Live Nation Entertainment Inc (LYV) 2008 Q4 法說會逐字稿

Good afternoon. At this time, I would like to welcome everyone to the Live Nation fourth quarter and full-year 2008 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 you that this afternoon's call will contain certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ. Please refer to Live Nation's SEC filings for a description of risks and uncertainties that could impact the actual results. Live Nation will also refer to some non-GAAP measures on this call. In accordance with SEC regulation G, Live Nation has provided a full reconciliation for the most comparable GAAP measure in the earnings release on their website. The release, reconciliations, and other financial or statistical information discussed on this call, can be found on www.livenation.com/investors.

It is now my pleasure to turn the call over to Mr. Michael Rapino, Chief Executive Officer. Sir, you may begin your conference.

Thank you. Good afternoon, everyone, and welcome to our 2008 fourth quarter and year-end conference call. I am joined by my CFO, Kathy Willard. Our operating and financial performance in the fourth quarter 2008 capped an outstanding year for Live Nation. We successfully executed our strategic plan and generated improved results across the majority of the metrics used to evaluate our operating and financial progress.

Highlights of the fourth quarter include our total fourth quarter adjusted operating income was $28.4 million, which was ahead of expectations. For the full year period, we delivered 20% growth in adjusted operating income. We believe this performance is well ahead of all of our peers. We grew the number of shows we produced by 33% in the fourth quarter and increased total attendance by over 14% during the same period. We also increased total sponsorship revenue by nearly 14% during the quarter, while average revenue per sponsor increased by nearly 15% for the year. And excluding the impact of the goodwill impairment charge, our North American Music operating income nearly tripled to $43 million for the full year.

Overall, we believe these results are outstanding given the severe global economic downturn. Millions of fans have continued to attend live concerts to support their favorite artists despite the challenging times. This trend has continued into the current quarter as ticket sales are pacing in line with last year. Artists continue to rely on touring as a primary driver of their income and we believe our pipe will match the levels we achieved in 2008. A sampling of the superstars touring in 2009 include Coldplay, Jonas Brothers, Madonna, Nickelback, and AC/DC, just to name a few of the many artists who will perform in 2009. Live Nation's mission is to maximize revenue generated by the live concert experience. Our business model is driven by monetizing our global distribution pipe. Let me briefly update you on the execution of 2008. Growing our core business model has two levers: filling our pipe and monetizing the pipe.

On our first strategic imperative of filling our pipe, we continue to fill our distribution pipe by buying artist rights more effectively and at the right price, securing both near and long-term revenue streams while minimizing our risk. We promoted almost 7,000 events with over 13 million attendees during the fourth quarter, compared to 5,200 events with nearly 12 million attendees a year ago, an increase of approximately 14% in attendance and 33% in events. For the full year, we promoted over 22,000 events with over 52 million attendees, compared to 17,000 events and 46 million attendees in 2007, an increase of 12% in attendance and 32% in events. We continue to add ancillary rights in order to provide our artists a broader array of services and expand our exposure to higher margin revenue streams. We have secured approximately 850 ancillary rights in 2008. Madonna's tour concluded on December 21st and was hugely successful, exceeding our forecast model.

Upon its conclusion, the tour became the number one largest grossing tour in history by a solo artist, and our 58 shows in Europe, North America, and South America generated over $280 million in ticket sales. In January, Madonna announced that she's extending her tour and going back on the road beginning July 4th in London. It was the first time Madonna has ever extended her tour, which speaks to the remarkable demand worldwide. Madonna will be visiting 22 markets overall in the 2009 leg, of which is already sold out. Monetizing the pipe. So, there's no doubt we succeeded in filling the pipe in 2008 and we expect to do the same in 2009.

Here is an update on how we grew and monetized the pipe. Our first strategy is always to expand the pipe. In 2008, we extended our geographic footprint by entering Latin America through an exclusive distribution deal with CIE. We entered the market of Dubai through the acquisition of Mirage. In addition, we expanded our venue platform by acquiring the Heineken Music Hall in Amsterdam, opening our new House of Blues in Houston, and finishing our expansion of the highly successful Point in Dublin, which is now reopened. And in February of this year, the House of Blues in Boston opened.

Our second strategy is to reduce costs and improve efficiencies. Adjusted operating income in our North American Music segment increased $46 million for the full year, as we increased the average profit by show by 25% partially driven by improved cost controls around talent buying and venue operating costs. Our third strategy is to increase our in venue revenues. For the full year, total revenue per attendee increased to $78.34 from $78.14 in the prior year. Total revenue per attendee in the fourth quarter was $66.49 versus $76.54 in the prior quarter, a decrease of 13% as a result of less arena shows in international and a currency exchange rate exchange.

