Live Nation Entertainment Inc (LYV) 2010 Q2 法說會逐字稿

Good afternoon, my name is Patrick and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Live Nation Entertainment second quarter 2010 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there be a question-and-answer session. Before we begin, Live Nation Entertainment 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 result to differ.

These forward-looking statements include statements relating to the Company's anticipated financial performance, business prospects, new developments, and similar matters, and/or statements that use words such as anticipate, estimate, expects, intends, plans, believes, and similar expressions. Please refer to Live Nation Entertainment's SEC filings, including the Risk Factors and cautionary statements set forth in the Company's most recent filings on Forms 10-K, 10-Q, and 8-K.

For a description of risks and uncertainties that could impact the actual results. Live Nation Entertainment will also refer to some non-GAAP measures on this call, in accordance with SEC Regulation G Live Nation Entertainment has provided a full reconciliation for the most comparable GAAP measure in the earnings release on their website. Reconciliations and other financial and statistical information to be discussed on this call can be found at www.livenation.com/investors. It is now my pleasure to turn the call over to Mr. Michael Rapino, Live Nation Entertainment's Chief Executive Officer.

Good afternoon everyone and welcome to our 2010 second quarter conference call. I am joined today by our Executive Chairman, Irving Azoff, and our CFO, Kathy Willard. Results for the second quarter were in line with our plan, allowing us to maintain our guidance of $405 million in adjusted operating income for the full year. With all of the headwind in the industry we have delivered a good bottom line quarter, with AOI is up [2.3%] (correct by Company after call), free cash flow up 31%, and AOI margin up from 7.8 to 8.9.

Declining industry volume in 2010 has been the primary impact on our revenue performance driving revenue down 9.7% for the quarter. After coming off a strong year in 2009, the economy's impact on fan ticket purchasing behavior is worse than expected, and pricing was too aggressive in 2010. We are heading into our biggest quarter, and ticket volume will be the risk in the third and fourth quarter for both North American concerts and ticketing. I will take you through our division highlights on a combined basis, as well as our action plans to meet our AOI targets.

The concert division has four metrics that drive its AOI, show count, attendance, on site spend, and revenue per ticket. The 2010 challenge has not been show count or on site spend, but rather ticket sales. On a global basis we held over 5,600 concerts in the second quarter, down 3% versus last year, or for six months held over 10,000 concerts which is flat year-over-year. Concert attendance for the quarter was 12.4 million compared with 13.1 million last year, a decrease of 6%, and for the 6 months attendance totalled 19.3 million, compared with 20.2 million last year, a decrease of 4% versus the industry decline of 12%. North American concerts show count is up 2%, while attendance is down 7%. Revenue per ticket for the first six months is $64.65 compared to $67.47 in 2009, a decline of 4%.

On site spending has held strong ancillary contribution per head in our amphitheaters was $18.55 for six months versus $18.35 for 2009, up 1%. Our outlook for the remaining six months, as of August 1st North American concerts has 1,773 shows on sale for Q3 and Q4, versus 1,676 for the same period in 2009, an increase of 6%. With 9.8 million tickets sold to date versus 10.1 million in 2009, a decline of 3%.

On International our show count is down 2%, and attendance down 1% from last year. Revenue per ticket for the six months is $59.83, compared to $61.64 in 2009, a decrease of 3%. On site spend has remained strong internationally as well. Ancillary contribution per head at our festivals was $10.00 for the six months, versus $9.90 in 2009, up 1%. Our outlook for the remaining six months in International as of August 1st, International concerts has 874 shows on sale, versus last year's 822, for an increase of 6%, with 3.7 million tickets sold, versus 4.8 million in 2009, down 23%. However, this reduction in International was foreseen, as it was driven last year by stadium events.

Our concert division for the next six months plan is simple, drive revenue and reduce costs, to try to meet our AOI targets. We are aggressively driving market promotions for our low-selling shows to drive incremental attendance, to date this program has sold approximately 2 million tickets, and we expect to sell another 500,000 tickets by the end of the summer. Additionally we have enlisted our support from our major sponsors marketing reach, to drive targeted promotions to drive sales. We have frozen discretionary fixed expense, which is expected to result in $3 million of savings for the second half. In addition to our planned variable cost reduction, we have put in an aggressive claw back plan with a goal of eliminating $10 million in the third and fourth quarter.

