Live Nation Entertainment Inc (LYV) 2011 Q1 法說會逐字稿

Good afternoon, my name is Lisa, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Live Nation Entertainment first quarter 2011 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. Before we begin, Live Nation has asked me to remind you that this afternoon, the call will contain certain forward-looking statements that are subject to risk and uncertainties that could cause actual results to differ including statements relating to the Company's anticipated financial performance, business prospects, new developments and similar matters.

Please refer to Live Nation's SEC filings including the risk factors and cautionary statements included 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 will also refer to some non-GAAP measures on this call. In accordance with SEC regulations G, Live Nation has regarded a full reconciliation for the most comparable GAAP measures in their earnings release. The release of reconciliations and financial or (inaudible) information discussed on this call can be found on www.LiveNation.com for investors. It is now my pleasure to turn the call over to Mr. Irving Azoff, Live Nation Entertainment Chairman of the Board.

Thank you, operator. and welcome everyone to our first quarter 2011 conference call. Joining me today as always, are my partner Michael Rapino, our CEO and Kathy Willard, our CFO. I will begin the call with some brief comments, and then turn it over to Michael who will review our first quarter results and some observations for the balance for the 2011 year. We have an incredibly strong and dedicated team at Live Nation that is hard at work improving the live entertainment experience on how people purchase event tickets and connect with their favorite artists. We're also strengthening our online advertising and eCommerce capabilities while continuing to drive our sponsorship business. Michael will give an update on these areas in a few minutes.

In addition to my broader role at Live Nation I continue to lead Artist Nation including Front Line Management. We entered the year with over 250 artists on our roster and over 90 executive managers, who work in our various management entities. During 2011, we look to continue to expand our artist relationships and to add proven industry managers who can help us build upon our leadership and artist services and further grow the business. During the first quarter, we closed our first two acquisitions in the United Kingdom, which bring two great new managers to the Company. We are excited to welcome industry veteran Scott Roger and Ian Grenfell.

In the United States, some of the new artist signings to our various management units include Rascal Flatts, Clarence Spalding, Sarah McLachlan, to Michael McDonald, Nicole Scherzinger to Jared Paul, Little Big Town to [Yell] Gellman, and Lenny Kravitz and Julio Iglesias to HK Management. Looking at 2011 we are excited about the number of our key managed artists that are planning on touring. We currently expect over 75% of our key artists will be active and touring compared to under 50% of these artists that were on the road in 2010.

Pipeline is much stronger this year and includes expected major tours from such top artists as The Eagles, Jimmy Buffet, Kenny Chesney. Neil Diamond, the cast of Glee, Journey, Kid Rock, KIngs of Leon, Britney Spears, Sugarland and Van Halen, to name a few. Like the rest of the board and management team I remain focused on moving Live Nation forward as we utilize our combined platform to innovation across the live event chain.

Although economic factors are still of some concern, I continue to be encouraged by the various strategic initiatives the Live Nation management team is executing to improve the ticketing and live entertainment experience. As well as their efforts to develop more robust resources for our advertising, sponsorship and eCommerce businesses. Thank you again for your support and I look forward to talking to all of you on our next earnings call. I would like to now introduce my partner, Mr. Michael Rapino for his remarks.

Thank you Irving. As our first quarter results indicate we are off to a good start this year. In Q1, all key financial and operating metrics grew year-over-year. Revenues, AOI and free cash flow all improved significantly compared to Q1 2010. These were driven by ticket improvements in ticket sales and our lower cost structure. Demonstrating the power of our assets as the industry recovers.

As we look at Live Nation today, our performance is driven by a two sided business model. One side is all about content. Signing and retaining artists, venues and concerts is the core of our front line Live Nation concert and Ticketmaster businesses. We believe we are the world leader in each of these segments and through this leadership we are able to leverage the best of our offerings and skills to increase the relative attractiveness of each business for our customers.

The other side of our business model is the is monetization of the event with the fan and the sponsor. This includes our on site sales and eCommerce platform and global sponsorship. These are all high margin businesses that are driven by the core content business. Our strategic focus for 2011 is four planks. First is to grow our content business, new tours, new ticketing venues, clients, additional artists and expansion in key markets are all part of our focus on growing our core content.

Second is about growing our global sponsorship business, fully monetizing each event and our global platform. And three, growing our fan ticket sales. Through investments in our online platform, growing our inventory, expanding the number of price points, increasing our distribution channels and monetizing our database. And fourth, as always, is to continue to focus on driving operational efficiencies, including extracting remaining cost synergies from the merger and aggressively managing our cost base.

Now let me give you an update on the ticket sales, both overall and for Live Nation concerts. Ticketmaster sales as of today on a combined global basis. Global sales are up 7%, year-over-year, North America is flat, and international is up 27%. By segment on a global basis, concerts are up 4%, arts and theater up 3%, sports is up 14% and family is up 17%. The improvement in international is largely driven by the increase in the number of stadium events in Q2 this year versus last year and the addition of the ticketing operations in France and Spain. The favorable in year-to-date for sports and family are driven by timing of events.

