Live Nation Entertainment Inc (LYV) 2011 Q3 法說會逐字稿

Good afternoon. My name is [Carrie], and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Live Nation Entertainment Third Quarter 2011 Earnings Conference Call. Today's conference is being recorded. (Operator instructions.)

Before we begin, Live Nation has asked me to remind you that this afternoon's call will contain certain forward-looking statements that are subject to risk and uncertainties that could cause actual results to differ, including statements related to the Company's anticipated financial performances, 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 Regulation G, Live Nation has provided a full reconciliation for the most comparable GAAP measure in their earnings release. The release, reconciliations and other financial or statistical information to be discussed on this call can be found on www.livenation.com-backslash-investors.

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

Thank you, Operator. Welcome, everyone, to our third quarter 2011 earnings call. Joining me today, as usual, are Michael Rapino, our CEO, and Kathy Willard, our CFO. I'll begin the call with some brief comments, and then turn it over to Michael, who will review our third quarter results and some observations on business for the balance of the year.

Despite the difficult global economic environment for discretionary consumer spending businesses, we continue to deliver improved results and make significant progress towards achieving the goals set following the merger of Live Nation and Ticketmaster last year. The strong concert performance and improvements to our ticketing platform, e-commerce capabilities, online advertising and sponsorship businesses will be covered in more detail by Michael.

I'm very excited about our revolving relationships with Apple, Facebook, Groupon and others. Not a day goes by that I don't get satisfied reports from our major Ticketmaster accounts for our new dynamic pricing tools, live analytics, interactive seat maps, and improving technologies.

In addition to my broader role at Live Nation Entertainment, I continue to lead Artist Nation, including Front Line management. Our key artists have been more active during 2011, delivering // results for the nine months 33% above last year. Several of our key artists have canceled and deferred some tour dates for a variety of reasons, including health, Hurricane Irene and other economic choices. Despite that, Front Line had a terrific year this year so far.

Several acts, like Jason Aldean, Rascall Flatts, have had amazing breakthroughs this year. The Eagles, Journey, Steely Dan and many of our vintage acts continue their record-breaking business. Kings of Leon are back on the road to play Canada and South Africa, and are now on an Australian tour. The improvement in our management business has been offset by the talent and inventory costs occurred on the integration of our merchandise businesses. We have successfully integrated the Group's various VIP ticketing businesses and look to more effective and profitable results from these, going forward.

Both merchandising and VIP areas should benefit, going forward, from the restructurings that are now completed.

As reported on our last call, we continue to grow our business through acquisitions and direct artist signing. The balance of the year will see some reduction in key artists touring due to deferral tour plans by Van Halen, Neil Diamond and Jimmy Buffett and a reduced schedule from The Eagles than normal. Both Mr. Diamond and Van Halen have already confirmed long US tours beginning second quarter of next year.

So thank you again for your support. I look forward to updating you on our progress during our next call. Now I'll turn it over to Michael for his remarks.

Thank you, Irving. Good afternoon, everyone, and welcome to our call. Another terrific quarter for us financially and strategically, putting us on track to deliver our goals for the year. Our results demonstrate the success of Live Nation's focus on producing great concerts that fans want to see and investing in innovations on how fans discover and buy tickets.

This strong quarter was highlighted by the U2 global tour that finished in July, touching down in 29 countries, selling seven million tickets, and grossing almost $750 million, making it the highest grossing tour in history, a great example of our powerful global platform.

Third quarter results are in line with our expectations of strengthening our core performance through 2011. Year-to-date, we have delivered on growing revenue, AOI, free cash flow, and improved profit margins, all against a fairly flat industry.

Our management team continues to execute well, finding the balance of running the core business better to drive short-term profitability and investing in launching new products to maximize long-term growth opportunities. Our financial results and ticket sales to date represent and validate that live events, particularly concerts, remain a very strong and sustainable consumer proposition despite the challenging economic environment.

In our recent research, fans place live events amongst their top priorities for discretionary spend, and 85% said they would attend as many or more events next year. The power of Live is healthy and strong, and it's the only form of entertainment that is not duplicatable.

