Live Nation Entertainment Inc (LYV) 2011 Q2 法說會逐字稿

Good afternoon. My name is Sade and I will be your conference facilitator today. At this time I would like to welcome everyone to the Live Nation Entertainment second quarter 2011 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer period.

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, including statements relating to the Company's anticipated financial performance, business prospects, new development, 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 Regulation G, Live Nation has provided a full reconciliation for the most comparable GAAP measure in the earnings release. The release, reconciliation, and other financial or statistical information to be discussed on this call, can be found on www.LiveNation.com/investors.

It is now my pleasure to turn the call over to Mr. Irving Azoff, Live Nation's Entertainment Chairman of the Board. Please go ahead.

Thank you, operator, and welcome everyone to our second quarter 2011 earnings conference call. Joining me today are Mike Rapino, our CEO; and Kathy Willard, our CFO. I'll begin the call with some brief comments and then turn it over to Michael to review our second quarter results and give you some observations for the second half of the year; and then, as is the custom, we will be happy to answer your questions.

I previously reported that we have a great team at Live Nation that is dedicated to delivering improvements in the live entertainment experience and how fans connect with their favourite artists. We continue to strengthen our ticketing platforms, ecommerce capabilities, online advertising and sponsorship business. Michael will give you an update on those businesses. In addition, to my broader role at Live Nation Entertainment, I continue to lead artist nation including, Front Line management. We entered the year with over 250 artists in our roster, and over 90 executive managers in our management business. During 2011 we continued to expand our artists' relationships and add proven industry managers who can help us build on our leadership in artist services and further grow our businesses. During our first quarter call, I reported on a number of new acquisitions and major artists signings in the US and the UK. We continue to make progress in this area with the addition of Jeff Battaglia, who manages Disturbed. And just this week the addition of Ron Laffitte who manages OneRepublic, Ryan Tedder, and Good Charlotte.

We've also just announced an agreement with Sony and Syco, whereby Frontline will manage the winners of the upcoming Simon Cowell X Factor TV series. Some further acquisitions are in negotiation and we'll tell you about those next quarter. We expect that approximately 75% of our key artists will have active touring schedules in 2011 compared with 50% in 2010. The artists that were on tour during the second quarter included The Eagles, Jimmy Buffett, Kenny Chesney, Neil Diamond, Journey, Britney Spears and the cast of "Glee". We're in the process of integrating our two merch businesses, and we aggressively continue to acquire new rights for these businesses, including consolidating the group's VIP ticketing (technical difficulties) businesses and rebranding them as VIP Nation.

Planned touring activity during the second half remains strong; with activity from the majority of our key artists, including Van Halen, who are also releasing a new album featuring David Lee Roth as their lead singer for the first time since 1984. Together with the Board and the rest of the management team, I remain focused on moving Live Nation forward despite several recent economic factors that impacted the consumer discretionary spending. So thank you again for your support. Look forward to updating your on our progress here on our next earnings call.

Now, I will turn it over to Michael for his remarks.

Thank you, Irving, I am not sure what happened there on the phone, but I know you're joining live now so we'll pick it up.

Good afternoon, everyone, welcome. We had a great quarter in the first 6 months of 2011. As you can see, we delivered double digit growth in revenue, AOI, and free cash flow in what has essentially been a flat ticket industry this year; and over 75% of that growth has come organically.

Our new management team is working well together, focusing on the overall growth and strategy of the Company, and our results are starting to show what we can do. Here are 4 examples that bring that to life. We grew our share of the top 100 concert tours in the first half of the year from 41% to 48% of tickets sold, demonstrating our success in growing the concert business. Second, I am now confident the management team at Ticketmaster will grow AOI in 2011 for the first time in five years. Third, our goal of global sponsorship team growing 10% a year looks like it will come to light. And finally, our e-commerce division is making great strides in leading the charge in the social media space with the beta launch of our Live Nation concert calendar on Facebook, turning our passionate fans into our marketing partners by empowering them to track and share their concert plans on Facebook.

