Live Nation Entertainment Inc (LYV) 2007 Q4 法說會逐字稿

Good afternoon. My name is Steve, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the the Live Nation fourth-quarter and full-year 2007 earnings conference call. (OPERATOR INSTRUCTIONS) .

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 the call's 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. Live Nation will also refer to some nonGAAP measures in this call.

In accordance with SEC's Regulation G, Live Nation has provide a full reconciliation for the most comparable GAAP measure and earnings release on the web site. The release reconciliation and other financial or statistical information to be discussed on this call can be found livenation.com. It is now my pleasure to turn the call over to Mr. Michael Rapino, Chief Executive Officer. Sir, you may begin your

Thank you. Good afternoon, everyone. Welcome to our 2007 year-end conference call.

On today's call, I will provide you a summary of Live Nations strategic and financial progress, as well as, an overview of what you can expect from us in the year ahead. Kathy Willard, our CFO will then provide commentary on our financials for the fourth quarter and full year.

First, we are the leader in a growing business and we believe our outlook is outstanding.

We're in a strong strategic position to continue to build on our success and capitalize on our vertically integrated platform as we lay the groundwork to take over our ticketing in only ten months.

We believe the live music industry is healthy and expanding. With 10% compounded annual growth, rates for the last ten years, there's no question live music business is the one shining star in the music business. As major artists are looking to live music for 50% to 90% of our earning potential.

As a global leader in live concerts, we are the number one business partner for artists worldwide and we believe we can leverage this position to expand to complimentary businesses with the artists. In 2007, we demonstrated tangible results and executed in our first two phases of our plan, which were aimed at transforming Live Nation into a vertically integrated music company while improving our financial results and overall operating efficiency.

We believe Live Nation today is a significantly stronger organization strategically and financially than just one year ago.

Our business strategy is crystal clear. To create a vertical integrated distribution platform that capitalizes on the live experience and directly unites artist, fan, and sponsor across all revenue-generating products from onstage to online, spanning tickets, food and beverage, merchandise, fan club, web sites, live content, dvds, VIP access, sponsorship, and many other direct online and on-site revenue opportunities.

Historically, we have only had one meaningful participation in the revenue stream and that was at the alive event. Our expanded platform changes by unlocking multiple new revenue extremes. Our business model is driven by four core drivers. Our global concert platform, including tickets and venue revenue, our digital media and e-commerce platform, which now has a growing Internet portfolio driven by ticketing.

Our global artist division which provides artists with integrated programs to build relationships with fans and drive revenue, and our sponsorship division offering sponsors a fully vertically integrated experience from artist to fans.

In 2007, let me step back and summarize what we have achieved in the past twelve months. First, I am pleased to report that our live music business is strong and fundamentals continue to improve.

In 2007, we served over 45 million music fans, 1,500 artists and more than 15,000 music events across 18 countries. We're the leader and growing business that now serves as the primary revenue driver for major artists.

Despite facing tough comparables and a softer concert season in 2007, we achieved overall pro forma adjusted OIBDAN of 198 up by almost 8 million versus 2006. This is due to the improvements we made in the core live music business.

Specifically, we set out to do five things in 2007.

First was to continue our asset realization plan. To the divestiture of variety of nonmusic assets, we sharpened our focus in our core music business. Most recently, we completed the sale of all of our north American theatrical business. Since the beginning of 2006, we have divested assets for total gross sale proceeds in excess of $260 million. At the same time, we invested in optimizing our venue portfolio both in North America internationally, which we believe will improve our growth profile going forward.

Our second priority in 2007 was fixing the core North American Music business. After five years of decline. We made solid progress in turn around in the performance of our amphitheater operations by more effective profit driven cost reductions.

We improved our food and beverage for the second straight year achieving 12.16 per fan through a focus on improving product quality and whole dollar pricing. These effects are proving successful as our amphitheater pro forma adjusted OIBDAN margins improved by almost 5% in 2007 compared to the prior year.

In turn, overall pro forma adjusted margin OIBDAN margin in our north america music business increased 1.2% in 2007. Incredible feat.

Our third priority was consolidating our global platform. We achieved notable progress in 2007 with regard to consolidating and building out our global platform and expanding our global touring competency. Through mid-size menu expansion, global platform expansion and touring expansion.

Fourth was to solidify a ticketing platform. We took steps to secure control of our ticketing platform. This will allow to us own the customer interface for providing significant revenue growth opportunities especially with regard to sponsorship and e-commerce.