As we look at our Live Nation concert business and how they stack up to those numbers, overall our concert business sales are up 4% year-to-date, North America year-to-date concert tickets are up 1%, and international tickets are up 7%. While we are encouraged by the first quarter industry in Live Nation sales, over 75% of our ticket sales are ahead of us. And with some recent softness starting in mid-April, it is to early to determine how the main summer months will finish given the economy, gas prices and other consumer pressures.

Turning to our core operating segments beginning with concerts. Revenues for our concert division were up 10% in the first quarter and AOI up 3%. The lineup continues to look solid for the concert season. Some of the artists who will be touring this year include U2, Adele, Lady Gaga, Roger Waters, Kate Perry, Kenny Chesney, Kings of Leon, Prince, Rihanna, Britney Spears, Sugarland and the Zac Brown Band.

Our concert division has four main product lines, arenas, amps, festivals, and theatres and clubs. Arena tours are the most profitable product line generating 30% to 35% of our concert AOI before overhead allocations. We will promote approximately 2,000 to 3,000 global arena and stadium shows with 16,000,000 fans attending in 2011, up slightly as we grow this business line. We're off to a strong start with arenas this year with ticket sales up 23% through April over this time last year. Our focus for arenas is now on continuing this momentum, booking additional tours in buildings and existing venues and delivering growth over last year while maintaining our cost structure.

Amphitheaters are our second largest contributor of AOI, approximately 25% of total concert AOI. This is generated by 50 amphitheatres and about 950 shows. It is a mature business but will continue to be an important profit driver for our Company. Our amp results were off $10 million last year over our traditional three year average AOI. We look to make up that $10 million in 2011 by two specific initiatives. We will price the show right from the beginning and eliminate ongoing discounting and we will optimize our show mix and reduce some of the higher risk shows. Thus bringing our show count and attendance down but increasing our overall profitability.

Our third product line is festivals and it's our fastest growing segment and contributes close to 25% of our AOI. We are the largest festival offerer in the world with 38 global festivals this year. This year we will be focussed on expanding further in both the US and Europe. We have already announced the decode festival in Madrid, and just concluded a successful Bamboozle festival in New Jersey last weekend with 70,000 in attendance. We will also be launching an aggressive electronic festival business this year.

Our fourth is theatre and clubs, which is about 15% to 20% of AOI. We will hold approximately 18,000 shows for 14 million consumers. We're offering an extensive theatre and club platform with strong brands like the House of Blues, [Former] and the Academy Group in Europe. In this segment we're focused on improving sales, increasing utilization, and driving sponsorship to this vibrant young demographic. All four of these concert segments together form the foundation that enables our sponsorship business and feeds our ticketing platform. Though our audience [reaches] the number of impressions we provide our sponsors, we are building a very strong and uniquely positioned advertising business.

Moving onto our ticketing business. Ticketing revenues increased 42% for the quarter and AOI was up 74%. Both comparisons benefit somewhat form the timing of the Ticketmaster acquisition, which Cathy will describe. Ticketing has three core ticketing solutions. Our core Ticketmaster venue platform. Number two, our TicketWeb platform, and three, our TicketsNow. On Ticketmaster, our main platform, we continue to hold a strong renewal rate of over 95% globally, North America our renewal rate is 94%, and we successfully renewed all top 25 accounts in Q1.

Our second platform is TicketWeb, which has been in operation for over 20 years and services thousands of smaller venues, events, and promoters across North America and UK, and is in the second position in this segment. We expect this unit to grow in this expanding white label smaller venue business. And finally, TicketsNow. This is our resale division. TicketsNow has over 2500 clients and has become the true competitive force in the resale market. This business showed solid growth last year and in Q1 we sold 16% more tickets than last year. We have a new and an energized management team here and a clear strategic (inaudible) to aggressively compete in this segment and help our venues, teams, and others capture secondary revenue.

While we were encouraged by the first quarter ticket volume, we are closely watching several potential risks, including a recent slowdown in ticketing growth and the NBA/NFL labor issues if these buildings do not fill the dark nights if they go on strike. Our eCommerce division revenues grew 62% during the quarter and AOI was up 42%. We are continuing to upgrade functionality, to drive conversion and build out our online advertising. We have increased the value captured on our traffic dramatically while sponsorship revenue is up over 100% for unique visitors in Q1. In the sponsorship division, revenue has increased 17%, and AOI was up 29% in the first quarter. We remain very optimistic about the long-term potential of our sponsorship business.

Looking at the macro trends, we see advertising in general is regaining momentum and we believe that out of home market, and more specifically the live event market, will continue to benefit from this recovery and we will increase our share. Looking more specifically at North America, IEG recently reported it expects music sponsorships will reach 1.2 billion in 2011. Live Nation currently has 9% of that number, and we believe that our unique ability to deliver impressions and (inaudible), we should be able to expand our market share significantly. Recent client wins for North America include the renewals of both Citi and American Express. Yesterday we announced the partnership with Carnival Cruise Lines. We sold five new name in titles in Q1 and renewed most of our notable name and titles like Nikon, Jones Beach and Charter One in Chicago.