For North American Music, we generated revenue per fan of $73.28 in 2008, up nearly 4% compared to revenue of $70.67 in 2004. Our focus here remains the same, increasing ancillary sales per fan in the food and beverage category, while promoting operating efficiencies. In 2008, we entered into a new concession contract with SMG-SAVOR and Aramark, for managing the food and beverage of concessions of 34 of our North American amphitheaters. We expect this new partnership to generate roughly 20% increase in adjusted operating income for North American concession business in 2009. Our fourth strategy is to expand sponsorship. We continue to attract larger and more profitable advertising and marketing campaigns.

During the fourth quarter, our sponsorship revenue recognized increased nearly 14%. For the full year, sponsorship revenue recognized increased 4%, and our average revenue per sponsor increased nearly 15%. To date in 2009, sponsorship revenue dollars are pacing ahead of the same in 2008 by over 25%. However, we do believe sponsorship is the biggest challenge in 2009 as the broader advertising downturn will impact the overall sponsorship dollar.

Our final strategy is the expansion into our ticketing and eCommerce platform. Our ticketing platform is proceeding according to our plan we launched in late December and while we had some learning curves, especially when volume is enormous, our platform is working well, and we are making the right adjustments to strengthen our ability to handle shows that generate unexpected traffic. We also recently relaunched livenation.com storefront in order to better differentiate our offerings in the marketplace and deliver improved functionality and transparency to consumers. We are seeing steady increases in traffic flow to our website and have sold over 1 million tickets to over 1,300 shows since our launch in December.

In summary, three years ago we set out on a clear three-year transformation plan. We embarked on a mission to transform what was then a declining fragmented live entertainment company into a global artist to fan concert company. We had three core strategies to achieve this. Number one was shedding non-core assets, which we are now 90% completed. Two was turning around our declining North American core business. Since we took over, we have grown the Global North American business by over 50%. Our third strategy was vertically integrating our operations with our ticketing and eCommerce business to strengthen the artist to fan connection and achieve more efficient marketing, develop better products, and drive higher margins. We are largely completed of the transformation of our operations.

So some of you may ask, Why then did we decide to merge? The answer is, the merger is consistent with the strategy we laid out three years ago. That is, to maximize our concert pipe and vertically expand into complimentary businesses that strengthen the artist to fan connection and improve our growth profile. We chose CTS to help build our ticketing capability; however, the option to now merge with Ticketmaster allows us to advance our strategy and start providing the eCommerce, marketing products, and solutions of the future today. Let's be clear, we can get to the end game either way. We just believe these economic times require a faster transformation to meet the evolving needs of the artist and fans today.

So on February 10th, we announced that we had entered into a merger agreement with Ticketmaster Entertainment. Once closed, the combined entity, which will be called Live Nation Entertainment, will accelerate the execution of our vision and strategy to build an artist-driven company that provides a full service connection between artists and fans. Both companies have proven leadership in their respective businesses, but it is clear neither are moving fast enough or have the complete model to address the artist and fan needs in these fast-changing times. Together we believe we can harness more technology and create jobs with development of a world-class technology eCommerce platform, relieve pressures on pricing in both primary and secondary by generating new revenue streams for the artists, increase sponsorship dollars, invest in new artists and provide a marketing channel to help them find a fan base, provide more secure robust platform for fans to buy tickets, deliver more shows to venues as new stars grow, attract higher attendance for artists through better dynamic pricing and promotion.

In addition, through this combination, we believe that we can create a more diversified company with a stronger financial profile and will be a better position to drive improved shareholder value over time. Specifically, the merger creates a diversified business across the portfolio of live entertainment genres and across the live entertainment value chain; brings together Live Nation's attractive growth profile with Ticketmaster's strong cash flow profile; provides opportunity for significant operating synergies of approximately $40 million to the combination of ticketing,marketing, data centers, and back room; and lastly, improves our credit profile on a relative basis versus the Live Nation stand alone.

We believe these strategic and financial benefits will help us to speed the fruition of our vision and deliver significant value to our shareholders in the future. So to conclude, 2008 was a solid year for the live concert industry and a superior year for Live Nation. We grew our core business despite a very economic backdrop and, more importantly, we delivered what we told investors we would deliver in 2008, as well as over the last three years. Merger aside, we are focused on executing and delivering another solid year through our focus on three priorities: insuring our pipe is full at the right price, implementing all measures to maximize revenue and further improve cost structures across the pipe, and continuing to grow our online eCommerce business by our Live Nation ticketing inventory.

Our management team will be working hard to close the merger and when completed, we believe we will be able to quickly consolidate these complimentary businesses and execute against a clear strategic road map. Looking ahead, our concert pipe remains robust, as evidenced by the strong group of artists that have already committed to touring, ticket sales continue to pace in line with sales at this point last year. Again, given the state of the economy and the pressures on the consumer, we are pleased with these trends. We remain optimistic about 2009, given the strength we are seeing across the business, our intense focus on execution, and the fact that millions of fans continue to attend live shows despite very tough times.

And now, I will turn it over to Kathy, who will comment on our financial outlook.