Our last priority was to build out our new revenue Live Nation artist and sign one major artist, which we accomplished with Madonna.

Now let me turn to 2008 for an outlook. We currently expect 2008 to be another healthy year for the industry. We are not seeing nor expect to see any significant impact in our business from the economic slowdown. In the year ahead, we are focused on the following priorities. Continue to move aggressively to divest noncore assets. Continue to increase profitability in our core operations. Ensure that the build of our ticketing business is complete to launch January 1, 2009. Add more artists to our Live Nation artist roster at all levels from increasing merchandise partnerships to signing fully integrated deals. And finally, build and solicit global national sponsors for our new platform.

I'll now take you through our core divisions and give you a summary of the highlights for 2008.

Our core business, which is the foundation to our business model, which provides us the 10,000 plus concerts a year and 1,000 artist relationships. It's the piece of the business that provides incredible barrier entry and provides the foundation for us to unlock new value.

Our North American international business being our core business will continue to seek to better monetize our audience by further improving the profitability of our live music operations.

Our goal in 2008 is to continue to execute on our amphitheater initiative and extend them to the rest of our North American operations. This will include a focus on cost reductions on both fixed and variable, driving revenues mostly through food and beverage and expanding our live platform, both through global markets, mid-sized band use, house of blues and festivals.

Respect to our concession contract, major driver of our North American business, we continue to hold discussions with Aramark and other companies and remain confident that we'll replace our current contract with one that is more beneficial with Live Nation from both a revenue and margin standpoint.

Our new division over the last two years is our ticketing online business. We believe that our ticketing platform will offer a compelling growth opportunity by leveraging our 20 million annual control tickets that our core business generates.

We believe we can unlock value by entering the direct ticketing business at a relatively low entry cost. Combined with our leadership role and live music, ticketing is a key component of our integrated platform and our ability to drive higher margin streams. Our collection of web sites peak at nearly 12 million visitors monthly.

We currently service over 400 artist web sites. All in all, we have built a formable online presence.

However, when we add full ticketing functions to our online presence, principally through livenation.com, we believe we will strengthen our growth potentially significantly.

Through our long-term agreement with C.T.S., the second largest ticketing company in the world, we will launch our own global ticketing business in 2009. Through this partnership, we have secured a technology advance, best-in-class ticketing engine, while avoiding heavy capital investments in software.

Offering our own ticketing platform will complete our vertical integration from artist to fan and remove the final barrier between Live Nation and the millions of fans we serve.

As previously stated, we expect simply ticketing in house and recouping 100% of the service charges will improve the profitability of our concert business by generating incremental 15 million in adjusted OIBDAN in 2009, which will increase to 25 million in 2010. It is important enough that these assumptions do not include any impact from varied additional prospects our ticketing business will provide.

These added revenue streams will be in product sales. Owning the ticket gives us the opportunity to drive from product sales spanning from fan clubs,dvds.s, t-shirts, VIP passes.

Our second opportunity of growth through being in the ticketing business will be soliciting third-party customers. Our ticketing platform will provide us the opportunity to pursue ticketing agreements with third-party venue.

Live Nation has strong relationships with over 650 third-party venues that we gradually -- that will gradually roll off their existing ticketing contracts.

We believe that a valued proposition based upon (Inaudible) ticketing which Live Nation will be equipped to deliver in a leadership position translates into an attractive alternative for our third-party venue partners. The final piece of revenue that will be driven by our ticketing business is the secondary market. We currently do not participate in.

We intend to build our presence in the secondary ticketing market. We capture incremental revenue on secondary tickets, which are often sold at a significant premium to face value, dynamic pricing structures aimed at previously unsold inventory.

The overriding principal of revenue driven by our online Internet group is online advertising, which we currently do not participate in. By controlling our ticketing inventory, it'll power our Internet portfolio and provide a platform that opens up new web advertising opportunities.

Our third division that has come out of our core business is our Live Nation artist division. By leveraging our relationships with over 1,000 artists annually generated by our core business, we have the relationship based to offer artist more services and products that we now have inhouse.

Through Live Nation artists, we believe we can expand our revenue line and build on the base of over 300 artists that Live Nation artist currently services.

