Live Nation Entertainment Inc (LYV) 2013 Q4 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 fourth-quarter and full-year 2013 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 risks and uncertainties that could cause actual results to differ, including statements relating to the Company's anticipated financial performance, business prospects, new developments, and similar matters. Please refer to Live Nation's SEC filings, including the risk factors and cautionary statements included in the Company's most recent filings on forms 10K, 10Q, and 8K 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 under the Investor Relations tab on investors.livenationentertainment.com. It is now my pleasure to turn the call over to Michael Rapino, President and Chief Executive Officer of Live Nation Entertainment.

Good afternoon, and welcome to our fourth-quarter and full-year conference call. We had a record year in 2013 and are well positioned to continue growth in 2014. During 2013 we grew our concert fan base by 10 million, attracting almost 60 million fans to our concerts, with Ticketmaster managing nearly 400 million total tickets.

Combined, we delivered a record year for revenue realized and free cash flow. Our results demonstrate the effectiveness of our business model, establishing Live Nation as what we believe to the number one player in each of our businesses, with concerts driving our flywheel, which then is monetized across our high margin, onsite sponsorship and ticketing businesses. We continue to see tremendous power of live events, with strong consumer global demand. Live show, live events are high priority for discretionary spend, and over 80% of our fans surveyed indicate they plan on attending the same or more events in 2014 as in 2013.

Another sign of the strength of our business is that 85% of Live Nation's fan growth came organically by promoting more shows, launching new festivals, and entering new markets. We believe the live business will continue that strong global demand for years to come, as fan demand, artist supply, and new markets come together.

Another reason for the strength of live events is that technology as rapidly transformed the business in a positive fashion. Live is not duplicatable, and new social platforms have enabled fans around the globe to get close to their favorite artist.

Fans in every corner of the globe can discover, follow, share, and embrace artists, translating into greater demand for tours in all markets because nothing compares to seeing your favorite artist live. As music has gone global, technology is enabling a similar transformation of ticketing.

Today the vast majority of ticketing transactions are online or via mobile. Ticket sales are continuing their rapid shift to mobile, almost doubling in 2013 to 14% of total ticket sales.

Today's fans are hearing about concerts either from fans or by digital 70% of the time. As Ticketmaster continues to improve its products for fans to buy and manage tickets digitally, more fans will be able to find out about shows, coordinate with friends, and go to more concerts or other events. As a result, Ticketmaster will sell more tickets, Ticketmaster clients will benefit from increased sales, and Live Nation concerts will increase its attendance per show.

We continued to build share across our concert business, growing by 19% in 2013, well above the industry growth rate, as Live Nation promoted 21 of the top 25 groups and tours in North America. In addition, we grew our festival portfolio by 1 million fans and we further expanded in new markets with an additional 1 million more fans, now reaching 33 countries.

We grew the business across all market and venue types, as well as across all genres in music, with country music delivering the greatest fan growth, up 2.3 million fans to nearly 7 million, a 50% increase year over year. And new artists also contributed to our growth. 7 of the top 10 tours were led by young artists.

At Artist Nation, the division became greater aligned with our core business in 2013, and we increased the number of shows we promoted with Artist Nation acts by 50%. This delivered increased value of approximately $20 million to our concerts and ticketing businesses while providing additional opportunities for our sponsors. We now feel confident that with added leadership, we will grow our artist management business in 2014, and that it will continue to be a valuable pipeline into our concert flywheel.

Our sponsorship and advertising business has now reached almost $300 million in revenue, connecting over 750 sponsors with 900 million visitors to our online and mobile sites and 60 million onsite fans. We now have the scale and unique online and onsite user base to attract a broad advertising base, which drove 26% increase in ad units in 2013. The same time our traditional sponsorship business continues to show strength, growing 11% last year, which was led by a 29% increase in festival sponsorship.

Ticketmaster also continues to build upon its strength, with nearly 400 million tickets issued and generating over $17 billion in gross transaction value, making Ticketmaster one of the top e-commerce sites in the world. And with 106% client net renewal rates in 2013, we continue to grow our B-to-B client base.

