Live Nation Entertainment Inc (LYV) 2012 Q2 法說會逐字稿

Good afternoon, my name is Carrie. I will be your conference facilitator today. At this time, I would like to welcome everyone to the Live Nation Entertainment's second quarter 2012 earnings conference call. Today's conference is being recorded. All lines will 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, news 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 measures 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/investors. It is now my pleasure to turn the call over to Mr Irving Azoff, Live Nation Entertainment's Chairman of the Board.

Welcome everyone to our second quarter 2012 earnings call. Joining me today are Michael Rapino, our CEO and Kathy Willard, our CFO. I will begin the call with some brief comments. Then turn it over to Michael, who will review our results for the quarter in more detail. We continue to deliver improved results without much help from the macro economy and are making significant progress towards achieving the goals set following the merger. Adjusted operating income for the quarter increased by 5% over last year on essentially flat revenues, led by strong results from our concert division. In addition to my broader roll at Live Nation Entertainment, I continue to lead Artist Nation, including Front Line Management. Touring activity by our key artists during the second quarter was slower than last year but did include -- Van Halen; Jimmy Buffett; and Jason Aldean.

Summer tours commenced late June, July include -- Kenny Chesney; Neil Diamond; Big Time Rush; and The Fray. Summer touring for many of our artists currently looks good. It is currently expected to be lower than 2011, however. Christina Aguilera and Adam Levine continue with their success, judges on The Voice. Mariah Carey has signed on as a judge on American Idol. We continue our program of aggressive new artist's signings and securing merchandise and VIP ticketing rights with established stars in the new tween band One Direction, which is performing exceptionally well. Full 2013 touring schedules for key acts are firming up and are currently expected to include the Eagles and Fleetwood Mac. So thank you again for your support. I look forward to updating you on the progress during our next earnings call. I would like now to turn it over to Michael for his remarks.

Good afternoon. Welcome to our conference call. This quarter, we continued to deliver positive results across revenue, AOI and free cash flow. Revenue increased 2% on a constant currency basis. AOI grew 5%. Free cash flow grew 27%. Our core businesses have remained strong, not only in North America, but also internationally. Ticket sales grew this quarter 6% at both Ticketmaster and Live Nation. For the full six months, Ticketmaster sales were 6% and Live Nation up 5%. These strong sales validate the strength of the live event which remains a high priority for discretionary spending with our fans. I have heard varying comments from the impact of the economy from other companies over the past few weeks. For us, the only market presenting noticeable impact was Spain and Italy. Both these markets together made up only 3% of our overall concert position sales and overall concert attendance between the two markets is expected to be flat for the year. On the ticketing side, Spain accounts for about 8% of sales and here again we expect the business to be roughly flat for the year.

As we continue to improve operating profitability across the core, we are invested in three key areas -- Ticketmaster re-platform project, which continues on schedule and on budget; Mobile expansion; and continued concert portfolio expansion, which drives all content to all divisions. With greater visibility now, for the full year, we expect to deliver growth across revenue, AOI and free cash flow for the full year. As we look at the divisions, Live Nation concerts had a great second quarter. We now see strong growth in both attendance and profitability for the season. For the quarter, AOI grew 83%. Total attendance for the quarter grew 6%, which compares to 5% for concerts as an overall category of Ticketmaster, indicating that we are continuing to build share. North American concert attendance for the quarter grew 5% and international was up 9%. Average attendance per show grew 7% during the second quarter, demonstrating the potential upside as we continue to execute on maximizing the core and driving incremental sales.

Our improvements this year in AOI have been driven by our Festival and Amp business, the two highest margin channels in our portfolio. Starting with Festivals, in the second quarter, we held 21 Festivals across Europe and North America. The total attendance of 1.1 million fans, an increase of 53% over last year. North America, we continued building our Festival base, adding River's Edge in St Paul, I Love San Francisco, Watershed at the Gorge, HARD Summer in LA and Made In America in Philadelphia. We currently expect Festival tickets in North America to more than double compared to last year. In Europe, we launched BluesFest in London, Rock Im Park in Holland, Metal Fest in Italy, IMPACT in Poland and Stockholm Music & Arts in Sweden. Across the entire global Festival portfolio this year, we plan on producing 57 Festivals with expected ticket sales growth of over 25% compared to last year.