We believe our Live Nation artist models the future of the music business. Through internal development and selective acquisitions during the past two years, we significantly expanded the number of revenue driving services we can now provide to the artist. December we purchased Signatures Network, a global leader in the music merchandise business. Signatures has master licenses with more than 150 artists including many of the top performing artists in the industry today. Through Signatures, as well as, resources such as Music Today, [Antel] Trading and Trunk, we now participate in an array of revenue streams built upon the live event, as mentioned before in the ticket. purchase.

These services span artist, merchandise, fan clubs, tour web sites, VIP tickets, live concert streaming, dvds, among others. They're all valuable components of the artist business model today and into the future.

Given the changes that have taken place in the music industry and expanding emphasis on the live event, artists are searching for more efficient ways to manage and maximize their diverse rights. Through our Live Nation artist division, we believe we can deliver an unprecedented package of services built around our Gateway to the Fan and increasing the sponsor value proposition.

That's why Madonna signed with us.

That's why we expect to sign more high-profile and proven artists in 2008.

We are currently in discussion with several major artists at this time. We offer a partnership based on highly transparent and predictable revenue strings in an industry going through a major transition. Through these diversified rights partnerships, we expect to build opportunities in which both the artist and Live Nation benefit from higher margin revenue streams. In the final division that will drive incremental revenue for us is our sponsorship division.

Our triple platform of concerts, tickets and artist rights support another key component of our business, and that is sponsorship. By adding ticketing, extending our direct access to fans and broaden our relationship with artists, we believe we can better tap into the multi-billion dollar global advertising market.

Right now, we only drive 100 million in annual revenue from over 500 sponsors. As a whole, the advertising industry totals nearly $400 billion, which music sponsorship being the industry's fastest growing segment.

We think this represents a fantastic opportunity for Live Nation given the unique value proposition our platform now provides to sponsors. With close relationships with over 1,000 artists, large scale global fan reach, and vertical integrated live music platform, we offer robust solution to sponsors that is second to none.

Going forward, the key to our sponsorship strategy will revolve around our ability to develop deeper relationship with artists. We are pursuing dynamic multi-year deals that incorporate multiple aspects of our platform. These multi-product deals are on average generate close to three times the revenue of standard sponsorship agreement.

In addition to existing multi-platform deals with Rogers Communication, AT&T and Nokia, our recently announced deal with Citigroup marks a major step in this business. We are providing Citi customers with multiple avenues to connect with their favorite artists including presales, preferred tickets and exclusive merchandise.

In exchange, we gain access to a national footprint of over 150 million credit card accounts, which we believe will drive incremental ticket sales.

To conclude, we believe that Live Nation's integrated business model, which unites artist, fan and sponsors around the live music experience is the future of the music industry. As the year unfolds, we think that the benefit of Live Nations unique business model will become increasingly clear as we build on our leadership position and prepare to take control of our ticketing in 2009.

As I mentioned, we believe this year ahead will be another healthy period for live concerts. We are well positioned to benefit from that. We currently expect to house tourists in 2008. The Police, Jonas Brothers, Van Halen, Jay-Z and Mary J, Tom Petty, Tim McGraw, Toby Keith, just to mention a few. We believe we can continue to show improved OIBDAN from our business as we benefit from additional efficiencies and cost reductions.

Throughout the year, we will update you on broad range initiative, including our signing additional artists to our Live Nation artist model, building our ticketing and e-commerce capabilities and maximizing our asset base and securing additional sponsors. I'll now turn it over to Kathy to discuss the financial results.

Thank you, Michael. Good afternoon, everyone.

Moving to our results. For the fourth quarter 2007, our adjusted OIBDAN on actuals basis was $32.6 million, an increase of 11.8 million over the same period of the prior year, which represents a 3.2% margin. On a pro forma basis, which includes all of the acquisitions and divestitures completed through the end of the quarter, our adjusted OI began was 34.3 million, representing a 3.3% margin. Adjusted OIBDAN increased 5.1 million or 17.2% compared to the same period last year.

he increase in pro forma adjusted OIBDAN was primarily due to improved North America music amphitheater operations and cost savings realized from the 2006 House of Blues acquisition. Improved results for international and music promotion and a reduction in operating expenses due to the conversion of employee bonuses from cash to stock. These improvements were partially offset by shutdown of the point in Ireland for expansion and global artist reductions due to reduced touring activity and increased cost to build a Live Nation artist platform.