Ticketmaster resale was the first new product launch enabled by our new platform, and it delivered a 26% growth in secondary GTV. This product expansion of Ticketmaster brings all tickets, primary and secondary, together in one place, creating increased options for our buying fans.

We believe the $9 billion secondary market that has historically not benefited content owners will start to be captured by content, and Ticketmaster resale will be at the forefront of. To date we have partnered with two-thirds of the NFL, NBA, and NHL teams, and over 1,000 concerts in launching this product in 2013.

Our team of over 500 engineers continues to work on new mobile products, improving the online experience, and building a new ticketing platform to enable Ticketmaster to substantially upgrade its commerce site of features for both fans and B-to-B clients over the next three years. As we head into 2014, we are more optimistic than ever on the growth potential of our business and our ability to deliver the three-year plan as laid out for 2014 and 2015.

While we have tremendous success building our concert fan base in 2013, we believe there is more runway ahead of us that will allow us to continue to build share at festivals and grow our global portfolio. Early indicators show we are off to a strong start, with event-related deferred revenue up 19% year on year to $434 million as of December 31 and concert ticket sales for shows in 2014 up 12% as of February 15 as compared to this time last year.

We expect sponsorship and advertising to continue dependable growth at recent historical rates, further building our global sponsorship base and expanding our online ad units as we grow and extend our online mobile presence. At Ticketmaster we plan on delivering client net renewal rates of over 100%, and continue growth of our Ticketmaster resale GTV.

Ticket master has also had a strong start to the year with overall ticket sales up 8% through February 15 on a year-over-year comparison. With that, I will turn it over to Joe Berchtold, our COO, to take you through the additional details of our condition.

Thanks, Michael. First on the overall financials, revenue grew 11%, $6.5 billion, driven by our concerts business. AOI increased 10% to $505 million, with growth across concert sponsorship and ticketing, and free cash flow grew 9%, scaling with our AOI growth.

Giving you a bit more detail on a couple of our businesses. First concerts. Live Nation concerts revenue for the year was up 17% on its 19% increase in fan attendance. AOI grew 92% to $60 million, driven by the higher fan base with both more shows and higher attendance per show.

Looking at our concert business by market. First North America, attendance was up 18%, or 5.9 million fans for the year. Within this, our amphitheaters delivered 2.8 million more fans, totaling 13.9 million for the year. This came from a combination of [11% more shows for a total of over 1,500 shows, and a 12% increase in attendance per show] (corrected by company after the call).

Arenas also grew strongly, up 19%, or 1.9 million fans for the year. Again, this was off the combination of more shows, up 12%, for a total of almost 1,300, and 7% more fans per show. Festivals then accounted for most of the remaining growth, up almost 800,000 fans, largely due to EDM activity.

In our international markets, attendance increased by 3.6 million fans, or 20%. Here to, arenas were a large driver of the growth, up 36%, or 2.4 million fans, to over 9 million total fans with a 20% increase in shows and a 13% increase in fans per show.

The other large driver in our international markets was stadiums, which grew by 29% to 3 million fans for the year. Globally, in our core amphitheater, arena, and stadium business we added 600 shows and increased attendance per show by 11%. And on the festival side, we held 62 festivals globally, attracting 4.5 million fans, a 26% increase from 2012.

Next, Artist Nation. Artist Nation AOI for the year was $32 million, down $6 million from last year. On the artist management side of the business we continue to deliver profit margins of over 20%, and for the full year this part of the business had a decline in profitability of [$4 million] (corrected by company after the call), which was due to the departure of 12 artists with management in December of 2012, and offset by savings elsewhere in the Company. Despite these departures, profits more than doubled in the fourth quarter and were up in the second half of 2013 because we added double-digit increase in revenue in this part of our business.

On the other side of the business, merchandise and other artist services, our profitability declined by $2 million. These results were impacted by our decision to restructure these businesses in the first half, making some management changes and ending activities that overlapped with what we do in the concerts division.

As a result, we believe these businesses are better positioned for growth going forward. Michael already covered the specifics on sponsorship and advertising and ticketing, so I will now turn the call over to Kathy Willard to take you through more details on the financials.