Turning to international with accounts were half of our global sponsorship revenue. We renewed the Barclaycard sponsorship, the Wireless Festival in London, Coca-Cola is sponsoring a number of our European festivals and Bacardi is sponsoring a variety of festivals in the UK. We have continued building our international team and are expecting growth in our key European markets of France and Germany, but we believe are substantially underdeveloped from our sponsorship perspective. As of April 27 we had 72% of our global sponsorship expected revenue under contract, which is slightly higher than where we were last time.

All in, this was a strong quarter for our sponsorship business, and we expect improved results from this division during the rest of the year as we continue to focus on attracting new sponsors and developing innovative programs. So in summary, operationally, concerts, tickets and management are headed in the right direction thus far, and our growth platform of eCommerce and sponsorship are well positioned to grow. It's still too early in the year, but we are aggressively focused on execution and encouraged with the results to date. With that I will turn it over to Cathy to discuss our financials.

Thanks Michael, and good afternoon everyone. We are very pleased with our results for the first quarter of 2011. Our overall growth in this quarter as compared to 2010 is driven primarily by the following items, growth in our ticketing segment driven by an 11% increase in ticket sales during the first quarter, In addition 2011 includes Ticketmaster's results for the full quarter whereas 2010 reported results exclude the first 25 days of January 2010, the period prior to the merger closing. The results for that 2010 pre-merger period for Ticketmaster included $76 million in revenue, $5 million in adjusted operating income, and an operating loss of $15 million excluding a gain on sale.

We also had continued realization of merger related synergy savings, partially offset by the impact of the loss of the Paciolan activity and reduction in AEG revenue as a result of the merger. And we showed continued solid growth in eCommerce and sponsorship. Our first quarter revenue was $849 million, an increase of 17% over the $723 million we reported in the first quarter of last year, and a 6% increase when you consider the Ticketmaster reported results for the 25 first days pre-merger in 2010. The remaining increase was primarily driven by higher revenue in concerts due to timing of touring activity, higher ticketing revenue driven by increased ticket sales internationally and higher resale activity in North America, and continued growth in sponsorship in eCommerce.

These increases were partially offset by a slight decrease in revenue in Artist Nation based on the timing of touring related merchandise sales. Adjusted operating for the quarter was $45 million compared to $2 million in 2010. This increase over the prior year was driven by an improvement in our ticketing segment due to acquisition activity, including the merger, increased international ticketing sales, and North America resale results, along with continued growth in our eCommerce and sponsorship division.

in addition, corporate costs were lower due to reductions following the merger. Our operating loss was $72 million in the first quarter compared to a loss of $106 million last year. This reduced operating loss resulted from our higher adjusted operating income, along with the reduction in merger related acquisition expenses in 2011, partially offset by increased expense from the impact of a full quarter of merger related intangible amortization and higher stock related compensation expense. Our results for the quarter were also impacted by costs and benefits from the acquisition of the remaining interests in Front Line in 2011.

As we previously highlighted, by acquiring the full ownership of Front Line, we expect to benefit from substantial savings related to reduced cash taxes, elimination of dividends and operating synergies that we believe will increase our free cash flow by more than $20 million annually. The income statement impact during the quarter there essentially one time effects to 2011 from this transaction. Our $24 million of stock related compensation expense that reduced our operating income, and $51 million of tax related benefits that increase net income related to the carry back of net operating losses and the release of evaluation allowances.

At March 31, we had total cash of $987 million, which includes $441 million in client cash. After deducting the concert event related items, our free cash was $189 million. Free cash declined during the quarter as compared to year end which was driven by a number of factors. Free cash flow was slightly negative in the period as is typical for this first quarter due to lower volume of activities. Our acquisition related payments in the quarter principally related to the purchase of the remaining interest in Front Line, along with the DC franchise, leaves a total of $106 million in operating cash.

Offsetting this, the Liberty stock sale during the quarter brought in $19 million of cash. Related to this, as we have previously discussed, once we obtained shareholder approval in June for the remaining sale of shares planned to Liberty, we will receive an additional $58 million in cash replacing some of the cash used for acquisition. The rest of the change is driven revenue generating CapEx, debt repayment and other changes in non-event related working capital. Free cash flow for the quarter was a loss of $7 million as it compared to a loss of $32 million in 2010. This $25 million improvement was primarily driven by our increase to adjusted operating income.

As of March 31, our total current and long-term debt, including capital leases, was $1.73 billion with no draws under our revolving credit facility. Our weighted average cost of debt excluding debt discounts and premiums was 6% as of March 31. With respect to our senior secured credit facility, we continue to remain comfortably in compliance with our debt covenant requirements. As of March 31, our total debt to EBITDA ratio is under four times versus the maximum of 4.9 times and our interest cover is over 4.8 times versus a minimum ratio of 2.5 times.