Before talking about the specific businesses, let me give you an update on ticket sales in the second quarter and how the industry is holding up. Worldwide, Ticketmaster ticket sales were up 15% for the second quarter. On a pro forma basis, ticket sales were up 1% for the second quarter and 3% for the first half. This is in line with our expectations for the year of roughly flat volumes. Sales have continued strong in the third quarter, with ticket sales up 17%; and 2% organically in July. On the concert side, the second quarter Live Nation concerts attendance was up 6%, and 4% for the first half of the year.

These numbers are in line with the overall industry; and as I noted, we have increased our share in top arena tours, which means we are being successful in balancing our portfolio between arenas, festivals, and amps. In July, shows have continued to do well; and for the month of July, concert tickets were up 6%. So, overall, we are pleased that the industry has stabilized and responded well from 2010; so on the concerts and live events in general are still very high on the consumer's list of great entertainment options. And when we price it right from the beginning, the fans respond and the business grows.

Now on to the segments. Our strategy is centered around 3 core activities. Acquiring great content and clients; selling more tickets; and building our advertising business. And now, I'll provide an update on our core segments that drive these strategies. Concerts in our second quarter -- we executed 6,000 concerts and drove 13 million fans in 40 countries.

Our management team was charged with increasing profitability and market share in 2011. And the key strategies to achieve this -- number 1 was no mass discounting, and by doing that our ticket revenues are up 6%. Second, focus this year was to price the house right from the beginning, to drive higher revenue from the front and lower prices in the back to stimulate purchase. Our top seats in our amphitheater sales are up 15% to 20%; while our lawn prices are generally flat to down. So, this initiative is driving our casual consumers.

Third, drive overall balanced portfolio of amps, arenas, and festivals. We did not chase amp shows that we do not believe will be profitable for us this year. This sharpened discipline is reducing our average artist percentage, while we grew our arena market share and festivals. We will be launching 8 new festivals in the second half in North America and Europe, including 4 electronic ones, for a total of 40 festivals in 2011, as we continue to build that important product line. As a result, I currently expect we will see concert's AOI end the year better than 2010 and well-positioned for 2012.

On the Ticketmaster side, improved AOI in its first half is a result of increased ticket volume, improved performance at TicketsNow, and operational improvements. We sold over 33 million tickets in the second quarter, up about 29 million tickets in 2010. We continue to have strong renewals with our existing customers, renewing every one of the top 25 customers up for renewal in each of North America and Europe. At this point, we have about 12,000 clients, and a renewal rate we expect to come in at about 90% for the year.

TicketsNow, our resale business, continued to show strong growth during the first half, due to new customers and service innovations. We successfully launched the US Open-Xchange in the quarter, furthering our strategy of partner exchanges; and we launched Ticket Fast service, enabling buyers to get tickets reissued and directly delivered to them, giving fans greater confidence in the transaction. In the operational improvements, we made commitments a year ago to focus on operational improvements, particularly improving the cost structure and overall operations of Ticketmaster; and we have delivered on these commitments.

Our e-commerce business improved in the first half through growth and overall ticket sales, and improved upselling. The gross value of tickets sold increased 17% for the first 6 months of 2011, with a GBT of $3.3 billion for the first half. Upsell volume increased 5% in North America, and more than doubled internationally; as we continue improving our online shopping experience and ease of purchase. And we continue to roll out new features and functionality, with seat maps now available for 4,000 venues across the world, and soon being tied into FaceBook. Our database now stands at over 100 million opted-in unique customers, an increase of more than 20% from last year. And, at the same time, we focused on expanding our sales channels. Groupon Live got going in the second quarter, with making over 1200 offers and selling 400,000 offers. And Wal-Mart now has rolled out its Ticketmaster kiosk to over 1,200 stores, and has sold over 200,000 tickets. So between these two channels, we feel that we have a great proposition with the casual, value-driven consumer without the need of broad discounting.