Thank you, Michael. Good afternoon and thank you, everyone, for joining us. During the fourth quarter, consolidated revenue was $916 million, which was down $6.4 million compared to revenues of $922.4 million in the same period last year. The slight revenue decline was primarily due to a decrease in International Music, resulting from the disposition of a portion of our promotion business in Italy, and reduced promotion activity, primarily related to arena events in several European markets. This decline was offset by a strong increase in Artist Nation revenues driven by Madonna's 'Sticky and Sweet' Tour, as well as the benefits from several of our recent acquisitions in International Music and the Artist Nation segment.

For the fourth quarter of 2008, we experienced normal quarterly fluctuations in our adjusted operating income with a reported adjusted operating income of $28.4 million, a slight decrease of $5.5 million as compared to $33.9 million during the fourth quarter of last year. This decrease in adjusted operating income was driven primarily by increased costs, as expected, in our ticketing segment resulting from the build-out of our ticketing platform and a decrease in show results in several European markets in the International Music segment. These declines were offset by the impact of Madonna's tour in Artist Nation, as well as the benefits of acquisitions in both International Music and Artist Nation.

As you note, we experienced a net loss in operating loss during the quarter, and this is driven by a goodwill impairment charge of $269.9 million that we recorded in the quarter. This impairment was recorded based on the Company's annual impairment test and was required according to SEC guidance and accounting literature due to the Company's market cap at year-end and the fair value of our total assets, which are much greater than the goodwill recorded.

As a result, our operating loss in the fourth quarter was $317.1 million compared to an operating loss of $24 million in the fourth quarter of 2007. Excluding this goodwill impairment charge, the operating loss for the fourth quarter was $47.2 million. This year-over-year decline of $23.2 million was primarily due to increased depreciation and amortization expenses, and noncash compensation, along with a slight overall decline in adjusted operating income previously discussed. Overall, our net loss, including the goodwill impairment charge, was $337.5 million for the fourth quarter of 2008, as compared to a net loss of $18.4 million for the same period last year.

Moving on to year-end results. For the full year, consolidated revenue increased to $4.2 billion, an 11% increase over 2007. This increase was driven primarily by North American Music due to increases in the number of events, total ancillary revenue per attendee, and increased attendance. 2008 had a strong artist lineup for North American Music, including the Dave Matthews Band, Journey, Jimmy Buffett, and the Jonas Brothers. We also had the benefit of recent acquisitions in North American Music, Artist Nation, and International Music. Our adjusted operating income was $169.8 million for the full year, an improvement of nearly $29 million compared to $141.1 million in 2007. This increase was primarily driven by strong growth in North American Music, based on the revenue growth noted, and also due to cost controls on show-related expenses.

Adjusted operating income for 2008 also benefited from our recent acquisition. These increases were partially offset by a decline in Artist Nation based on the overall volume and size of tours this year as compared to 2007 and higher infrastructure costs and also impacted by increased costs in ticketing for the build-out of our ticketing platform. Our operating loss for the full year, including the goodwill impairment charge, was $284.2 million, compared to operating income of $16.8 million in the prior year. Excluding the goodwill impairment charge of $269.9 million, our operating loss for 2008 was $14.3 million, despite the growth in adjusted operating income. This was driven by increased depreciation and amortization expense and a decreased gain related to the sale of several assets in 2007. Overall, our net loss for 2008, including the goodwill impairment charge, was $231.8 million as compared to a net loss of $11.9 million in 2007.

Turning now to other key financial information. As of December 31st, our cash and cash equivalents balance was $199.7 million. Of this, our free cash, which is essentially cash less event-related items, was $32.2 million. Free cash flow was up in the fourth quarter of 2008 to $11.2 million compared to negative free cash flow of $3.1 million in the fourth quarter of '07. Capital expenditures for the 12 months were $186.9 million, which includes $25 million in maintenance expenditures, which is a decrease over 2007, and $161.9 million of revenue generating projects. As we have discussed previously, these revenues generating projects are primarily for the development and renovation of various venues during the year, including the O2 Dublin arena in Ireland, formerly known as The Point, and the two new House of Blues in Houston and Boston, in addition to our ticketing roll out.

Overall, 2008 was the most capital intensive year in our history as a public company and we expect our capital expenditures to decrease significantly in 2009. As of December 3 1st, 2008, our total long-term debt, including our outstanding redeemable preferred stock, was $925.7 million. We have no significant debt maturities under our primary debt instruments until June 2012, and the Company continues to remain comfortably in compliance with all of our debt covenants at year-end. Based on the investments we have made over the last three years, we continue to believe that we will deliver solid adjusted operating income growth in 2009 and beyond, as we continue to grow our core operations and realize the impact of these investments in venues, artists, and our ticketing operations.

With that, I will open up the call for questions. Operator?

(Operator Instructions). Our first question comes from David Joyce with Miller Tabak & Company.

Thanks. There's some good metrics coming out of this quarter, and I was wondering if you could fill in if there's some sort of seasonality going on here. Overall, the attendance was below what we expected, but the better revenue per attendee. Is that, is that, I guess, ancillary revenue that's flowing through from the events, possibly, that's on an uptrend?