Now our ticketing division has three labors that drive its bottom line, ticket volume, number of venues, and royalty rate. In 2010 the team has made progress in reversing the historic royalty creep, and maintained all venue contracts. While lower ticketing volume is the main driver of reduced EBITDA in 2010. In North America ticket sales volume is down 14% for the second quarter, and down 12% for the six months, mostly driven by the concert industry, which has declined by 16%, and the arts down 21%. International ticketing is down 10% for the quarter, and 13% for the six months, also driven by the concert industry which is down 19%, and the arts down 8%. Royalty rates as a percent of revenue are down 6% year-over-year. Through the fist six months both the renewal rates and number of clients is up year-over-year, so the core business has stabilized.

Again in the ticketing division, like concerts we have adjusted our plan and our working hard to deliver revenue end costs to hit our bottom line, we are limiting increases in royalty payments, we are proactively rolling out in-house promotions to our clients, such as Ticketmaster Tuesday, and Tickets for the Season, to help drive ticket sales. We have initiated aggressive fixed and variable expense cutbacks, including freeze, hiring freezes, non-essential spend, reduced marketing, and significantly decrease in headcount. We are also on a fast track to roll-out our seat maps and Walmart kiosks, which are driving incremental ticket sales.

Our third division is our e-commerce, which houses livenation.com and ticketmaster.com, it continues to generate a robust traffic, with a combined database of 170 million names, we had an average of 27 million monthly unique visitors in the first half of 2010, a 6% increase year-over-year. Total gross value of all tickets sold was $3.2 billion for the first six months, versus $3.7 billion versus last year's spend, and we currently rank as the fifth largest e-commerce site globally. We generated over $20.8 million in the first six months of 2010 in online advertising, versus $21.2 million in 2009.

Our fifth division is sponsorship, which is having a great year, they have over 550 sponsors, and recognized nearly $60 million in total revenue for the first six months of the year. Through August 1st our contracted sponsorship revenue was 3% up, International sponsorships are currently expected to grow 7% in 2010.

In closing, we are aggressively taking steps to maximize our results, and achieve our 405 AOI goal for the year. Longer term we believe we have all of the segments that are poised for growth, our integration efforts are largely completed, and we now have the right pieces in place. Now it is all about execution and positioning ourselves to maximize our platform's full potential as the economy rebounds. As for next year we currently that 2011 will have a strong concert lineup, and the industry should rebound, as all participants in the value chain have the same incentive to drive attendance. 2010 has taught us this is achievable if we price the show right, and do a more effective job of meeting the fans needs. With that, I will turn it over to Irving Azoff to discuss Artist Nation.

Thank you, Michael, and thanks to everyone for joining us today. We believe that there is a reason why Live Nation Entertainment is the leading concert promoter ticketing company in music artist management company in the world. It is because we all share a common vision to deliver the best entertainment that keeps the consumer coming back. Artist Nation includes our artist management and our Artist Services businesses.

The main driver of Artist Nation is our front line Artist management business, which continues to be the largest music management company in the world, representing more than 250 artists and growing. Our goal is to provide artists world class services through our portfolio of businesses. Artist Nation's results for the quarter were below last year, primarily due to the timing of certain major artists touring schedules. For example, Kenny Chesney and Fleetwood Mac had strong tours during Q2 in 2009, but did not tour in 2010. Merchandise business in the quarter was similarly impacted by reduced touring activity in the US, and softer retail markets.

The key artist tours during the summer and anticipated for the balance of this year include The Eagles, Jimmy Buffett, The Glee Tour, Keisha, Brooks & Dunn, Aerosmith, Kid Rock, Kings of Leon, John Mayer, Maroon Five, REO Speedwagon, Scorpions, and Weezer, to name a few. Despite a difficult operating environment, we were more confident than ever that Live Nation entertainment has a unique business model to service artists and fans, and we believe it will drive great shareholder returns as we execute and expand our business.

As Executive Chairman of Live Nation and CEO of Front Line, my mandate is clear, to create a better experience for fans and artists alike, while enhancing shareholder value. In recent conversations with artists, they understand the challenges the economy presents for their fans and their business. It is about fans staying engaged with fans, filling venues, and ensuring tickets are at the right price. Artists have been very receptive in our meetings and are working with us to achieve these goals.