Our sponsorship business improved its AOI in the first half by increasing its revenue per sponsor by 25%, while largely maintaining the size of its sponsorship base. As I mentioned earlier, I continue to expect this business will deliver 10% AOI growth this year, with strong confidence at this point, given 80% of our contracts have been committed for the year. We have increased both ad volumes and CPMs, with CPMs increasing by over 10% in North America and internationally for the first half of the year.

So, in conclusion, I am very happy with our performance in the second quarter and first half of the year. We are demonstrating that despite tough economic conditions, if we price concerts right, the fans will come because of the unique experience of the live show. And at Ticketmaster, we are seeing that with the right leadership we can turn that ship around. I firmly believe that our platforms' leadership positions will drive long-term growth as we expand globally, drive advertising, and continue to find innovative ways to sell more tickets to the highly engaged fan.

Now, over to Kathy for the financial updates.

Thanks, Michael. And good afternoon, everyone.

We're extremely pleased with the results we have delivered for the second quarter and first half of 2011. Our second quarter revenue was $1.6 billion, an increase of 23% over the $1.3 billion we reported for last year. Overall, this increase was primarily driven by a 26% revenue increase in concerts from increased touring activity, higher festival revenue, and more arena shows in attendance. We also saw strong revenue growth in e-commerce, Artist Nation, and sponsorship.

Adjusted operating income for the second quarter was $139 million, compared to $113 million in 2010; a 22% increase. This increase was driven by high growth in e-commerce profitability from more online tickets, higher upsales, and online advertising. We also saw an increase in ticketing AOI of 11%, driven by higher ticket sales, organically and from acquisitions; fees from the 2012 Olympics for which the majority of the tickets are now sold; and cost savings. Additionally, Artist Nation's AOI grew 61% from increased touring activity and related merchandise sales, and sponsorship continued to show strong growth, with a 24% increase in AOI driven by higher festival activity and newer extended relationships with sponsors, including the renewal of our agreements with AMEX and Citi.

Concerts AOI was down for the quarter, even though events in attendance overall were slightly up; primarily due to the mix of the events in the period, along with some markets and new festivals that we are investing in. As a result of our higher AOI, operating income improved to $52 million in the second quarter, compared to $26 million last year; and we delivered positive net income of $13 million for the quarter. For the first half of 2011, revenues were $2.4 billion, an increase of 21% over the $2 billion we reported last year. This increase was driven by a revenue increase of 21% in concerts based on the second quarter activity, primarily. Ticketing also had a strong revenue increase of 23%, driven by the extra month of activity this year -- since 2010 was only post-merger -- higher ticketing revenue, and other ticketing growth. In addition, e-commerce, sponsorship, and Artist Nation also all had solid revenue growth so far this year.

Adjusted operating income for the 6 months was $184 million, compared to $115 million last year; a 59% increase. This improvement was driven by growth in ticketing AOI of 37%, due to increased ticket sales, both organically and from acquisitions; the addition of the extra month of Ticketmaster activity in 2011; and fixed cost management. Also, e-commerce more than doubled its AOI, driven by more online tickets, higher at sales, and online advertising. And, sponsorship AOI grew 25%.

Our operating loss was $20 million for the 6 months compared to a loss of $81 million last year. This improvement resulted from our higher AOI and lower acquisition expenses in 2011, partially offset by increased amortization and ticketing in Artist Nation from acquisition intangibles. The operating loss in 2011 was also impacted by $24 million of stock-related compensation expense recorded in the first quarter that was a direct result of the buy-in of the remainder of Front Line. At June 30, we had total cash of $1 billion, which includes $397 million in ticketing client cash. And after eliminating the concert event-related amounts, our free cash was $328 million. Free cash flow for the quarter was $78 million, compared to $64 million in 2010,;and for the full 6 months, our free cash flow was $71 million compared to $32 million for the first half of 2010. These increases are primarily driven by the improvement in our AOI, partially offset by the timing of tax earnings and payment.

