Live Nation Entertainment Inc (LYV) 2007 Q1 法說會逐字稿

Good afternoon. My name is Anthony, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Live Nation first quarter 2007 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question and answer period. (OPERATOR INSTRUCTIONS)

Before we begin, Live Nation has asked me to remind that you this afternoon's call will contain certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ. Please refer to Live Nation's SEC filing for a description of risks and uncertainties that could impact the actual results. It is now my pleasure to turn the floor over to Alan Ridgeway, Chief Financial Officer. Sir, you may begin your conference.

Thank you. And good afternoon, everyone. Welcome to our first quarter 007 conference call. I'll start by reviewing the quarter and then I'll turn over to Michael to provide his comments. To start with, let me point out that we'll refer to nonGAAP measures in this call. And in accordance with SEC Regulation G, we've provided a full reconciliation as to the most comparable GAAP measures in the earnings release. This release can also be found on LiveNation.com under the about us section.

For the first quarter of 2007, our revenues were $584 million, up $68 million or 13% as compared to 2006. Adjusted EBITDA declined by $12 million to $4 million. $85 million of this increase in revenue came from our acquisitions over the last 12 months. Due to the seasonality associated with these businesses, overall, this additional revenue resulted in minimal additional EBITDA in the quarter. The main cause of the decline in EBITDA in the first quarter of 2007 was the result of exceptionally strong tours in the first quarter 2006 led by the likes of: U2, Coldplay, Billy Joel, Aerosmith, and Depeche Mode versus the first quarter of 2007 which featured tours by: The Who, Josh Grobin, Bob Seger and Dolly Parton. As we said previously our business is very seasonal with most of our income coming quarter two and quarter three due to the festivals in Europe and the amphitheater season in North America. The quieter quarters of quarter one and quarter four are also very much subject to the timing of arena tours by major artists. In addition it should be remembered -- it should be remembered that the concept is cyclical, that the cycle is generally one to three years as major artists who go out in any given year typically do not tour again for one or two years. As you know, 2006 was a record year for the concert industry with the Rolling Stones, Madonna, U2 and Barbra Streisand all touring.

So far in 2007, we've announced global tours for The Police and The Who, European tours for the Rolling Stones and Barbra Streisand and a North American tour for Genesis. As I just mentioned, 2007 was impacted by our acquisition and divestiture strategy. Since the beginning of 2006, we've completed a number of acquisitions and divestitures including the acquisitions of: CPI, Musictoday, House of Blues, Trunk, Gamerco in Spain, Jackie Lombard in France, and the divestitures of our U.K. sports representation business Donington Racetrack in the U.K. and our remaining interest in Phantom - The Vegas Spectacular, as well as our amphitheater in Nashville. Assuming that all of these transactions are completed on January 1, 2006, we estimate that our adjusted EBITDA for the quarter of -- first quarter of 2007 would have been $7.1 million as compared to $22.9 million for the first quarter of 2006. A decline of $15.8 million.

The main reason for the larger decline is the impact of the CPI acquisition which had the Rolling Stones trip tour during the first quarter 2006. Offset by an improvement in results for House of Blues as we realized cost savings from the head count reduction we implemented in December 2006. Also the elimination of the operating loss in our Phantom production. The last 12 months ended March 31, 2007, we estimate our combined adjusted EBITDA would have been $165.2 million. These results are impacted by the timing of our global tours which is substantially better in the first quarter of 2006 than the first quarter of 2007. In addition, the concert cycle is generated longer than a 12-month period as I just talked about.

Looking at it -- looking at it from an organic perspective, assuming none of the acquisitions, but all of our divestitures are just listed completed as of January 1, 2006, we estimate that our adjusted EBITDA for the first quarter of 2007 would have been $6.6 million as compared to $18.4 million for the first quarter of 2006, a decline of $11.9 million. Again, the decline is primarily due to North American music and global artist events in the first quarter of 2007 that did not perform as strongly as in 2006. As we mentioned in our last earnings call and as you have seen by now in our earnings release, we have reorganized our business units and segment reporting around geography and business line. The new reporting segments now include North American music, international music and global artists, global digital and global theater. Previously, we reported our segments by profit driver, which included events, music sponsorship and digital distribution. These profit drivers have now consolidated within each of the new reporting segments. We believe these new segments will provide you with a better picture of the overall profitability of each of our different business lines.