Turning to Amphitheaters, attendance was up 53%, while delivering 8% increase in attendance per show in the second quarter compared to last year. Our business has benefited from three initiatives we focused on this year. One, a greater variety of acts geared towards the next generation of Amphitheater attendees, specifically teenagers. Second, improving the overall Amp experience with changes in higher quality food and value priced beer. Finally deploying dynamic and platinum pricing to capture more of the value of our shows. In the second quarter, we have had over 60 shows through dynamic pricing and over 100 platinum ticket packages. Combined, we are seeing an 8% to 10% increase in contribution margin on these shows. Electronic Music has been a priority for us this year. It represents a big growth opportunity to drive incremental attendance to our portfolio. Our EDM attendance has nearly tripled to 160,000 in the second quarter and for the six months total, it was 260,000. So far through July, including Festivals, we have produced 124 Electronic events around the world, compared to 52 at this point last year. Across all the Electronic activity, I expect a 24% increase in 2012. The Number One priority in concerts is ensuring we have a strong and diverse lineup of acts. Our second priority is to drive incremental ticket sales.

Mobile is a natural channel to sell, transfer, share and further engage with fans and drive higher conversion. We continue to expand our Mobile presence with the launch our android app in the introduction of our summer Mobile promotion. Through July, we have sold 1 million Mobile concert tickets through our apps and the Mobile version of LiveNation.com, a 300% increase from last year. Looking at these accomplishments individually and in total, I'm very pleased with the progress we have made in the concert division and expect another year of growth. For Ticketmaster, we continue to grow ticket sales this quarter while investing in technology for the future. For the quarter, revenue grew 2% and AOI was down 5%. AOI was down on a year on year basis due to investments in technology and the fact that last second quarter, we had the exceptional one-time London Olympics Onsales as a comparable.

Our 2012 focus continues to grow ticket sales in primary and secondary, while investing in our platform to achieve further operating efficiencies, while providing a modern platform to unlock growth opportunities that our scale provides. In the second quarter, we made great progress on each of these areas. Global ticket sales for the first six months were up 6%, while North America up 4% and international up 9%. We again achieved a net retention rate of over 100% globally, with our venue clients in the quarter and I expect us to maintain this for the full year. In addition, our secondary business has delivered 15% growth in ticket sales through July, driven by rapid adoption of ticket authentication and delivery, which allows us to ensure the fan purchases a valid ticket. We have seen a 44% increase in conversion for the six months through June, for venues that have activated [AVD]. We also continue to see strong growth with our existing content partners. We doubled sales with the LA Lakers, MSG and the NFL Exchange over last year. This growth is primarily the result of increased conversion driven by AVD.

We are on plan with our Ticketmaster platform project. This quarter, we began the first phase of rolling out new business to business products. We've launched a new business [off ware] software that reduces training for box office personnel, from days to hours and is already in use in over 300 clients, about 15% of our client base. We've also deployed an event management product that enables venues to set up their own events. As of June in North America, more than 80% of ticket clients are using this tool, reducing demand on customer service group and improving customer satisfaction. These tools represent the first pieces of the re-platform that will enhance our products for venue clients and significantly reduce cost per ticket.

Like Live Nation, Ticketmaster will continue to extend its business into Mobile. So far this year in Mobile, we have launched two iPhone and two android apps for Ticketmaster. Of these new releases, three were in the US and Canada and one in the UK. We have nearly 3.5 million downloads globally of our apps through July and I would expect this number to reach more than 5 million by the end of the year. Mobile has been our fastest growing channel with global ticket sales through July of 3 million, a 300% increase over last year. Looking forward, Mobile will continue to be a key focus this year. We expect to roll up seven more apps including android apps in Ireland, Australia and New Zealand and android in the UK. We plan to roll out an upgraded Mobile site for the UK at the end of August and to increase Mobile features for fans such as ticket bar codes to be used on a Mobile device for venue entry.