For the full year, our adjusted OIBDAN on an actual basis was 180.9 million, an increase of 24.8 million over the same period last year, which represents a margin improvement of from 4.2 to 4.3% in 2007. On a pro forma basis, adjusted OIBDAN was 197.7 million, an increase of 7.6 million or 4% versus last year's results of 190.1 million. Our adjusted OIBDAN margin improved to 4.5% on a pro forma basis in 2007 compared to 4.3% in 2006. The increase in pro forma adjusted OIBDAN for the full year was primarily due to improved North American Music amphitheater operations and cost savings from the House of Blues acquisition. Improved international music promotion and festival operations, offset by reduced results in North American Music arena and third party events, the shutdown of The Point for expansion and global artist reductions due to reduced touring activity and increased costs to build a Live Nation artist platform.

I'll now provide you with a quick overview of the main drivers in each of our segments. North American Music pro forma adjusted OIBDAN increased 20.6 million for the fourth quarter and 24.3 million or 45.9% for the year. The fourth quarter and full-year increases were due to improved amphitheater operations, cost savings realized from the acquisition of house of blues and bonus payments for employees that will be paid in stock instead of cash.

These increases were partially offset by reduced arena and third party promotion activity results. International music pro forma adjusted OIBDAN increased 24.7% during the fourth quarter and 7.5% for the full year, primarily due to stronger results at several of our festivals in the United Kingdom and improved promotion activity in several European countries, partially offset by a reduction due to the shutdown of The Point for expansion.

Global artist pro forma adjusted OIBDAN decreased in the fourth quarter and the full year in line with our expectations. This was due to a decline in global touring activity during 2007 along with the investment made in building the Live Nation artist division during that year. This reduction in touring activity was expected as the 2006 season was a very strong touring period. Global digital pro forma adjusted OIBDAN decreased and only slightly for the full year. As expected due to increased salary, maintenance and consultant expenses related to our internal information technology group and our web site management.

Turning to some other financial metrics. Capital expenditures were 49.9 million for the quarter. Of this amount, 14.5 million was associated with maintenance expenditures and the remaining 35.4 million was from revenue generating projects, including the renovation of The Point, the purchase of additional land where our Redding Festival was held and the wiring of our venues.

For the full year, capital expenditures totaled 116.8 million. Of this amount, 45.2 million was associated with maintenance expenditures which was less than the amount spent in the prior two years. As of December 31, 2007, our reported cash balance was 339 million, and our debt and preferred stock totaled 863 million.

We estimate our free cash balance, that is our total cash after excluding event related cash for future shows was approachly 85 million. Looking at 2008, we are focused on the continued execution of our strategic plan and the strengthening of our integrated platform. While it is still early, overall, we currently expect a healthy concert season in line with 2007.

For the full year, we expect to generate modest growth and adjusted OIBDAN and also expect to invest this growth back into our ticketing, digital e-commerce and Live Nation artist initiatives.

As we have previously noted, we expect our ticketing initiative to have a $15 million negative impact to 2008 adjusted OIBDAN. Even the progress we have made over the past two years, and our current investment plans, we currently believe that we will be in a position to deliver strong OIBDAN growth in 2009 and beyond. With that, I will open up to questions. Operator.

(OPERATOR INSTRUCTIONS) Your first question comes from David Kestenbaum, Morgan Joseph.

Hello?

We can hear you.

Okay great. Can you just talk about some of the speculation in the market about AEG doing a deal possibly to sell 49% of themselves to the Garden, and Ticket Master? You know, how you think that might affect the industry?

Was the first question. You know, I guess imitation is the greatest form of flattery. We figure this supports with everything we've been saying for the last year, the live music business is the incredible hot piece of the music business right now.

Everybody wants to figure out how to get control of that concert and ticket to build upon their business model.

If those rumors are true and those investments made into a competitor like AEG, it validates the frenzy around the live music business. I think it validates the frenzy that says content plus ticket is the king. And you know, we have great respect for all three of those companies and I'm sure they'll continue to be a great competitor, but we're very confident that we are ahead of the curve with the industry right now because we're not talking about change.

We have an infrastructure that can execute the new business model today and now it's about just moving forward and fine tuning the model and finishing the pieces to keep maximizing the revenue.

Thanks. My understanding was you were going to provide guidance at one point. I guess you kind of gave vague guidance.

As we think about the base on OIBDAN for 2008, shall we be thinking 198 million was your pro forma number, and then you subtract that to 15 million for ticket cost and 11 million I think for the theater sale. 172 million is the base as we go into 2008. Is that the way to think about it?

