Live Nation Entertainment Inc (LYV) 2009 Q4 法說會逐字稿

Good afternoon. My name is Todd and I will be your conference facilitator today. At this time I would like to welcome everyone to the fourth quarter and 20009 year end earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's 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 descriptions 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.

Good afternoon, everybody. This is Barry Diller, and I am happy to be on this first earnings call of the combined Live Nation and Ticketmaster.

I have just a couple things I would like to say. First is I tried for actually a little over 10 years to put Ticketmaster and Live Nation together, even when it was in its predecessor form . I had always believed that they were natural to be aligned with each other. Of course, I failed. It was not until the abilities of Michael Rapino and Irving Azoff and their respective positions in each company that actually got this to happen -- and got it to happen not in the usual manner where one of the most senior executives falls and the other takes over the company, but where they are both joined in a truly I think unique partnership, and I think it is a real one. I think it is the real reason that the companies were able to come together, the ability to come together, was because actually their uniqueness in terms of both what they each do and what they are able to do together.

I think that the combination of these two companies is actually quite remarkable because I think this is the one area despite technology, despite new inventions, despite anything, live is never ever going to be disenfranchised by anything that I think can even be thought of. As a matter of fact, I think as things get more complicated in the world, live becomes stronger. And that's what these companies do . That's what this company will do. So I simply want to essentially welcome everyone. I will not by be on these calls in the future, which will make everybody happy, my colleagues and the audience. And I have -- I have truly great expectations from this new company.

The only other thing I think I have to add is for those who will ask questions, who want to ask questions about the Liberty Media, let me be completely and simply clear about it, when we made the original merger agreement, it provided that Liberty, who had owned about a little over 30% I think of the predecessor companies and then the spun-off Ticketmaster. Liberty wanted to maintain the right, indeed they have, to go back up to their percentage which I think was stopped out at 35%. And this, what their tender offer which was not contemplated at the time, but their tender offer certainly allowed will, if successful, will take them up to I think just under 35%.

But just so you are all clear, the agreements provide that they cannot go above 35% at any time. And in talking with a senior executive of Liberty who believes in this as much as I do, I think what he is doing, what his company , this is John Malone, is doing in wanting to increase his percentage ownership of the company is just underscores what a good enterprise it is. So with that, Mr. Azoff

This is Mr. Azoff, and I would like to say through that the last 15 months, Mr. Diller has been maybe the best partner I have had in the entertainment business, and has worked tirelessly with us through this entire process, through the merger, through the arduous regulatory --

Painless.

The painless visits we have gone through, and we are still on somewhat of a celebration high after that. I can't even really state better than what Barry said about what the prospects that we believe we have for the merged companies and for the live business in general. But I would like to thank Barry for flying out here and coming and spending time with us on the call today and for continuing to make himself available to us for everything that we need.

With the merger completed, we are now focused solely on the future, building a new company with the opportunity to transform the live event experience for artists, teams, venues and most importantly, the fans.

As standalone entities, both companies are successful in their initial steps to reshape the industry, but neither could have finished the job alone. Today the end to end platform of Live Nation Entertainment allows us the flexibility to drive innovation along all sections of the value chain. We are very, very, very excited about the new model.

I have worked in all areas of the business, the record business, the management business, promotion business, business of discovering new talent. The business of the future must unite these fragmented businesses in order to really successfully innovate for the artist and the fan. I envision, as we get through phase one of our plan in 2010, we will start to unlock growth in artist revenue, employing unique and fan friendly marketing, selling more tickets utilizing dynamic pricing and other platforms, continued expansion of the management business in a still fragmented industry and major growth in international markets. I am thrilled about having the tools at hand to make a significant difference and drive value for artists and fans and shareholders.

One of my continuing roles is to perform as CEO of Frontline. Frontline in 2009 was a very good year. Despite the postponement of a number of artist tours and a tough retail environment for our merchandise business, our adjusted EBITDA net of minority interest grew by 6.4%. During the year we made acquisitions and signed new artists that brought additional key executives into the group, and added representation of such superstars as Kenny Chesney, Big and Rich, Avril Lavigne, Britney Spears and the touring rights to the hit Fox TV phenomenon television show "Glee." There were many new projects included international success. I would like to single out this year's success with Kings of Leon, Kid Rock and 30 Seconds to Mars. We will continue to grow our business organically with new signings, and there will be further strategic acquisitions.

2010 looks to be a very strong year for touring by the major Frontline artists including The Eagles, Jimmy Buffett, Fleetwood Mac, Cristina Aguilera, Van Halen, Avril Lavigne, Dixie Chicks, Brooks and Dunn, Maroon 5, John Mayer, Kid Rock, Kings of Leon, Neil Diamond, Jennifer Hudson, and many, many more tours planned for this year.

I can't begin to tell you how smoothly post-merger integration is going and how all of the business sectors are planning together for the future. And I have a new partner who inspires and challenges me every day. We could not be off to a better start together. May I now introduce our CEO, Mr. Michael Rapino.