I'll now walk you through each of the segments. This will take a bit longer than usual so I can provide you an overview as to what is included in each and how the first quarter performance compared to last year. The details of all these changes in our segments also set out in detail in our earnings release in the 10Q. You'll also see that the Q includes -- the earnings release includes all four quarters of 2006 restated under the new segments. First, North American music. Our North American music segment includes the promotion of our live music show in our own door operated venues and rented third party venues. The financial results for North American music segment include all concert and venue income streams and expenses in which Live Nation participates including one ticket sales and show-related -- show-related costs that previously recorded in events, two, food and beverage sponsorship, merchandise, rental and other venue (inaudible) income and venue related costs such as rent, venue personnel and a sponsorship sales force that were previously recorded in venues and sponsorship. And three, ticket rebates that were previously recorded in digital distribution. Because of the competitive nature of the talent in the United States and our segment revenue presence our margins in North America tend to be lower than the rest of the world.

During the quarter, the number of events in North American music increased by 20%. Attendance increased by 7% and revenue increased by $36 million to $243 million or a 17% increase. The event attendance revenue growth were all primarily due to the acquisition of House of Blues which is not included in our results during the first quarter during 2006 and which generated a total of $58 million revenue during the quarter. The increase, however, was offset by a decrease in revenue from arena tours, primarily due to us promoting major tours by artists such as Coldplay, Aerosmith and Billy Joel during the first quarter of 2006, which were not matched in 2007. The reason that the revenue exceeds the attendance increase, is due to restaurant revenues at House of Blues for which we did not record attendance. Our segment adjusted EBITDA decreased by $3 million by a loss of $19 million primarily due to fewer arena shows during the first quarter 2007 versus the first quarter of 2006. Also some increased legal expenses related in ongoing cases and incremental fixed cost -- fixed costs related to the commencement of our lease on the Dodge Theatre in Phoenix. This decline was offset by an increase in adjusted EBITDA due to the acquisition of House of Blues, which generated $6 million with adjusted EBITDA during the quarter. I'm pleased to say that excluding SG&A and House of Blues, our direct operational contribution margin remained consistent with the prior year, at approximately 16%. And with the inclusion of House of Blues increased approximately 22%.

Moving on to international music. Our international music segment operates in 17 countries in Europe and the far east. Includes results from venues mainly in the United Kingdom and concerts in third-party venues and festivals. For the most part, the international music segment's financial results match our previous segments in much the same way that North America does. The main difference is our international music business is primarily a promotion business and far less dependent on venues than as our North American business. In addition, the international business tends to be less competitive and as such offers higher margins. Similar to North America, international music's highest quarters are typical the second and third quarters when our festival is a large open air concerts occur. During the quarter, the number of events attendance each increased by 21% and revenue increased by $17 million to $105 million or a 19% increase over the same period for the prior year. The increase in events attendance and revenues primarily due to our U.K. operations proven by strong (inaudible) activity during the first quarter for artists such as Dolly Parton and successful performances of Mama Mia at our arena in Ireland.

We also had incremental revenue of $6.5 million related to effects of acquisitions in France and Spain and the addition to the Wembley Arena operating agreement in the U.K. which were not included in the 2006 results. The increases were partially offset by a decrease in attendance for our other European operations largely driven by a successful Depeche Mode tour in 2006 and fee-driven events that we organized prior to the winter Olympics in Italy in 2006. Our segment adjusted EBITDA decreased by $3.7 million to $0.6 million primarily due to reduction in attendance in some of our European markets due to a strong arena -- due to strong arena tours in 2006. Losses in the first quarter of 2007 from our recent acquisitions from Spain and France, due to the timing of events in these markets and also a $9.9 million write-down of a theatrical investment in -- in Spain. This was the remaining piece of the theatrical investment made in Spain in early 2005. As with North American music, excluding the write-off in Spain, and the impact of foreign exchange movements, our direct operating or contribution margin remains stable at approximately 33%.

Next global artists. Our global artists segment principally involves the production and the promotion of global music tours, and superstar artists such as the Rolling Stones, U2, Madonna, Barbra Streisand and The Who. As well as providing various services to artists such as fan -- artist fan clubs and artist merchandising and our new division, Artist Nation, which Michael will talk about in detail later. The global touring artists we work with in this segment typical form partnerships with us where we provide them an upfront guarantee for the tour, but we -- but we receive a percentage of all revenues associated with the tour or the pot. The pot revenues in addition to touring revenues can include certain ancillary revenue streams depending on the artist such as fan club or tour website rights, VIP ticketing, tour merchandising and tour DVDs. As such, we are incentivized to maximize tour total revenues to the pot. Financial results from global tours were previously recorded in events. Financial results from Artist Nation were previously recorded in events and digital distribution.