Before I move on to the business lines, I'll provide an overall view of how ticket sales in general are doing for the first nine months and into Q4. Ticketmaster has sold 103 million tickets through the first three quarters, up 11% for the year. In the third quarter, Ticketmaster sold 35 million tickets, up 7% from last year. Maintaining this momentum for the month of October, we are up 2%, on a pro forma basis, ticket sales were flat for the first nine months, in line with our earlier expectations for the year.

We are particularly pleased with these results because concerts and sports, the core of our business, have both held up. Year-to-date, concerts are up 1% on a pro forma basis, and sport's up 5%. Looking ahead, while we believe the [demand] fundamentals are holding in ticket sales, we expect our ticket sales will be down year-over-year on Q4 due to the impact of the NBA lockout, which we now believe will be about a $10 million AOI hit to us in Q4. This is a greater impact than we previously communicated because the league is canceling these games in a two-week row process, making it challenging to add replacement dates.

We expect arts and theater primarily to be slightly weaker against last year's Wicked ticket sales. And the combined shortfall of these items is just over three million tickets for the fourth quarter. Given Q4, we expect full ticket sales to be down 1% to 2%.

In concert attendance, Live Nation concert attendance was down 6% in the third quarter and down 1% year-to-date. If you exclude amphitheater shows, attendance was up 6% for the third quarter and year-to-date 8%, outperforming the industry, which was at 1%. We continue to see solid demand in October with live concerts, expecting it to be roughly flat year-over-year.

Turning to our business lines, Live Nation in the concert business, so far in 2011, we have completed 15,700 concerts, entertained 36 million fans across 40 countries, a growth of about 4% over last year. Overall, our goal this year was to improve profitability and concerts by managing our portfolio for overall growth while reducing low margin amphitheater shows. As a result, year-to-date AOI concerts are up 42% and revenue 6%.

For the third quarter, revenue was down 7% while AOI was up 35%. The key drivers of growth - we reduced our amphitheater shows by 15% while increasing profitability by 18% per show. We grew global arena attendance by 10%, and grew profitability by show by 33%. The club business also had a strong quarter, with improving AOI by over 30% year-over-year, show count up 13%, and per-cap spend's up 3%.

We increased our festival portfolio in the US and Europe, launching 10 new festivals for a total of 45. Our number of electronic festivals, which we see as a growth opportunity, has doubled in 2011 to six. Since we haven't seen any real deterioration of consumer demand and the talent lineup looks consistent, we believe we are well positioned heading into 2012.

In our advertising and sponsorship business, revenue in the quarter was up 5%, and AOI 2%, with year-to-date revenue up 14% and AOI up 11%. 80% of this AOI is generated from our concert business. We continue to see a strong runway for sponsorships as we move into new categories and deepen our relationship with existing sponsors to drive increased share of the advertising market. As a result, revenue per sponsor has increased 13% for the first nine months. Our total number of sponsors as of September was 713.

The strength of our in-venue platform is complemented by our online advertising network. Year-to-date, we have sold two billion impressions worldwide, a 9% increase year-over-year, and at the same time our CPMs have grown in double digits, both internationally and North America.

On the Ticketmaster business, we now have over 12,000 clients, up 10% from last year, and have put over 2,000 events on sale so far this year, up 1% year-over-year, showing the global event activity has held strong. In our ticketing business, for the third quarter, revenue was up 10% and 18% year-to-date, and AOI was up 4%, or 25% for the year before our legal settlement. Client retention remains a high priority. Our global renewal rate so far this year was 86%, and we expect that rate to be about 90% for the full year. If you factor in the new clients we have added, the net client retention was over 104% on a global basis through Q3. So not only have we been able to retain the majority of our clients but, most importantly, we have gained new clients.

We have been aggressively extending our distribution channels. Our Groupon Live venture has delivered meaningful sales through 2,000 offers and 1.2 million tickets sold through October. Our Walmart kiosk programs have sold over 300,000 tickets, and we're in about 30% locations, with more to go.

So going forward, we are confident in our ability to retain and build our customer base // technology, along with our aggressive product development programs. Our online business of Ticketmaster and livenation.com's revenue for the quarter was up 42% and 65% for the year, while AOI was up 4% and 64% for the year. Much of our focus on e-commerce in the third quarter was building additional social tools and more effectively harnessing our consumer data to drive deeper engagement, awareness, and ticket sales.