Thank you, Irving. Again, I would just like to note that as CEO, it is a dream to have Irving, Barry Diller and John Malone at Liberty in your corner. And that is going to make us a better company and give me an incredible sounding board to learn from.

As we move into this merger , we know it is a major milestone for the live music business. These leading businesses provide the foundation to drive earnings and free cash flow. This end to end platform provides endless opportunities to innovate the value chain and drive increased margins. The merger was driven by the theory that the fragmented value chain was causing pressure on each link. And by itself no link can provide the innovation needed. But if you have an end to end model you can innovate within.

Putting these two companies together will be our main focus for 2010. Our operating plan breaks into two phases. Phase One for 2010, we have two core objectives -- complete the integration of the corporate and ticketing function and realize the cost synergies to end up with a strong organization. And number 2, execute our core businesses better and find additional savings.

Phase 2 of our plan, toward the end of 2010 and 2011 beyond is about five growth areas. Our first is e-commerce. In this area, ticketmaster.com and livenation.com, we need to elevate the user experience and truly become the one-stop live shop. We can drive growth in ticketing sales, bundling, up sales, dynamic pricing, and activate our underused database of 114 million names to drive sales and lower marketing costs.

Our second area of growth is international expansion. There are many markets we see great markets to expand into at a low entry cost. Third as Irving as alluded to, artist management. This is our highest margin business, and in this industry continues to be fragmented with great opportunity. Our fourth area is sponsorship and on-line advertising. With our new collection of assets we believe we are poised for big growth in this division. And finally continued cost reductions, as we put these mature businesses together and start looking at both sides of the balance sheet, we believe there is great opportunity to take fixed costs out of the business.

We will manage our business going forward along five business lines. Number one, the concert and venue platform, the global ticketing software, our e-commerce division, global sponsorship, and artist management.

Now I will take you through quickly each of the business lines and some core metrics.

Our global concert and venue promotion unit produced over 22,000 concerts and sold 52 million tickets in 2009. In 2010 we will be eliminating approximately 1000 low margin events, while increasing show counts in the high-margin venues. In total we expect to do about 500 fewer shows while selling close to the same level of tickets as in 2009. This unit generated $99 million in adjusted operating income, excluding sponsorships and we look to grow this unit in the single digits in 2010.

Global ticketing unit sold approximately 141 million tickets with over 10,000 clients in 2009 including the Live Nation ticket volume of approximately -- excluding the Live nation ticket volume of approximately 10 million. This unit generated $230 million in adjusted operating income excluding sponsorship, and we expect currently this unit to be flat to slightly down through the transition as I take you through those numbers later. This unit will realize the most in synergies in the range of $30 million as we move Live Nation tickets off CTS and on to the Ticketmaster platform, but will be offset with the one time costs in severance this year as well as loss of Paciolan and a higher AEG cost totaled in the range of $20 million for 2010.

Our third unit is the e-commerce division which will house Ticketmaster and Live Nation. Ticketmaster is the number one ticket site and the third largest e-commerce site in North America. Live Nation is the 37th ranked e-commerce site in a top 10 music site. Combined our on-line network had 25 million unique visitors with a database of 114 million names. Both these sites will be the backbone to innovating our business model through an elevated user experience and becoming the one-stop live commerce shop. This unit generated $7 million in on-line advertising, and we expect this number to grow substantially in 2010 and beyond. This division will realize about 5 million in synergies from combining the units.

Our fourth division is global sponsorship. This unit has over 850 sponsors and generated 140 million in adjusted income in 2009. We expect single-digit growth in this unit given the timing of the corporate budget spend. As we move into this year, as you know, we would all hope to have this merger done last year. But now that it is done in February, March, we won't be able to maximize the budget as hoped. But we expect a big in 2011 as we wrap up the fall advertising year.

The final division is artist management, artist services. This unit has over 200 artists and generated $63 million of operating income in 2009, and this will house the artist management division as well as the artist services of merchandise, VIP ticketing and tour design. On the corporate front we expect to drive about $5 million in synergies.

The core economic mission that unites all of these divisions is simple. Sell more tickets to address the 40 percent of unsold inventory. Each incremental ticket sold equals $2.48 of adjusted income to our bottom line. We will look to advance the agenda in all of these divisions by, one, enhancing our store front and selling more bundles, cheaper tickets and testing -- continually testing new innovations. Two, we will drive our database to sell more tickets to the heavy user. We will continue to look to ways to reduce ticket prices and drive incremental purchasing as we did with our no service fees. We will continue to find corporate partners to enhance marketing and distribution, as we have just rolled out our Wal-Mart kiosk which will be in over 1000 stores in 2010. And we will continue to revamp our pricing, looking for better transparency and dynamic pricing as we are currently doing with The Eagles. And finally, expand our global footprint. We believe there are great opportunities to expand to markets that we are underserviced in from France, Australia, Japan and Germany, so we can truly offer a global footprint to our sponsors and our superstars.