Capital expenditures in the first quarter were $18 million compared to $12 million last year, with higher costs being driven by CapEx primarily related to the re-architecture of our ticketing system and website enhancements. We currently expect total CapEx for 2011 to be approximately $115 million for the year. At this point in the year, we continue to expect flat organic ticket sales for 2011, and while we had a solid first quarter, the majority of our revenues and adjusted operating income will come in the next six months. Our business continues to have fluctuations quarter-over-quarter and year-over-year, driven by our event seasonality and timing of artist tours and ticket on sales.

We also lack visibility for final show results until closer to the event day. in addition, while we believe that economic conditions are improving, there remains continued uncertainty with respect to general discretionary spending. Based on these operational realities we will not be providing guidance on full year adjusted operating income or free cash flow expectations for 2011.

Thank you again for joining us today, and we will now open up the calls for questions, operator.

(Operator Instructions). Your first question comes from the line of David Joyce with Miller Tabak and Company.

Thank you. Just a few little things. What are the number of sponsors this quarter, or in your contracts to date, versus last year? And what was the break down between the maintenance and growth CapEx?

So on maintenance versus growth CapEx, I think it's $11 million maintenance and $7 million revenue generating, and then our number of sponsors has not changed significantly.

The $7 million growth CapEx, what was that for? Are you considering that part of the ticketing re-architecture that you mentioned?

Correct, that rolls into that number, David.

Okay, and the, is it the year-over-year growth in ticket sales for some of the categories, the concerts and sports were up and family up in the mid-teens. Was there any kind of timing year-over-year that shifted ahead that helped that? Or could those kind of rates be part of the overall improvement that you have been seeing that we could expect later? Even though you are starting to see some slow down? Are any of those categories likely to be up in the low to mid-teens?

No, I think the trend that was, January and February were up double-digits year-over-year, March was up 3% or 4% and April was up about 1% or 2%. So we did see that most, a lot of people probably decided to get on sale really early in the year and beat the other guy to the market. So we did see a lot of activity in January and February, which will not be replicated throughout the year.

So that's why we do believe, even though the numbers look good for Q1 and we're excited to have tail wind versus a year ago, but we think it will normalize out in terms of show counts for all of the segments and probably eat into some of that early lead to end up. We believe, as we said from day one, we think this is a year that we show that the industry is stabilized and it's not a continued decline. But we think it probably hovers in by the end of the year, flattish, year-over-year by the time all the shows play through.

Okay, and I have imagine that some participants, your investors, are going to want a little bit more color on guidance. Is there anything you can possibly provide on a wider range on the financial guidance for the year?

No, you know, David, historically on Live Nation, we have not given guidance, with most of our business happening in the summer, and the trends that can happen. Last year, given our first years combined with all of the different numbers out there, we feel confident now that we have a lot more coverage, yourself included, there's a lot of good coverage out there that seems fairly in line with where the business is probably headed and we're going to kind of result back to where we operated for many years and not give up that AOI guidance, given the visibility and lack of it right now for the year.

All right, thank you.

Your next question comes from David Kestenbaum with Morgan Joseph.

Are you taking any steps to address this sudden softness in the market? And where are you seeing it? Is it across the board? Are the major acts at least holding up or is it some of the smaller acts where you are seeing the softness?

Well, what typically happens in a concert year is the bigger acts always go on sale early. They have the bigger tours. So you always have your January, February, March, if you have your world tours, your big artists are probably on sale at the beginning. And then as you move into March, April and May, it starts to become the second level of artists that go on the road. And those are always a little softer than your first big artists. So we would say, listen, a year ago, we didn't have the January and February at all kind of tail wind behind us.

The big stuff and the small stuff was starting to cave early. This year, the good stuff, Lady Gagas, the U2s, the big acts, Princes of the world, they are selling out and doing very good business. And we expect like most summers, now we're into the thick of the middle of the roster and we're starting to see a little softness in the B markets and some of the B and C acts.

Okay, and have you booked at this point, the entire summer concert season or is there still some more to come?

No, at this point, we would be probably about 75% booked. Our bookers across the globe would still be finalizing August and kind of September dates to still hit either the amphitheaters or some late festivals or arenas. So about 75% would be booked to date.

Okay. And then finally up on the last question. Would you be willing to give guidance on the second quarter call? Is that something you are thinking about or are you going to wait from there?

We think that right now, as we operated under your analyst reports before, we're going to stick to the main metrics of our business, but not get ourselves in the guidance box right now.

It's deserving. I think we could better predict what's going on if we knew what gas prices are going to be, so if you can tell us what gas prices are going to be we can predict a little better what ticket sales are going to be.

Okay, thank you very much.

Your next question comes from the line of Ben Mogil with Stifel Nicolaus.

Hi, good afternoon. So Michael I just want to clarify something to make sure that I have it right here. You were saying the ticket, the softness that you said about ticket sales, you were still a plus one, right? It was just a deceleration from your earlier months in the quarter, is that correct?