Total capital expenditures in the first 6 months of 2011 were $45 million, compared to $30 million last year; the increase primarily driven by higher costs related to the re-platforming of our ticketing system and website enhancements. We continue to expect total CapEx to be approximately $115 million for the full year. As of June 30th, our total current and long-term debt was $1.7 billion, with nothing drawn on our revolver; and our weighted average cost of debt is currently 6%. With respect to our credit facility, we continue to remain comfortably in compliance with our debt covenant requirements. As of June 30th, our total debt-to-EBITDA ratio is under 4 times, versus the maximum of 4.9 times; and our interest cover ratio is over 4.8 times, versus a minimum of 2.5.

We are very pleased with the results we have delivered so far in 2011, with two strong quarters of results to date; and are optimistic about the remainder of 2011. While we don't expect to see the same level of year-over-year growth in the second half of the year in some of our segments, as Michael noted, we currently believe that all of our segments will deliver growth in AOI for the full year over the results reported in 2010.

We thank you for joining us today for our second quarter update, and we will now open up the call for questions. Operator?

(Operator Instructions) We will pause for just a moment to compile the Q&A roster. Your first question comes from David Joyce with Miller Tabak & Co. Mr. Joyce, your line is now open.

You want to go on to the next caller, operator?

Hello. Can you hear me now?

Yes, we can hear you.

Okay, I didn't have my mute button on. Thanks for the color on things moving ahead given the backdrop of what we're seeing in the markets. Can you give us an update on some of the markets around the globe? Especially where we've had some acquisitions, like in Spain?

Yes. Overall in Europe, I just got back from there, but we are sensing overall -- Europe and Spain and Italy, and even the UK -- we had a little softer festival ticket sales this year than historically. That's driven a little bit of our AOI down by a few million. Now, that maybe just due to the fact that there is a lot of festivals versus anything from a market perspective. So, overall, European ticketing has held strong this year and is up so we don't have any markets from Spain or France or Italy that have anything unique going on from a consumer spend perspective.

All right. And, domestically, it looks like your strategy worked for the amps in setting the pricing lower but not discounting going in. Was there a material difference in, say, the ancillary spending for the seats versus the lawn? Any trends like that?

No, we are seeing are per caps flat to slightly up. They are still spending the same amount of money once they get in the venue, so all positive on that end.

All right. And finally, on sponsorship. The per sponsor revenue was higher than we were expecting. Is the trend continuing that you're still migrating towards larger advertisers and sort of away from smaller and regional?

We have a triple combination of both local, regional and national. But if you look at the trend over the last 4 or 5 years, it's been a continual growth of more and more national, larger customers. So we believe that's an overall, global strategy, and this year with the Citi and American Express kind of deals coming in, they definitely would increase that metric.

And I'm sorry, I just have 1 more. I think you said that you were able to renew all of your ticketing contracts that came due during the quarter? Is that what you said? And are you seeing any potential market share erosion from some of the other newer technologies that might be coming out there?

No, I said we renewed the top 25 that would have been on the target list. Historically, Ticketmaster has lost a few buildings a year on whoever the latest or newest technology platform is out there. We this year have not seen any erosion. We've seen that stabilize well over 90% as we said in term of renewal. So right now the market share and our renewal rates remain as strong as ever.

Great, thank you.

Your next question comes from Ingrid Chung with Goldman Sachs.

Thanks, good afternoon. So, I was just wondering, first off, you said last quarter that you'd seen some issues in terms of the last minute, walk-in buyer go away. I was wondering if you had seen that last minute, 10% to 15% volume come back? And then, secondly, I was wondering if you could give us an update on your dynamic pricing tool, who signed up and how the early indications looked?

Ingrid, I'm not quite sure I said the last minute buyer went away. I think I would've said in our business we have 2 pieces to it. We have the on sale and then the final piece of your business is the week of or the 2 week before walk-up. So you can have a strong on sale, but if you miss that other 50% of your business, which is the walk-up, you don't deliver the total number.