As far as our outlook for 2010, in the concert pipeline, the 2010 pipeline is robust. Initial demand for peak season is strong. We have U2, Shakira, Sting, The Eagles, Lady Gaga, Rascal Flats currently as global tours and we -- to date we have sold 18 million tickets to these events, which would have put us at the same volume as a year ago to date. So we are on pace to sell 2009 levels and beyond. Ticketing -- as of the end of February we are attracting about 5% down from last year, but when we add in Live Nation's 10 million plus tickets we will look to have end the year a few percentage points up. Sponsorship year to date, as of end of February we currently have under contract 55% of our expected sponsorship. One year ago we had 50%.

In conclusion, we are looking forward to the phase 1 of our dream. We are going to execute hard this year to run a better business, find all of the synergies, and we look forward to 2011 and on as we reinvent the way consumers and artists attend live shows.

And now Kathy will take you through the update on

Thank you, Michael, and good afternoon, everyone. I will first briefly discuss results for Live Nation and Ticketmaster separately for 2009 fourth quarter and year-end, and then I will address combined information for 2010. The UK theater business was sold in the fourth quarter of 2009 and is now reported as discontinued operations. All results I will discuss for live nation are after the removal of this business.

Fourth quarter revenue for live nation was $854 million down 4.7% compared to last year driven by a decrease in show results in North American music. Adjusted operating income at $3.5 million for the fourth quarter of 2009 was down from last year due to the decline in North American music. Operating loss in the fourth quarter was $64 million, an improvement of $259 million over last year due to the goodwill impairment we recorded in 2008.

For full year revenue we were at $4.2 billion, up 2.3% compared to 2008 driven by international music strong show results for the year. Revenue increased 7% for the year excluding the FX impact. Adjusted operating income was $165 million in 2009, up 10.4% due to increases in both international music and ticketing. Operating lots for the full year was $52 million, an improvement over 2008 by $245 million from the 2008 goodwill impairment, partially offset by $36 million of acquisition costs.

Our concerts globally, at total number events, was down 3.8% in the fourth quarter versus last year, down 2.1% for the full year compared to 2008. Total global attendance was flat for the full year compared to 2008 with international music actually up 22% and North American music down 9%. At international music, adjusted operating income increased by nearly 19% for the year.

Sponsorship continued to outperform, with revenue up 7% in the fourth quarter, and up 6% for the full year. This was a solid performance, given the global economic downturn and the impact of the overall advertising market. Ticketmaster's revenue was $409 million in the fourth quarter, up 6.5% due to growth in average ticket fees along with Frontline results. Tickets sold in the quarter totaled 34 million, down 3.7% from 2008, but on a same store basis excluding Live Nation tickets lost, ticket sales grew slightly and average revenue per primary ticket improved 4%. Adjusted EBITDA $73 million for the quarter, up 24% driven by ticketing growth and cost savings partially offset by $10 million in merger costs.

Operating income was $35 million in the fourth quarter, compared to an operating loss of $1.1 billion last year due to the 2008 impairment to goodwill. For the full year, Ticketmaster's revenue was nearly $1.5 billion, an increase of 2% driven by a full year of Frontline. Ticketing revenue actually decreased 8% compared to 2008, driven by the loss of the Live Nation tickets, foreign exchange and softer results. Without the Live Nation impact, ticketing revenue was flat for the year and also excluding FX was actually up 3%. Frontline artist management generated full year revenue of $192 million of the total.

Adjusted EBITDA was $248 million in 2009, down 4% due to merger costs of $32 million, the Live Nation impact, soft resale performance and China exit cost. Without the Live Nation impact, adjusted EBITDA increased 9%. Operating income for 2009 was $96 million compared to an operating loss of $954 million in 2008 due to the goodwill impairment last year.

Ticketmaster sold 130 million tickets in 2009 . Ticket volume was down only 2% excluding the Live Nation impact and down 8% including the Live Nation impact. Also, average revenue for primary tickets increased 3% excluding foreign exchange.

Turning to the balance sheet, at December 31st, Live Nation had total cash of $237 million and free cash of $95 million compared to $32 million last year. Deferred revenue was $285 million compared to $226 million last year, driven by ticket sales of future shows. And Live Nation's free cash flow was $59 million for 2009, a slight increase over last year's $55 million. As of December 31,Ticketmaster had total cash of $555 million comprised of client cash of $302 million and operating cash of $253 million. For the full year, free cash flow was $114 million, down $53 million due to merger costs and the timing of ticket sales.

As of December 31st, Live Nation's total long-term debt including outstanding retainable preferred stock was $780 million compared to $864million last year, driven by pay downs of $96 million on the revolver and term loans, primarily from asset sales. Ticketmaster's total long-term debt at December 31 was $812 million. That is compared to $865 million last year after repayments of $53 million during the year. As a combined company we will continue to operate under two separate debt silos until we complete a refinancing.