Yes, directionally. I think we believe first of all, we're very proud of our reporting today. So we think we have delivered exactly to the dollar on plan that we delivered to the board a year ago.

So we are absolutely on plan. We are ecstatic that we grew organically. The North American performance is just outstanding. The margin growth, the organic growth to fix that core business, as I said a year ago, we didn't fix the core, we couldn't build upon it. It's a real testament to the team and Jason Garner who built and rebuilt that division.

So we're very proud that the core is after five years of decline, the hockey stick is going in the right direction and we've got great growth, great new fundamentals to build upon.

So we're very proud of our foundation, and I think we've kind of given you guidance that says we will grow the business again organically in 2008. So, you know, we're not asking you to, you know, hang tight while we don't grow it. We're trying to provide growth but we have said that that growth will also come back and reinvest that growth back in to cover our ticketing online investment.

Okay.

You know, one growth forward and to cover the cost of the investments going forward.

Okay. As far as the global artists, you said last year was kind of a light year 2007. How does 2008 look in that perspective. When can you expect Madonna to tour? I guess her album is coming out some time in the beginning of the year. I guess that's the question.

You know, as we said most investors that ask the question, the core concert business there's enough history in our books now to show you that there is not going to be a sizable change both from a positive or negative from our core business.

So we don't go to sleep worried that we're not going to deliver 10,000 shows and provide the foundation to our base. But you are right. The difference between a little head wind or tail wind is whether we have three global tours to our one.

As of right now, it looks like we have cobbled together one, meaning The Police are back out again this year. They won't tour the entire year like they did in 2007 for complete comparable but if you kind of added a Van Halen and a Police together right now, you could say, well, okay we are at worst case comparable to 2007.

If we get lucky, Madonna or some other superstar will wake up over the next few months and decide to tour in the back half. We don't know -- we have not had any confirmation on Madonna's plans yet. She does have an album out. We like you would hope she decides 2008 is the year she'll tour. No reports on that yet.

Thanks a lot.

Thank you. Your next question comes from Mark Wienkes from Goldman Sachs.

Just to clarify first on the guidance question. The reinvestments will come into the Op Ex line so the reported EBITDA that you are talking about like if we used 197, that's the appropriate base, plus the 15 but I thought the 197 was already pro forma for the theater sale?

No. The pro forma includes all acquisitions in divestitures through the end of '07. So it does not include the sale which happened in January '08.

Okay. Understood. On the first growth driver for 2008, can you provide some more specific examples like how your applying the lessons learned from the improvement in the North America ad business through the smaller arenas in '08?

They're not smaller arenas. The second most important piece of our north American business is our arena business.

Smaller venues.

Yes. We consider amphitheaters and arenas the same size to the type of artist that plays them. In 2007, we focused on the amphitheaters and really booking them more strategically, centralizing the booking process, driving food and beverage, driving on-site execution.

We do have some get fixed costs and booking strategies that we now know we can implement on how we book those. Remember, although the amphitheaters drive incredible amount of profit, they only tend to be somewhere between 900 and 1,000 shows that we do in North America.

We then do a few thousand arena shows of the Tom petty natures, big artists, Boston, arena kind of levels. So it's our second largest EBITDA business is providing all of these great venues around America with 30, 40 shows a year.

So we'll take some of all of those disciplines and booking strategies and cost reduction strategies and spread those into our arena and what we call club and theater booking.

Basically, just taking our amphitheater learning and applying it to an entire division in all 10,000 shows and running a tighter ship from top to bottom on how we buy everything, not just the 900 shows.

And promoter compensation is aligned?

Yes. The big start on getting them aligned in 2007 we had an incredible morale. The momentum is amazing. We had all of our top revenue producers agree to abandon their individual bonuses and align behind the 2007 North American total number.

And it just amazingly drove the entire organization around one goal of making sure that we hit in North America 74 million, which was the magic number but they all worked towards and we achieved it. So now we'll continue to revised compensation around amps, arenas and total picture.

Great. One last one. Could you just provide a range how much the Citi sponsorship deal could be worth? Are you going to use this as a template for other verticals?

The second part is absolutely true. We think it's a great template that says the corporate America is very excited about the music business.