Yes, absolutely.

Because that metric was up. But I was wondering, also, because of the global economic slow down, how much of that was a factor to some of the European countries you mentioned versus it being pipeline volume?

Zero. In the fourth quarter, it was our arena show comparable 2008 to 2007 in Europe was down. So if you don't have the big arena shows, then, remember we don't have amphitheaters in Europe. So, if our arena shows are down, our ancillaries go down. And then also, a large majority of it was just pure currency year-over-year.

All right. That's it for now. Thanks.

And I just tell you that, although it is not a big month and as most of you know, Q1 is a fairly irrelevant quarter in our overall year since we are actually just buying the shows and getting them on sale for the summer. Now that we have sold Motorsports, year-over-year it'll be a very, a low coder for us in terms of activity. But we do have some shows that have been already executed. Nickelback is already on sale and closing nightly, sold out. And our per heads or any of the revenue metrics in January and February seem online with last year. So we have not seen any decline in ticket sales or decline in, in someone having a beer or hot dog or parking at the venue in these arenas that they're going to already.

All right. And on the sponsorship front, granted you said that in this advertising environment, that is going to be one of the challenges for this year and you were still up 14% in the fourth quarter. Is there any clear seasonality starting to emerge from sponsorship revenue, or is it very highly linked with the, with the regular concert season?

Yes, it is, it is 100% linked with the concert season. Usually a sponsor would be buying some activity, whether it is a sign, a sampling or some advertising campaign that is usually probably going to happen when the most, majority of the shows are. So we haven't seen any decline to date. But we are absolutely in the middle of renewing for the summer and we would say that, in Q3 we knocked it out of the park and there was a lot of skepticism on was that history and would the future on ticket sales hurt us?

We have now shown you in Q4 we didn't get hit by ticket sales and as of the first two months, we haven't got hit by ticket sales. So we can confidently say, although no one has believed us for months, that we are fairly recession proof in the concert business in terms of that consumer going to those two shows a year and having a hot dog or beer. So we do not belief in 2009 that we will have a pipe problem in terms of the number of shows, number of people walking in or them spending their $12 to $15 on parking and food. But we absolutely believe that if we are reading the tea leaves on everyone else who's being affected by the advertising downturn, that we could have some pressure closing some of our sponsorship deals going into the next couple of months.

Now the good news is most of our sponsorship business is on a one to three-year cycle. So we don't have a huge amount of deals up in any one year. We'd have about 25% of our deals up for renewal in terms of risk. So we could see some risk in the final closing over the next two months, internationally or here, if some of those deals don't get closed and in that sponsorship business, as you imagine, you could have a deal approved on Friday and it could be in trouble by a Tuesday. So, that business we are just tracking daily. And if we think anywhere we get hit this year, that could be an area that could be anywhere from a $5 million to $15 million risk on our business.

And has any of that started to emerge, because in the fourth quarter, you did have greater sponsorship revenue, but fewer sponsors. Is there some sort of shift into larger sponsors maybe in better fiscal shape?

We purposely drove that. And you will notice, hopefully if we are successful over a three-year period, you will see our sponsorship number go down in terms of the number of sponsors, but the revenue per sponsor go up. We actually, over the last two years, have been cutting sponsorships at the bottom level. If you were a $5,000 to $15,000 sponsor, we started to cut those sponsors and require a minimum commitment because the servicing of those sponsors is expensive. So we have been very successful in reducing the execution, but increasing our bigger deals. So that is the result of the success you have seen in Q4. And as of right now, we seem on track.

We don't have any data right now that suggests that the sponsorship category could not deliver its plan, but I do want to look at the fuller market impacts on advertising, and assume if there was risk, which a lot of people thought for the last few months was going to be, Will they come to the show, Will they buy a beer, that doesn't seem the be the risk, which is the good part. That's the solid foundation to what will drive the machine for us this year. But we do expect that we will have some sponsorship challenges on the overall business, and we are planning and have a club act plan in place for that if that is to come to life.

Okay. Thank you.

Our next question comes from Mark Wienkes with Goldman Sachs.

Great. Thank you. Just a follow up to the last question, what percentage roughly of your expected business has been booked this year or typically is booked by this time this year, both in attendance for the shows and in sponsorships?

Just a simple question, Mark.

Yes. Like you have typically 15% of the year booked by now, 20%?

Yes. I will give you two of them, sponsorship, do you have that number?

Yes. Sponsorship we are running at the same point in time compared to last year, 25% over where we were last year, Mark

Right. But what percentage of the business is booked of your expected full year business?