We have no significant debt maturities until June 2012. We are discussing various options with our banks and monitoring the market as we evaluate our refinancing options. For both of the companies, we continue to remain comfortably in compliance with our debt covenants.

On a combined non pro forma basis, adjusted operating income for the full year in 2009 was $444 million. The combined free cash flow was $173 million. As of December 31, 2009, the combined net debt including preferred stock and net of free cash and operating cash was $1.26 billion.

We will begin reporting consolidated results in the first quarter of 2010 from the close of the merger. We are now 30 days into the merger and continuing to evaluate the operations. But based on current expectations, we estimate our synergies before one-time costs will be approximately $40 million in the first year. Total severance and restructuring costs to achieve these synergies not expected to be recurring are currently estimated at $15 million. This cost excludes merger costs as well as debt issuance cost and impact to interest expenses that don't impact our adjusted operating income. We expect to sale of Paciolan and the AEG white label agreement and will together reduce AOI by about $20 million in 2010.

We currently believe our global concerts will see growth in the single digits and the artist management business will see growth in the high single digits. Ticketing will be flat to a slight decline so, we are currently expecting for the full year after taking into account synergies, net of costs to affect the synergies and the lost business due to the remedy that AOI will be flat to slightly down in 2009. We currently believe we will generate free cash flow growth in 2010 with a total estimated of approximately $200 million.

We will now open up the call

(Operator Instructions). And your first question comes from the line of Bishop Cheen from Wells Fargo.

Hey, everyone, thank you for taking the question, and congratulations. We feel your excitement on this side. I understand the twin silos until you have a reason to recap and consolidate. But I believe that both companies work under covenant EBITDA. Can you share that with us on the call or is that something I need to follow-up off line with you?

You mean the actual calculations for the covenant?

Yes, if you can give us what the covenant EBITDA is.

We don't typically share that because obviously the bank EBITDA does a different calculations for both companies, but we are comfortably in compliance on both sides.

Right. Okay. That tells me I will follow-up with you after. Thank you.

All righty. Thank you.

Your next question comes from David Joyce with Miller Tabak and Company. David?

...domestically and internationally, what do you have in your contract for them? Are you buying them out? What should we be expecting as the year wears on there?

I'm sorry, David, you were cut off at the beginning. Can you just repeat that?

Yes. You mentioned that you will be migrating the ticketing that has been on the CTS platform over to Ticketmaster. Based on your contracts in place with them, what should we be expecting from their side of the equation?

I'm not sure what you mean by their side of the equation. I will tell you from our side of the equation. In America we have been using the CTS platform for the last year. We haven't been satisfied or thrilled with the functionality that we were expecting to get. And we will, as permitted under our contract, we will move our tickets to our Ticketmaster platform to realize our synergies and also to be able to unlock the innovation that we were hoping to get done. In the UK we launched on February 1st with the CTS system. Since the launch we have had a number of operational issues. We are waiting for CTS to get that system compatible and competitive as we monitor that very closely in the UK.

That's what I was trying to clear up. Was there anything that you -- we're going to have to pay to get out of a contract with them?

No, there is no getting out of a contract. We contractually in America can use any system we wanted. That was always our contractual right, and Ticketmaster is a superior system, and we will move to that. We will continue to pay our annual fees to CTS on our Live Nation tickets as per the contract. Our European countries all have contractual payments that will continue to split as per the contracts.

Okay. And on the -- I was just going to ask on the outlook for the concert season, with you taking out some of the lower margin venues or events, a quarter or two ago you mentioned that there were -- there was an increase in supply of artists and groups ready to get out on the roads for this session. How does that -- has anything changed there with you taking out some of the lower margin events?

I think I got the question. Both businesses, Ticketmaster and Live Nation as you know are leadership positions. We have over 11,000 contracts with Ticketmaster and over 22,000 concerts at Live Nation. And we know we can run those businesses even better than we have been running them. We know we have unprofitable customers. And we are going to make sure going forward that we continue to look at our roster and get out of the businesses that aren't delivering the margins so we can focus all of our resources against the clients and artists that are providing the greatest growth opportunity. So you will -- we will continually look at the roster on both sides and figure out where is the best place to spend our time and resources.

Great. Thank you.

(Operator Instructions). Your next question comes from the line of Steven Pfeiffer with Wells Capital Management.

Hello. My question goes for how the capital structure impacts your corporate strategy. I mean, you are having to keep Live Nation assets and Ticketmaster assets separate because of how the term loans are. Does that make life difficult for how you are planning things on there? For example, the Live Nation venues, they went and paid for and developed their own ticketing strategy, and now it is going to be switched over to Ticketmaster systems. When you do the ticketing for those locations, does that profitability show up on one side of the house or the other? And how do you make those decisions and does that really impair your overall corporate ability to be flexible?

No, it really -- the beauty of what we are doing in this merger is -- it is really, at the end of the day complementary businesses. If you look at Live Nation, 90% of the money that it generates comes from its 22,000 concerts and being a promoter and running ancillary businesses onsite and sponsorship. And 90% of what Ticketmaster does for a living is the ticketing platform. So the overlap in this is quite minimal, actually compared to maybe some larger mergers of equals that are in the same business line.