So we are seeing this summer, as you can see from the numbers coming in, we have a very strong walk-up in the month of July. Something we didn't have last year. If you look at a year ago, we were reporting 13% ticket decline year-over-year this time of the year, versus this year, we are reporting the opposite in terms of growth. So we are seeing a strong July into August walk-up. So the consumer seems to be still making it a priority to get to that show and I think because we are not discounting to the level we have before and pricing it right, it's driving that last week of sales to great high levels.

The second, dynamic pricing. So we launched our dynamic tool called Pricemaster in Q2 from the Ticketmaster side. We are now out getting adoption, selling it to our sports clients as well as our internal concert promoters. So, we will roll it out this quarter in Q3 for some fall shows because we were too late in terms of getting it up for the summer. So we would believe by the end of the year we will have up to 10 sports clients that have tested it and we will have tested it across our concert division on some fall time shows. So we should have some updated information by Q3 and then by the end of the year, we will have had our full test done across sports and concerts and be in a position then to sell it in for the 2012 season.

Okay, great. Thank you.

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

Hi, good afternoon. Thanks for taking the call. First for Kathy, sort of on the free cash flow, wondering -- given that you had the frontline take-in this year, wondering if you know, do you think the cash tax rate for the first half of the year is there for the second half of the year? I'm wondering sort of where the cash tax savings from frontline starts to kick in a little bit more.

Yes, a couple of things. Our rate that we put in the Q, is we're saying it's about 20% rate right now, which is consistent with overall what we'd said before. The cash taxes are little bit front end loaded this time in terms of when we've been making estimated payments, primarily internationally. And the other big positive coming from the frontline is we will get a refund in taxes because we're able to carry back some of the earnings against NOLs, and we don't expect to get that refund in probably until early next year, but we will still see it. But yes, you're seeing an overall impact because as our international operations have grown a little bit, we're seeing the positive offset of not having to pay the US taxes on the frontline business this time.

Okay. Michael, going back to that Ticketmaster renewal rate of 90%. First of all, is that historically where it's always been around; is it higher or lower? And then I think also following up on Ingrid's question about dynamic ticket pricing, are you getting any real push back from venues? And if you are, how are you dealing with that, if you will?

On number 1, the renewal rate is consistent with history. So, we haven't lost or gained any and that number of 90, as you know, is a pretty impressive number in any industry. As far as dynamic pricing, the sports side is the easy side because many teams, whether it's baseball or football have tested some idea of a dynamic model, so it's an easier sell to most sports teams. Obviously, with the NFL almost going out and now renewing and the basketball, it's a little hard to sell right now into those sports' seasons; but in general, the sports guys get this model and we believe they will be the pioneers of adoption.

The concert business, it's a little bit -- it's obviously a lot more fragmented. So we'll kind of guinea pig on ourselves for the Fall and find the right managers that understand the dynamic model. And that's why we hope to have the 10 or 12 shows or tours done through the Fall that we kind of hold the hand of certain managers and test it together. And that should provide us a good enough test market to start talking wider to the music business next year.

And are you able to sort of use the sports guys, let's just use MSG as an example. You roll out MSG, are you able to therefore basically roll it out at all concerts MSG as well? Does it kind of work that way?

No. I mean, yes and no. As you know, in the concert business, there's -- the manager is really driving the business for that show and regardless of what venue it's in. So the manager and agent need to buy into your model for their show and their tour. And, Irving can jump in.

I don't think it's a stretch. Most managers understand the concept. We are just going to focus on the easier place, which is the sports side since it's already been instituted to go find some wins on the sports side first. Now, we have a few clients we think we'll be ready to announce soon. So we'll sell the sports side, which is the easier angle first. And we'll test a few concerts and 2012 will be much more about the sports side coming to light and a first stage of concert, probably amphitheaters.

Ben, that said, every major artist is understanding the upside here. And, whereas it always used to be worried about, Oh, we'll get bad press if we do that, those barriers are coming down. So, I think that -- and as you know we beta tested last year with the Eagles and certain other acts and it worked magnificently. I think it will roll out -- we want to get it right, but we're meeting positive reaction from most of the major artists.

