in the U.S. and U.K. With almost 1,200 amphitheater shows played off, these shows give us the best data set for comparing to 2019.
I'll give you more detail on trends for these shows and in general, the same trends also hold for our festivals. On pricing, average ticket pricing at our amphitheaters was up 17% to $63. There are two primary drivers to this. First, ticket pricing, including more Platinum and VIP tickets for shows this year, increased average ticket pricing by $7. Secondly, our Concert Week promotion and other promotions were smaller scale this year, which had an impact of $2 per ticket. For on-site spending, average fan spending was up 25% to $36. This growth came from a combination of more orders per fan, more items per order, and higher average spend per order. Many of our fans shifted to buying higher priced products, which was part of our higher spend per order.
The shift to cashless also helped as card transactions have historically been larger than cash transactions, and this has held up as we shifted to 100% cashless. Finally, operating costs, including labor costs, were up. These higher labor costs were driven by several factors, fewer shows per building, our accelerated ramp-up to open the buildings this summer, new health and safety protocols, and a generally tightened labor market. At the same time, as noted with increased average ticket price and higher on-site spending, we increased the contribution margin per fan and did so to such a level that our profitability per fan, net of operating expenses, rose double digits. Turning now to Ticketmaster.
As Michael said, Ticketmaster had a record AOI of $172 million for the quarter, driven by its fourth highest fee-bearing GTV quarter, excluding refunds, and lower cost structure from its reorganization, along with lower ramp-up labor costs as we accelerated activity faster than the return of staff. Primary ticketing was driven substantially by concerts, which accounted for over 70% of fee-bearing GTV, while sports was the second-largest category, and together they represented approximately 90% of all fee-bearing GTV. Geographically, North America accounted for 80% of fee-bearing GTV as activity remained limited internationally outside the U.K. In secondary ticketing, we similarly saw concerts and sports account for over 90% of fee-bearing GTV, though in this case, sports was the primary driver with the launch of new football and basketball seasons.
Another contributor to our growth in ticketing is the continued signing of new clients with over 14 million net new fee-bearing tickets added this year through the third quarter. These new client additions have been particularly strong internationally, accounting for 2/3 of our new client tickets. Finally, sponsorship. Sponsorship AOI surpassed $100 million in the quarter for the first time in two years as it again had available ad units at scale, both on-site and online. Like our other businesses, it was largely U.S. and U.K. driven, together accounting for approximately 90% of total activity. As activity resumed, we were also able to engage new sponsors, adding eight new strategic sponsors in the quarter. As we look to Q4, we see a continuation of the same trends we had in Q3.
With concerts, we expect North America and the U.K. to continue ramping toward historical activity levels, while the rest of Europe and other international markets have limited activity given the lead time to plan concerts. With ticketing, we expect a broader recovery as most European markets put stadium and arena tours on sale in Q4, enabling GTV levels that could approach Q4 2019 levels despite 65 million fee-bearing tickets already being sold for 2022 events. While Q4 is typically a seasonally slower period for sponsorship, it too should benefit from concerts and ticketing sales ramping up. Let us now turn to our cash and cost management. We had free cash of $1.7 billion at the end of the quarter, which includes $450 million earmarked for the OCESA acquisition.
This was our first quarter since 2019, where our cash contribution margin was higher than our cash burn, contributing a net $166 million in free cash. We also added $850 million in cash in the quarter through our $400 million drawdown of our Term A loan and $450 million equity raise for OCESA mentioned previously. We then had free cash reduced by $370 million, largely resulting from long-term deferred revenue shifting into short-term for shows next summer, as we previously indicated would be happening. This improved cash position was also helped by our ongoing cost and cash management program. And this year, we expect to reduce costs by $900 million and cash spend by $1.5 billion relative to pre-pandemic plans and on the cash side, excluding OCESA.
As we prepare for 2022 plans, we remain confident that we have structurally reduced our operating costs by $200 million relative to our pre-pandemic 2020 plans. A few other balance sheet items. Our deferred revenue at the end of the quarter was $1.9 billion. This is compared to $950 million at the end of Q3 of 2019, which gives us the best like-for-like view of the demand pipeline already in place. A reminder on our debt that we continue with our liquidity covenants until we report Q4 this year, at which point we switch to a more traditional leverage test. Given our current liquidity and expected Q4 and 2022 activity levels, we do not anticipate any covenant issues through next year and expect to continue investing in growth.
With that, let me open the call for questions. Operator.
Thank you. At this time, we'll be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of David Karnovsky with JP Morgan. Please proceed with your question.