So the silos really have no effect. The concert division is full steam ahead. They will still get their rebate whether they are using a Live Nation platform or Ticketmaster. So the operators there will still get their regular rebates and will hit their bottom line. They will be included in the adjusted income numbers I referenced for the concert division. And in the 40 million in synergies we talk about, obviously one of the big synergies is by shutting down Live Nation ticketing in North America and the fixed costs that well occur annually in the $15million range will go away, as we now just move that on to the scale Ticketmaster platform in North America. And Ticketmaster will pick up some EBITDA and revenue because in theory they have picked up 10,000 to 12,000 new tickets from a new account called Live Nation overall.

So the profitability that the Live Nation side got -- creates from doing the tickets that they created on that side, that profitability is now showing up on the Ticketmaster side, is that correct?

Yes. If you looked at our current numbers, we would have had a ticketing P&L line that was a unit on its own that was generating some contribution from selling those 12 million tickets that it was retaining as well as giving the rebate to the concert division. We no longer have a Live Nation ticketing department. We have a Ticketmaster division who will now get the benefit of the extra 10 million tickets and the contribution that will come to that.

But aren't those just two separate -- I mean according to the corporate capital structure has to work under, they have to be treated as two separate companies, don't they? Can you really freely transfer and say, this side will be able to do this and make that money? Don't they have to be treated as separate, standalone companies?

But it is an arm's length transaction. If Jason Garner in charge of the concert division gets bonused and rewarded for growing his division, he would demand that he would get a market rate rebate for his venues. He doesn't care if it is Ticketmaster or Live Nation. He needs his market rate rebate to be competitive with the other promoters. So he will continue to get the market rate rebates that he would have historically got . To Ticketmaster they are now serving a new customer. It is called Live Nation venues and they will give them the market rate rebate and retain the market rate contribution to

Sure, but then the Live Nation though in addition to having the venue side where they made the rebates, they also had the ticketing side which made profits. That's why you got into the business in the first place and we talked about this with you last year. You got into it because you were going to make money. Now the money that's being made isn't being made by Live Nation anymore, correct?

We'll try one last time and we will move on and see if we can get there. The venue concert division economics have not changed. They didn't change last year, and they didn't change this year. They get a rebate because they are a venue owner. The last year in 2009 got it from the ticketing division. This year going forward they will get it from Ticketmaster. The net company benefit is that we were able to eliminate our ticketing division and achieve those $40 million in synergies and the benefit will be picked upon the Ticketmaster side as they have now more volume. So the net number overall is one arm's length transaction, but the net synergies of not having two ticketing platforms is the net positive to the overall company.

Operator, can we go the next question, please.

Your next question comes from the line of Tuna Amobi with Standard & Poor's.

Thank you very much. I guess I got to say congratulations on getting the deal through. So the question for Barry, it sounds like from your prepared, your earlier comments that you kind of view --

That is very complimentary. They were not prepared.

That's well taken. In terms of Liberty Media, it sounds like you would characterize John Malone's approach as friendly. As you look down several years from now, I know you said it is frozen at 35, but how -- what is kind of the thinking in terms of potentially -- you know, the pathway of unwinding that stake, so to speak. I realize it is still a little early, but would you view this as some kind of strategic or financial kind of arrangement? I know you and John Malone go way back. I am just wondering how you see this kind of unfolding several years from now?

First of all, you really should direct the question to Liberty Media and Dr. Malone. It speaks for itself. They are increasing their ownership and the reason they are doing it is they can't go above 35% is because they want a bigger stake in our business. I suspect it is long-term, but you have to ask Liberty. It is certainly supportive of the merger itself and the prospects of the company. Beyond that, direct your questions to Liberty.

Okay. That's fair. Switching gears to the conditions of the approval from Department of Justice, I think most people might concur that some of the conditions appear relatively benign -- licensing your software to AEG and selling off your subsidiary ticketing. So in light of some of the news that has been coming out of Washington, I want to call it noise, but given what has happened, is it fair to say that , you know, that these conditions are not something that could create undue concerns over the longer term? Are there things that perhaps create some concerns near

The Department of Justice and the states and the overseas authorities conducted very extensive investigations and negotiations. And we think that the remedies were fair and fair for all and we obviously as caretakers of this business would not have agreed to conditions that would have severely hampered what we could do in the future. So we have even post these remedies, that Michael and I have the tools to go out and grow the business in the way that we always intended which includes these new methods. Right now everything revolves around the ticket, but yet we are selling along with the ticket. You should be a lot of new business opportunities from us -- everything from dynamic ticketing, to paperless ticketing, to bundling recorded music and merchandise with tickets. So yes, we feel good about post-remedies, our ability to run the business.