Looking at the ticket business in total, it remains on track to deliver slight growth in overall ticket sales for the year with great upside as we unlock future opportunities across our 200 million fan base, with technology improvements. Turning to sponsorship. For the quarter, revenue and AOI in our sponsorship and advertising divisions were both flat on a constant currency basis and down 3% in actuals. For the year, I still expect us to deliver double-digit AOI growth on a constant currency basis. In North America, we had two important new sponsors during the quarter, Samsung Mobile USA celebrated by rewarding its fans with a surprise concert that was streamed on Facebook. The event generated over 487 million impressions. Live Nation is engaged with Kellogg's to drive their teen summer program, Crazy Good Summer. Internationally, Festivals continue to drive new sponsors to our portfolio. Intel recently signed up and is utilizing an integrated campaign with our Festivals and HP hosted acoustic sets at our wireless Festivals in London. Our online advertising business continues to grow. For the six months through June, online advertising revenue is up 8%.

In North America, we have added a number of new national advertisers to our LiveNation.com and Ticketmaster.com advertising portfolio, including MetLife, Pizza Hut, Toyota Prius, Supercuts and MetroPCS. Internationally we have brought ad sales online for 11 additional countries so far this year. My confidence in achieving full-year AOI growth comes from a few sources. Number one, in July we had booked 7% more committed sponsors than we had last time this year. And second, we have additional inventory planned for the back half of the year. We're expanding our ad units on-site. We've upgraded video screens, branded viewing decks and tech lounges. We're learning our growing portfolio of Mobile apps to increase our Mobile advertising sales. We're deploying a rich media content units at LiveNation.com which we think will drive higher CP and some increased online sales. In summary, our second quarter was very successful and demonstrates the continued progress we have made in each of our businesses over the past year. For the full year, I currently believe we will deliver the growth in revenue, AOI and cash flow that we have planned. And from that, I will continue to see a strong run way to build on future growth. Kathy, I will turn it over to you now.

Thanks, Michael. Good afternoon, everyone. For the first six months, we've delivered growth in revenue, AOI, operating income and free cash flow. We are pleased with these results for the first half of 2012. Concert ticket sales are up, driving a strong increase in deferred revenue. Our business is solid enabling the Company to deliver on our key operating metrics while continuing to make necessary investments to drive our future growth. For the second quarter, revenue was $1.55 billion, essentially flat compared to 2011. However, after adjusting for the impact of changes in foreign exchange rates in the quarter, revenue actually increased by 2%. On a reported basis, our concert segment revenue was also essentially flat. Global concert attendance was up 6%, driven by higher show count at our Amphitheaters. The concerts revenue was also negatively impacted by foreign currency changes and the timing of global tours in the quarter. Ticketing revenue was up 2%, due to strength in global ticket sales which grew 6% fueled by concerts and sporting events.

Artist Nation revenue was down 8% from lower merchandise sales, while sponsorship and advertising is in line with last year. Adjusted operating income increased 5% for the second quarter, to $146 million compared to last year's $139 million. The concerts division delivered this growth, up year-over-year by 83%, due to more shows and higher attendance in our Amphitheaters and strong global Festival results, even as we continue to invest in building our portfolio, both organically and via acquisition. Ticketing AOI decreased 5% or $4 million, as our profitability was impacted by our continued investment in the ticketing platform, along with a higher sales of the Olympics tickets in 2011. Sponsorship and advertising AOI was down $1 million, largely as a result of the timing of Europe Festivals with related sponsorships. Our operating income from the quarter was $43 million, down from $52 million in the prior year, driven by higher amortization expense in our concert business.

Our net income for the quarter was $8 million, compared to $13 million in 2011, with the decrease coming from our lower operating income. For the first six months of 2012, revenues were $2.4 billion, up $10 million over 2011. On a constant currency basis, revenues increased 3%. Concerts revenue increased 2% on constant currency basis, without the negative currency impact of $39 million. On a reported basis, concerts revenue was essentially flat to last year in the first half. As Michael noted, our Amphitheater season is off to a strong start with increased attendance and higher average attendance per show. Our ancillary net revenue per attendee in the Amps is currently down slightly by 3% as compared to last year. During the second quarter, we had several tours that attract younger audiences which typically have lower spin per head. We currently expect that for the full year, our spin per head will be in line with last year. Ticketing revenue for the six months increased 2%, driven by higher ticket volumes in the US and in Europe.