Hi. Thank you. As you've returned to touring at scale, you know, what have you found about operating with a reduced cost structure, and how do you think about expense growth from here relative to pre-pandemic, where I think, you know, you've noted you were just kinda less focused as an organization on driving cost efficiencies. Then just a second question. How are you thinking about labor constraints as you ramp towards, you know, this huge wave of supply coming in 2022? Are there any concerns about finding enough road or venue crews? And then to the extent costs do move up, you know, who bears that? Is that Live Nation as a promoter, or does that kind of go to the artist? Thanks.
Sure. Just, on operating with the reduced cost structure, I think we had the benefit, if you will, of really zero basing our cost structure over the past year and a half. We've talked through at various points, a lot of it around Ticketmaster's globalization and how we revised our approach on the concert side. We're not seeing any issues in terms of operating with this renewed cost structure because it's been a pretty methodical, laid-out approach to how we wanna run the business. I think as we move forward and we continue to grow the business, our expectations is that the incremental profitability of our business is as good or better than it's ever been, and that there continues to be a long runway to do so.
In terms of the labor constraint, as we talked, we were able to put on all of our shows this year without any issues. Looking forward to next year, at least, we don't think that there's any issue in terms of getting back the level of activity that we've had or the level of activity that we're talking about in terms of our pipeline of shows. Ultimately, that is what the short-term constraint is in terms of why we won't be doing 45 mega tours, why you can't have 80% growth in a given year, does have to do with some of the short-term ability to get your buses or to get your staff. There's no long-term constraints to the growth, and we're still able to grow it in next year.
In terms of the costs incurred, it's different pieces for different folks. The artist is generally responsible for their crew and their operations. They're out on the road, and we're responsible for the venues that we operate.
Thank you.
Just to add texture to that. I mean, we would have absolutely in July or August, with the idea that we had to instantly hire 20,000 people for summer amphitheaters, that usually would happen way back in April. We would have had concern, but we surprisingly were able to to fully staff all of those jobs. As Joe said, you know, marginal cost increased a few million dollars. We did see that the part-time seasonal workforce that needed to come back to help kinda make the machine work were eager to get back. We didn't have that challenge. I think we're gonna keep looking at how we do a better job of attracting and retaining them in today's environment. We don't see that as a cost challenge.
We think it's an exciting category, so a lot of people like coming to work at the amphitheater, the club, the theater. It's a lifestyle type job. As Joe said, we have no supply chain issues. The artist gets on stage, there's plenty of trucks, lights, staging, et cetera, to make the machine work on a global basis.
Thanks.
Our next question comes from the line of Brandon Ross with LightShed Partners. Please proceed with your question.
Hello. Thanks for taking the questions. Just, you talked about your quarter and how the return to live has been predominantly in the U.S. and U.K. Wondering if you could give an update on when, I know it's a big world out there, but when we can expect the rest of the world to get back to those 2019 levels and beyond that we've seen in the U.S. and U.K.? And then I have a follow-up.
Yeah, I'll jump in, and Joe can jump in.
Yeah.
We had a global call yesterday this week with all of our different presidents. You know, we're feeling very confident. Obviously, Canada, U.S., U.K. are fully open. Europe will be fully open by the end of the year. We'll have most of the main markets open into January. Pacific Rim, Latin America, all looks positive in terms of being open fully for international artists by April. We think internationally, on a global basis, by April, the world will be moving around again. Doesn't overly affect our business short term because, you know, most of the outdoor stadium festival business is summertime, so that will be all fully up and rolling. We have Lollapalooza starting in April in Latin America and Australia Festivals.
We think we'll be open for prime season, and we'll be rolling around indoors in the main markets of U.S., Europe, Canada and the U.K. between now and April.
Great. I wanted to focus a little on your O&O business. You talked about that prime season starting in April, and you extended your amp season and festival season this year as the summer got off to a late start. Do you plan on keeping that summer season extended going forward? Is that a way for you to own more of the fans?
Yeah, it's a great point, right? You just force yourself in this last two years to think differently and extract more value from your base. We absolutely look at it now and see, especially in most of South America, we can stay open much longer than we historically have. Yes, we will look to extend the season in those markets for sure.
Great. Michael, I saw on your socials that you invested in some new international venues. Can you maybe explain to us what your new venue strategy is going forward, what you're trying to accomplish, and in what parts of the world?
Yeah. You know, I always think we kind of underestimate bragging about our venue portfolio. You know, we already are well over 200 venues that we operate somewhere in the world, amphitheaters, theaters, clubs, arenas in Dublin, Holland, etc. You know, we know that the venue when we go vertical is a high margin business for us. I consider festivals almost venues because you get to own the real estate for the weekend. You're owning all the revenue streams. Anytime that we can put a show in our festival or our venue and ticketed by Ticketmaster, have our sponsorship, able to use the asset and count all the revenue streams, it's our highest margin business.