Thanks, Joe. Good afternoon, everyone. For the fourth quarter, revenue was $1.6 billion, up 12% over the same period in 2012, driven by concerts growth of 18% coming from the higher show count and attendance, and higher online advertising helped grow sponsorship and advertising revenue by another 15%. Adjusted operating income for the quarter grew 14% to $71 million, with ticketing up 18% and sponsorship and advertising higher by 7%.

Our operating income for the fourth quarter improved from a loss of $126 million last year to a loss of $51 million in 2013. This improvement came from our higher AOI, along with lower amortization expense due to higher impairments in 2012. Net loss for the quarter was $82 million compared to a loss of $160 million in 2012.

Revenue for the full year was $6.5 billion, up 11% over 2012. The majority of this growth was in concerts which was up 17%. Sponsorship and advertising also delivered strong revenue growth, up 15% for the year.

Adjusted operating income for 2013 grew 10% to $505 million as compared to $459 million last year. Concert's AOI roughly doubled compared to last year to $60 million, driven by the strength in our shows and attendance, delivering an AOI margin of 1.3% as compared to 0.8% in 2012.

Sponsorship and advertising's AOI grew 11% from higher online advertising revenue, along with increases in festival and other sponsorship activity globally. We are pleased to have delivered another double-digit growth year for this segment while continuing to deliver high margins at 68%.

Ticketing delivered AOI of $298 million, an increase of 1%, along with a 1% increase in fee-bearing tickets sold and a consistent margin year over year of 21%. Artist Nation delivered growth in AOI in the fourth quarter following our changes to our business in the first half of the year.

For the full year 2013 our overall AOI margin was 8%, in line with last year. Operating income for the year was $140 million compared to a loss of $22 million in 2012.

This growth was driven by our higher AOI, lower amortization due to the 2012 impairments, and a $38 million gain on disposal of operating assets, primarily in our concert segment. The net loss for 2013 was $43 million compared to a loss of $163 million last year. After adjusting for the costs related to refinancing our debt in the third quarter, our adjusted net loss for this year is $7 million, an improvement of $157 million over 2012.

Our EPS improved from a loss of $0.87 per share in 2012 to a loss of $0.22 per share in 2013. And without the refinancing costs, our 2013 adjusted EPS was a loss of $0.04, an improvement of $0.84 over last year.

Free cash flow was $17 million in the fourth quarter compared to $1 million last year. For the full year, free cash flow was $300 million compared to $276 million in 2012.

In 2012, included $26 million in tax refunds. Excluding the 2012 tax refunds, our free cash flow increased by $50 million due to our higher AOI along with lower cash interest this year. Our free cash flow as a percentage of AOI was 59% for 2013, in line with 2012.

Cash flow from operations was $417 million for the full year as compared to $367 million last year, driven by our higher AOI. As of December 31 we had total cash of $1.3 billion, which includes $538 million in ticketing client cash.

Our free cash, which excludes event-related cash for future shows, was $445 million as compared to $340 million in 2012. This increase in free cash comes from our higher free cash flow, proceeds from the sale of a theater in New York, and $85 million from stock option exercises during the year, partially offset by higher acquisition activity in 2013. Total event-related deferred revenue was $434 million as of the end of December, compared to $364 million at the end of December 2012, an increase of 19%.

The total capital expenditures for 2013 were $116 million, with $59 million spend on maintenance items and $57 million on revenue-generating additions, including our ticketing replatforming project. We currently project that our capital expenditures for 2014 will be $130 million, as we expect overall CapEx to be roughly consistent as a percentage of revenue.

Our total debt was $1.8 billion as of December 31, and our weighted average cost of debt is 4.3%. This compares to our cost of debt in 2012 of 5.2%, with the improvement coming from the debt refinancing we completed this year. Our single debt covenant currently requires a maximum of leverage of 5.25 times, and we are in compliance at less than 3.5 times.

We are delighted with our strong results across all of our business segments, and key financial metrics in 2013. Thank you for joining us today for the overview of these record results. And we will now open up the call for questions. Operator?

(Operator Instructions)

And we will take our first question from Vasily Karasyov with Sterne Agee.

Thank you. Good afternoon. I was wondering if we could talk in more detail about the growth in sponsorship and advertising segment? It seems like that you highlighted that increase in festivals was a driver this year.