Sponsorship and advertising grew by 1%, driven by higher online advertising. Artist Nation was down by $2 million or 1% due to lower merchandise sales. As noted, we experienced a 3% negative impact to revenue in the first six months from currency headwinds. Based on current forward rates, we expect similar negative impacts for the second half of 2012. Adjusted operating income for the six months grew 6%, to $194 million, compared to $184 million in 2011. This growth comes from the overall improvements in concerts, which delivered an increase of $33 million in AOI, driven by growth in Amphitheaters and strong Festival activity. Ticketing AOI is down 10%. Their improved sales and operating performance was offset by the investments in technology we're making, as well as the impact of the higher ticket sales for the Olympics in 2011. Sponsorship and advertising is up 2% driven by higher online sales and North American Festival sponsorship.

The overall increase in selling, general and administrative expenses of $9 million for the first half of 2012 is driven by higher costs in ticketing for the re-platforming project. For the full year, we currently continue to expect that ticketings overall fixed costs will be up approximately $10 million for the full year. Corporate costs are higher by $5 million, driven by increased corporate related non-cash comp expense, as well as legal costs on the Live Concert Antitrust Litigation which we have now successfully concluded after 10 years with no material impact to our financials. For the six months, we had operating income of $165,000, compared to a loss of $20 million last year. This improvement comes from our higher AOI and a reduction of $24 million in stock-based compensation from the Front Line buyout in 2011, partially offset by a slight increase in amortization expense this year. Our net loss for the six months is $61 million, compared to a loss of $35 million in 2011, with the decrease driven by tax benefits realized in 2011 of $40 million related to the Front Line buyout. For the quarter, free cash flow was $100 million, compared to $78 million last year. For the six months was $123 million, versus $71 million last year. This increase was driven by our higher AOI and lower cash taxes due to tax refunds received in 2012.

As of June 30, we had total cash of $1 billion, which included $393 million in ticketing client cash and $314 million in concert event-related cash. Our free cash or available cash was $213 million. For the six months, we have generated $310 million in cash flow from operations compared to $133 million in the prior year for the same period. The main difference between cash flow from operations and free cash flow are working capital changes which were a $191 million source of cash in the first half of 2012, driven by an increase in event-related deferred revenue, less prepaid show cost, as a result of the higher ticket sales in our concert segment. We also had higher receivable collections from tax receivables and timing of other items. Our working capital requirements are driven primarily by the timing of ticket sales for future events and payments to artist and venue. We don't recognize revenue and cost for events until the show occurs. Total deferred revenue was $830 million as of June 30, 2012, compared to $641 million, in June 2011, an increase of almost $200 million. This increase was driven by higher Live Nation concert ticket sales in 2012, regardless of the event date, that we had seen through July, which are currently up 15%.

Through July on the Ticketmaster side, we have seen total ticket sales regardless of event date, increase by 5%, with North America up 4%, and international up 9%. We currently continue to expect that our total capital expenditures for 2012 will be approximately $125 million. For the first six months we have spent $59 million. The increase over last year's $45 million was driven by the cost for the redesign of the Ticketmaster technology platform, along with other technology and venue equipment costs. As of June 30, our total current and long-term debt including capital leases, was $1.74 billion, with no outstanding draws on our revolver. We made $7 million in net debt repayments in the quarter. Our weighted average cost of debt, excluding debt discounts and premiums is 6%. We continue to remain comfortably in compliance with our debt covenant requirements under our credit facility. As of June 30, our total debt to EBITDA ratio was under 4 times, versus the maximum 4.5 times. Our interest coverage ratio was over 4.4 times, versus the minimum ratio of 2.75.