Right now would be, we call it three levels of booked. We've got contracted, we got letter of intent. So right now we have 63% booked. So 2009, a year ago to date, we would have only had 56% booked. So we are running ahead of where we historically are in terms of booked sponsorship business. So that's good. And on the music side, we would be running exactly flat right now year-over-year. We are identical in terms of the number of shows on sale. The number, we've got over 5 million tickets sold as of last, on a comparison basis, and historically right now, you would have not on sale, but you would have booked in the pipeline, hopefully by March because you are going to be on sale in two months, you have at least 50% of your summer booked. And we are tracking on that right now.

Okay. Excellent. All right. And then, can you just confirm that the Company still expects the ticketing business, your own internal ticketing that the cash flow will largely reverse the mid-teen millions adjusted loss from '08 in '09?

Right. You mean the investment, the fixed cost investment turns into a positive in 2009.

Yes.

Yes.

Okay. And then the -- sorry. Two more. Kathy, any interest in putting a range on the significant CapEx decline in 2009, could that number be $100 million or below?

Yes, go ahead.

It will be -- we are still finalizing the number, so we expect it to be less than $60 million for the year in total.

Less than $60 million? Okay. Excellent. And then last question, how much of the reported cash, not the free cash balance, but the reported cash balance does the bank count against the Company in the leverage ratio?

As we have disclosed in our covenants, we have up to -- we can deduct up to $150 million in total cash.

Right. Whether the cash is free cash or not?

That's correct.

Right. Okay. Thank you.

Our next question comes from Ben Mogil with Thomas Weisel Partners.

Hi, guys. Good afternoon. Thanks for taking the call. So just following up first on Mark's question about sponsorship, the 63% number you were talking about, when that is booked, is that sort of everything from deals that are signed to sort of letter of intents that are out there or is that actually deals that have been signed?

That would be considered contracted and gone to letter of intent. So those would be committed in our world.

Okay. But --

We then have two other categories where we would call them in negotiations and then we would have TBDs.

Generally speaking, are most of the letter of intents that you get out there, most of them, I suspect, are closed eventually?

Oh, yes, 100%.

Okay. Great. Thanks. Starting at the beginning, from an FX perspective, if in terms of guarantee, so obviously an artist who is only playing in the US or only playing in Europe, you can obviously pay them guarantees only in Euros or in dollars. When you get artists like Madonna that are playing in both parts of the pond, if you will, are you giving them just a global guarantee in US dollars or are you giving them sort of a Euro guarantee for the European dates and the same thing for US dollar dates?

Ben, it's very artist-specific. But certainly, when there's a difference in currency between how we are paying the artists and how we, what currency we are selling the tickets in, then we look at hedging as appropriate.

Okay. And have you done so?

Absolutely.

Sure.

But just to give you a perspective, 99% of our shows are booked locally. So our Swedish operation is booking every day in that currency. So on an exception like Madonna and U2s, are we doing a global deal and we would hedge all the time.

You do? Okay. Great. Thanks. In terms of the debt level, so it looks like you are up about $8 million dollar on the revolver for the quarter. Can you sort of walk us through from a debt perspective, do we see debt, is that sort of a typical fourth quarter draw down and then the first half is it paid down? I just want to get a sense of the seasonalities of the revolver and how we should be looking at it.

That's basically right, then. Obviously as fourth quarter and first quarter being quieter quarters for us and we are funding artist advances, then you're going to see more draws on the revolver. However, when we start to put tickets on sale, then those start turning around.

Okay. So, if we were to look at sort of the average debt level for the year, let's say the average debt level in '09 as you sort of see the world, do you anticipate the average debt level to be below that of '08 on the average?

Ben, I don't have those numbers with me. Certainly, we are focused on growing the operations this year and putting less reliance on the revolver and there are other things like we have talked about, including the potential sale of UK Theatre and other assets that can impact that as well. So it is a little hard for me to predict that.

Okay.

But it is safe to say you can tell by the number we've just given you on CapEx that we have brought down our CapEx considerable still will operate our buildings to the levels we need, but in 2009, we will not be using any capital for anything else than basic CapEx. We do look between the Boston Opera House, the New York 42nd Street Theatre, and the UK Theatres, we will be shopping those this year in an effort to remove our final non-core assets and put that money in the bank. We will grow our operations this year through our return on our investments from the House of Blues and Point, with the overall objective to reduce debt and get into free cash flow by 2010 and all of those measures to get there.

Okay. Thanks, Michael. I think sort of the last question for me, in terms of CTS events, where do they, like, let's say for the sake of the conversation, that the Ticketmaster deal is successful, you pass several requirements you need to pass regulatory-wise, where do CTS events fall, do they stay with you until their contract is over, do you buy them out? I mean, I want to get a sense if there's an early penalty or something of that nature.

No, there's no early penalty and as of right now, we are met with Klaus Schulenberg last week. We are very committed to honoring our contract. If you think about the CTS deal, it is a great software platform that we license in North America and we would continue to do that. But really, where the fruit of the relationship is, both for Klaus Schulenberg and ourselves, is really international where we are in markets with him as he expands. So, we envision the merger getting approved, and we do envision life continuing with CTS and the new merged company under its existing contract and any other way that we can kind of operate on a global basis that makes sense for both of us.