How much does the guidance depend on increasing number of festivals? If you could just highlight the drivers price versus new contracts would be great. Thank you. Yes. I mean, overall we look at our sponsorship in two categories. There is the onsite business where you are selling sponsorship, whether it's locally, regionally, nationally across your portfolio, across the globe. We have shown that has been growing year over year for the last few years at 10% plus.

We think we still have a lot of runway on a global basis on the onsite business. One, because we continually are growing our fan base. So when you grow 10%, 15% across your fan base you have more fans to sell sponsorship to. We also believe that we still have underutilized assets. And for the next few years we see no reason why traditional onsite sponsorship will continue to grow at double digits, whether we are upgrading low-level sponsors to higher deals, finding new categories, or selling across a broader portfolio.

And the second piece is, it's been the real growth behind our overall advertising business is the digital, which as we said, grew over 26%. And we're just at the start of that runway. We have no mobile advertising right now, but with over 900 million visits to our platform, we think we're making great strides but believe that is a double-digit plus-plus growth business for us for the next few years.

So I think both of them have lots of inventory unsold, lots of portfolio opportunities to grow double-digits. Thank you. And your sponsorship contracts or relationships, how long term are they? Would it be fair to say that it's a multi-year usually relationship?

Yes, We have -- it's varied. We have a lot of local deals, lot of regional, lots of national deals. The larger the deal, those tend to be a three- to five-year deal. The smaller deals are kind of maybe yea -by year or two years, but easily replaced.

So three to five is kind of the number on the deals that matter on the top end. And historically we have had a very high renewal rate across our 750 sponsors.

All right. Thank you very much.

And we'll take our next question from John Tinker with Maxim.

Thank you. The 12% increase in tickets for this year to date, how much do you think that is being driven by just a cyclical upturn, and how much of it is by the fact that you are getting to people more effectively?

We think it's a field marketing story, right, where half your marketing is effective. We do believe in general, as we have been saying over the last two years, that this industry has been a fairly unsophisticated marketing industry in general.

Print ads and radio spots in a market like Los Angeles don't tend to be sharp enough reach the real fan. So I think over the last two years as we've used our data and have been able to dramatically go from basically 0% to almost 40%, 50% of our budgets now are being spent in some direct marketing, social online direction, we think we have been able to find a much more effective means to target those consumers. And we think of it as a big reason that has been driving our per-show attendance increase.

So we think we have a long runway ahead as we get better and better at our digital ad server and buying across our platform, and finding that exact U2 fan and sending him that message early versus the traditional shotgun approach of the past. So we think it's a big factor. We've outlined for the last couple of years social media database, mobile connected world and we can find those consumers thanks to our huge database of purchase intent and purchase history will drive more effective marketing.

If I could have a quick follow-up. You know, ticketing AOI, the margin is ticking up. How much of this is sort of Ticketmaster Plus beginning to gain traction, or is it just you all near the end of the capital expenditure cycle?

John, year over year, it's really pretty flat.

I am looking at the quarter.

Yes, quarters are always going to move around a bit.

Okay.

I wouldn't look too much at that. I think I would look at the full year, and we feel it's pretty consistent year over year.

Okay. Thank you.

And we will take our next question from David Joyce with ISI Group.

Thank you. I was wondering which venues tend to be leading and lagging so far in the ticket sales as well as in the concert sales?

As we stated in our Q3 and now in our Q4, in 2013 every segment of the venues portfolio performed exceptionally well, whether it was small theaters and clubs who had more shows, more young artists. Whether it was arenas or amphitheaters, or this year even stadiums, which look to be robust again in 2014.

And obviously festivals have been on a growth [chair] on a global basis. The good news is from top to bottom, activity, more bands, more consumers showing up to the venue has kind of been growth consistent in both international, North America markets.

Great. And on the Ticketmaster side, how much of the client contracts will be coming up in this year for renegotiation? And how far along are you in giving the secondary ticketing on with those clients?

In 2014, there is no exceptional renewals this year that we don't expect to renew or would be at risk, typical year renewal cycle. Long-term deals on most of those contracts. So none of them are up at any specific point. They kind of all cycle through year over year.