To cultivate further growth, we are focused on direct signing, acquisitions, and International expansion. The opportunity for continued International growth is strong. We are sending artists all over the world, including Australia, Europe, and South America, and even South Africa, where are margins are better than they are here domestically. Whether it is Neil Diamond or The Eagles, there is a lot of untapped potential for our artists outside of the North America. We remain confident that Artist Nation is on track to grow in the future, based on our commitment to artists, and ability to work with the industry in our Live Nation businesses. We believe we are well-positioned to drive innovation in the industry, and continue to be a key driver for Live Nation's future growth. With this, I will now turn the call over to Kathy Willard for an overview of the various business units finances. Kathy.

Thank you, Irving, and good afternoon everyone.

Our second quarter revenue increased to $1.3 billion, up from the prior year reported revenue of $1 billion, and down slightly from the 2009 revenue on a combined basis, including Ticketmaster of $1.4 billion. This decrease over last year's combined revenue is driven by the decline in ticket sales for both concerts and ticketing. Adjusted operating income for the quarter was $112.3 million, as compared to $45 million as reported in 2009, and up over the combined 2009 results of $109.8 million. This improvement of over prior year combined AOI, was driven by the reduction of expenses, due to purchase accounting, along with cost declines from synergies and other cost reductions, partially offset by the reduced results from the decline in ticket sales.

Our operating income of $26.6 million in the second quarter compares to a loss of $8.1 million as reported last year, and operating income of $6.9 million on a combined basis. This increase results from the items impacting the higher AOI, along with lower acquisition costs and depreciation expense in 2010. For the first six months of 2010, consolidated revenue was $2 billion as compared to $1.5 billion as reported in the same period last year, and $2.2 billion on a combined basis. This decrease is again driven by the decline in ticket sales.

Adjusted operating income for the first half of 2010 was $113.8 million, as compared to $5.5 million last year on a reported basis, and down slightly from $119 million in AOI on a combined basis in 2009. This decline was driven by the $13 million reserve we recorded in the first quarter in concerts related to artist advances, partially offset by the improvements we saw in the second quarter. Our operating loss of $76.9 million compares to a loss of $96.4 million on a reported basis in 2009 for the six months, and a loss of $60.1 million on a combined basis. This increased loss is driven by the $13 million reserve, along with addition noncash compensation expense related to the merger.

At June 30th we had total cash of $1 billion, excluding the $309 million in client cash in the events related items, we had free cash of $329 million. Free cash flow for the second quarter was $64 million, as compared to $48 million on a combined basis in 2009. This increase in free cash flow was primarily driven by higher AOI, and reduced cash taxes during the period. Our deferred revenue was $743 million as of June 30th, as compared to $894 million as reported last year. This decrease is principally driven by the lower number of International stadium shows on sale in 2010, as compared to last year. As we have previously discussed, our adjusted operating income has been favorably impacted in 2010, by purchase accounting adjustments that resulted from the merger, which require us to write-down certain of Ticketmaster's loss contracts to current value, which reduces expense going forward, and to reflect other new advances of amortization expense. These changes primarily relate to sports league sponsorship, and non-recoupable venue contract advances.

For the first six months of 2010 the impact of these reduced expenses to AOI is approximately $18 million. We currently expect that the full year impact of purchase accounting in 2010 will be approximately $40 million. We continue to expect that we will benefit from approximately $40 million of merger-related synergies in 2010, and through June 30th we have actually realized approximately $13 million of these savings. We expect to realize additional synergy impacts in 2011 with an anticipated incremental savings of approximately $20 million.

As of June 30th our total current and long-term debt including capital leases was $1.74 billion, with no balance outstanding on our revolver. The weighted average cost of debt, including debt discounts and premiums was 6.01% at June 30. In May we completed the refinancing of our debt at what appears to have been an ideal time in the debt market, and consolidated the debt of our two companies. Our capital structure has been simplified, so we no longer have to maintain separate silos, and we are able to provide substantial liquidity to meet our expected capital requirements for the foreseeable future. The refinancing also allowed us to simplify our corporate structure through the merger of the former Ticketmaster public entity, up and into Live Nation, this combination allows us to consolidate our Federal tax position, generating approximately $15 million in annual free cash flow savings.

Because of the refinancing we recorded $21 million in expenses related to the debt extinguishment this quarter, below AOI, negatively impacting our net loss compared to last year. The number of debt covenants that we operate under has been reduced from 6 six to two under the new credit facility. For the second quarter our covenant ratios are 3.68 times total debt to EBITDA versus a covenant of 4.9 times. And interest cover is 4.5 times versus a covenant of 2.5 times. The EBITDA used in our covenant calculations is based on both trailing results and forward expectations. As a result, the full annualized synergy benefits from the merger are added to our trailing EBITDA to calculate covenants, and we are also able to adjust for certain noncash expenses.