During the third quarter, we continued to add more ways for fans to engage on Facebook adding integration with our seat maps to build on our previously released concert calendar. We continue to build our database, increasing our opt-in customers by 13% to 107 million. Our live analytics business that we launched now has 38 customers, of which are -- 17 are major league sports team. We're helping these clients market more effectively to their fans, delivering additional value only from Ticketmaster. And with this capability now in place, we'll be using it broadly to support our concert business in 2012.

We launched Pricemaster this year, our dynamic pricing tool, expect to be used over 300 beta events in 2011 with a full rollout in 2012. And we've increased our focus on mobile, both our Live Nation app and our Ticketmaster mobile website, which have generated one million tickets year-to-date. We have also continued to improve the efficiency of our shopping cart experience, with revenues from upsales up 54% for the year.

In conclusion, I am excited about the third quarter and how we're doing nine months into the year for two reasons. First, demand has held up, both in North America and internationally, despite the environment. This speaks to the power of the live event and the strength of our business model as we face further economic uncertainty.

Second, we're continuing to deliver operational and profit improvements on effectively flat demand while rolling out new, innovative products, advancing our mission of getting more fans to events. Given both these factors, I'm confident in our ability to continue delivering value to the shareholders as we progress into the fourth quarter and 2012.

Now I'll turn it over to Kathy Willard, our CFO.

Thanks, Michael, and hello, everyone. We're pleased to report another solid quarter for 2011. Our overall improvement during the third quarter as compared to last year was primarily driven by higher profitability in our concerts business, the benefits from our ticketing revenue growth, and fixed cost savings. Our third quarter revenue was $1.79 billion, a decrease of 2.5% compared to the $1.84 billion we reported last year. This decrease was due to lower concerts revenue by 7.3% as a result of our planned reduction in amphitheater events and reduced revenue from less global touring activity during the quarter, offset by arena and stadium events growth. All other segments delivered revenue growth, with ticketing having the most impact at 10%.

Adjusted operating income for the third quarter was $204 million as compared to $191 million in 2010, an increase of 7%. This AOI growth was driven by a 35% increase in our concerts business from improved amphitheater profitability per show and higher arena and stadium results, along with cost savings. Ticketing AOI was down 19% for the quarter as a result of a $14.6 million legal expense recorded for the settlement of pre-merger litigation. Excluding this legal accrual, ticketing would have delivered a 4% increase in AOI for the quarter, and our overall AOI would have been $218 million, a 14% increase over last year.

This legal expense in ticketing relates to the ticketing fees consumer class action that we previously disclosed. In the fourth quarter of last year, we reported an accrual of $21 million related to this case as our best estimate of the expected exposure based on a settlement reached with the plaintiff. As we previously reported in June 2011, the judge in the matter declined to approve the settlement and effectively reopened the settlement discussions. We have now reached an adjusted settlement with the plaintiff, which required us to record an additional $14.6 million in legal expense in the third quarter. The judge has now given preliminary approval for this revised settlement.

The other legal matter to note is our arbitration with CTS. We completed the arbitration hearing in August and are progressing through post-hearing proceedings. We continue to believe that the facts presented to date support our position and that we are unlikely to have any meaningful exposure. Based on this, we have recorded no legal accrual at this time for this matter. We currently expect that this issue will be resolved by the end of the first quarter of next year.

Operating income was up slightly to $105 million in the third quarter compared to $103 million last year, driven by the improvement in AOI, offset by higher amortization expense from acquisition-related intangibles. And our net income for the quarter was $52 million.

For the nine months to date in 2011, revenue was $4.2 billion, an increase of 10% over the $3.8 billion in the prior year. This increase was driven by revenue growth across all of our segments. Notably, concerts revenue grew 6% primarily due to increased touring revenue from global tours with U2, Lady Gaga, Sting and Shakira all out on tour in '11, as well as higher attendance from arena and stadium events, offset by the decline in amphitheater revenue.

Ticketing revenue was up 18% year-to-date, driven by higher revenue from our 11% increase in total ticket sales, fees earned from the 2012 London Olympics, along with the extra month of activity this year due to the timing of the closing of the Ticketmaster merger in 2010. E-commerce increased 65% due to an increase in online advertising and upsells, along with the fees earned for international online ticket sales in 2011. In addition, sponsorship and Artist Nation delivered solid revenue growth over last year.