During the quarter, revenues decreased by $7 million to $23 million. 24% decrease over the same period of the prior year. And segment adjusted EBITDA decreased by $6 million to a loss of $5 million. These results were impacted primarily due to decreases in our global touring revenue as during the first quarter of 2006, U2 was touring in South America while during the first quarter of 2007, there are fewer number of smaller capacity shows for The Who. The decrease in revenues was offset in part by the inclusion of the results of CPI Trunk and Musictoday which were required during the second and third quarters of 2006 and together contributed $21 million -- $21 million of revenue. However, these businesses lost $2.6 million of segment adjusted EBITDA during the first quarter 2000 -- 2007 due to the seasonality of their business.

Next, global digital. Our global digital segment is involved in managing our in-house ticketing operations and online and wireless distribution activities including the development of our website. This segment derives the majority of its revenues from service charges and on tickets sold through our in-house centralized ticketing operations. The tickets sold by this segment are the tickets that we're allowed to sell directly to customers in North America under our agreements with outside ticketing agencies. For these tickets, global digital pays our North American music and global theater segments a ticket rebate equivalent to the amount they would have received had the ticket been sold by an outside ticketing agency. The remainder of the service charge is retained by global digital. During the quarter, revenue for digital increased 0.9 -- $0.5 million to $1.3 million or a 71% increase. While adjusted EBITDA remained flat at a loss of $1.8 million. The increase in revenue was primarily due to increased sponsorship revenues associated with our in-house ticketing operations. Adjusted EBITDA remained flat as the increase in revenues was offset by an increase in salary for new staff and consultants related to our website and internet management.

Next global theater. Our global theater segment principally involves the presentation and production of touring and other theatrical performances, owning or operating theatrical venues and selling sponsorships and advertising. This segment includes results from our North America presenting business, Broadway Across America and North American theatrical venues which we announced in our previous earnings call they are undertaking a process (inaudible). And also our United Kingdom theatrical producing and presenting business and theatrical venues are included in this segment. Similar to our North American music division, the global theater financial results were previously split among our various prized segments with a presenting business included in events, the management and operations of the theatrical venues and venues and sponsorship, and the ticket service charge or rebates in digital distribution. While our global theater segment operates year round, we typically experience higher revenues during the first, second and fourth as the theater touring season typically runs from September to April. During the quarter, the number of events increased by 24%, attendance increased by 25% and revenue increase by $27 million to $109 million or 33% primarily due to our production of Phantom - The Vegas Spectacular, which opened in Las Vegas during the third quarter of 2006. In addition, the number of events for our North American and international presenting markets increased by 473 events.

Our U.K. theaters experienced increased merchandise and concession revenues due to an increase in the number of events and related attendance driven by shows such as Wicked and The Producers. Our adjusted EBITDA in theater declined by $900,000 to $10 million or an 8.5% decrease over the prior year. As our production of Phantom generated a loss on adjusted EBITDA which offset the benefit of any improvement in the rest of global theater. I'm pleased to say that we were successful in divesting our remaining stake in Phantom to our partner effective March 31, 2007. The North American theatrical sale process continues. We currently expect that we should have something to report to you on the progress of this sale on our next quarterly earnings call.

Finally, our other operations principally include our motor sports business and a few remaining portions of our sports representation business. The majority of which were divested in 2006. The results of operations for our motor sports business was previously included in events and our sports representation business was included in other. The first quarter represents the primary season for our motor sports business. During the quarter, revenues together decreased by $5.4 million to $105 million, a 5% decrease which was primarily due to the sale of portions of our sports representation business assets and decline in revenue related to DVD/CD production. Partially offsetting these declines was an increase in revenues related to our specialized motor sports business, due to an increase in ticket prices and attendance. Adjusted EBITDA increased by $3 million to $28 million, a 13% increase due primarily to an improvement in our motor sports business which had another successful season to even surpassed the record results of last year.

Finally, turning to some other financial metrics. Capital expenditures were $13.7 million for the quarter. Of this amount, $6.9 million was associated with maintenance expenditures. And the remaining $6.7 million was from other revenue generating projects at Live Nation. The main ones being the -- the main one being the completion of HOB Dallas that opens this weekend. Free cash flow which we defined as adjusted EBITDA less maintenance, CapEx, plus net interest expense, cash taxes and less the cash flows to our minority interest partners plus cash flows to our nonconsolidated affiliates was $18.8 million and that was $18.8 million outflow, excluding a $20.9 million investment in the Academy of Music Group. This compared to a $6 million outflow for the same period in the prior year. As of March 31st, 2007, our cash balance was $395 million, we estimate our precash balance, the cash that we estimate is not attributable to shows which have not yet -- not yet played, at $27 million. Our debt and preferred stock totaled $705 million. I'll now turn the call over to Michael to provide his comments.