These adjustments provide for substantial additional headroom, and we remain very comfortable with our covenant projections. Our capital expenditures for the first six months are $29.8 million, compared to $24.6 million last year, a slight increase driven by the addition of Ticketmaster. We continue to expect capital expenditures to be approximately $100 million for 2010, and that this is absolutely achievable, with approximately half of that amount expected to be for the maintenance projects.

In closing, our financial performance for the first half of 2010 was in line with our internal expectations, and we continue to maintain our guidance of $405 million in adjusted operating income for the full 2010 year. We will now open the call up for questions, operator.

(Operator Instructions). We will pause for just a moment to compile the Q&A roster. And your first question comes from David Joyce from Miller Tabak and company.

On the sponsorship line I was wondering if there is still room for more sponsors to be added, I think you typically will be tracking that along with the convert volume. Is there still more sponsors to be added in here for sponsor revenue in the third quarter?

Yes. Yes. I mean we do local, national and regional. The national and the regional ones are longer lead time. The local deals we do are happening on a monthly and weekly basis. So they would be focused very hard right now on closing as many deals as they can from all of our venues, amphitheaters, International, et cetera.

And on the concert volume, it looks like your number of concerts was a little bit less than we expected but attendance was a little better. Is this part of the trend of filling up the clubs better than expected? What sort of trend in the different venue sizes were you seeing in the second quarter?

The bottom line across all of the businesses lines, whether it is a club or an amphitheater, was just the less tickets per show was the real metric that is down, so as you know you can have a bunch of club slows versus one Greenday show, but the real number is what is your pure attendance divided by your show count, and is it going up, and obviously this year our show count is fairly solid and attendance is down, and it would be, at the end of the day, it is mostly driven along the bigger shows that has the bigger EBITDA effect, but as you can tell from Ticketmaster's industry number, for them to be down 15% or 16% across an industry, that would tell you that it would have to hit all segments of the business this year on the pull back.

Thank you.

(Operator Instructions). Your next question comes from David Kestenbaum from Morgan Joseph.

Okay. Thanks. Kathy can you reconcile the total revenue per attendee, you said it was $69.47 this year versus $70.47 last year, but last year you showed $78.00, so can you just reconcile the difference there?

The difference is that last year those would have included the sponsorship dollars, and now that we are breaking sponsorship out as a separate segment it has gone down, so if you want to get a comparable could you COO add that sponsorship revenue in and do the calc.

Okay. Alright. Thanks. And then Michael, can you talk about the conditions since the Analyst Day, I saw you signed up Gorillaz for a tour, have you signed up anyone else, or how are you feeling about the fourth quarter as far as new artists?

Well, as you can see the show count is not the problem. We seem to have a decent show count. Where we are feeling the softness would be again, the quality of the show count. We don't have a sizeable big lineup this Q3 and Q4 of A artists and arenas, that really drive the AOI. So I would say that the hole in the marketplace right now in Q4 more than Q3 is just some superstars that are going on the road that help push you over the edge.

Okay. And then finally why do you think, I don't think you really elaborated on it, but just can you talk about what is going on e-commerce, I mean it was down 10% year-over-year?

Yes it is a pure adjustment. When we took over Ticketmaster, they had a program called Web Loyalty, which was kind of a program where when you signed up at Ticketmaster, you could kind of get a credit card and take your credit card, and you can get discounts to a whole bunch of things. We shut that program down. It wasn't what we would consider a fan-friendly kind of product. So the bad news was it was, at a certain time bringing in about $10 million, but it was riddled with problems and State Attorneys were shutting down the practice, so we terminated the deal, so we have a bit of a catch up. So the good news is actually we dropped $10 million, but apps, but almost gained it all back through new online advertising, which has grown significantly. We just started with a bad comparable when we lost that, I think it was actually as much as $14 million across International and North America.

So was it $10 million annually, so about $2.5 million a quarter is what you are saying?

This year, yes.

Okay. Thanks a lot.

And your next question comes from the line of [Ben Shapiro] from Stifel Nicolaus.

Hi. I am on for Ben Mogil here. I just have two questions. First one, I was wondering if I could get the ancillary revenue per patron and the North American patron number at your O&O venues for this quarter, and then the second question was on sponsorship?

Okay. While Kathy is looking for that, what was the sponsorship question?