AOI for the nine months was $387 million compared to $306 million last year, a 27% increase. This improvement was driven by a growth in concerts of 42% as a result of increased arena and stadium show profitability and overall cost reductions, offset partially by the reduced amphitheater results due to the fewer shows.

Ticketing AOI was up 17% even with the legal accrual in the quarter due to increased ticket sales, both organically and from acquisitions, UK Olympics, and the extra month of Ticketmaster activity in 2011, as well as overall cost savings, offset by our investment in the ticketing re-platforming. E-commerce grew 64% from its increased run, offset by the investment in social and mobile products, along with database investments.

Our operating income was $85 million for the nine months compared to $22 million last year. This improvement was driven by our higher AOI and lower acquisition expenses in 2011, offset by increased amortization expenses from the acquisition intangibles and the $24 million of stock-related compensation expense that we recorded in the first quarter from the buyout of the remainder of Front Line.

Our net income for the first nine months was $17 million. At September 30, we had total cash of $783 million, which includes $334 million in ticketing client cash. After eliminating this client cash and the concert event-related amounts, our free cash was $357 million.

Free cash flow for the quarter was $152 million compared to $145 million in 2010. And for the nine months, our free cash flow was $224 million compared to $153 million in 2010. This growth driven by the improvement in AOI of $81 million, offset by higher maintenance capital expenditures of $12 million from the merger-related integration cost and improvements of ticketing systems in venues.

Total CapEx in the nine months was $69 million compared to $49 million last year, with the increase being driven by the re-platforming of our ticketing system, database, social and mobile product enhancements, along with the higher maintenance items. We continue to expect total CapEx to be approximately $115 for the full year. As of September 30, our total current and long-term debt, including capital leases, was $1.7 billion, with no draws on our revolver. And our weighted average cost of debt, excluding debt discounts and premiums, is 6%.

With respect to our credit facility, we continue to remain comfortably in compliance with our debt covenant requirements. As of September 30, our total debt to EBITDA ratio was under four times versus the new maximum of 4.5 times. And our interest coverage ratio was over 4.5 times versus the new minimum of 2.75 times.

We are very pleased with the results that we have delivered so far in 2011, ad remain confident in our ability to deliver full-year revenue and AOI growth, along with overall margin improvements. We currently expect that all of our segments will deliver higher AOI than last year, the concerts will more than double its AOI as compared to last year, and that sponsorship and online advertising-related AOI will grow more than 10% for the full year.

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

(Operator instructions.)

John Healy with Northcoast Research.

Thank you, and congrats on a great quarter. I wanted to ask a little bit about 2012. Michael, I believe one of your comments you made is a similar lineup or a strong lineup for 2012. Is there anything you can provide, from a highlight standpoint, of what we might expect to come from you guys, and maybe how you feel the strength of the quality of acts compares to 2011.

Well, on the concert side, I'll let Irving pipe in on his management stuff. I mean, obviously, we don't announce until the artist fully announces what they're going to do, but we would know this time of the year through all of the discussions with the major artists. One of the kind of the profile tours that are going out next year compared to what we had this year at all levels of our business. And I would just say to you that we would feel very confident that what we see that will be going out there, by the time they all confirm, right now looks consistent to 2011, and we expect it to be a strong, consistent lineup on a global basis to fill all the different pipes and markets.

So we don't think that the talent lineup will be any issue next year in terms of the quality of band nor quantity.

Irving's our management business. You can refer to the artists he knows.

Yes. Look, everybody wants to work that can work. We got hit a little bit this year with two throat surgeries, a case of Legionnaire's disease, and these were on acts that aren't some of our older acts. But the answer is everybody wants to work, and we're in cycle in a lot of good album release on a lot of artists.

And so I think next year -- look, Van Halen hasn't worked in ages. It looks like they'll work next year. Yes, they are going to work next year. So it comes and goes, but generally it feels about the same next year versus this year.

That's great. And then I wanted to make sure I just understood something. You guys reported the AOI of around 203, but that included the legal expense in that number with Ticketmaster. So without that item, it would have been more like 218, right, Kathy?