Thank you, Alan. Thank you for joining us, everyone. We are one year into our three-year transformation to become a vertically integrated live music company. We have demonstrated quarter after quarter our ability to execute systematically on our fixed bill expanse strategy to get us to that goal. Year one was about stabilizing our core music business and refocusing our mission. Now with the defined music mission, year two is about improving the core, expanding our core music offering and growing our core business substantially. Year three will see our growth being propelled by the synergy of our core live online and artist nation business. The concert business remains strong. Live music remains one of the few true unsubstitutable entertainment experiences. The intersection of the increase in importance of the live music business to artists in general and the build up of our core live music business and expansion of our artists' offerings, we believe, will create substantial future opportunity at that intersection.

We learned a lot during the 2006 summer concert season and believe that we have a team and plan in place to improve our execution this year. The level of focus on our operations have significantly increased and we are finding there is substantial room for improvement. On top of all that we believe that we have substantial incremental revenue opportunities from pursuing new initiatives for artists and fan services including our ticketing opportunities in 2009. To achieve our objectives, we'll continue to be focused on our strategy that we have set forth on fixed build and expand themes. I'll take you through our fixed strategies and what we will do this year. Initiatives to build around our core business and improve it leading up to the summer season this year, we took a hard look at our business and have assessed that we know what we can do better and put our action plan into place to improve and build on our core operations.

We believe through intense focus, something that this business has not had consistently over long period of times there is significant opportunity to change the way we do business and improve our core business profitability. The key to this decision is our new initiative around the challenge -- the competitively challenged assets of North American amphitheaters. As you will see in our new financial segments, our North American music business made $34 million of adjusted EBITDA in 2006. This business is dominated by our amphitheater division which generated around $44 million of adjusted EBITDA before taking into consideration our significant North American fixed costs that are not directly attributed to the venues. So rightfully, our attention is focused on this segment. If we can increase our profitability here, we'll help our entire business.

As those of you who have been with us on the calls before, the key costs driving the amphitheaters is talent costs. As such, we have moved into our busy season, the summer concert season. We have implemented a number of new strategies for buying shows for the amps. Last year we undertook a strategy to increase the number of shows in our amphitheater business 200 and we were able to achieve that goal. While we have the benefit of additional attendees, the incremental costs of the talent ate away at our profits. This summer, we are focused on executing a lower number of shows, we are targeting around 850 versus the 950 last year. We have a strict set of guidelines for booking this summer, specifically we are seeking to reduce or eliminate events with less than 7,500 attendees, which have historically been less or unprofitable for us.

On the food and beverage side, we hope to capitalize on the momentum of last year and again improve our F&B per head. In 2006, we achieved $11.62 per cap in our amps. We are aiming to increase that number by more than 5% this year. We plan to achieve this objective by reducing the number of product offerings at our amphitheaters from over 200, 250, with the focus on best selling highest profit items and we have implemented whole dollar prices so speed fans through the concession lines. In addition, we are expanding our successful hocking initiative from last summer and are reducing -- are eliminating low margin third party local food and beverage vendors. Outside of the amps we've begun to execute on a rebranding initiative for some of our venues to capitalize on the strength of the Fillmore brand. We rebranded venues in New York and Philadelphia to be Fillmores. We believe that brand are important to both the artist and fan, much like our House of Blues brand, and will drive long-term value for our portfolio. Internationally we are very focused also. While the business is a higher margin and better business for us, we still have areas to work on. This year, we are focused on improving our relatively new European operations that continue to benefit from our world-leading U.K. and European festival business as well as integrating our new France and Spain acquisitions to maximize returns.

As far as expanding our business, we've many initiatives in place. Today we announced the creation of a new division named Artist Nation. This division will consolidate all of our artist ancillary businesses into a cohesive unit that will work as one synergistic unit to provide artists with a one-stop platform to increase its artist to fan product offerings and maximize revenue. The division will include: our interest in Musictoday, a world leader in connecting artists directly to the fans through online fan clubs, artist e-commerce and fulfillment, VIP packaging and artist fan club and secondary market ticketing. Our interest in Ultrastar which provides online content development and marketing services for top tiers and marketing brands. Our company Trunk, authentic music-inspired lifestyle merchandise company and Tour Design, which is our leading tour marketing creative service company servicing office will comprise the beginning of this new division. These businesses on a pro forma basis in 2006 generate more than $50 million of revenue and are at various stages of profitability. We expect that our artist's division will ultimately be a growth and margin driver for us.