As far as this TM resale question, I wasn't sure, you asked exactly what? When do we get -- how many clients on did you ask?

How far along are long are you in getting a secondary ticketing rolled out?

We did roll it out in last August, we launched the TM resale business. As we said today, we had over 1,000 concerts in the last four or five months on the TM resale page at Ticketmaster.

And we had three-quarters of the NBA, NHL, and NFL teams who are all official partners with Ticketmaster resale on through the entire season. So we've made great progress in selling throughout all the portfolios of sports and concerts, and working through getting most of our clients to adopt and activate the product.

Thanks. Sorry I asked you to repeat a little of that. I lost you there for a minute. Finally, on the O2, is that closed? Was there anything new we should expect on that this year versus last year? Any new opportunities?

In Ireland?

Yes.

No, it's just we've always been this that business. It's a leader in Dublin, Ireland. High margin business for us. We had a partner that had some financial issues. So we took over the remaining equity in the venue to ensure and solidify our position in Dublin.

Great. Thank you very much.

And we'll take our next question from Amy Yong with Macquarie.

I have two questions. First on the international segment, could you just frame for us, better frame for us, kind of the number of concerts, or tickets, or specific markets, or genres that you are going after for this year and next year?

And then my second question is on expenses. Kathy, can you talk about some of the tailwinds or headwinds that we could actually see, particularly as you cycle through some of the investments over at Ticketmaster? Thanks.

Hello, Amy. On the international, are you looking -- our metrics show the breakout. Are you looking in 2014? Are you asking is there any -- where we'll spend more time on, or what is the specific question on the international show counts/metric?

Sure. I guess over the next two, three years, any particular regions, whether it be Asia or LatAm where we could see areas of investments that could lead to upside to numbers, whether or not it's the numbers of concerts or tickets being sold? Anything like that would be really helpful.

I see. Yes, as you look at the way we -- if you look at history and how we expanded many years ago, we were a very US-centric business and today in 33 countries. We are a global business.

Our strategy tends to be open up a retail market, but you need some scale in that region. But if you look originally in Europe, you start in London or Holland, and you try to figure out those 9 or 10 markets in the area.

And that's when the synergy and efficiency comes to life, because then you can buy a tour and you have all of the Western Europe kind of zone filled out, and you can drive your content through there. You can start employing sponsorship and ticketing. So Eastern and Western Europe are fairly filled out, always some bolt-ons we'll look for to keep that market strong.

And where we've been focusing the last year is you've seen us slowly one by one add markets in the Pacific Rim and Asia to start filling out that zone. We obviously like everyone else know that there is a lot of young demographics in Asia dying to see Rhiannon.

So we've been expanding over those markets. You will continue to see us over the next two to three years add full-time offices in Asia. We have already been in China for years, we've been in South Korea and Hong Kong, we've recently looked at Thailand, and et cetera.

So you'll see us build out our Asia and Pacific Rim where that becomes a real zone that we can synergize our tours, sponsorship, and then ticketing. And you will see us continue to look at Latin America. Like most of the world, we were a little excited a couple years ago, have stepped back to find the right partner and the right economics down there.

But you'll see us continuing to look as our [DOT for] fund comes up over the next year, you will look for us, or we will look to start establishing some permanent offices in South America. Again, the reason we need permanent offices is we have the global content. When we sell off global content or partner with the local partner, it's the least effective margin for us. If we have a local office, we're capturing all the local benefits of bringing that U2 show to the market, and it from there it lets us build out our sponsorship, ticketing, and onsite revenue.

So Asia is where you'll see us continue over the short term, and we'll be opportunistic in South America as certain markets and opportunities come together. And in the interim you'll see us just continue a bolt-on strategy in North America and Eastern and Western Europe where needed to supplement our core.

And Amy, on the cost structure question, that's one of the pillars of our three-year plan that we have laid out, and it's coming from the, primarily the North America tickets in 2015. That's where we've talked about the $0.35 a ticket on those, as we roll out the new product and start to be able to take costs out of the system.

Great. Thank you so much.

And we'll take our next question from Richard Tullo with Albert Fried.