Okay. Thanks. And then this is the last one before I secede the floor. I mean, we've seen Anschutz basically say that they've got the right to exit Ticketmaster in the case that you guys merge. What's your thoughts as you are reaching out to some of these other promoters who possibly have these kind of deals? Do you think you can keep everyone in the fold, if you will?

Well, listen, we, we won't comment on the AEG Ticketmaster part, as that's really still their business. We would have went through, obviously, when we decided to merge, we would have built a very dynamic model that said, What will this company look like going forward? And, to be clear, we said it last week in Washington. Market share wasn't the priority, growing it was definitely not the priority, and losing some market share is absolutely okay with us in the overall picture because we believe the real benefit of the combined new entity is to start developing new products based around the artists, the website, the fan. So, we are not worried about what business we lose. We have modeled that out, we think it can be a much more stable, profitable business with less market share, but better products in the long run.

Okay. Great. Michael, Kathy, thank you very much.

Thanks, Ben.

(Operator Instructions). Now, our next question comes from Tuna Amobi with Standard and Poor's.

All right. Thank you very much. So, with regard to the margin, I am just trying to get a little bit more qualitative commentary, perhaps from Michael, on what kind of vibes we are hearing in Washington. It just seems like since the time that you guys announced this transaction, there has been a lot of unanimous outcry toward, as well as from some of the major artists out there, surprisingly so. So just kind of trying to wonder, get a sense from you how you feel in terms of a realistic chance of this deal going through. Would you say that since last week, your expectations have improved based on the public responses or have gotten a little bit dimmer? Or how do you feel overall qualitatively?

We are very confident. I mean, nothing happened in the last three weeks that we wouldn't have predicted was going to happen in terms of the press. We realize that one of the, one of the core issues is Ticketmaster is not going to win a lot of popular vote right now. It has always kind of been at the front end of taking most of the, of the industry brunts when the consumer can't get a great ticket. So, we understand clearly the issues with the Ticketmaster brand. We believe the foundation of Ticketmaster, the core business is strong, when we won, that's why we called it Live Nation Entertainment. We believe we can turn that combined business into a much more fan-artist friendly business.

Number two, just to credit to -- to kind of put it on the table, we have not had a large number of artists against this deal at all. There was Bruce Springsteen, who had a very big issue with some of the way his tickets were sold on Ticketmaster, but we delivered artist support letters last week to Washington and we have seen a real strong support from the artists who are definitely looking for a continued strong business partner in the live music business to help them through these tough times, while maybe the record label business partner hasn't been delivering for them. So we absolutely expect to get this approved. We expect it to be a very thorough review by the DOJ. We have great respect for them, they'll do their job.

We believe on a horizontal level, we will prove both management, promoting, and ticketing, there are great competitors and on the vertical, we will prove that there is no leverage that is going to be used or has -- we gained by this combination that puts anything of competition at risk. We do believe building a better mouse trap is okay, and we will prove that the better mouse trap is what the consumer needs today, but it surely will have a ton of competition going forward.

So, would you characterize, given the atmosphere in Washington right now, with the new administration, perhaps the timing of that, would you say perhaps inauspicious?

That's not my job. Listen, we put a lot of work into building our Company. We believe this is a great move for the Live Nation shareholder and our business model. It is completely consistent with everything we are going to do. We have great respect for the DOJ process, which is a very legal and factual based review, and we will leave it to the pros and our board and our management team spent a lot of time reviewing all of the options and believe we will get approved in the end and it was the right move in the interim. We will let all the other stuff --

Okay. Let me switch gears real quick, follow up on the comment that you made at a merger call. I think I was kind of struck when you said that you are still kind of looking to use Ticketmaster as kind of your front door with or without the deal, if I am correct in that interpretation. So, and then I am just looking at some of the other sources out there, the outlets, whether that's the artist website or music today, of course, your own ticketing platform, how do you see all of these various sources coming together as you think about your own platform, which I had, I was under the impression that you were actually looking to drive most of the, the sales from there, particular for your own venues, it seems like there's going be a mix and match of some of these different channels, including Ticketmaster.

I'm not sure what you are reading, but that's nowhere near where we are. We have never stated we were going to use Ticketmaster's front door. We use livenation.com as our front door for all of our controlled tickets at our venues, have been doing that since January and have been building that front door for a couple of years. What I did say is, people are sometimes confused that we also have 50% of the shows that we do promote are in Ticketmaster buildings, which are sold at Ticketmaster, because we don't control those tickets.

Are you looking to reduce that 50% perhaps, given your ticketing launch? I mean assuming the margin does not occur, are you still going to not want to do anything about that 50%, or are you just going to live with that?