That's correct. That's correct. We would have been at 218 if we didn't have that accrual.

Yes. Just to recap, for those of you that don't recall, that was an old Ticketmaster case from -- oh, how many years ago?

Seven.

Seven years.

Eight years, eight, nine years ago that, had Michael Rapino and I been running this company, would have been settled then. So it was a big surprise.

And obviously we're proud, as you said, that we were able to digest it, get it all behind us, and still deliver above the consensus and move on with that one. So on--.

--And I just wanted to ask one final question on the dynamic pricing. How much of a rollout do you think is achievable next year in terms of Ticketmaster venues, and then maybe as well as the kind of -- your [sheds] in terms of how much dynamic pricing, or Pricemaster you're calling it, will be rolled out next year?

The good news is the beta tests have done very well. If you're a sports team or a manager that has been part of our test over the last few months, the results have been very strong. So that was step one, make sure we got some basic results that we can use to merchandise, going forward.

I would tell you, on the Live Nation concert side, for our amphitheater season, we are starting with kind of the mandate that that will be fully rolled out to as many and all shows in amphitheater next year, artist approval pending, but we think it'll be a very high adoption rate in our amphitheaters is our focus for the concert division. And I think selling it to sports teams is a lot easier. It's a lot more digestible and been in the marketplace. So we think that number continues to grow strong and consistent. But the big win will be from an internal perspective, is getting those 1,000 or 900 amphitheater shows using dynamic pricing. So that's our goal right now, and we're out selling and talking to managers about it.

I will say that artist acceptance of this is, in my opinion, running ahead of schedule. The way -- people of the old days didn't want us to even do Golden Circle. Oh, don't do $500 for the first five rows. When it becomes dynamic pricing, so that we can say to an artist, hey, your fans are telling, in some cases, our computers how to reprice the seats based on supply and demand, it seems much more defendable by artists when we have to do an interview about why your ticket price is so high when they can just say, hey, we set up dynamic prices. We didn't determine those prices. The fans did.

And it's been -- I think Michael is being a little more cautious than he has to be in terms of adoption rate. I mean, I think, at least with my front line acts, every one of the amphitheater offers contain the request for dynamic pricing, and I don't know of one that's been turned down.

Great. Look forward to the future success.

Ben Mogil with Stifel Nicolaus.

Hi, good afternoon. Irving, it sounds like you should be running an infirmary over there.

Heading over to sponsorship and advertising, when I look at sponsorship and advertising, these third quarter numbers and sort of the guidance that Kathy gave, certainly slowing down more in the second half than the growth in the first half. Are you seeing sort of the overall broader advertising sponsor environment sort of begin to slow and you being impacted by that, or are there some timing issues here?

Well, I mean, I know Kathy's answer is going to be timing. We have not seen any slowdown at all. I mean, most of our business, as you know, we start selling right now to get sponsors locked in between now and March so they can execute the programs for the summer.

So in our weekly updates with both our international and our national North American, our online is on fire. We just have to keep building better and more products. But overall, we have not sensed any slowdown from the demand.

And Ben, we've been saying the 10% growth for a while because we knew that that's how it would flatten out, that we had some early higher numbers in Q2 because of how the festivals rolled out versus last year and some other impacts, and we knew that Q3 it would get a little bit more consistent, and it would be more in line with that overall growth for the year.

I'm generally optimistic. It feels like we have a lot -- Russell and his team, there's a lot of accounts that have never spent with us, big, big people that are starting to realize how important music is and that we're the credible company to [trust] that investment with. So I'm very -- I'm feeling very good about the [cost of] next year on the (inaudible).

Okay, great, thanks. And then just one quick follow-up for Kathy. Kathy, when I look at the cash flow, working capital's a big outflow in the nine months this year whereas it was much more of a source of cash last year in the nine months. I get there's obviously timing issues around tour, advances, et cetera. When you end the year, do you think working cap will be more moderate, will be more similar to last year?

Yes, I think so. I mean, we always have more -- the receivable collections come in in the fourth quarter, which helps impact that. And then you really are seeing a larger impact in Q3 of this year than you did last year in terms of the global tours, because you had Shakira, U2, Lady Gaga all out last year, continue into this year. Those tours are all done by the end of September, and so that deferred revenue is completely finished and off the books. And we do not yet have the 2012 global tours on sale yet, so you'll see that even [out] a little bit more.