Hello, guys. Congratulations on terrific performance in 2013. As we look at 2014, normally I would say, wow, this is going to be a huge year because U2, and U2 is always a huge year.

But it seems to me that Live Nation is really going to benefit from the organic opportunities, and part of that I think is the conversion of ticket sales in the back of the house into AOI growth. And could you explain to us the benefit of the performance in 2013? Was it really due to extensions onto the previously-existing tours, or is filling out the back half of the house?

You joke, yes. Yes is the answer to all of that. We think there is a few things going on. We've been building this model for a while. So it's all about monetizing the ecosystem.

There is never one tour that makes a difference. It's about the scale of our business. So having the largest sponsorship team and being able to continually sell against your portfolio is a big growth curve for us.

Ticketmaster and launching a secondary offering and starting to really monetize some of that revenue as we also look to relaunch and expand our bigger platform later is key to growth. You look at the concert business, going to my earlier reference, having the scale we have has also given us the luxury of having one of the greatest marketing teams and databases that starts to make a difference when you are selling these shows.

So we do believe that the robust consumer base that wants to go to the show, you have a vigorated supply chain of artists coming up, filling up venues. You look at artists like Lourde, name the new artists a year ago we weren't talking about that will go on and do great things this year.

So incredible supply and great young artists that need to get on the road. So you got consumer demand and supply. Our job is then to make sure we sell that extra 1,000 to 2,000 tickets per show to maximize our bottom line.

We saw success in that in 2013. We think in 2014 we got two great things happening. To be sitting here today saying that we are ahead of what was a record attendance is good news.

That means that the supply is out there. That means consumers are buying, and it means that we are continually grabbing more market share from our competitors.

So we think we're going to have the ticket and show count this year that will drive year-over-year growth. But every year we are getting better and better at monetizing that per-show profitability by selling a few extra tickets more effectively, by driving onsite profitability, selling more sponsorship, and driving extra fees when we sell incremental tickets. So we think we're executing on all cylinders and we have, in 2014, what would appear to be some decent tailwind from a consumer spend and an artist supply.

Okay. So two follow-ups, really, if I can get away with that. First on the big data. Is the big data being collected by Ticketmaster helping you deciding how to kind of market new types of concerts and new types of acts more effectively based on maybe how they did? Like maybe the high for Pink or something like that?

And then the second question is for Kathy, is as we think about AOI as a percentage of free cash flow, is it fair to think about that 59% number? Or is there going to be some delta to that over the course of the year?

Well, I'll tackle the data question. I mean, as everyone knows, the buzz is always about data. We happen to have probably one of the largest databases of live consumers in the world.

We've gotten better over the last couple of years at accumulating that data, getting it segmented and usable for our business operators. And over the last year we started to really come to life by using that data to be very effective at direct marketing, which is the sweet spot for driving lower costs and higher per-show tickets. So we think the data is, like everyone talks about, one of our unique gold mines.

We're getting better at it every day on monetizing that data by being a lot more effective direct marketers. An example would be last year we would have looked at our data and said who went to and bought mega-tickets for country?

This year we can go out very early, talk specifically to all of those consumers who may have purchased exactly that packaging historically, and start to use our effective marketing dollars at a very sharpshooting approach to talk to past purchases and casual consumers who we know have a high likelihood to purchase, which takes all of the efficiency into the marketplace that historically we were shooting way wide in our marketing approach. So data is going to enable us to be way more efficient with our $200 million and drive per-sales ticket sales per show by motivating that consumer directly. Kathy?

As far as analyzing the percentage of free cash flow, obviously we've shown some growth. And if you take out, if you really look at year-over-year 2013 to 2012 and take out those tax refunds we received last year, we're actually up a bit this year. So we're seeing a good growth from it already.

Going through the pieces, obviously AOI, we've given you some information in terms of a three-year plan. And whatever you are presuming is going to happen in 2014 for AOI, cash interest expense will be down again because we put the -- we did the new refinancing in August and we haven't seen a full-year impact of that yet. And those are probably the biggest pieces that would be changing it. But I think overall it's a scale business. As we continue to grow that, than we expect to continue to deliver positive trends there.