Artist Nation will be a division of the global artist segment. Also included in the global artist segment is global touring which provides premium tour, promotion and production services to our superstar artists such as the Rolling Stones, Madonna, The Police, U2 and others. As Alan mentioned, this division it predicated upon partner type arrangements with artists and working together with the artist to maximize overall revenue streams while providing Live Nation with its fair share of the profits. One of the highlights of the global touring segment is our controlling interest in CPI. As you know, CPI is run by Michael Cohl, creator of the global touring and model, and a member of our board of directors. To draw a comparison, Michael Cohl is to the music business as Warren Buffett is to the investment community. Of the top 50 North American grossing tours of all time, Michael Cohl has promoted 11 of them. In 2006 and '07, CPI promoted the Rolling Stones, Barbra Streisand, The Who and the Genesis tours. But what is even more impressive is that Michael Cohl has been successful in extending his relationship with his artists to not only include the tour, but all of the ancillary products associated with the artists and their tours. It is this exact model that we plan to expand through our artist nation division. Our other division that we are expecting great results from as we title fan nation is the addition of our artist nation business is our -- different as a business model, is our fans experience generated through our new website livenation.com. We are very excited about the progress we've made in this regard. Our websites year over year have been increasing in the number of unique visitors by over 30%. And this improvement was completed without spending $1 of advertising or marketing specifically related to our site.

We expect our web traffic to grow substantially as we are building our presence as the leading content search engine to provide exclusive products for fans who come to our site. Yesterday we announced we launched a number of new products on our website which we expect to drive traffic to our site and expand our revenues. These products were previously sold through our premium seats sales, sponsorship group who sold those products as a package. We have now unbundled them and are selling them to a great -- to the public at livenation.com. We are offering registered members exclusive access to premium seats at all our amphitheaters for a premium price, preferred parking passes for spots which generally close to the venue and VIP club passes which provide fans with special access to premium bar and lounge areas at select venues. Since we launched these products just three weeks ago, we have already sold over 5,000 units for $667,000 of gross sales. We estimate that we have around 150,000 units to sell over the course of the summer. This represents only partial inventory. If the initiative works, we can significantly increase the project next year. This initiative will also have cost benefits across our businesses as we can move more of our sales online.

Our sponsors, too, are realizing our value proposition. Yesterday we announced our partnership with Nokia which provides Nokia ticket rush members with access to Live Nation presales and promotions regarding our events. This partnership extends into North American the successful relationship we have with Nokia in the U.K. We already generate over $20 million of annual income from sponsorships with mobile and telecom companies. We believe our value proposition in the demographics we can target will line up very nicely in this market.

Our final expansion is around our global platform. In addition to these core organic expansion initiatives, we continue to pursue our aggressive acquisition strategy to quickly build global platform of venues and services we acquire. In March, we announced we and our partner acquired the Academy Music Group which together gives a 56% controlling stake. We're very excited about this transaction much the same way we're excited about the House of Blues. The AMG brand is one of the strongest live music brands in the U.K. and the company has substantial growth potential from the rollout of additional venues throughout the U.K. and synergies from cost savings, increased sponsorship and greater uses of AMG venues by Live Nation. In addition, in the U.K. the ticketing rights are generally shared between the venue and the promotor, so this transaction brings in another 3 million in annual attendees into the Live Nation network. The transaction value at AMG is around $114 million and AMG generated $13 million of adjusted EBITDA in 2006. But for the forward 12 months ending June 2008, we project that AMG will generate $16 million of adjusted EBITDA which reflects a multiple of just over 7. In April, we announced that we had entered in a long-term lease agreement for the world famous Hollywood Palladium. This venue is a 4,000-seat general admission capacity venue which filled the gap in our Los Angeles area portfolio and is consistent with our strategy to expand our mid-sized venue portfolio in North America. We plan to spend less than $10 million renovating the venue and anticipate that we'll achieve greater than 15% after-tax return on our investment over the life of the lease.