That's helpful. Along those lines, given the earlier comments, I believe it was Michael, regarding the relationship with CTS, seems like in the UK, the regulators are reopening the book on this. And CTS appears to be one oft he parties that's driving that . How does this all factor in your comments regarding the operational issues in Europe, and how the CTS relationship unfolds, particularly in Europe. Do you think it ever gets to the point where the regulators might actually take it another step further and try to undo some of the -- you know, some

No .

Okay. That's a short answer can you provide --

We are really just trying to give our first earnings call and give everybody an idea of business and segments and how we are going to grow it. Speculating on what European regulators may do one day is certainly not my strength. We had a long review of every regulator in the world. They have had all of the good fortune of spending the year with us, and we support everything in the end they subscribe to. We are now just full steam ahead on making a great company for employees and shareholders.

And lastly, just a quick housekeeping question for Kathy. And by the way, the numbers and outlook you provided are very detailed. I want to commend you on that. But I think Kathy said you plan to prepare -- to consolidate numbers from Q3. My question was, are you putting out some sort of pro forma numbers?

No, Tuna, you misunderstood. It is from first quarter starting with the merger day.

Okay.

So 2009.

Yes, the release has the 2009 numbers and then obviously going forward we will be reporting on a combined basis.

So when is that going to be. Is that out already?

The 10-K's are both on file for both companies.

Super. Thank you very much.

all righty. Operator?

Your next question comes from the line of Ben Mogil with Thomas Weisel Partners.

Hi guys. Good afternoon, thanks for taking the call. So on the sponsorship side, you did 181 last year in '09. How much of that automatically rolls over to 2010 because it is multiyear agreements?

You know, as I just gave you the number earlier we have 55% contracted right now, you can assume a large percent of that is rollover. We would not have assigned that in the last month. We typically have about a 45%, 50% rollover year over year.

Okay. So we are looking around the $85 million, $90 million of rollover. Is that a fair statement?

On numbers?

Yes, on dollar figures.

Based on revenue.

On revenue, yes, yes.

Okay. Secondly, sort of Michael on the maintenance CapEx front, you have been able to take it from 45 to17 over the last couple years . As you kind of go out and look forward, how much longer can you keep it down at 17? I realize you have shrunken the footprint of the business as well. How much longer do you think you can keep

You know, one of the challenges we had, and we didn't communicate well for a couple years, there was a perception that we had a large CapEx to run all of these buildings. And we did a bad job of confusing revenue CapEx, the things we want to invest on versus pure investment -- per venue roofs and parking lots. We now know we can run and maintain our global platform on a physical basis anywhere in the 17 to 25 range. That's the number that is an annual number. Anything we spend beyond that is pure choice. If we want to roll out -- we are looking at electronic POS systems in the venues so you can order your drink at your seat. We are looking at lots of ways, but those are only investments we would make if we knew the return was worth those investments. But on a pure CapEx, to put in a new parking lot and keep everything running, where it is about a 17 to 25 range.

Okay. That's fair enough. Kathy, a couple for you. On the EBITDA front, the flat year over year number, you may have said this, but the line was cutting in and out. Is that number -- is it flat excluding synergies and excluding one-time costs? Is that the way that you are looking at it?

That builds that in. It is taking the growth in concerts, the growth in artist management, the fact that tickets will be flat to slightly down and then taking into account the synergies, the one-time costs and lost business from Paciolan and AEG for the remedy.

Okay.

And then to jump on that have seen your report and you are very aggressive. And we want to make sure we set the bar properly. One of the big challenges and I want to restate it again. We had hoped this was going to be done in October. If the dream was done we would have been done in October and we would have spent a lot of money on severances and tried to clean it all up and been off to a 2010 race. Reality is it is March now, and we will have to absorb the one timers. We will not get full year synergies. We are going to get 10 months' worth.

On simple math Ben, if you looked at the pro forma of the 444 and added $40 million in synergies , then take down $20 million for the cost to Paciolan and the new higher cost of delivering a white label to AEG, throw in another $15 million in one-time severance costs for the 200 plus employees, and you are now up $5 million . And then throw another $10 million in there in contingencies on things we will clean up this year on some businesses and other costs that we will find. And our goal this year is to deliver some growth on the concert side, deliver some growth in the Frontline side, on the ticketing side.

We have had a few bumps we want to get through. We lost a big sponsor in the last month, a web loyalty program we used to make $12 million on. That is gone now through some new regulations. So we have to replace that. And we -- so we believe overall it will -- as we get through the year we are not certain whether it is $3 million or $5 million cost to us to run the white label. So we want to give ourselves some breathing room on the Ticketmaster side since they have the heavy load of delivering the white label, absorbing our costs and we want to make sure we have the right organization when we are done this year. So we are looking to repeat our 445 and set up the business right and

That's fair enough. The $15 million is for one time fees is obviously just a 2010 event. It presumably does not roll over for the following year?

Yes, that is just severance employees.