Okay, that's great. Thanks.

David Joyce with Miller Tabak & Company.

Thanks. I was just wondering if you'd go into more detail on the Universal Music Group financial and operational impacts with that venture integration.

Well, Irving will give you the strategic kind of strategy on what the deal is and the finances.

Look, in general, it's a work in progress. It's kind of an intent [to] to the two companies to take the largest record company in the world together with our assets and find new ways of making money together. The simple part of it was that, from their old Sanctuary acquisition, they owned four management companies, all of which we now operate in joint venture with them. So with really no acquisition cost, we added seven great managers and over a dozen great more acts.

But we're going to use some ticket -- all the ticketing from their -- I don't know if you want to call them 360 deals--.

--Fan clubs, artists--.

-- (Inaudible), artists. That's not a big number. The announcement is really an announcement to hope we grow a big strategic business with them. And we also, both at Front Line and through Live Nation, they've really stepped up in terms of providing us with a solution for the distribution of recorded music on some of our artists.

So we're off to a great start. It's a work in progress, but we're confident that that venture will be great for both companies.

And to build on Irving's point, we get asked about the 360s, the nine albums that we have over the 10 years. Obviously with Irving's expertise and a great relationship with Universal and Sony and others, we're very close to looking at partnering with one of those labels to take the risk and the execution of the record part of those deals off the table for us so we can focus on the touring and the sponsorship core profitable business that we do best.

Which furthers the statement we made that we're not a record company and are not going to be in the traditional record business.

No, that's a great deal. Just one final housekeeping thing. Michael, did you mention how ancillary spending is looking here into the fourth quarter?

It's up 6%. We had a fabulous quarter. They continue to walk in the building and are spending money once they get in there.

Okay, great. Thank you.

Ingrid Chung with Goldman Sachs.

Thanks. Good afternoon. So I was wondering if you could speak to which inning you think you are in terms of transitioning Ticketmaster into a more consumer-friendly website. I know Ticketmaster's been building out a lot of the e-commerce capabilities that other sites have, such as shopping carts, consumer reviews, seat maps, et cetera. I was wondering how much more work do you think is left to do there, and how are you going to be positioned for 2012. Are most of the pieces going to be there?

I'll [launch] it a couple of ways. It's the third or fourth largest e-commerce site in the world, so I think there's a zillion companies trying to figure out how to get to that position in life. So we're very proud of what we do and what that business does today.

With the renewal rates we have, which is the key to making sure that the inventory is full on the shelves in that store, that was kind of the priority this year, and make sure that we have a strong team out there securing the 12,000 contracts. That keeps the inventory and the unique part of our web business flourishing.

As far as the consumer side, one of the strategic moves here has been to really focus on that consumer, and we're focusing in [on] a couple ways. First and foremost, we've done some things this year that we'll continue to do next year that has just about increased in elevating the functionality and feature set at the website. So when you show up there this year, we've done small things to big things, on how you pay for the show, how you can transfer the ticket, does it print at home, is it authentic, what can you put in your shopping cart. So we have an ongoing kind of list of things to continue to elevate that experience when you get there, mobile being a big part of it.

And in that, we're probably in the third or fourth inning there. We think we still have some great opportunities to elevate that site, and also the Live Nation site.

The other opportunity that is the part that is unique to us is what can we do with those 200 million consumers that come to that site, not only just sell them a better shopping experience, but how do we have a more engaged relationship with them. The number one way we'll grow our business is by using the power of the consumer to help discover, share the concert information and buying experience, as we've seen on our Facebook and our soon-to-be probably Twitter business, if we can engage those consumers, help them spread the word about the show, tackle some of that challenge that 50% of consumers didn't know about the show.

So I think it's an ongoing movement that you'll see us continually launch new products, which is kind of the new part of the Ticketmaster business. We'll launch new products every year on how do you upgrade that feature and functionality, upgrade better and more mobile products so you can transfer the ticket, scan it when you walk in the venue, then continue to be innovative on the social media and CRM part of the business.

