Live Nation is aware of reports that the DOJ Antitrust division might file a lawsuit seeking to potentially break up Live Nation and Ticketmaster. Discussions with senior DOJ leadership are about to begin, which is usually the final phase of an investigation.
Competitors and interest groups are urging the DOJ to sue Live Nation for a breakup.
The DOJ’s investigation focuses on specific business practices rather than the legality of the Live Nation Ticketmaster merger or the overall business structure. The investigation’s concerns mostly do not relate to the merger’s combination of ticketing and promotion.
Live Nation believes that a breakup would not be a legally permissible remedy, citing the lawful merger approved by the DOJ with divestitures and other remedies. The DOJ has stated that the merger was in the public interest.
Structural relief, such as divestiture, is deemed rare and legally applicable only when there’s a strong connection between corporate structure and the ability to engage in alleged unlawful conduct. Live Nation argues this connection is lacking in their case.
Live Nation is prepared to defend itself in court if necessary but remains hopeful for an amicable resolution with the DOJ.
Question and Answer
Relative Value of Ticketmaster within Live Nation
Question
How do you see the relative value of Ticketmaster inside Live Nation versus as a separate stand-alone company?
Answer
Live Nation operates as a decentralized organization with four distinct businesses: sponsorship, concerts, ticketing (Ticketmaster), and Venue Nation.
While these businesses are successful on their own, they also form a valuable portfolio within Live Nation.
Reconciliation of Deferred Revenue and Fan Demand
Question
Can you reconcile the exceeding of double-digit AOI growth expectations in the first quarter with the decline in deferred revenue?
Answer
Consumer demand for live events remains strong, with consistent sell-through and increased grosses for touring artists.
The shift from stadium shows to more arena and amphitheater shows results in a later sales cycle and lower deferred revenue, but contributes to higher fan profitability and concert AOI growth through margin expansion.
Festival Demand and Trends
Question
What observations can you share regarding festival demand and industry trends, particularly in light of recent reports of challenges in ticket sales for established events?
Answer
Live Nation’s festival ticket sales are up double digits year-over-year, with a strong start to the festival portfolio, driven by both ticket sales and sponsorship.
The company has observed a shift towards smaller, niche 1- or 2-day festivals with higher per-head spending and sponsorship value, as the large, multi-day festivals with unique headliners become more challenging to sustain.
Venue Strategy and Capital Deployment
Question
Can you discuss the criteria for determining when it’s best for Live Nation to execute venue projects independently versus partnering with third parties like Oak View Group?
Answer
Live Nation pursues an opportunistic approach to venue development, partnering with third parties when it makes sense, such as with sports team owners looking to expand their retail footprint.
The company is excited about its Venue Nation division and has a strong global pipeline of projects, with the flexibility to pursue partnerships or fully-owned projects based on the economics and developer relationships.
Sponsorship Revenue Growth and Outlook
Question
What are the drivers behind the strong international sponsorship revenue growth, and should we expect this trend to continue throughout the year?
Answer
The growth in international sponsorship is driven by festivals, particularly in South America and Asia, as well as a strong overall festival portfolio and a 20% year-over-year increase in sponsorship.
While Q1 and Q4 are expected to see the highest growth rates due to the traction in building the international business, sponsorship growth is expected to continue throughout the year.
Concert Segment Margin Outlook
Question
Can you elaborate on the factors that could influence the full-year concert segment margin, including the impact of foreign exchange, Q4 arena activity, and the strong stadium tour lineup for 2025?
Answer
Foreign exchange rates can have a material impact on margin growth, as seen in the Q1 results where constant currency growth was significantly higher than reported growth.
The level of Q4 arena activity is still being finalized and could impact margins, with a potential trade-off between margin expansion and AOI growth.
The strong lineup of stadium tours for 2025 may lead to increased marketing expenses and write-offs in Q4, affecting margin expansion.
Growth Outlook and Venue CapEx
Question
Can you provide insights into the growth outlook for the year and the implications of the higher CapEx outlook for venue opportunities?
Answer
The company remains positive and optimistic about delivering double-digit growth this year, driven by concerts AOI, sponsorship, and Ticketmaster (with lower growth due to the absence of high-ticket-price stadium shows).
The higher CapEx outlook reflects the strong performance of new venue openings and the increasing volume of opportunities, with developers seeking partnerships with Live Nation due to its effective operations and track record.
Venue Build-Out and Long-Term Growth
Question
If Live Nation didn’t build any large arenas outside the United States, could it still achieve its long-term goal of compounding AOI at a double-digit rate for many years to come? How are returns on capital evaluated for these venues?
Answer
Venue build-out is a key component of Live Nation’s long-term growth plan and its ability to achieve continued double-digit AOI growth.
Returns on capital for venues are evaluated using standard metrics, such as cash-on-cash returns, considering the cash outlay and cash generated by the business.
Disclosures and Segments
Question
Are there plans to disclose the venue build-out projects as a separate segment, and can you provide more information on the FASB request regarding expense disclosures?
Answer
At this point, Live Nation is not considering the venue build-out projects as separate segments, as concerts and venues are still under the same organizational structure.
The company is reviewing any new accounting regulations, including the FASB request, and will assess the impact and make any necessary revisions to comply.
Concert Attendance and Regional Growth
Question
Can you explain the larger step-up in North American concert attendance compared to international attendance in the first quarter, and how do you anticipate growth in each region for the year?
Answer
The difference in attendance is primarily due to the absence of international stadium shows, particularly in the Southern Hemisphere, compared to the previous year.
While North America may see disproportionate growth this year due to the venue mix, the overall trend is towards increasing international share, driven by growth in amphitheaters and international venues.
Path to Growing Concert Attendance per Capita and Ticketing Platform Upgrades
Question
What strategies will Live Nation employ to grow concert attendance per capita, particularly outside the U.S.? And what are the plans for upgrading ticketing platforms globally, and how are the costs allocated between CapEx and OpEx?
Answer
Live Nation will continue its hyper-local focus in North America to drive penetration and build its fan base.
The company will also introduce more diverse artists and genres, such as K-pop, Latin, and Afrobeats, to attract a wider audience and further increase penetration.
In international markets, growth in attendance per capita will be driven by expanding into new cities and regions through venue development, as well as implementing hyper-local strategies in more mature markets like the U.K.
Live Nation has made significant progress in upgrading its ticketing platform and considers it the leading enterprise software system in the world.
The company will continue to invest in developing new products for both enterprise customers and the marketplace, with a focus on maintaining a stable investment level similar to the past few years.