Okay, that's what I thought. Irving, I don't want you to feel left out so I will ask you a couple. Dynamic ticket pricing, I know you rolled it out in Sacramento for The Eagles, can you talk to us about what you are seeing in general about how the consumer is feeling. Secondly, following the deal, are you seeing Frontline have more opportunities as some guys that were previously thinking they could do it alone seeing your business as being more interesting than it was on January 24?

To answer the second question first -- we are in conversation for a lot of potential acquisitions. I wouldn't say there are any fewer or any less. Obviously, the uncertainty of the merger might have held some people up. We were certainly too busy to really focus on it. Yes, you should expect that we will grow Frontline not only through our normal way of signing clients but also some acquisitions.

The dynamic pricing experiments, we are out with four or five MDA teams and now we are starting on the rock and roll side at both theaters and in arenas and it has been phenomenally well received by everyone except the secondary broker communities as you can well imagine. The facts and figures as I understand them on the Sacramento Eagles show are that 50% of the tickets have been priced lower and that was absorbed by the 28% highest priced tickets. You have never gone to an Eagles show I know of and basically be able to buy a $32 all in ticket. You know the Eagles, wherever we can, are all in pricing. That $32 ticket basically represents a $25 ticket and a $7 service charge. We issued paperless tickets for these $32 tickets because the band and I believed they were worth considerably more than the $32. So our promise to reduce costs to fans resulted in a show in the secondary market where those seats that normally wouldn't have gone as quickly have just flown out the doors.

And AEG building in Ontario is about to go on sale. AEG is also very interested also in learning about dynamic ticketing. That's the next Eagles show that will go up with dynamic ticketing. And it has just been phenomenally successful. If you look at it and you look at the interactive seat maps, which has worked flawlessly -- especially if you look at some of the NBA teams that have used it. The aisle seat is sometimes selling more than the seat next to it, but the Sacramento experiment was approximately 10 prices. We get -- having run Ticketmaster we get lots of complaints. We breathe and we get a complaint. I will say to you, I haven't had one complaint off the Sacramento experience other than Don Vaccaro and our friends at TicketNetwork.

That's great. Thanks for the update. I appreciate it.

Thanks. Operator?

The next question comes from the line of David Kestenbaum with Morgan Joseph.

Thanks a lot. Just two quick questions. One is, it seems like you grew a lot faster internationally this year. Do you see that as the trend going forward? And I know in your comments you mentioned you are looking for international acquisition opportunities. Can you just elaborate on what markets you find attractive? And then second, are you comfortable with the debt levels where they are today? If you generate the $200 million in cash in the next year like you think you will in free cash flow, what are you planning to do with that cash? Thanks.

All right, we will do it in three part. I will talk about the core business, Irving will take the Frontline expansion, and Kathy on the cash.

You know, we believe international is a great opportunity in that in North America we are by far the market leaders in both concerts and ticketing. As you know with any business, getting that extra percentage of market share when you are the leader is expensive. Getting 10% market share in an unserviced market tends to be a great growth opportunity. So we believe internationally is ripe. One of the great parts about our business, unlike many other industries, is you truly can globally expand with your current skill set. Meaning Shakira will tour everywhere with the same production, with the same crew and buildings are pretty much the same all over the world. So we can transport that skillset very easily.

There are some major markets that we have held back in as we have gotten through the merger . But we now have an exciting bundle between ticketing and concerts to start looking at Australia. We think it is a great market. We want to continue to expand in Canada .We think there is great opportunities to continue in Canada. Latin America, we have a great relationship with Ocesa and C.I.A., and that market has proven to be very, very strong in the last couple years. Lots of artists, Coldplay is there right now, selling out arenas and stadiums, ACDC sold out for us. So we would like to continue our relationship there.

And in Europe, where we are a very strong network, we just added some more resources in France. We think that's obviously an opportunity. And Germany, we have not been in historically in any strong manner. We had a relationship with Marek Lieberberg where we had an equity acquisition in his business, and in return we had a relationship with CTS where we were using them as our exclusive promoter for the last five years. That ended in December of 2009. We think that is a -- you know, you just can't look at Germany as one of the top three markets in the world where we have a zero market share and a lot of content and concerts flowing through there, and a ticketing platform to not think we could expand our concert platform in Germany with or without CTS or who ever ends up being a great local partner.

So we would look at Japan, also Australia and Germany as one of the top three markets -- the top three markets of the top 10 we are not in, in Latin America, and we are having conversations with promoters all over the world about interesting alliances that would love to be the local Live Nation office. Irving can talk about his Frontline and some of the

As you know we have Roger Ames headquartered in London, and he has now been given the green light to open and staff and acquire and we are going to start -- we will start in the UK. We will start building a Frontline and our merchandise operation and e-ticketing operations over there. One thing I stated many times during the merger was that this merger allows us -- in the old days if Ticketmaster wanted to go into a territory they would usually buy a company, and then have to import their technology and then go out to promoters and try and acquire rights. Outside the United States, most of the territories have -- they are based on ticket allotments, where the promoters and the acts control a good portion of the tickets. So now as a promoter and a ticketing company, the cost of entry to open in an international territory is basically just hang a sign on the door and open as opposed to the old days where there had to have been a significant investment.