Our business is solid and we remain confident in our ability to execute on our growth expectations for the year. Our key expectations for the full-year 2012 are to continue to build and grow our concert portfolio. We currently expect this business to deliver a high single-digit increase in attendance and solid growth in AOI, continue growing our sponsorship in advertising network. We expect this segment to maintain its momentum and deliver low double-digit AOI growth in 2012 on a constant currency basis. We will continue to invest in our Ticketmaster business. We expect overall ticket sales to be slightly up in 2012, but this will be substantially offset by our investments in the Ticketmaster technology re-platforming, and Mobile and social products. We thank you for joining us today for our second quarter 2012 update. We will now open up the call for questions, operator?

(Operator Instructions)

David Joyce, ISI Group.

Appreciate that the second quarter concert's AOI was up based on the incremental Festivals. But I was wondering if you could quantify any of the benefits you've had from the dynamic pricing that you started rolling out?

Well, as I said, David, on my script here, without getting precise, because of competitive reasons, you can appreciate, as I said, we got -- the key is the adoption rate, so I think last year, I spoke about build the tool that we could get adopted throughout the business. We think we have a great simple dynamic pricing product now, that agents and managers in the industry can use. We've got -- we spent the year selling it in. Have over 100 artists participating, or shows, if you would want to call it, against either dynamic pricing or a platinum scaling. Either version is about -- secures some of the high revenue that ends up on the scalpers column and put it in the P&L of the artist and the promoter.

So as I've alluded to here, we've got -- when activated and an artist or a show is used in the dynamic pricing tool and/or platinum and increasing some of the scaling, or thinking about a few different ways to scale the house based on some factual input, we're getting an 8% to 10% increase in that show's contribution. So early success first year, we've started to roll it out. As I promised, The Street was about, get some adoption, learn some lessons and get some successes built. We're very happy right now that we have close to 100 participating. Our goal by the end of the year is if you get 100 artists and agents and managers participating in all having an increased revenue output for that show, that will be a great way to pave the future to higher adoption.

Thanks. If I may, on another front, some of your peers and competitors seem to have some potential to stream concerts on the cable networks such as AEG and AccessTV, Madison Square Garden. Might be able to do that with Fuse, for example. Do you have -- do you participate in rights for those streaming with your artists or with your promotions? Or do you foresee anything more tangible that you might do with a cable network partnership?

Well, in general, the ownership of that live show is owned somewhere between that artist and the record label. The rights to stream a show are a lot easier to obtain than obviously the rights to download and buy a show. So we do somewhere around 300 to 400 shows a year where we would be filming them, recording them, or streaming them. Whether they're for sponsors, whether they're at LiveNation.com, or whether they're at -- we stream the entire iTunes Music Festival in partnership with them at iTunes. We have a Live Nation studio division that has been at it for a while.

We have found the easiest way to monetize that live show to date, has been to build a division that can serve as sponsors, so most sponsors have websites and Facebook pages and desire for live streams and content. We've been delivering direct to sponsors, as a way to build our sponsor base to date. But we have definitely been stepping up this year and you will see us more aggressive in the fall. At LiveNation.com, as we relaunch that website coming into the fall, into a much more interactive website that will definitely have a higher level of live stream shows and live concert interaction. We would think that the best model for us is to build our current online business, as the main vehicle, supported by our sponsorship strategy, then start to venture into the cable world right now.

Doug Arthur, Evercore.

Yes, two questions. Kind of back to concert margins for a second. I mean this is the fourth quarter in a row where revenues have exceeded costs, i.e. costs have gone down at a pretty good clip. So is it -- do you feel you've reached sort of an inflection point in terms of all the initiatives, dynamic pricing, better scheduling in this division? Can that sustain itself in the big seasonal third quarter? Then secondly, on the sponsorship advertising, I mean is this timing going to be sort of a fact of life in this division, where you have some big quarters and some flat quarters? Because it seems like as you gain more critical mass, there has been more kind of -- not randomness but kind of the quarterly numbers have jumped around a lot?