And finally, as Alan has alluded to, we continue to divest noncore. We have funded most of these asset expansions in part through the divestiture of our noncore assets. So far this year we have sold assets which lost $500,000 of adjusted EBITDA in 2006 and had $6.2 million of capital expenditures associated with them for $38 million of net proceeds. The assets we sold include Donington Park, a racetrack in the U.K., a remaining 50% in Phantom, our amphitheaters -- amphitheater in Nashville, Tennessee, which we sold to a real estate developer, not as a venue, and our office building in San Francisco. These sales are clearly accretive to our business and shareholders. We continue to work on the sales of our North American theatrical business and several other venues. As Alan mentioned, we expect to have more on our next earnings call. Going forward you will continue to see us execute on our three-prong strategy of fixed build and expand. We believe very strongly that Live Nation's opportunity's an exciting one at a time the music business and ticketing industries where a lot of change and disruption is happening. We have a relationship with both the artist and the fan, that we believe ideally positions us to capitalize on these opportunities and create significant shareholder value. When we took over 16 months ago, we inherited a broken business model of 11 fragmented divisions that produced $137 million in EBITDA. In 2006, we moved to stabilize and slightly grow that EBITDA. And today in 2007, we stand with three interlinked core divisions/platforms that feed off each other. Our live concert venue platform, our online platform and our artist nation platform. We are very confident these three platforms will deliver great opportunities and continued EBITDA (inaudible). Now we'll open it up for questions.

Thank you. (OPERATOR INSTRUCTIONS) We'll pause for just a moment to compile the Q&A roster. Thank you. Our first question is coming from Mark Weinkes of Goldman Sachs.

Thank you. Good afternoon. First, just a follow up on the contribution margins side. Was the North American music contribution margin up year-over-year?

North American music was up year-over-year if you include House of Blues.

-- including. Okay, but flat at 16?

On a like for like basis.

Do you expect the initiatives you are undertaking now with respect to the whole fix strategy will cause contribution margins to be higher year-over-year for '07?

On the fixed strategy, Mark?

Yes, just overall, I guess, for the North American music, would you expect margins to improve as the year goes on a year over year basis?

I would say certainly a lot of the things that we're doing within the North American amphitheater business are addressing our variable costs within our business so yes, that should result in an increase in contribution. We're always focused on EBITDA growth as opposed to contribution growth. And like we've mentioned on previous calls, yet our margins are always dependent as well on the type of tours out there and ticket prices on those tours compares to artist's fees.

Right. So I guess longer term then, let's say the next 10 years look like the last 10 years. And industry revenue's up low doubles or even high single digits. Why -- what might stop EBITDA from at least backing the revenue growth given where the margins are now?

Well, I think the good news is the last 10 years of revenue growth Clear Channel entertainment's business model didn't capture that growth as you know.

Right.

So when we took over at 137, we managed to start last year and this year significant EBITDA growth. The only piece of the equation that's always limits your EBITDA, your contribution margin is the competition and the limited amount of shows available. So as you guys have learned over the last year, sometimes the artist has been fairly successful at increasing its piece of the pie as the ticket prices have increased, which is why our business model is always -- is based around maximizing your scalable inventory, but building businesses around that core live show to maximize your combined EBITDA.

Right. And just one quick follow up. You noted the margins in the U.S. are lower because of competitive reasons versus the rest of the world. But the 31% expected margins on the AMG property is a little startling in a good way. Seems extraordinarily stronger than the 6% to 10% venue margins that have been noted here in the U.S. Just wondering if you can comment on the drivers of that variance?

Well the U.K. is something Alan and I are dear about because we were there and built it. It's an example of a case study that -- what we're trying to do in our North American model. When you have a very diverse and strong business model like London, you can maximize your contribution, meaning we have a very diversified portfolio of we've got a great festival business, we have a great market share. We have a great sponsorship division, we have a venue portfolio. When you can put all of those things together, you can deliver a one plus one equals three. As I referred to in North America our challenge has been, we had a very fragmented base in North American of 41 cities with one revenue driver and we're doing our best this year in the last year to kind of focus on the top 15 markets and build a similar London or Boston case study, where in that one market you have a good market share, small, medium and large venues, as well as a sponsorship and festival overlay. When you have that ability like London where you're not dependent on the seller to sell you just one band at one venue size, your market share works in your favor to distribute that throughout all your portfolio.

Understood. Thank you very much.

Thank you. Our next question is coming from David Kestenbaum from Morgan Joseph.

Okay. Thanks. This premier seating and packaging that you -- seems to be promoting it pretty heavily on your website, does the economics change at all with the artists and how big an offering you think that can be long term? Sorry.

We think it's a small, but very significantly big move in our strategy. If you look at our mission last year of containing our core in terms of structure and building on it, but our big initiative last year was launching this whole new division, we currently and historically have a large sales staff that sells all those tickets locally door by door. And we knew that if we brought them online, we would be able to save some cost savings on how we executed historically and open them up to a much wider eyeball strategy. So one that's the first move.