And on the question of free cash flow growth and debt, obviously our company has been focused on growing free cash flow and deleveraging and we are continuing to focus on that. That will be one of the primary goals.

But are you comfortable with your leverage ratio as it is today? Or do you think you could -- there are other opportunities to utilize that cash?

You know, I think we have said many times that we are obviously comfortable where we are. But our goal is to get down to a range more in the three times on leverage. We will continue to focus on that.

Okay, thanks.

Operator?

Yes, your next question comes from Brett Harris with Gabelli and Company.

Hi, guys. First one is for Kathy. Live Nation as an NOL, do you think you can use it in 2010 and if you can would it be incremental to the $40 million synergies?

Remember, the $40 million synergy is an adjusted operating income target. We are looking at the tax structure right now and doing some tax planning around that to try and get the most optimal structure for the combined company. So yes we will be able to use part of our NOLs, not all of it in one year. But certainly looking for the best long-term structure for tax

Okay. And the second is for Irving. You have Miley out there with paperless. You have the Eagles with dynamic pricing. By the time you get to the summer, do you have any -- I know it is early, but do you have any expectations on penetration on those two just in terms of your owned and operated tickets?

Actually, no, because you have to reconfigure each building seat map. Again, it requires all rights holders along the value chain to want to get it done. It has to be the artist, the venue, the promoter. So it will move out. I don't think it will move rapidly. Mike will know better than me, but by midyear we were hoping on our dynamic pricing tools we were hoping to allow the rights holder to sit in his own office and change prices. We are waiting for that tool also. But it will grow and it will grow rapidly. Artists are going to understand its benefit as well as an all-in pricing, and we are not meeting the kind of resistance we did when we first started.

We should expect it to become material more in 2011?

yes.

Okay. Great. Thanks.

Operator, let's make the next one the last one please.

Yes, ma'am. Your final question comes from Dan Kilmurray with UBS.

Hi, good afternoon, everybody. Congratulations on successfully completing the merger. Maybe you can just give us a sense of where you think the margin drivers to the upside in the business are going forward, and which -- I mean, some of it is obvious, but I guess I also just wanted to clarify the advertising revenue number that I reared heard at $7million, and is that actually the number? It seems awfully low for a business with this dynamic. And maybe you can just walk us through a little about how you think you can drive some of the higher margin pieces of your business over the next couple of years.

All right. I will take a stab at a very top level structure. At the top end, I will restress again where will the growth come from? At the core, the engine, to this company we have a fabulous Ticketmaster-Live Nation concert leadership business. Those are strong machines that will continue to lead their industries and we will look to drive costs out of both of those businesses and maintain that strong core business. The growth will come from one, Frontline as we have alluded to. It is a high, high margin business and every dollar we make at Frontline is a much higher business than anywhere else. Number two, sponsorship. High, high margin for us. We have well over $100 million. There wouldn't be another music company probably where it would be challenging most sports companies that have over 850 sponsors . And now with this new platform of artists and global ticketing and artists, we think sponsorship is a huge opportunity to grow the margin business. International tends to be a double margin business compared to America. Every time we expand internationally we drive the margin. And on the core business of the marketing numbers that you mixed up, what we were saying was the e-commerce division, both divisions have really just put their toe in the water in on-line advertising they can generate from their sites. And we know we have a huge opportunity to grow that 7 to a much bigger number for both Live Nation and Ticketmaster.com and our other websites. Overall marketing, both companies would spend over $200 million dollars on marketing. We believe that most of those dollars are still traditional mediums. Over time if we can use our 141 million names and our database and become a real leader at effective database one-to-one marketing and motivate purchase through that medium, we can transfer a lot of those dollars from traditional to on-line and achieve some of those efficiencies which would fall to Ticketmaster and Live Nation bottom line. So those are the big buckets. We get those pieces moving in the right direction, the

Great. And then just one last question for Kathy. In the debt schedule, Kathy, is there anything in there that is significantly higher cost to the company that could potentially get targeted first in terms of any kind of deleveraging you have in the three buckets of your debt structure?

The most expensive piece is the Ticketmaster. That could be part of it.

Okay. All right. Thank you very much.

all right, thank you.

Thank you, everybody. On behalf of Irving and Barry and myself we are thrilled. We are a team dedicated to growing this business and delivering to all of our shareholders and thank you. Barry?

I listen to this and I envy Michael and Irving and their colleagues because after an enormous amount of wear and tear over the last year, it is enormously stressful to go through that process of government review et cetera. That everyday joy they want to get, I hope they get it and the real pleasure of building a company that is so well funded is just amazing to me. Anyway, enough of all that. Nice to be here, and I wish you all a nice earnings call in three months.

Thank you.

This concludes the fourth quarter and 2009 year end conference call. You may now disconnect.