All right, I will take a stab at a bit of that. I will start from the back, forward. As you know, other than the natural reality of quarters for Wall Street, we play for the year. It tend to be -- in the world of concert touring, it is a January/December kind of season. So obviously in our business, the second and third quarter, meaning the summers, both internationally in Festivals, Amphitheaters, tend to be the highest -- obviously, the highest activity globally for the artists. So somewhere between the second and third quarter, depending on what day that cuts off and what shows we're having, you can have a spring. So definitely there are chances that sometimes the Madonna tour is in the second quarter and one year, U2 is in the third quarter, so you have some swing. Generally, while you continually hear us talk about full year, is we're less worried about whether the show happens in June or July and more worried about during the year -- in totality, do we have the lineup and the show count to deliver the growth.

So definitely a business where you have continual movement between Q2 and Q3 and the odd time you get a big Q1, Roger Waters World Tour that launches in the winter time, that can take your numbers on a year-over-year basis. But totality over the years, what we play for to kind of smooth out the realities of when certain things happen. Concert division, you're right. We were very proud that we -- over the last couple of years of running the business, a lot better than we had previously. We've got a great team, both in international and in North America. We're buying better, but a lot of the focus has been on the execution. When you have 25,000 shows a year, if you can upgrade that marketing capability and start to claw into that little fact that we live with here, that 40% of consumers didn't know about the show, or they would have went and 60% of your shows aren't sold out.

So if every of those 25,000 shows, we sold 10 more tickets to every one of those shows, that's a nice drop to the bottom line. So while you hear us talk about Mobile and social and engagement, is we do believe that the social platform and the Mobile platforms, it is made for the concert business. In terms of people want to buy a ticket online -- on their Mobile phone and they want to share all of their fun activity around the concert in a social environment. The more people that spread and post to Facebook and tell their friends, incremental sales are coming to life. So we think we've got great runway to drive that number I talked about, attendance per show, up. That's the foundation to driving our bottom line.

We will probably always have somewhere in the 25,000-plus shows. We will grow those, if we grow some markets. But the upside in our bottom line will continually be if we can continue to build a strong marketing department that can sell incremental tickets to those 25,000 shows. That's been the focus for 18 months and definitely coming to life this year. We think we've got great runway ahead of us to -- even if you took 40% of consumers didn't know about a show, to 35%, that 5% that hit our bottom line would change the dynamics of our business. We think Mobile and social are incredible tools to help drive that.

That's great. Kathy, just a quick follow-up on the concert division. Was there -- can you explain the one-time item in D&A in the concert division?

There was an impairment of about $14 million in the quarter related to some of the intangibles that timing-wise -- it's really a timing issue, because it's coming off one way or another, the impact for the full year is going to be about $9 million.

Martin [Hyphonen].

A couple questions. On the AOI margin for the concert segment, kind of going forward into -- in terms of next year, is there sort of a normalized or peak level that you can obtain relative to cost and the dynamic pricing initiatives you've had? Then a clarification, Kathy said something about 3 points of FX impact. Was that specific to the concert segment or was that overall? If it was overall, do you have that broken out for concert revenue specifically? Thank you.

So, yes. I will answer that -- the second question first. The FX impact for 3% was for the full Company. We do the concert piece of it alone was about 2%. So it is obviously the biggest piece of our revenue and does drive the (inaudible) exchange.

As far as the margin, we wouldn't give you guidance on that, but I think the tone is the important part. We believe obviously, with our scale in concerts and ticketing and our kind of leadership market position, overall, our number one goal is obviously to drive higher free cash flow from the existing business and ultimately delever our balance sheet over time, as we build that stockpile. The way we're going to get there, is less about more revenue and definitely about driving a higher margin from our existing business. So without giving you the guidance on the numbers, yes, the schematic here is, how do we drive higher margins from those existing 200 million-plus consumers that are transacting with our core business.

Obviously, then that drives down to the cash flow, bottom line. So we think there is opportunity to increase the margin. Now, it's tough, because of the revenue mix in our business. When you drive big revenue tours like Madonna, and you are driving $5 billion or $6 billion in that revenue mix, mathematically it's tough to make a substantial difference in the bottom line margin, but generally, the schematic on how we're going to execute here has been over the last year and continues to drive higher margin from the existing business.