Okay so for the sponsorship one, I am I just wondering how much does attendance matter to sponsorship, is most of your sponsorship revenue for the year tied to attendance, or is it just flat fees per tour or venue, with respect to that are there minimum thresholds, where if you don't meet a certain amount of attendance levels, you have to give sponsorship refunds?

In general the sponsorships are tied to a venue, and yes, there would be some level of expected attendance on an annual basis, but being down 4% or 5% or 6% wouldn't even be close to a threshold that would require any repayments. So we would have no liability at the end of the year on any commitments that we didn't make from an attendance perspective.

Okay.

And Kathy?

Ben you were asking about on the ancillary per head if the amp was $18.55 for the six months?

Oh, I was asking for the quarter.

Oh, for the quarter it was about $18.59 not much different.

Okay.

Versus $18.46.

Last year, yes.

Okay. And then the attendance at the amps?

Attendance at the amps? Yes.

Yes, we have that. It is just down 2%. 8 point, Kathy is going to have to spell out the number.

For the quarter it was 2.4, 2,432 versus 2,709 last year.

Versus 2432 versus 2709 last year?

Yes. For the quarter.

Okay. Great. Thanks a lot.

And your next question comes from the line of [Seth Allen] from Gilder, Gagnon, Howe.

Hi, guys thanks for the taking the call. I just wanted to ask with respect to ticketing, the acceleration of variable costs and fixed costs, what specifically are those costs associated with, and how are you planning on maybe getting them in controls, so they are not accelerating beyond revenue as they have been?

Well, the number one driver of our variable has been our royalty, or what we call an effective royalty. What are we paying the venue out of that service fee, and it is usually a combination of a royalty split, and then a marketing and sales fund on top of that. So the two ways that we have already this year reversed it, and as we said, is going down a couple of percentage points, the first place to attack is your sales and marketing. All of the extra variable costs you would be spending against that client on top of your royalty. As it excelled over the last three or four years by tens of millions, so first goal is to reduce our sales and marketing variable per client, we have been effective at doing that.

And then number 2 is also look at reversing and freezing the annual royalty rate, and the way you get that done is you just start delivering a better product to the venue, and I think our team is well on the way of doing that, as we are met with most of the big clients, and our upgrading software and putting new releases out by the end of the year, and meeting a lot of their needs on a technology basis. So first goal is to reduce the variable sales and marketing, which is affectable now, and royalty rate will get better, as we continue to meet the needs of that venue operator.

Okay. And then the fixed costs?

Well, what do you mean, what are they, or how to--?

Yes. What are they?

Well, the fixed costs are, there are two parts to the fixed. It is the engineers and the operators and everybody that is running the software in our various offices, our call center and our sales force. So we have already this year started getting more efficient as we have reorganized our business from a geography to a product line, and we believe that there is more room in our fixed from our synergies, since synergies we have knocked $14 million of fixed out, and you would see us looking to find a comparable number like that going forward.

Okay. Thanks.

And your next question comes from John Healy from Northcoast Research.

Thank you. Michael, question for you on ticketing. I thought you made the comment that your renewal rate on venues were up, and you were also making some progress on the royalty fees there. I was just trying to tie those two things together, how you are having success at the royalty renewal rates, and maybe what the competitive environment looks like?

Yes. The challenge with ticketing is, if the industry was up and we were flat we would be making our numbers, so the hard part is that is a business that really has at the end of the day a limited revenue levers, but the levers that we are going to control and are doing a good job on is the royalty rate. And it is really just I think starting to be the fruit of the new merger. Our proposition when we are walking into those venues now, when we are talking about our technology offering, our ticketmaster.com, number 5 website listing, an audience that that is bringing them, and the new focus that we are providing that, and also the content that Live Nation and Front Line are bringing. When you are kind of looking at that new whole Live Nation Entertainment proposition as a venue owner, it is a bundle of offerings that Ticketmaster didn't have a year ago. So that is kind of our number one sales point right now, that has given the team the tools this year to, as we said, we haven't lost a client this year. They had lost a couple, three last year. We signed some new ones, and I think we will end this year at the same rate of clients, renewal rate up, and possibly a few new ones to add to the roster, based on that kind of three-pronged offering.

Great. Okay. And then question for you, Kathy. You ran through the EBITDA covenant. Would you be able to walk us through what is added back there from a level of noncash expense and forecasted synergies?