Yes. Let's remember what I said, international is up, our arena business is up, North America was still up. Now we have a little bit of an artificially kind of suppressed number in North America because we are going to track behind year-over-year in amphitheaters all year on purpose, because we are booking less shows in those amps. So we'll probably have a million less tickets in those amphitheaters this year, on purpose. Because those were those extra shows that we don't think are worth the risk/reward. So we'll probably have some, in North America we'll always be dragged down slightly by our year-over-year comparisons on amphitheatres when they are added in.

That's why today we wanted to help give a little clarity because, I know you wrote something, and a lot of the press like to talk about our amphitheaters, and the perception is, we sink or swim with our amphitheaters. We wanted to lay out better metrics to show you that they are an important piece because they drive a lot of sponsorship, but from the big picture, they're a 20% to 25% piece, and we would consider our arenas and our festival business a much stronger and bigger piece of our business, and where we focus on. So overall, I think in North America, you'll see the amps will purposely drive down our core metric for the year in terms of ticket sales, but we believe we will grow our arena business overall, which is the key metric for us.

Okay, and then, thank you, following on Irving's comments about gasoline prices. I realize that it's sort of early in the amphitheater season, or even the season in general, but can you tell us what you seeing in terms of in venues spend, either at your own arenas or even at the third party arenas where you do get some rebates on the food and beverage. Are you seeing the customer come in and hold the line on the second beer, if you will?

It is early obviously because our festivals and our summer business is where that really comes to life. But I would say even last year, when the ticket sales and the industry was under pressure, the per cap stayed strong. So we know going through the first quarter, if there was any trend happening in arenas or theaters and clubs that was extraordinary jumping out at us, we would have seen it by now. So we think the per caps will maintain once they get through the doors.

And Ben, we don't normally get a piece of the food and beverage. Our rebates would mostly be on the number of people. But we don't necessarily see those numbers in third party buildings. And also I didn't mean to be funny about the gas prices but literally, as the turmoil started in Egypt and beyond and the gas prices inched up, I would look at some of the key front line, what we call wraps, the shows that are 90, 120 days out that normally would sell 75, 100 tickets a day, the minute gas prices went up the 75 goes to 60 or the 100 goes to 85. So there really is a correlation of what goes on in the economy, really, I think the first place it hits is consumer confidence, and do I have the money, the expendables to go to more than one event.

Absolutely, we saw that a couple of summers now, and I knew your comments were not in jest, if you will. And then lastly, flipping over to the [CTS invent] situation, I realize that obviously it's going to arbitration, so I don't expect you to have a lot of commentary. But two questions, one is the arbitration in North America or is it Europe? And then second question, in the theoretical that, you say, lose the arbitration but it still goes to appeal, do you have to post a bond? Can you give us a sense of, is the appeal mechanism, sort of what the mechanism is around this arbitration?

Yes, the arbitration is in London by a New York based judge, and short of that, I know the other guy has used this forum to negotiate. But we were going to stick with no comment as we always do with any pending legal cases. But back to the main business, I will say this, because you and I have talked about it. I think the positive trends that we're seeing in general, we think the industry is obviously after this Q1, starting to stabilize and recover, and the economy will probably dictate how fast it recovers to its 10% growth industry of 20 years, but we're definitely seeing it stabilize.

And the second part that's positive is, because this industry is fairly fragmented, meaning that you have a lot of different artists and managers that have to kind of change the way they do business, we're definitely seeing this year that the number one theme when we're negotiating with artists, and when you're talking to the managers and the agents, everyone learned their lesson last year. You're seeing a lot of artists trying to price the house differently, and have bigger scalings, and make sure that the ticket in the last row is cheaper.

You look what Prince has done in Los Angeles at the forum with us. Where we're charging $25 tickets for 85% of the house, and instead of 5 nights in LA, he's going to end up doing 21 nights. So you are definitely, the good news is we see that the industry, the participants that drive the agenda, the top of mind on this business has been how do we make sure we sell tickets this year? And whether that's through better marketing, through better price points, through better packaging, playing different markets, playing less markets, a lot of the changes that need to happen are slowly happening, and the bands that are winning, you can kind of see, they probably did something a little bit different to change the way they go to market this year.

So I think the important part is, as the economy comes back over time, as the business stabilizes, and as the industry in general starts to learn and adjust the way they go to market, that is why the business, we believe will recover, because it's a business that can change as long as the participants are willing to change the way they go to market. And last year has forced everyone to think about change, so we think we're going to have a lot of good success stories this year about the smart artists and managers that took that to heart.

That's great, thanks.

Your next question comes from the line of Tuna Amobi with Standard and Poors.

Thank you so much. I appreciate your question. First I want to touch on some of the numbers that Michael provided which is very, very helpful, by the way. Those forward looking numbers, I guess my understanding is that you pretty much expect trends to kind of follow the normal seasonal patterns you have seen in the past. Is there anything this year at all that makes you kind of believe that the (inaudible) a pattern would be different than you have had in normalized years. Not looking at last year which I think may be an anomaly, but any commentary on the seasonality would be helpful.