Okay. Then just one quick follow-up. On the fall/winter, deep fall/winter, as you said, it's a full year the way you look at it. That's obviously the less seasonal part. You have qualitatively at this point in terms of those that are touring, that you know the number of shows kind of planned -- just what is the general outlook for year-over-year this coming fall/winter versus the previous?

You're right. We would at this point in the year, we know two things that matter. We know how strong Q3 is going to close, generally. Because obviously, all of those shows are all well booked and on sale. Now it is just a matter of how they close. So that would be the biggest determination to how the overall year will play out. Then after that is, what does your show count look like from both a ticketing and a concert perspective for Q4. Now Q4 is always light. So you're never going to make a substantial change in Q4. You're not going to gain a lot of bottom line in Q4. You just don't want to give a lot -- you don't want to give away a lot. At this point, I would say that Q3 is looking very strong. Q4 is looking on par with history. So I don't think we will be giving away much in Q4. It should be flat year-over-year, as we look at the rest of the lineup. So that is kind of the basics on how we can sit here today and call the year, in terms of we believe it is a strong revenue AOI and cash flow growth year-over-year. If we close everything in Q3 like we hope and all of the TBD's come to life in Q4, those two look on course right now to deliver our growth.

Ben Mogil, Stifel Nicolaus.

Kathy or Michael, I don't know if you -- I don't think you did it this call. In the past, you given a current quarter update on ticketing trends. Can you give us anything along those lines?

Yes. Ben we did say that. This is when we're looking at the ticket sales during the year regardless of the event date.

Sure.

Through July, concerts is currently up 15% over last year. Ticketmaster is up 5%, with North America up 4% and international up 9%.

That's -- so that is just the entire year to date, that's not a -- that's not just the current quarter, correct?

Correct. But that basically shows you -- I mean, that is in line with what we were showing in Ticketmaster tickets for the six months and gives you a different view on concerts which shows you why the deferred revenue is so strong.

Okay. Then I think, just going back to your comments before, on the sponsorship numbers that you look to be -- think you'll be up low double-digit EBITDA on a constant currency, which I guess would be a mid to high single-digit on US dollars. Any thoughts about hedging that going forward? Or is it just not worth it from where you guys sit? Hedging the currency exposure on them.

Again, we continued our process of hedging the artist contracts in foreign countries where we're paying in a different currency than ticket sales. We're continuing to valuate the other, but no real plans right now.

Okay. Lastly, on the CTS arbitration, I saw in the Q that you noted that you expect something in the fall. It is obviously beyond your control. Has the arbiter gone back to either party for more information? Or is it really being no change in an update since almost I guess the beginning of the year?

No change. No information. Just a delay on the arbitrator's side to deliver the judgment. So we are now waiting for a fall due date, is the latest.

Okay. That's --

We still feel confident. No changes in our perspective, on our defense.

Rich Tullo, Albert Fried & Company.

Did you say that ticket sales -- Mobile ticket sales were $1 million for concerts and about $3 million for Ticketmaster? Is that correct?

Yes.

Is there a demographic difference from your typical customer, from the customer that is acquiring a ticket on Mobile?

Yes, in general, we ran a bunch of research around this, but if you simplified it, as you would expect, they are younger. Younger and more active buyers. So the first to convert are going to be obviously the high user and younger demo.

In terms of streaming, does it make sense for Ticketmaster to link up with one of the Internet radio services such as Pandora, Spotify or iHeart, to do sponsorship channels on their platform?

We're talking and always evaluating all our options with partners. Remember, that's what's called -- the competitor set we have, nobody has what we have, meaning a platform and the presence of Ticketmaster.com and LiveNation.com. So our first priority and the way that we monetize 100% of the advertising dollar is to deliver that business to our sponsor in our own platform. The larger our platform and the higher our traffic at our platform -- the more tickets we sell and the higher our sponsorship is. So, to date we believe we will continue to feed our TM and LiveNation.com businesses. That's the way we can keep delivering that double-digit sponsorship online advertising growth versus kind of producing and delivering to someone else's advertising platform.