So I think the way we look at our business, there's no one close to us in our business that has a website of our scale, that is printing tickets and capturing data like we are. So we have a long lead-time in that, and we think that gives us the opportunity to start continually just building better products that will entice more sales. So we think we've got some good products already this year. They're going to make a difference next year. We're going to roll out more products next year around our social and our mobile strategy to further our kind of competitive advantage. So we think it's an ongoing new mission in life to be the innovator and evolve how a consumer finds out and buys a ticket, and we're going to keep running fast in that race to do a better job at it.

Okay, great. And I was wondering if I could follow up on the enterprise side of Ticketmaster, then. What can you tell us in terms of market share gains internationally? What kind of headway have you made there?

Yes. I mean, I think our fact that we've retained 90% of them, and then also grown the net number overall. We've talked about adding -- as we said, we added more accounts this year than last year. Those would have been in Europe also. As you know, last year we picked up both a French and a Spanish ticketing company. Our goal in Europe was we have a strong UK business, and we needed to continue to expand into some other big markets where we can monetize and get some of that pie.

So France, Spain, two big markets, made great progress there with our new businesses. They're on track to deliver what we forecasted. So those -- you can call them incremental businesses, and overall in Europe, our retention and our new business has been strong and healthy.

Okay, great. Thanks.

Rich Tullo with Albert Fried.

Yes, Albert [Freed]. Thank you very much for taking my question. You said earlier in the conversation that the NBA was going to have a $10 million impact. How many games loss do you use to calculate that statistic? And from a practical point of view, the NBA and the NBA players union continue to act more like guys on a half-court and less like businessmen. What are the contingencies going into next year, and how long would it take you to stand up new events?

So in terms of your first part of your question, that number assumes that we have no NBA events through the end of the year, and that's about 700,000 tickets is the impact to us.

Okay. And was there anything lost in the third quarter from that?

A little bit, but the majority of that's in Q4.

Okay.

I mean, listen, we believe obviously that the NBA will solve their problems whether they have -- I would doubt that they're going to have a full year lock-out. But we just -- we wanted to just be clear in Q4, as they're going through a negotiating process on a week-by-week basis versus maybe just canceling the year, we're not going to be able to get a concert up on a one-week notice. So I would assume, through Q4, we won't be able to turn much of the cancellations around. If it's a longer walk-out and it gets to that level, then we'll probably -- I would assume the owners will have more time, and in 2012 the buildings would not be empty all year.

I've had some owners call me now saying, "We'll give you these Saturday nights that are held for the NBA. We don't care." Some of them are assuming that, whatever happens, that they'll rework the schedule so that, if they've given us some of the prime nights now for concerts, that the new NBA schedule would be worked out around them. And I think if they don't solve this in another week or so, I think, Michael, we'll see some (inaudible) open up.

Perfect.

So I think -- so what you're saying to me right now is they're not making anything available, so you're having a hard time -- I mean, you just can't build anything around that.

Well, right now we're having to live with their announced schedule as if they were playing. And then they haven't canceled any games, I don't think, past November 15 yet, have they?

Yes, November 30, right?

So if it were a December or January hold, we can't get it. but I've got owners saying, hey, whenever our team was playing, take any date you want now because we'll make [up a] new schedule around it if the strike gets settled. But I don't -- it's just starting to get to that point. In other words, I would think at the point the Christmas day games, I think that's the -- from what I understand, that'll be the critical thing. If they now cancel all of December, it'll probably open up the schedule for us for the first quarter.

And would that be a net gain for you guys next year, assuming the loss on the front end?

I don't see how it could ever equal what we lose on our basketball tickets.

It just -- it can mitigate some of the damage.

Okay. Thank you very much for taking my questions.

Doug Arthur with Evercore.

Yes. Michael, I was wondering if you could just put a little perspective around the quarterly estimated attendance. I mean, you've talked about obviously the curtailment in the amphitheater shows, so I assume that explains most of the 4.5% or so drop in North America, maybe not all of it. International's down 10%. What was that -- what caused that?

What numbers are you looking at?

I'm looking at estimated attendance, North America versus international.

You're looking at nine months, right?

I was just looking at the quarter, quarter-over-quarter.

So I just want to make sure I got my pro forma versus my -- you're talking the concert division, right?