Historically, because of the closed distribution nature of the industry, whether it was the way records were sold or the way tickets were sold, they had very peripheral participation in the business. They're very excited with companies opening the door saying do you want some tickets? Do you want some t-shirts? Do you want a exclusive single for your business model? We are getting great response. We can't talk about the number on Citibank. We had incredible credit card category bake off.

Everybody was widely excited to participate. We have great respect for American Express. We've worked with in the past. We won't say the size of the number.

We could just say to you by having the new platform and selling the music platform versus two years ago, we would have walked in and said, "Do you want a motor sport event? Do you want a theater." All mismatched products that we have taken our credit card category deal and increased it 200% to 300% in terms of our participation.

Excellent. Thank you.

Thank you. Your next question comes from John Blackledge of J.P. Morgan.

I guess first on guidance. I know the two previous analysts have hit it. What's driving in '08, what will the drivers be? It's off of 172 just to clarify again, it's off of 172 and which segments are driving? I think North America music was much better than we thought in the fourth quarter. You guys did a great job there this year. Obviously, a focus for you guys and are we are going to see incremental kind of gains again in EBITDA in '08 there and then I have a couple follow-ups?

Yes. I think we want to clarify the 172 away here. They're already just baking in the 15 million ticket reduction.

Right. Right.

So, we kind of look at it slightly the same but a bit different. We take away the theater business off the core so we get that. Our stated goal would be fabulously great if we could grow in modest low numbers in terms of 8, 9, 10% on a basic base, which would cover - try to cover as much as we can of the incremental 15 is the intent for the year.

We might have a range of - if we grow it 10 million or grow it 15 million, but our goal would be, can we cover the $15 million fixed cost investment in our online group through organic growth. That would be the range we would be participating in this year. Does that help you?

Yes. That's definitely helpful.

On the global artist side, I know you talked about in the press release and in your prepared remarks, looking to sign more artists, so I'm wondering over the next 12 months, how many would you be looking to sign?

How many would be of Madonna type of magnitude from the total dollar amount up-front payment and length of contract and how many would be kind of smaller type of deals? Thanks.

We don't have that level of detail. Just by virtue of superstarrism, there's a few Madonnas in the world, period. That pool is fairly small. We'd love to have another superstar of that nature.

We have been very clear from day one that this isn't a quantity division. You know, our portfolio today is won over the next year if it grew to five or six. That would be a big target. So that's kind of the range of.

And Madonna, there's probably two or three artists that live in the Madonna economic size of deal world, and then there are some, you know, the next superstars who wouldn't have that level of touring of our revenue business so it would require smaller deals.

Thank you.

(OPERATOR INSTRUCTIONS) Your next question comes from David Joyce of Miller Tabak.

Thank you. Mentioned that they bought theater in Chicago. That something you've looked at or would you still be interested in adding venues throughout the U.S. or are you more interested in adding venues internationally?

Well, you know, venues are real focus in venue would be a House of Blues venues. Those are really the only the most high priority venue that we would own. Most of the time, we dont own. We don't want to put the capital to buy real estate in major markets.

Most major market tenants are wildly excited to give us a long-term lease to run a House of Blues on their context. So House of Blues are a high margin business for us an incredible world wide brand and we think that is the -- probably the most valuable brand in all live music in a smaller sized venue capacity. So House of Blues would be a continued priority.

The rest of venues, period, whether they're fill mores or mid sized were always looking to take over management deal, leases in major markets around the world as we did in Holland with the Heineken Music Hall last year, which is the premier 5,000 seat venue in Amsterdam, an incredible competitive advantage. We're not looking to use our capital to buy real estate.

Our core business is about our scale around our artist portfolio. As I've always said, there's more artists than there are venues. So the artists have incredible power. Where we can find the right venues, in the right markets, with the right revenue return, we would always look at a long-term management if we can bring value to it.

Another question on the global artist Live Nation and artist division, how should we think about the margins there? Was the investment in the platform to make those services available artist? Is that investment largely behind you now or is there still some more to go?

On the infrastructure?

Yes.

We don't believe that always tuck in acquisitions but we have assembled the execution machine. That no one in the world has anywhere close to right now with our music today, our touring division, our merchandise division now our, our dvd division, our broadcast division and our sponsorship division. We have incredible service platform in that division that is built out now.

Maybe the odd tuck in, if there was right company that added new value but generally our large investments in that division are over - will continue to build the infrastructure and add the experts on the fixed cost side, but the real capital that will be used for that is really the artist's rights advanced payments that we put up front when we find the right artists.