Okay. One last question. In regards to, I guess, concert disruption -- the London Olympics going on right now, is that going to be somewhat disruptive in the third quarter? Can we see some shifting of revenues from the third quarter to the fourth quarter?

Not in general. I mean we -- everybody obviously, it's a big business over in Europe, in general. So it is only really affected London proper, so there wouldn't be a lot of shows planned over those two weeks if you were an artist. But in general, the European concert season, or the Festival season which kind of drives the London business, just naturally, it happens to be a May/June and end of August business. Not a big change in these two weeks during the Olympics that has changed any of the historic business in London.

One last question. The relative cost to promote a Electronics Dance Music concert or Festival relative to more traditional type of Festival -- are the margins on those kind of events a little fatter for you?

Well, Festivals in general are our -- one of the highest margin businesses we have. So we like the Festival business period. Electronic Festival versus a good pop or rock-n-roll Festival, it would be on par to possibly a few points higher on margin.

Thank you very much for answering my questions. Just such a terrific job on cost management this quarter.

(Operator Instructions)

John Tinker, Financial Services.

Actually it is Maxim. Just a follow-up to the Festival -- the higher profitability. I noticed that the British Congleton Music Festivals which had issued a profit warning a few days ago and are looking to raise capital. Is that company specific or do you think there could be a turn in the Festivals business as people start to over bid to get the talent?

Yes. That company you're referring to has been down that path a couple times. So if you're in the business of owning one Festival in the UK, you're fairly exposed on that one event. When you have a portfolio of 57. It's the portfolio that really kind of hedges the risk. So every year out of 57, you always have two or three that just don't hit it, maybe weather is bad, maybe you don't have a perfect lineup, and you have two or three that hit it out of the park. In totality, as you can see by our numbers, we're growing 25% ticket sales, year-over-year. So I think definitely the Festival business is high margin. Obviously, there is a lot of Festivals continuing to evolve, but the leadership position that we have is the competitive advantage that lets us obviously buy in bulk, deliver sponsorship in bulk, ticketing in bulk, marketing in bulk. So it wouldn't be a business that you would want to start today in one by one. But we believe that, given we have been in this business for 10 years plus and are the market leader, it lets us build efficiently, with a good tolerance to the risk that comes with them.

Just another quick question. What's your view on paperless tickets, in terms of, as a way to attack the secondary market and stop scalpers reselling? Thanks.

In general, our principle is this -- we believe that our job is to protect the first sale. What I mean by that is, I would like to tell that you that every artist is going to charge exactly what the market will bear. But that is not reality. There are some artists that just want to charge $99. Regardless of how expensive that first row could go for. Our job is to figure out how to make that first sale secure. If Bruce Springsteen absolutely wants to charge $99 in Detroit, our job is to figure out all of the ways we can deliver that $99 ticket to a real fan who has a shot to buy it. Now, what that fan does with it after and if they want to resell it on the secondary market, we have no problems with that, we support that.

But any way we can help deliver that $99 ticket to a true fan, for the first sale, is what we believe we're in business to do and make that consumer feel like he has a shot at getting it. Now paperless is one tool you can use which we've done many times. If you use paperless, it gives you a shot to deliver a kind of a deterrent to the scalping system and deliver that to that first fan. I think in general, Mobile is going to be an incredible tool to deliver a digital ticket to an exact person who then can walk into that venue and scan it at the door. So whether it's paperless or whether it's Mobile, we are continuing to look at new technology to deliver a direct sale to that first fan. We think Mobile is probably going to be the most exciting opportunity for us to deliver that digital ticket to that fan.

Thanks. Hopefully, Bruce didn't blame you personally for Live Nation taking him -- cutting short his concert in London early at the Olympics.

Well, you had to, didn't you, John? (laughter) Your homeland, too. We do what we can. Thank you, John.

Ladies and gentlemen, that concludes our question-and-answer session for the day. I will now turn the call back over to Mr Rapino for closing remarks.

Thank you, everybody. Have a great summer and we will talk in Q3.

Ladies and gentlemen, this concludes the Live Nation Entertainment's second quarter 2012 earnings conference call.