If you take last year out of the equation and look at the last 20 years and how the industry went on sale in the first quarter and where you were standing in a May time period, I think this year has started to look like prior years where you had a good, solid Q1 of some big artists going on sale, some stadium stuff that sold, and you end up usually in your single digits in terms of growth by your May period. What we just don't know is how much of last year versus prior years is mixed in and going to come to light this summer in terms of the, you think about our business, about 50% of it is about what is the on sale and about 50% is how much you sold the last week of the show, the walk up.

So you hope last year where the walk up really went down and you didn't get that final 10% or 15% sale through the door which caused the industry to decline, you hope this year that now that the on sales started strong that you can finish the walk up and hold your industry numbers. Today we will take the good half of the equation where we have the first half looks positive in terms of the on sale. We didn't have last year. And now hopefully between some pricing, and good promotion we can stimulate the walk up and finish up the numbers this year.

And more specifically in sports and family category, it seems like the trends got significantly better as you went through the quarter. Am I correct there or is anything else going on?

We believe those segments got hit last year also. And most of what we believe given we are not in the sports business from the operating perspective, we are just in the ticket selling part of it, so we have not as much visibility, but from what we see from our reports we believe that is probably more timing than it is substance and volume. I would assume some of that Q2 will eat away at that early lead and normalize volume in those segments also.

Your next question comes from the line of Ingrid Chung with Goldman Sachs.

Hi. Thanks. Good afternoon. This is Grace filling in for Ingrid. Can you talk more about the progress you have made and rolling out more tiers of pricing, maybe in terms of geographies, in size of artists. And secondly, it seems like you are making a lot more headway on the dynamic pricing front with the recent partnership with market share. Can you talk about client reception to that?

Dynamic pricing as you know has been a buzz word in the industry for a few years. It is a pretty universally accepted, in terms of it makes sense to do. The sports guys have been ahead of the concert division and certain teams have already been testing it. You have had a few years of good press from the teams that have tried it. Overall, our ticketing division would tell you that when they are out talking to venues, teams, that it is a number one tool priority that they are ready to embrace and they want to get their hands on this year and start using. We believe we will roll it out in the next while.

We think we did the hard part. We made a dynamic pricing model tool into a very usable platform for any team owner or artist to load on his computer and really start to take advantage of how to price that house effectively. We hope by Q2 and Q3 we will have some updates on how many teams or artists or shows participated and what the results looked. But we believe we did, the technology part was the hard part finding the world class partner and turning it into what we call price master, a very usable product that we think can get wide adoption. We will give you updates in Q2 as to who jumped on and tested it out. We will use it extensively on the concert side on the Live Nation part where we have that control in our amphitheatres. We will start to have some data through the summer on how that worked.

Okay. Thanks.

Our next question comes from the line of Martin [Plachinken] with Ridge Partners.

Were you referring to a typical live concert season, the early May time frame, 75% of the typical sales are still in front of you? Just want to make sure that was a definition of what you said?

Yes, we were just referring to most of our business globally from festivals to others happen in the end of Q2 and Q3 period. Remember Ticketmaster reports the revenue as the ticket goes on sale and Live Nation reports the revenue as the show happens.

So I guess what I wanted to ask is the follow on part to that is for your concerts your promoting this season and your inventory essentially, when would you be typically in a typical year at say 90%? Would that be by the end of Q2 or midway into Q3 even?

No that would be into Q4. We still have probably 15% of our business in Q4. But most of our, at the end of the day because of our food and beverage, our contribution, our festivals, our arenas, our amps, as most people know from following this Q3 is your money quarter. It is your biggest quarter, and if everything comes together in terms of your show count and people eating and drinking on site, that is the quarter where get most of your contribution and to deliver your years.

And just one thing I wanted to ask, Irving mentioned the comment up front about 75% versus under 50% of your artists under management touring. You have certain names like Kenny Chesney that didn't tour last year and a few down the list. Is there anybody meaningful in last year's season that you had that is not in your inventory and agenda this year? I'm not finding --

There's got to be some cyclical, I'm trying to think who worked last year that didn't work this year. Guy has to go off the road to make albums and stuff at some point.

I guess the bigger question, the bigger part question is you have more people, artists, bands, touring this year on your promoted tours than you did last year certainly on a net basis. I think that's fair to say, right?

Those were managed artists. On the concert side, as you know, as Michael said, we had, we've actually bought, we are going to have a million less tickets in the amphitheaters because we have not bought some of the mid-level shows where when we did our analysis we didn't come out so well. And what it means on the front line side is I have a bunch of acts, and I am seeing stuff that has really been positive. Steely Dan has their biggest on sale in 10 years the past couple weeks. A lot of those are, it isn't a traditional Live Nation tour. Live Nation bought, the regional offices bought a lot of them, but we play a lot of things like Ravinia in Chicago and Tanglewood in Boston. A lot of these mid-level things that we didn't put in the amphitheaters this year, that are front line acts, because we were worried they wouldn't do the business, are playing third party other, what we call the soft money casinos and some of these were venues and stuff like that and business there seems to be really good.