Okay, great. And then last question very quickly, you gave ticketing trends for July, which was helpful. Any trends you can give on the ancillary spend at the amphitheater? Are you seeing it sort of stay at a similar percentage like similar growth rate to what we saw in the second quarter?

Yes, it's flat. No surprises there. It's kicking in at the usual amphitheater per head number. So, we don't see any erosion in the per caps on a year-on basis.

Okay, great. That's it for me. Thanks, guys.

Thanks, Ben.

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

Hi. A couple of quick questions. Can you talk a little more about how Groupon is working?

Yes. So, we just launched, as you know in the second quarter, Groupon Live. We have, I think as I said, over 1,200 offers, which is kind of a same way of looking at the pricing -- dynamic pricing adoption strategy. There was a time when you wouldn't think you would get 1,200 different artists, concerts or sport teams to sign up to this kind of value model. But it's been a very easy sale throughout the entire concert business and sports business.

It's very targeted, so we are able to take a show or a sporting event in an exact city that maybe needs a little extra help, and they'll -- kind of a rifle shot to Baltimore for a certain show. So, great adoption, concerts and Ticketmaster side, we're getting over 1,200 -- sold over 400,000 offers in the last few months. Groupon Live in general is kind of a branded start place where Groupon puts all of their tickets, whether we bring them from Ticketmaster and Live Nation or other sports and theater and music companies bring tickets, they all end up at Groupon Live, so we kind of we believe built a destination within the Groupon that says this is the place to go look for tickets.

And, overall, that entire business had a very robust June and July. I'm sure it's the market leader by far right now in terms of the total amount of tickets that would be placed on there. I think there was a total of -- we sold 422,000 offers and there was over -- close to 600,000 tickets sold in total for Groupon Live in that same period. So, we're very pleased with its progress. We think it's been used very effectively by the entire business to tackle that problem market or problem show in a very focused manner.

And there's no negative feedback from people who haven't got the discount?

In general, last year, when you are doing an overall discount, you get a lot of push back, but in this case, because we believe it is so targeted in Baltimore, if you are doing the last week of a discounted offer it's fairly isolated and we've received minimum to a few complaints. But overall, not affected at all. I think most consumers have well grasped and bought into the flash seats model and their daily purchase pattern and concerts being no different than anything else.

And this is trying to help your stock in a somewhat difficult environment? I noticed John Malone, one of your shareholders through Liberty made some comments at a conference recently suggesting that you wouldn't be an appropriate Company to go private. Do you have any comments on that?

No.

No. Nice try though.

I might add, by the way that on the artist side, when you go to them on last-minute discounting, they are all unhappy but because Groupon is a nice buzzword, they are buying into it. So, I'm just saying Michael spoke about the consumer side, but the artist and the executive side have bought into the Groupon thing. And I think, especially I know on Britney Spears we did the reps of -- I don't know what cities they were, but the reps meaning the daily sales were down to around 50 and then we sold several hundred on Britney and Larry Rudolph is Britney's manager says, he absolutely believed these were new fans that had never seen Britney. So, part of what artists and managers are thinking about the Groupon Live experience is it's not the typical concert goer and we're bringing new people in that hopefully will then go to more shows.

Great. Thanks.

Your next question comes from Martin Pyykkonen with Wedge Partners.

Thanks. Great quarter. Just curious on the AOI in the concert segment relative to revenue growth where AOI was down year-over-year, obviously up. You probably don't want to split it out quantitatively but could you talk a little bit about how much of that was domestic versus international where the decline on the AOI came from?

Yes. If you look -- just in broad strokes, the numbers are fairly small in the big picture. We're down $3 million or $4 million if looked at the quarter or year-over-year on a global basis. Most of that is driven by the festival business in Europe. Overall, it is successful, but out of our 35-plus festivals, 3 or 4 of them did not deliver the numbers we had hoped from a year ago. So, that kind of is about a $4 million to $5 million swing alone. So as we look at the overall year, we believe Q3, meaning July and August, where we see the kind of the business trending now, will make up for any of the first half declines and deliver our year-over-year growth goal.