The second move that makes I believe our long-term proposition compelling and superior to all of the others is this great combination that we've always said. When you're promoting the show with the artists and have that deep relationship and you're also in charge of help selling some of the tickets, you can combine those two economics together to make the pie bigger for us. So we're able to offer the artist a healthy percentage of the premium seat as part of our overall relationship with him on that night. So it starts to achieve our dream that says, we can make you more money than anybody else because we have other product lines and offerings to make the pot bigger than anybody. And when the pot's bigger, we get a bigger share.

Okay. Then on AMG --

Sorry. So just to finish that to give you that -- to make it really simple for you, if you take 200 seats a day that are going on StubHub, the artist isn't participating at all. If 200 seats are being sold on our website as a premium seat to our customer and are getting a 76% premium, the artist is participating and motivated to help us excel that program.

Okay. And then on AMG, just to be clear, you were forced to sell two venues, right, because of regulatory purposes? And then are there any other opportunities internationally like the AMG opportunity and what countries are you targeting?

We continue to look. We think there's great opportunity still internationally in either the market where's we already have a strong footprint, Holland and Germany -- sorry, Holland, Belgium and Italy and now Spain where we have a high market share and a diverse portfolio. So we'll -- those are a bit on bolt on strategies so we'll find and look for opportunities there. And we still have the top 10 countries in the world, we still have Australia and Japan and Germany and some other markets that we don't have a presence in yet that represent a very lucrative opportunity for us. So I think you'll see us continually look to expand our international presence and network.

Okay, and then given all of the different transactions, when's your current CapEx guidance for the year?

You'll see in the 10Q there, our maintenance CapEx for the year we still expect to be pretty much in line with last year at around about $50 million a year.

Okay. And then growth, did you give guidance on that or no?

No. Depends on the opportunities that arise over the course of the year in terms of new venues.

Okay. Have you been seeing any effects from the commission change? I know you change the way you pay your people who book your shows. Has there been any positive effects that you've see yet some?

We'll tell you on the next earnings call. We hope so.

Okay. Thanks.

Just to answer your first question about the two venues we sold in London, that was enforced by the competition commission as part of the deal.

Thank you. Our next question is coming from David Joyce of Miller Tabak.

Thank you. A couple related questions. In the not too distant past, you talked about different pricing strategies maybe adding more tiers to see if you can increase the overall attendance or occupancy for your venue. I was just wondering if you had any updates on that progress. And related to that, an interesting tour model this summer with the free Ozzfest tour where the artists don't get paid, but they get much more of their own ancillary revenue, fewer sponsors, but maybe they're contributing more. Could you talk about that strategy, or would you be testing that further? Do you have any data points on that yet?

Yes, thanks, David. Last year, we were -- as we were in a hurry up and run offense in our first year, we initiated some price promotion centralized strategies. And this summer, we have an aggressive department dedicated to our price promotion strategies whether their four packs which worked very well last year, whether a guest program where it's a buy one get a second at a discount or a four pack, buy three, buy four get a discount, or an upgrade grasshopper program where you buy a lawn seat and upgrade to a reserve seat. Those produce incredible results on a very limited test last year and this year we are very aggressive on using our 20 million plus people in our database of concert goers and targeting them with those price promotions to drive attendance. Then the big piece for us is now we are getting a bit more aggressive on the online business of the premium seats and testing the higher end tickets and realizing some of those price point opportunities also. So we feel good that we're expanding our portfolio of product offerings. Even simple -- something as simple as taking our parking and turning it into a separate product and marketing that online to our concert goers is huge value to them or our VIP passes. So hopefully in our earnings call next time we'll be able to provide you some data points on what those programs produced in interprets of attendance.

And free -- free fest or Ozzfest, it's is a great opportunity test for us. It was, I think, a great example where there was alignment between the artist and the promoter, us, on how do we get as many people onto the venue as possible, because when that happens, we all have a chance to maximize our revenue and our reach. So we decided with Sharon Osbourne to try something really, really different and hopefully we're going to fill those venues this summer and all walk away with our objectives met of revenue and in their case, a massive audience getting to sample and hear the great -- great bands present. So we're excited about that one, because it's a real collaboration with the artist where we did not start the conversation by how much are we going to pay. It started with how we're going to get 20,000 people into our venues. So, we'll, again, have the update for you in the next earnings call, but we're excited about it.

Thank you.

Thank you. Thank you. Our next question is coming from John Klim of Credit Suisse.

Afternoon. Ticketmaster's revenue in Q1 increased 26%. The company attributed a significant portion of this growth to the concert business. Does that give you any comfort around the summer concert season? And then secondly, a sort of a bigger or longer term question. Realize that your business can be seasonal and cyclical, but when we think about the business on a long-term basis how should we be thinking about the growth rate on the top line? And then in terms of EBITDA? Thank you.