Yes, I'm sorry. I'm talking the concert division.

Yes, concert division, in international we had a couple -- as I think I referred to in our other earnings call, a couple festivals were weaker this year than last year, and those big 150,000 tickets per festival, if you get a couple of those soft for the year, they bring down your numbers. So overall, the business was strong, but we had three or four festivals that didn't hit year-over-year comparisons that dragged down international slightly.

Okay, and then the drop-off -- the small drop-off in North America is mostly explained by the curtailment of the amphitheater shows?

Yes, that's -- and if you look at the North American business, we've got 800 shows in the amphitheater and 8,000 shows outside of the amphitheater. So if you took those 800 shows out, our overall club, theater, arena business was strong and grew 6% ahead of the industry.

Great. Thank you.

(Operator instructions.)

Tuna Amobi with Standard & Poor's Equity Group.

Good afternoon. Thanks for taking the question. I'm sorry if I missed this earlier. I got on the call a little late. But I was wondering if in Europe you're seeing any kind of -- with regard to all of the volatility going on there, the euro crisis, whatnot, is that in any way impact your performance for the quarter? I know you talked about the slowdown in some festivals. I don't know to what extent you're concerned about that.

And for Kathy, as I look at your cash balance, seems like pretty relatively stable despite some of the fluctuations in some of the other earnings. I'm just kind of trying to get a better sense of your liquidity management strategy day to day. And I also see that your working capital is becoming more of a cash use instead of a source. So how do you think about your day-to-day liquidity management? And do you have any kind of a benchmark to hold a certain amount of cash? Just trying to get a sense of that would be helpful. Thanks.

All right, Tuna. Internationally, we have not seen any erosion from all of the noise in the economy come to life yet. So we've had a strong summer, strong Q3, and even into the September-October ticket sales have been flat year-over-year, so no erosion that is linked to the economic challenges internationally have come to life.

Okay.

And Tuna, on the cash, obviously we've had several acquisitions certainly since September of last year. Michael mentioned the two ticketing acquisitions internationally. There's another one over here. Just in our ticketing acquisitions alone, we've spent over $100 million in cash. And so that's been a focus area of growing the business we've talked about, is building the accretive acquisitions. So that's the biggest piece of it. Yes, you saw a little bit of the working capital. And you may have missed this earlier when we were talking about it, which is really based on the global tour activity, which we had major tours out with Gaga and U2 and Shakira that all started last year, went through this year, and were basically complete by the end of September. And we have not yet put those 2012 global tours on sale, so you're seeing some impacts from that in the working capital.

So it's one of the reasons why we think free cash flow is the right measure for us because of the working capital fluctuations of timing of ticket sales and artist advances and the things that can really impact that. But overall, we feel very, very good about our cash position overall.

Thank you.

John Tinker with Maxim.

Hi. Just given that your costs and your profitability on the concert side seems to be picking up, so to get some idea of the operating leverage, if someone like, say, Madonna decided to go on tour, what kind of impact would that have on you?

You mean on the year-over-year basis, or just--?

--No, just in absolute kind of dollars. What could one big tour kind of bring to the bottom line? You talked about NBAs cost you $10 million. What would the flip side of that be?

Well, stating that out loud doesn't help me much negotiating with artists, but let's just say--.

--Sorry.

That's a good headline. But I think we've said, over time, there are certain kind of global tours where they're stadium to big deal. I think we used last year when U2 had -- or the year before when they had to postpone, what would be the impact on a quarter. So on a big global tour over time, you're going to make somewhere in the $10 million range. And typically every year we have one or two of those out, so as long as you kind of have one or two of those out every year to equal your comparable year-over-year, the rest of the business takes care of itself. So we would be expecting next year to have a comparable business out there from what we did in 2011.

And just one final quick follow-up. The CapEx for the year is about 150. And I think from--.

--1-1-5.

Oh, 1-1-5, okay. Thanks.

Thanks, John.

And that does conclude our Q&A session for the day. I will now turn the call back over to Mr. Rapino for closing remarks.

Thank you, everybody. We'll talk to you on -- March.

Ladies and gentlemen, this concludes the Live Nation Entertainment Third Quarter 2011 Earnings Conference Call.