Okay. Thank you very much for taking my questions, and congratulations on a brilliant year.

Thank you.

And we'll take our next question from Ben Mogil with Stifel Nicolaus.

Hi. Good afternoon. Thanks for taking my question. So I just want to talk about secondary a little bit here. Michael, I think in the last quarter you talked about sort of 750,000 tickets being sold on the secondary platform in the third quarter. Can you give us a sense of what the number looked like in the fourth quarter?

I don't know if I said that number in the third quarter. What do we got in our metrics?

I think we can say it has been continued on a rapid growth trajectory. I am not sure that we have given out specific numbers.

Okay. And then --

(Multiple speakers ].

I'm sorry?

We don't think we have broken it out to that granular (multiple speakers).

Okay. And then looking at the secondary market. So at the beginning of February, Stubhub went back to its resellers and offered them both higher volume discounts and also lowered the threshold above which you started to get some discounting.

When you look at what they're doing, and that's almost more B-to-B because I think the threshold was like $0.5 million worth of ticket sales. When you look at that sort of part of the business and you look at what you are doing, should we be thinking about you guys as more, I bought a ticket for a show, I can't go, I want to resell it, as opposed to Stubhub, which seems to be more focused on the volume, i.e., the ticket broker side of the business? Is that the right way we should be thinking about the dynamics in the market?

No, not at all. I mean, the marketplace is a supply and demand business. Most of the tickets that end up on secondary sites, large component are the professional brokers in all those markets.

We have a great relationship with them and have similar incentive programs with them. So they are a large supplier to secondary websites.

We continue to work with them. We also see us a large relationship with the NFL, NBA, NHL in the content. So we're, unlike Stubhub, very aligned with the content. And you can see that through the NFL exchange.

And of course, the component of the consumer that can't go, the consumer that wants to sell his tickets for a profit, that's a component of the business, and big part of Ticketmaster also. So we're in the same business.

Our only competitive advantage that we look at from differently than Stubhub is, we're in the primary business with a lot of traffic, and we know that when 27 million uniques are coming into that website, that having three months of no Beyonce tickets didn't make a lot of sense, and at 10:01 for the next three months having Beyonce tickets available to our fan adds a big level of inventory to the store shelf. We have seen the growth to date, and expect that to continue to grow as we work with the leagues and the brokers and others to supply the inventory onsite.

Okay. That's great. Thanks, guys.

And we'll take our next question from Doug Arthur with Evercore.

Yes, thanks. Two questions. Joe, you talked a little bit about the moving parts at Artist Nation. I mean, that had a awfully good quarter on a down revenue number, and I know there is a lot of shifting parts there. But have you sort of lowered the cost structure of that now on an ongoing basis? That's question one.

Yes. I think that we lowered the cost structure over the beginning of the year. And part of this is, I think we're seeing the results of the greater alignment with the concert business, and part of this is timing.

That helped in the fourth quarter for sure. But as I also said, it wasn't just the fourth quarter on that part of the business. It was the total second half that saw both strong revenue increase as well as an improvement in profitability.

So we feel good about where the business is at, at this point. We think it's primed to continue to grow and add more, both in its own right as well as what it contributes to the rest of the business.

Okay, great. Michael, this may be a mix issue. But if I look at ancillary revenues per attendee, you've had real good growth in the festival business overseas, but the amps have been kind of flattish.

I know historically that's been a goal to get that up. Is there any kind of trend there, or is that a mix issue?

Yes, it tends to be a mix issue. We have been fairly efficient with the North American amps onsite business. So we obviously like to see it grow year over year.

We don't have high expectations that there is a ton of room left in that business from an F&B perspective. As I said, operating fairly efficiently, but it is a mix.

One of the realities are, when you have Kid Rock dates, lots of beer is sold. When you have One Direction, a few bottles of water are sold. Depending on the mix you may have that year, it can vary by $1 up or down. But generally we think the business, because of its country base in 2014, will be able to deliver those numbers or better, looking at the mix this year.

Great. And actually just one follow-up. I mean, you talked -- you had very good success in the online ad sales, up 26%. But the theme is that you are just scratching the surface, particularly in mobile. Would it be your hope that, or expectation that you can continue to see 20%-plus growth in that for some time?