The -- I'll leave the second one to Alan. The first one you know we lag behind how we report revenue, so I think it's safe to say that Ticketmaster revenue would indicate that the concert business is alive and strong and doing well. As you probably know if you've listened to us for six months, in our business, revenue doesn't always translate to profit. So we're very confident that we are running a much better business this year and are going to extract a higher -- a higher profit from our existing show count that we have baked in this year. Regardless of exactly how the show count ends up, I can confidently say that we are going to run amphitheaters on much more strict and profitable basis this year and be able to deliver our plan as we're tracking on right now. As for as guidance going forward, Alan we've --

John, as you know, we haven't been providing guidance to date. Because our business is going through so many changes at the moment with things that we're buying and selling. I think overall certainly there's no sign that there's a slow down in growth in ticket prices. So I think you'll see our revenues growing as ticket price increase. As you know, a lot of that ends up going out to the artist, so that doesn't tend to fall to the bottom line. Clearly, initiatives that Mike has talked about early on in the call, in terms of improving operational performance should all lead towards improving the margins and our bottom line EBITDA over the medium term.

Okay. Thank you.

Thank you. Our next question is a follow up from Mark Wienkes of Goldman Sachs.

Thanks. Just wondering, some of the artists, like Widespread Panic have -- you've limited tickets to two per person and made the fan pick up the tickets on the day with a photo ID on the day of the show. Could you just talk to some of the techniques that you are seeing across the industry or at Live Nation specifically with respect to sort of limiting the amount of profit that ticket brokers are sort of taking from the artist and from you guys?

Yes, and it's definitely a hot topic. Artists are able to log on to those sites, as well as anyone and see that they are not participating. So I think that's great for us, because they consider us their partner in helping solve that equation. So I think there's -- there is various techniques, I mean in the U.K. and Belgium, we've been working with the mobile platform on a wireless ticket, show up at the venue and swipe your phone at the entry and walk in and use your phone text message as your ticket. So I think that's a little advanced right here. But one of the ways the consumers are interacting.

I think the real solution is the artist is going to look for the partner that can help participate in that secondary market. It's not a -- it's not a bad thing. It's just something that historic promoter model has not been a participant in. And now that it is a mainstream business that Ticketmaster is doing a good job of attacking, StubHub, etc., I think the artist will find and look for the partner that can help solve his solution of participating in those premium seats. And our premium offering online for our registered users is one small step on how we think we can help become a better partner with the artist and letting him participate in that revenue.

Do you have more tickets available for sale this year versus what you sold via the sponsors last year? Any tickets via the website, or are you just allocated -- shift in allocation?

Exactly. We just allocated. We did two things. We typically had sold those as a bundle, a premium seat was a parking pass, all access and a ticket. So we haven't debundled them. So we've kind of tripled our inventory off a historic one-product offering. But from pure allocation of tickets, it's just been allocated from our premium seat division online as our first initial test to see can the Internet be a more effective sales force than historic model?

Right. And then you mentioned ticket exchange through Ticketmaster's exchange program. You think you're limited strategically at all in your ability to help the artists in maximizing the revenue via an auction or something until you have a chance to renegotiate or terminate that deal?

Well, right at it, Mark.

Sorry.

I -- listen, we -- there is a lot of moving parts in the business and we have been using Ticketmaster. They have an auction program on the up-front part and been very successful at that on The Police tours and others. That's a fairly common -- common move right now for most artists and Ticketmaster has done a great job of championing that. We have The Police and some other dates on the exchange system working that, also. So, they have a fairly full suite of services right now that we are participating in, and the future will hold on does that model work for our holistic needs to service artists on what we want to get done?

Did you notice that -- sorry, last one, I promise. The difference I saw on tickets available via auction for The Police at Wrigley Field via your website that was powered by eBay technology. I guess what's -- did you notice a difference in the performance or are the economics better or -- I guess whatever you can comment about that transaction relative to the ticket exchange experience.

Yes. We have -- if it was -- if Ticketmaster was not the contractual ticket seller for the building, the artist still wanted the solution to selling tickets, so we had to find ways to help deliver the artists' needs. And we did it on our site and licensed a software to help get that done. And I know the band's very -- very happy about both the Ticketmaster and the Live Nation generated auctions. It's captured a lot of revenue that would have elsewhere been in someone else's hands.

Okay. Thanks. Thanks, again.

Thank you. At this time, I'd like to turn the floor back over to management for closing remarks.

Thank you, everyone, for your time, and we'll talk to you soon.

Thank you. That does conclude today's conference. You may disconnect your lines at this time, and have a wonderful day.