Where your number of events was down internationally in this quarter, and I guess as you look ahead to the rest of the summer and even all the way into next summer, is it fair to characterize it as there is more fat to cut on the international side for your profitability outlook? Or is there still more you think to fine-tune domestically to try to get a sense of balance between the 2 where you may have more of that middle ground to cut out for AOI growth reasons?

No. Our international business is a much higher margin business to start with than our North America business. So we believe that our European business has continued growth ahead of it once we get through this year in terms of some festival hiccups that we didn't expect. But, overall, we think both businesses, generally will perform better year-over-year than last year. You will see some of that event stuff internationally pick up in Q2, or Q3, I mean. So, by the end of the year, the number of shows in each market will look relatively the same, maybe up. The strategic difference was just the amphitheater shows will be down from 900 -- from 1,000 to about 850, which drives some savings on our North American side.

But, remember, we break out -- one of the goals on our concert division, we used to put our sponsorship business, which is about 99% of it is driven because of concerts, all into one segment. We strip out the segments now to show you the pieces of the wheel, but the concert business is about -- you've got to drive a certain level of market share, a certain level of fans to be able to drive your sponsorship business and your CPMs.

So, we're feeling really good about the fine balance we have right now in our concert division. If we finish as we hope to in this year, I think we will have the right balance of a better portfolio, improved profitability on a global basis. And an increased market share, which helps our ticketing business and helps our sponsorship business. So we think that balance is going to be there by the end of the year.

Then just 1 other thing on sponsorship, just kind of the color on if -- you've obviously got some nice growth there as well as on the profitability side. Is it a fair situation that you have a lot of head room if you have the people out there selling the sponsorships? I'm just guessing you are probably no where near capped relative to the number of shows you have in concerts? Is that fair that more focused sales effort could even get that high relative to the concert business?

Well, I will answer in this way, we believe that our advertising sponsorship online business in general has great, great growth ahead of it. We think we have a lot of room left on our advertising -- on our online platform. We are continually upgrading our, let's call it a static billboard to a video billboard and increasing CPMs. We have a very, very rich online experience, which is fairly unique for kind of an e-commerce site. So, we think both TM.com, LiveNation.com, House of Blues, our festival sites -- we think those have continued CPM upgrading potential, which will drive that business.

We think we have continual global nationalism kind of deals both in Europe, North America, that will increase the per deal revenue number. And as we are expanding into countries like Australia and France and Spain where we've got the platform we may have a ticketing and we are now just slowly getting the sponsorship team in place. Those kinds of markets just have a great growth potential ahead of us. So, we think is sponsorship advertising overall, why we broke it out from day 1 as a separate segment to show the profitability has great growth and will be one of our biggest growth drivers year-over-year for the next few years.

Okay, great. Thanks. Nice job.

Your next question comes from David Kestenbaum with Morgan Joseph.

Okay, thanks. Michael, can you talk about how your fall concert lineup stacks up against last year? In particular, since there's been obviously no evidence about a slowdown in the economy, are some of your performers are little wary about going out right now? And then second, can you update us on where you are with Madonna? I know she owes you an album and another tour.

Yes. I'll start with the easy one, Madonna. We don't announce, as you know, until the artist is ready to announce, but you could assume that even we've announced nothing yet, there is no album nor no tour in 2011. So, I would assume 2012 will most likely be the year those come together.

As far as the fall, if you look kind of a like for like, it looks fairly similar. We're not sensing anywhere near the panic we did last year. As you know, last year, by this time there had been 2 months of bad press about the concert business. We don't sense any of that this year. I'm sure this week we'll hear a few things because of the news, but overall, it's kind of business as usual for an artist. If they had planned on going in the fall, they're still going. So, we think our fall and Q4 will be -- it's the slower time of the year, but we think it will be good enough as compared to last year to finish the year and deliver our plan.

Okay, thank you.