We, our business is based on, we put artists in venues, and make the ancillary revenues and dollars from it. A lot of times it makes sense to put our artists like Madonnas or Coldplays that we're promoting into Ticketmaster buildings, whether it is a Staples Center or the Madison Square Gardens. If that's the right building for the artist, that's where we'll put them. And if the ticketing function happens to be through Ticketmaster, then that's what we will do. So, our business model provides us to put the artist in the right venue where we can maximize revenue and where the artist is approving to play. Many times, it is our own buildings, many times it's in great arenas around the world and we have a great ancillary revenue lines, whether they're in our buildings or others, and that's the way we drive our business.

Thank you, Mr. Rapino. Our next question comes from Alan Gould with Natixis.

Thank you. I've got a few questions. First, Michael, can you tell us what milestones we should be looking for in terms of this merger process? Is there filings, any dates when the DOJ is supposed to come back to ask more questions or make any rulings?

Kathy, do we have any? We don't really have any out loud. Roles, [Michael Roles], my GC, I guess, we got our 30 days, we will be coming back now that we have filed with the DOJ, and we would expect to hear from them after the 30 days and that would be the first milestone. We will have a shareholder vote after that in the next few months. But I think we are business as usual. We have already begun the process of filing and after 30 days, we should have more, more sight.

When will the merger document be filed?

What do you think, Kathy.

Within the next 45 days.

Right.

45 days.

Okay. Switching to the ticketing, one question. I know that UCTS event, they had done the World Cup so they had some experience with some big events. Obviously, it's a learning curve that you're starting, you are using their system now. But can you just go through a little bit of what happened in the first quarter, what hiccups there are, and why you are confident that things will be fine when we start selling for the big summer shows?

Sure. And, listen, we have been selling since January. So we have sold well over, as I said, a million tickets. So we have no issues that the system sales tickets works when you go to our site. The only weekend where we absolutely dropped the ball was when Phish -- we put the Phish on sales on. And God bless Phish, a huge band. We had 1 million hits at our 10 a.m. website. That's an incredible big load for us.

It was nothing really to do with the ticketing platform or the storefront. It was just a combination that the two weren't talking well together on letting 1 million people come through the front door. So the engineers from both sides worked hard over the weekend to readjust for that and since then, we've had Coldplay on sales, and every weekend on sale. So, we are more than confident that we will absolutely and now can handle the load and haven't had a breakdown of that nature since. And we remind people. If Ticketmaster system blew up on Bruce Springsteen. These ticketing systems do crash when there are huge, huge drivers to the site.

And one of the challenges, and we said it last week in Washington, one of the challenges is the secondary scalping market is very sophisticated. They have these incredible platforms that blow into your system at that 10:00 a.m. on sale to grab as many seats as possible and they're a whole new level of business that you have to work against. So anyways, we had a meltdown on the Phish 10 a.m. We still sold out the shows by the end of the day, and we haven't had a meltdown since and we are now confident that the platform can handle the load. Not telling you that over the summer we won't have a couple of technical issues and a glitch here and there, but 100%, the drive train works on our ticketing platform and we are already off to the races in huge numbers.

Okay. So, it is basically one incident that really got all this press?

Absolutely.

Kathy, two financial questions for you. Can you tell us what the FX impact was in the fourth quarter and if FX stays where it is today what it would be in for '09? And can you also tell us on this $270 million impartment charge, what assets were written down? Was it all goodwill, was there any real estate, was there any other assets written down as part of that $270 million?

No, on the goodwill impairment charge just requires you to look at your goodwill compared to your overall fair value of assets. So, no, it did not require any write down of any other asset and actually just implies that we have more fair value of unrecorded assets around things like the Live Nation tradename that aren't part of our balance sheet. It was just related to goodwill and it was specifically in the North American Music and Artist Nation segments. So nothing outside of that, Alan.

Okay. And the FX?

And the FX, I do no t have the '09 numbers for you, but the, the overall impact just on revenue alone for the full year was around $8 million.

And that would have been all fourth quarter, I'm assuming?

That's a full year number. I don't have the fourth quarter stand alone with me.

Okay. Thank you.

Thank you. The next question comes from David Kestenbaum with Morgan Joseph.

Okay. Thanks. First question, can you just talk about the total revenue per attendee for the fourth quarter, it fell by about $7. And is that all ticketing, because I know you said that beer and the food remain constant. So, then what would be the trend there going forward?

Sure, David. Sorry, you were asking, Q4 --

The total revenue per attendee dropped about $7.

That's really related to the International mix that Michael highlighted in his script.

Okay. So the Italy, that whole issue?

Well, yes, and just the arena shows and the timing.

Okay. Now will that move back up in the first quarter and throughout next year or is that, or are we at that level going forward?

That's international. And we would assume, depending on the currency, but we would assume that's a, it should work its way back up over the summer as the arena shows increase.

Yes, we're always going to have some quarterly fluctuations, obviously, but that was really just (inaudible) in the FX. But we would expect that over the summer season, that that's more impactful.