And I guess my last question on the dynamic pricing. I know you don't have a lot of data to share yet and maybe more as you go through the next several months. But qualitatively you have Prince that sounds like willing to buy into the idea of filling the house and obviously you benefit when you fill the house from a volume standpoint. Overall, artists, how much of a challenge is this to get them to buy in and work with you kind of through the sale process. You have some that are obviously well known as pretty shrewd business people in their own right. Is that pretty representative or do you have a lot of challenge to get them to buy into the scheme?

Some are still doing it, some are resisting because they just want to do it the way they used to. But certainly on the front line side more and more each day are seeing the benefits and participating that way.

Okay. Thank you.

Your next question comes from the line of John Healy with Northcoast Research.

Thank you. Michael I wanted to ask you a little about the sponsorship in Artist Nation business. I know you gave some pretty direct comments last quarter in terms of where you guys were at with sponsorship revenues on the books. And I was hoping to get some color on where you think sponsorship revenue might be tracking on a year-over-year basis. And when you're with the Artist Nation business, when you say 75% of the acts are active this year, it sounds like you are talking about the top acts versus 50% last year. How do we think about what that means to year-over-year type revenue growth for Artist Nation?

I think the sponsorship we have always been a bit consistently bullish on. It is our second largest AOI unit in our Company. We think it has a 10% to 15% annual growth rate on the bottom line. A high, high margin business because of the nature of the way that operation works. We have continually talked about that division from a global perspective and an on line advertising perspective as our number one growth division. And we have now delivered a few years of that growth. With the addition of Front Line and Ticketmaster, that sales team has an incredible unique platform now. So we think that will continue to be a 10% to 15% growth kind of business. On Front Line we will, Irving do you want to take over or do you want me to --

I think the, without giving the guidance on the Front Line because Front Line is similar to the sponsorship division. The revenue is generated by the commissions, not by so much the revenue of the artist. So the good news on the guidance Irving gave you, any year it is simple math, the more the artists are working, the more commission is coming in the till. You can imagine on a year like this if there is more activity and more artists are out there then last year, then his bottom line AOI would be looking towards a positive growth this year.

And I wanted to try to square some comments you made on the ticket activity. It sounds like when you talk about ticketing volumes, you are kind of implying maybe profits in the NFL or the NBA, what sort of volumes are you doing with those two leagues and I was hoping to get some color there.

Well, I think the volume is significant enough if the venues are dark. Here is what we don't know. We don't know obviously if the strikes are going to happen, we are all reading the press like everyone else. If the lockouts were to happen and those buildings went completely dark. It is a $10 million to $15 million AOI hit to us. If we just lost all of those basketball games and football games. What we believe, talking to most of the owners and others, if you own a building you are probably going to be pretty aggressive at making sure other events are coming to power those dark nights. What we don't know yet, is it going to happen, and if it does happen how many of those empty nights will somebody be renting the building and powering some tickets through there to drive incremental volume to close that gap. We would assume most incentives on the owner side is to make money on dark nights, so we would assume that we have a good chance to make up some of the gap by new activity and more concerts and more family shows and et cetera that will take up the veils.

Okay. Then I guess it is fair to say if I take what you are saying there, you have a little bit of caution built in on the league business and you also are walking away from a million or so tickets in the amphitheaters. So if you have those on an apples to apples comparison, is it decent to think that your expectation is maybe that the industry, at least in this kind of environment, is capable of delivering low single digit year-over-year ticketing growth?

The concert business you are saying or the industry in general?

I guess concerts and ticketing all in.

We have given you the numbers. We think generally the international side definitely has, if you look at global tickets are up 7%. North America is flat and international is up 27%. I would assume international is going to end up in some positive zone given the early lead they have. We assume North America is flat and probably doesn't have a ton of upside. We are also hoping it doesn't have much downside, and concerts up 4%. We are kind of taking all of the variables in hand and kind of planning and budgeting for a flat year-over-year business. Whether it's up 2% or down 2% the minor part of the equation we just don't believe that it is going to be down to the magnitudes of anything that happened last year across all of those segments and the 10% to 15% part. Step one in recovering and ensuring that this industry has a long life is proving that last year was the dip and this year is kind of the stabilizer, I would be, I will be okay with flat volume this year if it is step one in terms of a recovery.

Great, and last question. I just want clarification. Kathy, what do you guys think the year-over-year cost-savings goal for the Company is? I know you had said $20 million in the past from the synergies. I know there was some restructuring done at the end of last year, and kind of wondering what target we should think about?

Yes, you are right. The information we've put out is that annualization, full year annualization from the synergies from the merger which is about $20 million, which you also remember has the offset with the AEG and Paciolan change which was about $12 million down. And then what we said on North American concerts is that we had severance of around five and then our cost savings would be two to three times that, but probably more like two times would be the goal for this year.

Okay, great. Thank you.

Your next question comes from the line of Rich Tulo with Albert Fried.

Did you say owing to the acquisition that the stock compensation was $24 million and the tax benefit was $54 million?