The biggest item is, you are basically pulling together, pulling forward the full $60 million of annualized run rate on synergies versus the, call it $13 million that we have gotten to ,date and then the noncash items are things like that the reserve on the artists that we booked in Q1 of about $13 million, receivable reserves, things like that. So you can pretty much pull those items off the cash flow statement, but those are the three biggest items.

Okay. Thank you.

Okay.

(Operator Instructions). Your next question comes from Tuna Amobi from S&P.

Thank you. So the first question for Kathy, how would you reassess the down case scenario that you had talked about at Investor Day, as of today. Would you there has been anything to change your outlook? I know you reaffirmed your AOI guidance, but what is the probability for the down case scenario, any factors to consider?

Yes. We are very comfortable with our $405 million in annual adjusted operating income for the year right now, and as Michael said, there are some risks in the third and fourth quarter, but no, no probabilities on that.

Okay. For Michael, in terms of your roll-out outlook for next year, I know you had spoken favorably about a possible pickup in some touring. Can you comment on perhaps any change to that view, what do you think might be the swing factors to look for next year? Any kind of touring that you might have actually on the books right now, what are you hearing from the artists, anything that might affect the overall outlook for next year would be helpful?

Yes. As we said, we think the lineup from our conversations with most of the agents and managers, we feel next year will be a strong lineup. Any of the artists that have decided not to tour in Q3 or Q4, they will be on the road. That is how they make a living, so we are confident that the lineup will be strong, but we are more confident that the industry has read enough of the press, and the tea leaves, that we think we are as an industry going to be much smarter as we head into October and November, on how we buy the talent, how we price that talent, and how we get ahead of the curve versus discounting it, and pricing that act from the beginning at the right price, to get the right attendance levels.

So we would be very, very, very optimistic that the changes in our business model in terms of some reduced fixed, and some better buying from the beginning, knowing that the consumer now will come to the show if the price is right. They won't come if you miss the mark on the pricing. So while the economy rebounds, we think the lineup will be there, and more importantly, we think we will be ahead of the curve on executing how we buy and price that product from the beginning, to make sure we can drive the proper attendance next year through the model.

On the front line side, Kenny Chesney, Fleetwood Mac, Van Halen, Neil Diamond, Christina Aguilera, none of them worked this year. All of them are working next year. So like everybody says, our act is going to stay off the road, and the decline in what an act can make off of recorded music, their livelihood depends on touring. The acts are not going to stop touring, they are just going to try and tour smarter. And also Journey took this year off. So on the front line side, we are seeing everybody wanting to go, and they are all, every one of them has looked at what is going on this year, and said, how do we price our tickets right, do we need to work a few extra shows, but there are no artists that don't want to charge less for tickets if they can get away with it, even if they can't. So we feel good about the product flow for 2011.

(Operator Instructions). Our next question comes from the line of [James Abbott from Vigilance] Capital Management.

Thank you. A question for you on the guarantees that you have booked or committed to for the second half of the year. I wonder if you would quantify those, and then help us understand if attendance is weak, and a show has to cancel, what recourse do you have on the guarantees?

Yes, we don't talk about our total guarantee in any lump format. The show count and the deferred revenue is your best guess at kind of that magnitude. The canceled shows as we said in our Investor Day are still 3% to 4% of our total show count. So a small percent. Most of the shows that are going to cancel would have already happened in Q2, meaning because the summer season is so busy, the tour goes up and right away people know what dates should be canceled. So we don't see much more on the horizon in Q3 and Q4 in terms of the cancellations. But if a tour or a show is canceled it is usually a decision between the manager and the agent and the promoter, because we all realize the show won't do the numbers that the artist needs, and the guarantee is not paid, and you move on. So that is kind of the traditional model, but cancellations will not be a big factor in the last half of the year. They just tend to be a summer problem.

Okay. And then I also had a second question on the timing of revenue recognition on ticket sales, and is that revenue recognized at the time of the sale, and so therefore if the show is canceled, that you have to unwind that revenue, or is it booked at the time of the show is concluded?

For the concert side of the business it is recognized when the event happens, or the ticketing company they will recognize their fees when they sell the ticket, except if it is one of our events and then it is also deferred. So the majority of the monies are deferred until the show happens.

Okay. Thank you very much.

And at this time, I would now like to turn the call back over to Live Nation Entertainment's Chief Executive Officer, Mr. Michael Rapino, for closing remarks.

Thank you everybody, and we will look toward to talking to you on the third quarter.

And this concludes today's conference call. You may now disconnect.