I mean, David, that's why we always say the real to us, the real metric is the year, because if you have a bunch of tours in one quarter versus the other, it could be relevant or not. We like to just look the at the entire year so you get the full up and downs of touring to say, Did the business per revenue increase, decrease, et cetera? On a year basis, we are very proud of the overall numbers on all those metrics.

Okay. Now you said at one point that '08 was a strong year, can you comment on '09 or is it still too early?

No. I mean, listen, we believe that, again, we have been -- we do know, from what we understand on the overall live business, sports, theater, motorsports, broadway versus concerts, from everything we've heard, we, in the concert business, are absolutely delivering strong numbers and consistent numbers year-over-year. I think if you are in the other businesses you are probably going to feel a little bit of a tough 2009, and quite honestly that's a very simple analogy because if you look at a sports team, they have got 80 games to sale; whereas, in our economic, we have one Aerosmith show in that city for three years. So, we believe that's why our shows always end up holding their own is the supply and demand is just so different than a Broadway show, which has 400 opportunities for you to see it.

So we do believe in 2009 you will start to hear some sports, some of the other businesses may be affected on the ticket sales, but our concert business is looking very strong for 2009. Now remember, 2008 was an incredibly good year for us versus 2007, so for us to be saying that we think 2009 could deliver somewhere in the same level of events and our attendance is a fairly strong number. But as of so far, we are dead on track with our 2008 tickets on sale and shows in the pipe.

Okay. And then you didn't really touch on the announcement you made this morning with some of these new people coming into the Company. None of them seem to have much concert business experience, but maybe you want to give some color on what you are planning to do that there.

Yes. It's just really what we have been doing over the last three years, we have been really turning this into -- at the core, we are a sales and distribution company. We are outsourced, the artist hires us, we put a financial guarantee down, and our job then is to go market the show, sale the tickets, and maximize the on site revenue. The challenge when we took over we realized were we had great people that knew how to buy shows, but we did not have a great skill set to meet the needs of today from a marketing, on site revenue basis, so hiring people from Disneyland, The Hilton, GE, those people are coming in here saying, How do we drive per head revenue, per square revenue from our existing business?

And how do we market those shows and break through the clutter and not market like we historically have with print ad and radio spot, but how do we break clutter, sell more tickets, and sell more per revenue, per revenue per fan this summer? So we are trying to bring all of that skill set in and we want to learn from whether Starbucks or Disney, how do you drive your retail per revenue?

Okay. Thanks.

Another question from the line of Ben Mogil with Thomas Weisel.

Hi, guys. Sorry for the second round of questions. When I look at the balance sheet, I'm seeing the deferred revenue at the end of the year is down from what it was at the end of the year '07, but then when I look at the cash flow statement, it looks like it's a source of cash. Can you help me rereconcile those two and I'm trying to get a sense of deferred revenue as an indicator, if you will, of what '09 looks like.

Yes, one of the items there is the way that those discontinued operations work, Ben, is that the balance sheet is reflective of just the operations that we still have. So it wouldn't include theater, it wouldn't include motorsports as our last year K would if you went back and looked at that. The cash flow statement, however, is not restated for discontinued operations, so you kind of have the flows going through there. So, that's really big drive on there. But all in all, you are only seeing a, call it a $30 million drop between years and that's just really timing of ticket sales related to our core music business.

So the balance sheet for '07 was for restated for the divestiture of those two businesses?

That's correct.

Okay. So help me walk through. So, is it -- I mean, for me to feel comfortable that you think '09 is pacing sort of similar to what '08 was, how do I look at the deferred revenue on the balance sheet and feel sort of comfortable with that?

Remember, again, you are going into -- you're finishing fourth quarter and starting first and first is always a low quarter for us with the big seasonality in the amphitheaters and the festivals coming in in second and third. And so, those ticket sales would typically be going on first quarter and second quarter. So, it's really the activity that's going on right now that will impact more of the summer season.

But that was the same last year, too, right? Because after all, I'm looking at the balance sheet from the year end, not from the quarter end.

That's right.

Okay. But is deferred revenue for you not a relatively good indicator of what you think this following year looks like or are you saying that the amount of money, the amount of the deferred revenue is basically first and second quarter, which is so small that it gets swung around a lot?

It is definitely an indicator, but I'm saying that the seasonality impacts that. So, you can't just look at one point in time being year-end and decide what the whole year is going to look like. Because, as Michael said, our ticket sales for events, kind of same time of year, are flat to prior year.

Okay.

I think you could also feel good that if there's only a $30 million difference right now of deferred revenue off a spectacular 2008, then $30 million is a swing of one tour. It could have been Q1 versus Q2. So, to be more near that range is a great indicator, but it wouldn't be a substance indicator of itself because it is, it is too early in the year.

Okay. Fair enough. I appreciate that. Thanks, guys.

Thank you. There are no further audio questions at this time. I would like to now turn the call back to Mr. Michael Rapino for closing remarks.

All right. Thank you, operator. We are done. Thank you, everyone, for calling in.

Thank you for joining today's Live Nation fourth quarter conference call. You may now disconnect.