$24 million was in stock comp expense related to that Front Line acquisition this year and there is $51 million of tax benefits this quarter from that transaction, yes.

And the cash flow took up roughly $20 million annually, is that what you said?

Yes, That's the long-term goal. Some of that will come in a little bit slower as we will get synergies in place, et cetera, but that is an annualized full year number once we have that in place.

How much of that stock comp is one time in nature.

That $24 million is all one time.

Very good. And in the past we had talked about cost savings from a little bit more less extravagant concerts. Is that going to happen this year, or has most of that happened already?

I guess the definition is extravagant, but I think in general our goal in Q4 last year was to work on our fixed cost structure across our business, both corporately, concerts and ticketing, above and beyond what the synergies of the merger provided and we talked about that already. And that was accomplished so we will see some of those benefits this year. In terms of a talent cost savings, like I have referred to, if you are a Lady Gaga and U2, supply/demand is working really well, you are selling out and you are getting paid a lot of money, rightly so. And along the middle lines, a lot of the bands I referred to under Ben's comment, if last year you went out and maybe you got a high guarantee, but 3,000 people showed up, we would absolutely see that the manager and agent this year are talking about if that artist is going back out, how do we make sure 9,000 show up? That usually is the result of maybe a slightly lower guarantee and more dynamic pricing around it to drive purchase. So we definitely have seen a lot of artists thinking more about how many tickets I sell than how big is the guarantee. And we will see some of those results come through this year.

The other thing I wanted to lay on top of those cost savings is remember, as we also discussed, we are investing in the on-line infrastructure as well as ticketing re-architecture, and part of that is CapEx but part of it is also OPEX. We are also layering in additional costs this year across those divisions in order to enhance those platforms.

Okay. Fair enough. And would you say that the million less tickets in amphitheaters in North America, these are the type of concerts that would be the 3,000 ticket sales type concerts where nobody is showing up and you are paying up front money?

Yes, our goal is, we usually do around a thousand shows in our amphitheater, maybe 1100. We think will come in somewhere around 900, maybe 950 shows this year. Probably come in around somewhere around $8 million versus $9 million in sales and the net result of that is our AOI will probably go up about $10 million if we sell through, and they all show up in the perk household. So we would have, under the new management team, we would have bought on a different level of discipline this summer and we believe that we will drive a higher AOI contribution by reducing some money losing shows.

Our next question comes from the line of Doug Arthur with Evercore Partners.

Kathy can you provide any further detail on the $76 million for the sub period last year in terms of how it breaks down by segment?

You know, I don't have that in front of me. But the big impact is really going to be ticketing in both revenue and AOI. Corporate would have had some higher costs so the negative AOI and the other piece of that is really Artist Nation. I can tell you that the ticketing impact alone of that $5 million AOI is about $7 million to $8 million, so gives you perspective. Most of it is really in ticketing.

Okay. And then finally, this revenue drop off at Artist Station in the quarter, can you elaborate on, was that a timing issue with the merchandise? Is that something that is going to reverse? What is actually going on there?

Just like the timing of their artist touring and the commissions for the management company, the merchandise follows that. And it is quarter-over-quarter depending on which of the merchandise companies artists are out. There will be some fluctuation.

Okay. Thank you.

Your next question comes from the line of John Tinker with Maxim.

Hi, thanks. Two brief questions. As the international business keeps picking up, and I know you made a couple of acquisitions recently, I think in Spain and France, how many acquisitions would you be looking to fill that out? And secondly, are there any foreign exchange implications there, I assume it is basically positive as the dollar keeps going down?

Yeah, absolutely on the foreign exchange. And you can see the impact. It is a couple million in this quarter, but again, it is a low activity quarter. We do think the currency is working in our favor this year.

And, John, as far as the strategy, we have always through the Live Nation, and now as a combined unit, Front Line expanded into the UK. Ticketmaster had historically been fairly weak in Europe, so we needed to make some strong moves in the main markets like France and Spain. So you will see us continually look whether it is in the Pacific Rim, as we launched in Australia last year a concert division to support our ticketing platform. We look hard always at our Latin America businesses where we have strategic partners with Tea for Fun and [CEA], and both in Europe. So we would absolutely continue to think that internationally, which tends to be a much higher margin business for us with great opportunity to grow it because they usually have a very unsophisticated sponsorship platform, we will continue to look around the world at the right acquisitions or start ups to build any one of those three divisions.

And I have to ask this, did you make any money on Charlie Sheen?

You had to, John. We absolutely did. It was a no guaranteed proposition. We were paid to be kind of the production arm behind the scenes and we did all of the merchandising through Irving's division. And it ended up playing a bunch of our venues. It is rock and roll. We are not the moral cops, but we absolutely delivered some bottom line AOI to the Company.

Glad you were opportunistic.

The boys in the UK liked it the most. They want the show over there.

Thank you.

I would now like to turn the call over to Mr. Rapino for closing comments.

Great. Thank you, everyone and we will talk to you on Q2.

This concludes today's conference. You may now disconnect.