What we've seen over time now is, in the last five years, there's been a new real estate boom around the world, where every major city in the world looks at live entertainment much like they used to look at movie theaters as being this incredible tenant in their development. We are talking ongoing to multiple developers around the world who are building something, and they want a 2,000-seat, a 5,000-seat, a 7,000-seat, maybe an arena as an anchor into one of their developments. We've really ramped up that division over the last two years, and we see great opportunity around the world of continuing to expand our venue portfolio in these prime markets. I mean, Austin's an example where there's no arena. We're gonna open that arena in the next couple of years.
It's gonna be a monster of a return for us as a great single venue in the Austin market right now for live shows to complement our club, our theater, our amphitheater portfolio. We'll continue to be very opportunistic in the markets around the world where there's an opening for a live venue of any size.
Great. Thanks so much.
Our next question comes from the line of Stephen Laszczyk with Goldman Sachs. Please proceed with your question.
Great. Thank you. I appreciate all the detail you provided on the pricing and spending trends in the quarter. I was just wondering if you could maybe talk a little bit more about how durable you think those trends will be into next year, especially now that you have the vantage point of seeing these trends play out across an entire summer concert slate. Now that we're getting closer to 2022 and the slate's taking more shape, I was wondering if you could talk a little bit about the cadence of shows that you expect in 2022 and how that might compare to a normal year. Thank you.
Sure. This is Joe. I'll start. On the pricing, the per caps, I think we believe this is structurally a level of spend that we're seeing from the consumer now. On the pricing, heavily driven by the front of the house, the best seats, where we've long known there's this arbitrage because of the size and continued growth of the secondary market, even as we've been pricing and moving more money to the artists over the past several years. This year, that trend continued, more VIP, more Platinum tickets, getting that money to the artist. We're seeing a relatively strong inelasticity on the demand for those best tickets.
On the on-site, I think because we're seeing it come from a number of fronts, we are confident that it's staying. We talked about it in the comments, right? Moving from cash to cashless just opens up increased spend. It's been a long existing difference between those two. Moving to 100% cashless just raises the average because instead of being half of each. We're seeing, again, structural trends. People are going to a bit higher quality in terms of some of the alcohol. Some of our product offerings are making more of a deal for people to take higher price point products. All of those, we think, are a continuation of the trends that we've seen over the past several years and have no reason to expect that would be any different going forward.
In terms of the cadence for shows next year in general, and Michael talked about this a bit, you'll see similar, where Q2 and Q3 will continue to be our strongest quarters. That's when we'll have a great stadium next year. Looks to be far and away the largest stadium year we've had. That'll be primarily in those Q2, Q3 outdoor months. Obviously, our amphitheater and festivals largely those months. Even the arena, certainly here in the U.S., you just have more avails in those months because of the timing of the sports season. There's no reason not to expect similar seasonality in general as we've had historically.
Great. Thank you.
Our next question comes from the line of Stephen Glagola with Cowen. Please proceed with your question.
Yes, thank you. Joe, on the ticketing segment, you had another great quarter. Margins were at 46% on AOI. I know you said prior, the Q2's 40% margin shouldn't be extrapolated, and I know you love talking about margins. Just wanted to see if you had an update on, you know, that mid-single digit margin expansion that you talked about prior, on an annualized basis. Is that still, you know, how we should be thinking about the ticketing business coming out of the pandemic? Or, you know, are we talking about something higher than that now?
Well, I think we absolutely believe you'll continue to expect to see higher than historical margins because of the cost reductions. This year or this quarter, you got the particular benefit of a few things, one being that we ramped up our activity faster than we ramped up our staff, as we said we were doing from our cost management. We pushed our people and extracted more from that side. Secondly, as we also talked, this is much more of a U.S.-driven, and then secondly, U.K.-driven. We've talked historically about the fact that the U.S. market is a higher service fee and therefore generally a higher margin market than internationally. Some of that mix shift will convert back next year.
I don't think we're ready to give exact numbers, but we certainly do think that the ticketing margin will improve relative to historical.
Okay. Thank you.
Our next question comes from the line of David Katz with Jefferies. Please proceed with your question.
Hi. Evening, everyone, and thanks for taking my question. With everything going, you know, as well as it has and the numbers starting to materialize, I wanted to ask a little bit longer term, like 2023, and if there's any, you know, evidence to support the, you know, trajectory continuing to move up in 2023. I think, Joe, you may have used the phrase at one point, you know, there's no air pocket out there. You know, any help there would be welcome.