Well, you are not going get me on that exact number, but I would say yes, I think we all look at the industry of digital online and mobile growth as growing the highest of all advertising mediums. We think we have done a fabulous job where three years ago we weren't even in this business.

We have staffed up over the last three years a strong digital team. Align that with our digital content, and we've been able to grow that business substantially. And we think yes, it's going to be a double-digit-plus growth business for us as we even get better at delivering ad units online, digital, mobile, et cetera.

Okay, great. Thank you.

And we'll take our final question today from Martin Pyykkonen with Wedge Partners.

Nice quarter and end of the year as well. Two questions. I guess on the AOI margin for the concert segment going forward in the year. I know you're not going to give a number in terms of guidance, but can you talk about what the swing factors might be?

You got a great 2013 in terms of attendance and revenue, and AOI was up in dollars incrementally, up in terms of margin. Where could that go, or what are the sort of fundamental limits to it, if you want to talk about them that way?

Then second question, on social media, when I look at your sales and marketing for 2013 up just over 7%, obviously revenue for the Company and concerts in the high double digits. Was there a, in 2013 should we think of this going forward in this year where you are pulling back, and maybe the sort of quote-unquote traditional media advertising spend and getting a lot more leverage out of social media? Is that what's going on in the sales and marketing number and percent of revenue? Thanks.

So on the first one first. I mean, start with the constraints on the profitability of the concert business. When your typical deal with an artist business, they might get 80% to 90% at the door. And then you have costs to cover on top of that. It is going to be a low limited margin business inherently.

So we've said that, I think, in the past and talked about that's why the importance of getting that concert, the power of the flywheel that then drives the onsite, the sponsorships, the ticketing businesses, to drive the majority of the profitability. I think in 2013 you saw a nice increase in the relative profitability of that business, largely because you had strong increases in attendance per show.

So even though you think about the artist as being a substantially variable cost against your revenue stream, a lot of your other costs associated with putting on the show from the marketing to the actual night of the show are going to be more fixed against a given show, which then means the more people you can drive to that show, the greater it is your profitability, the greater it is your profit margin. So do we think there is still room for us to continue to hedge up in our profitability of that business? Yes.

But it's not a -- it's never going to be a high margin business. It's never going to be something that you see a dramatic increase as we think that having -- I broke out a lot of the specific numbers, Having very high increases in attendance per show. You saw how much that it lifted it. So you can get a range in terms of where that can go.

In terms of the second question on our advertising shift and its impact, absolutely a big focus in 2013, a continued focus in 2014 in shifting ad spend away from traditional media to social and digital platforms. We think that was one of the factors that helped our attendance per show, and we think that there is still a ways to go in what we could can do there as well as the upside of the effectiveness of doing so.

It comes a piece at a time, a tour at a time. But it's certainly the trend that exists for our business.

Okay. And then just quickly if I could do a follow-up. On the festival business in particular, and to the[extent you can split it this out domestic versus foreign. Is there [true] you're thinking there's a lot of runway and headroom in terms of adding festival volume in terms of shows, that would -- festivals that would make sense to you financially? Or is there any diminishing returns, large numbers sort of impact that is closer, or is there a lot of headroom still to go? Thanks.

Well, we look at everything on a global basis. So as large as we are, we still look at the world and have lots of runway in all of the categories. We have lots of runway to expand Ticketmaster onto foreign markets that hasn't been very aggressive at it, lots of room to move Live Nation into more markets that are growing.

And in our portfolio we're very strong on a European basis. Have 40 or 50 festivals in Europe, and have a smaller portfolio in North America. And then when you look at Latin America, Pacific Rim, et cetera, we would have no festivals there. So we think the festival business is a big segment, lots of growth, and we still believe we have a relatively small overall market share on a global basis. I think we have lots of room to still build those into our portfolio and grow that business.

Okay. Thank you.

There are no further questions. I'll turn the call back over it Mr. Rapino for closing remarks.

Thank you everybody, and we will talk to you out in Q1.

Ladies and gentlemen, this concludes the Live Nation Entertainment fourth-quarter 2013 earnings conference call.