Thanks. Finally, you mention it looks like the touring level this year would be comparable to last year. I guess that implies that you have decent visibility into the summer. One of the recurring here is with the recession in the U.S. and economic growth thus slowing. Internationally is there any hesitancy or more immediacy towards the concert date of actual buying the tickets?

You know, we've analyzed this inside out. We've looked at industry data for 20 years Pole Star has and you can look at the '93 and the '81. You can look at so-called recessions and downturns in history. Doesn't seem to be any data that would suggest an economic downturn has any effect on a concert on the concert revenue business.

Internationally or Canadian wise, I have had no indications from any of my regional Presidents around the world who are selling tickets right now for Jonas Brothers and Tom Petty just went on sale. Incredible accounts. Van Halen's on fire. The Police is on fire. Rush, so we haven't seen anything yet from anybody that would suggest the tickets are showing any reflect on the economy.

Now, our theory is simple. The average consumer only goes to 1.5 shows a year. We're not in the quantity business of other consumer categories where you bought 8 but maybe you'll buy 6 now. And we believe that 1.5 shows a year is a pretty important fabric to your social theme. 1.5 times a year you will continue to find the dollars to go and get out and rally behind that band you want to see.

So you don't predict in our business model that it would be an easy one to use right now, but we are very confident that the economic downturn will not be, you know, a huge head wind to our revenue this summer.

Thanks for the update.

Thank you. Your next question comes from Jeff Shelton of Natixis.

Thanks. A few questions. I was hoping you could expand your comments on M and A to talk about the international market. That is the first question. Second question, what was the magnitude of the bonus conversions in the fourth quarter and is that type of payment expected to continue into '08, so similarly as it was in '07. I guess you mentioned a 74 million magic number for '07.

Do you have one for '08? And last question would be, how should we be thinking about capital expenditures in '08 if we strip out the incremental 20 million for ticketing? How should we be looking at the trends there? Thank you.

International markets, you know, Alan Ridgeway now back in London, we're continuing to look as we just announced in this last month our acquisition of a leading international promoter in Dubai.

We will continue to look at the international markets, as you know from our numbers, international somewhere in the 7 to 8% margin business, the higher margin business. There are still some incredible good markets around the world from South America to Australia to Germany to Japan and some tuck-in markets in Europe that provide great opportunity.

If we can find the right market with the right partner at the right price, we would continue to expand our global platform.

Bonus is over to you.

As far as the bonus conversion, it was approximately $13 million of expense in 2007 converted from cash to stock, and as far as 2008, we're still evaluating and don't have that number to share with you at this point.

On CapEx, you can expect maintenance to be about the same level it was in '07 and the company's still evaluating the revenue generating projects but if you exclude ticketing based on projects ongoing like The Point and a couple's House of Blues developments and a few other projects. It's not unreasonable it will be about in the same ballpark and total expenditures based on what we see right now.

Thank you.

And yes, we would continue to on the bonus front, we obviously are not going to give you our exact magic number but yes, every division would have a magic number right now around the driver. Again, I just want to reiterate the incredible shift in internal alignment this year is why the machine is starting to work after many years of fragmented agendas.

North America, we historically started the year with 50 to 100 different employment contracts from various promoters around the country which were all and we started the year not one of them was tied to EBITDA. Not one of them was tied to 74.

We had an incredible team just not pointed in the right direction and we had an annual very large cash expense on bonuses kind of guaranteed for showing up.

Well in the excess of $30 million in terms of planning. We started the year in Jason and the team by saying, we have got to unite the team to be great and we ripped up employment contracts - voluntarily reassigned these contracts through all of the leaders wanting to jump on one agenda to win. And finally fixed North America. And we're ecstatic that we wanted to get our lead promoters invested in our company from a stock perspective. We want them to care about the big picture both from a value perspective and EBITDA. So we ended up paying out bonuses in stock, which is the good part. We now will be able to, you know, have some invested earning -- invested employees but the real important part is, we align them around the target and we dramatically reduced the number we actually paid out from a historical perspective.

So that 30 million and plus planning that we would have paid out historically when we aligned them around targets and EBITDA, we ended up paying considerably less in our fixed cost reduction plan but more importantly got them aligned around the right agenda.

We continue to look to get people aligned around our key metrics on EBITDA and OIBDAN and growth, corporate EBITDA growth and we'd love to continue to reward them in equity.