Your next question comes from Doug Arthur with Evercore.

Yes, can you hear me?

Yes.

Yes, we can hear you fine.

Just -- I know you touched on the festival business a couple times here. Michael, just in terms of -- you cited a couple of unexpected things impacting the business, was that weather-related, was it specific to management of some big festivals, or do you think there is a little saturation going on?

There's definitely some saturation, we just happened to have the leaders, so if you're kind of the leader in your market, whether it is Holland or the UK, you will be okay. We just had a couple of festivals which, Download, in the UK. Last year, we happened to have AC/DC and happened to have a huge, monster year and you can make $4 million or $5 million on that festival. This year we just didn't have kind of the same level of overall talent line-up. Didn't drive the same numbers and basically, broke even on that festival. So you now just -- you've taken $5 million out of your pocket that you made last year. It's that simple.

And next year, because it is a hard rock festival, it's sometimes a bit of a challenge to find the perfect, overall line-up to drive those 3 days. But, we feel we are ready for next year and we'll be able to rebound back on that 1 festival and you put 36 of those festivals together and if that's your only 1 hiccup for the year, you're batting a good average still. So we think we'll be fine next year.

Okay, got it. Thank you.

Your next question comes from Richard Greenfield with BTIG.

Hello, Rich, you are breaking up.

Hello?

Got you.

Hello?

Yes, Rich, are you there?

Can you hear me?

We can now. Now we can't.

Your next question is Tuna Amobi with Standard & Poor's.

Hi. Good afternoon. Can you hear me?

Yes.

Yes.

Okay, so on the Groupon deal, I was wondering if you can perhaps provide a little bit more color. If the deal has perhaps a cap or a floor, and with regard to the accounting of that, is that purely flowing through the equity line, or are there numbers in the ticket and/or concerts? And I have a follow-up.

Kathy can answer the accounting.

So on the Groupon Live, Tuna, how we are doing that is that it just goes in as revenue and most of it will go in concerts with a little bit going into ticketing. But it's not an equity venture.

Just like a ticket sale. What was your next part?

Tuna Amobi has no further questions. Mr. Rapino, I'd like to turn it back over to you for closing remarks.

I feel bad, did Rich try to call back in?

No sir, he did not.

Irving, just because I did get an e-mail, I guess your recorded part unfortunately did not work well. If you had to give a top -- was there anything that you just kind of want to restate because you are having such a great year, just so we can get it out on the record? Is there a summary of your business, anything you wanted to add that they may not have heard?

No. Not much that we wanted to add, just that we're getting the consolidation of the VIP area and the merge areas done. A couple manager acquisitions that weren't major but just -- that we are continuing to do that. A couple artist signings. And fourth quarter touring activity -- in the last call we said it looked like 75% of the artists would tour this year versus 50 and that number is holding up.

We lost 22 shows because the Kings of Leon lead singer is down with a torn vocal cord, but the Van Halen tour actually moved into this year. So there's the first Van Halen album since 1984 with David Lee Roth and a big international tour getting rolling. All systems go on the Artist Nation side.

And Irving, from a fall, anything on the fall? Are you sensing on your side any pullback or is it business as usual?

Business as usual. Artists are more anxious than ever to work. I think the fact that it's like an athlete like the NBA guys will go through this year. These guys sat out last year and didn't make money and they're trying to make up for it now. I see no reluctance. If there is any positive about last year being down, when it comes to ticket prices and things, people are finally -- some of the barriers of entry are coming down. But no, everybody wants to work as much as they can work.

And, the 1 thing is we're not seeing -- in the middle of a lapse that depend on a lot of what we call soft money dates, we're not seeing a recovery there meaning that a lot of the casinos and city and state owned facilities and universities have not returned as buyers as quickly as we would have liked. But in terms of supply and demand, there seem to be enough dates to go around and enough artists to go work them.

I feel like you and I could just do the Q&A. I guess -- thank you, everybody and we look forward to our Q3 results.

All right. Bye, everyone.

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