Yeah. I think to Joe's point, I think we said it before. You know, the good news is 2022 is gonna probably be a record year. There's only so many Fridays and Saturdays, and artists are pretty smart about how they route their tours and how they look at the world, and find their right positioning. It kinda self-regulates itself. You're never gonna have a bunch of tours on the same weekend piled on. That just meant we have more inventory to spread into 2022, 2023, and we're talking 2024 now. You know, I would say we have a backlog that needs to still work through the system in 2022, 2023, which will be, you know, incredibly strong years.
We continue to kind of just get back to regular, you know, we've had over the years, double-digit growth in the live entertainment space ongoing. We project that to continue both on pricing and global volume as demand and supply continues to grow around the world.
Thank you for that. If, Michael, if I may just follow up on the prospective deal front. You know, I think when we last spoke, activity in terms of potential acquisitions was starting to ramp up again and become more active. Any update there that's worth sharing?
Yeah. I mean, if you follow my Twitter or what we're up to, we've been pretty active, and we're back, you know, with our backlog of 30, 40 things around the world we're looking at that can keep propelling our business and growing our scale. Good pipeline. We'll continue to be very aggressive at growing our global market share and then monetizing products on top of it.
Thank you very much. I appreciate it.
Our next question comes from the line of Ryan Sundby with William Blair. Please proceed with your question.
Hey, Michael. Hey, Joe. Thanks for taking my question. If you look at the 14 million net new keeping customers that Ticketmaster's added this year so far, what's been the primary drivers for winning that business? Are they looking for digital ticketing? Was there a change in their ticketing during COVID? With 2/3 of them being international, it sounded like are these exclusive ticketing partners? Any color there would be great.
Sure, Ryan. As you said, you know, 2/3 of them international, I think is indicative of, particularly in the international markets, just what a strong leadership position Ticketmaster has with a lot of the investments we've been making over the past five years. Digital ticketing, as you said, is overnight goes from being a nice feature to a critical part of it because you're moving away from contactless of any sort. You need a digital ticket, and our leadership there is a big differentiator. We've been investing for a long time. We're not trying to play catch up. And these tickets are a mix of where we have the full allocation in some markets. In other markets, we have a partial allocation. In aggregate, it's adding 14 million tickets to the portfolio.
Got it.
William, I would just add, I don't want to ever forget that Ticketmaster is incredibly great at what they do on a global basis. If you own a stadium, an arena, high volume ticket business with complex season owners and regular tickets, it's a complex business to do at scale. So a lot of our customers, sometimes we may lose a customer, they end up coming back. So one, I just want to remind you, we've been investing in this platform for the last few years. Our enterprise platform is a world-class platform. The U.S. ticket market is the most complicated market in the world. Reserved seats equal season seat is a complex model to manage at 10 A.M. on an on-sale with bots and all the things that pressure your system.
You know, when at the core, our enterprise platform is really good. When we're out competing for that offering, we end up just being ultimately winning the business because we are the best at it. We see that because we see the clients that may leave, but end up coming back because the functionality that we provide is superior to others. We're seeing this in the Barclays Center last week with a competitor trying to do a presale that broke, and that's the pretty basic stuff. I just remind people we are on a global basis the best at what we do. That's why clients pick us.
We happen to be global and opening up all of our technology to a global base is gonna be our great runway for the next while.
Got it. That makes a lot of sense. Just sequencing of this past quarter, it didn't sound like you called out a big impact from Delta here. Did you feel that at all? Did you see much of a rebound then, I guess, as you move past that, you know, further out?
Well, I think every month for us, we continue to see ongoing growth in the reopening. It'd be hard to separate out Delta specifically versus reopening in general. Everything that we saw was more fans going to more shows consistently, contrary to some of the press I've seen, very low no-show rates, low to low single digit increases in terms of no-shows as a result of the pandemic. It seems that the people that wanna go to the shows are going to the shows, and that's just continued to grow as a portion of the fan base out there.
That's great to hear. Thanks for the questions.
To Joe's point, I would just add, what we also noticed is the. It's all different genres and ages. This isn't just young kids are going to shows because they're not scared. The Eagles just had a wildly successful arena tour that's gonna finish up this week in Seattle. The Grateful Dead were out doing full stadiums. Harry Styles obviously doing indoors too just record business, as well as our amphitheater business. You know, we weren't sure going into the market, what segment or what age demo would react differently or if there would be a difference. We saw huge demand across the board, at all ages, all demos, all markets. So strong rebound back as we've seen with the early on sales going forward.
Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session, and this concludes today's conference. You may disconnect your lines at this time. Thank you all for your participation.