Thanks.

Thank you. Your next question comes from [Tim Amorbe] from Standard & Poors.

Thank you very much for taking the question. I apologize if you had commented on this earlier because I joined you a little late, but my question is for you, Michael Rapino.

I wanted to know what gets you as you look at the longer term prospects of the industry kind of a bigger picture question. Where do you see the organic, you know, growth coming from? Because clearly, you know, I think if you look back over the past few years, I think there's an argument that, you know there's been obviously some cyclical, you know, peaks and valleys.

I thought it was interesting your comment that the data does not suggest that the industry is vulnerable to recession .Which, you know, thought was somewhat curious. I guess as I look out over the next five years or so. What is it that gets you most excited about live entertainment industry? Clearly, you are in a very sweet spot being the largest operator and I see a lot of detail coming from efficiency gains and cost cutting. Organically is what I am trying to focus on here. Any color you can provide will be helpful.

I will do my best in a short time so we can wrap this up because we have outlined this continually on our core strategy. We have demonstrated this year organic to start with. We talked about - we can run the business better and use our scale in a more efficient manner. We have organically grown North America this year.

If you look at Europe over the last three to four years, there is lots of organic growth built into that business. Whether we launch new festivals, sponsorship, et cetera. So we think that the foundation to our business model is simple. We have an incredible network around the world of 90 plus offices and now 19 countries. 150 plus venues, 10,000 plus concerts.

The great news is - if you tried to replicate our network right now, it would cost you billions of dollars. If you add up all of the clear channel dollars combined, our platform is incredibly deep. Very hard to replicate.

Now what we've got to do is take that beautiful platform now that the artist is so centered around his live show and what business lines could we enter that are complimentary and driven from those 10,000 concerts or 1,000 artists. And we believe that the two that we have outlined are the organic growth drivers to unlock value.

You can't be in the ticketing business like we are going to be next year, if you don't have 20 million tickets and 10,000 shows. You can't do it without the scale. You can't be a destination web site if you don't have the scale we have.

So the greatest organic unlock we will do is the idea we will take our incredible core business 10,000 plus shows, 20 million tickets and 1,000 artists and launch a ticketing company that ranks us number two or three in the world overnight. Added by the fact we're supplying third-party customers with 20, 30, 40, 50 shows a year, where we would already beat their number one business partner at music venues around the world.

We think we've got an incredible opportunity to consolidate the value chain by moving into ticketing, service ourself and make more money but really unlock new venues and new customers. Every new customer we add to our portfolio next year is incremental revenue at low cost. That's the great revenue story for us. We know that that model works.

We know that content plus tickets is powerful. We don't want to be a sports ticketing company. We not -- Ticket Master's is an incredible big company. They do a great job. But we bring a sweet spot. If you are a music venue in North America or the world, like those 600 plus that we are probably already the largest supplier.

If you're a music venue and we're your best friend because we're bringing you Madonna and U2 concerts, we may be able to be an alternative ticketing option for you also. We don't need a big market share to make a difference in our business.

So that's where the huge unlock happens next year, and I think you've seen some market reactions following our strategy as a bit of validation with that.

Then the second is just - we have a thousand artists and didn't do anything with them. We collected their ticket and told them a beer for the last ten years. There's a sweet spot right now where artists are waking up and their historic business partner labels are having a tough time on refiguring their business model.

And when you spending $1.5 billion a year on artist fees directly to those artists. 80 shows a day we settle around the world at midnight in the dressing room, we're writing an artist a check every night, incredible close relationship with artists.

It would only make sense when you are in that dressing room at midnight after the show that you start talking about, why don't we do your concert T-shirt for you. Hey, I think we can run your web site around your tour better. I think we can drive sponsorship rally for you. I think we can get your next single distributed uniquely around the world with a different corporate partner.

So if we can capitalize on our thousand artist relationship and go build the structure which we did already, we're not asking for anything free.

We have the most integrated service platform in the world. We can gain more revenue by our large concert relationship and we believe that we can enter into the ticketing business and start talking to those 45 million consumers directly and understanding them and selling them and marketing to them, which then has that halo effect back on our concert division on how do we market shows? Can we be more efficient? Do we know them better?

Very helpful. Thank you very much.

Thank you. Thank you, operator. Thank you, everybody, for joining us today.

Thank you. This now concludes this evening's conference call. You may now disconnect, and have a wonderful evening.