Live Nation Entertainment Inc (LYV) 2016 Q3 法說會逐字稿

Good afternoon. My name is Cody and I will be your conference facilitator today. At this time I'd like to welcome everyone to the Live Nation Entertainment third quarter 2016 earnings conference call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer period.

Before we begin, Live Nation has asked me to remind you that this afternoon's call will contain certain forward looking statements that are subject to risks and uncertainties that could cause actual results to differ, including statements related to the Company's anticipated financial performance, business prospects, new developments and similar matters. Please refer to the Live Nation's SEC filings, including the risk factors and cautionary statements included in the Company's most recent filings on Forms 10K, 10-Q, and 8K for a description of risks and uncertainties that could impact the actual results. Live Nation will also refer to some non-GAAP measurements in our measures on the call.

In accordance with SEC regulation G, Live Nation has provided a full reconciliation of the most comparable GAAP measure in the earnings release. The release reconciles and other financial or statistical call information to be discussed on the 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. Please go ahead sir.

Thank you. Good afternoon and welcome to our third quarter 2016 conference call. Live Nation had a record third quarter and 2016 is on track to deliver another year of record results across revenue, AOI and free cash flow. For the quarter, revenue was up 23%, AOI up 15% to constant currency and free cash flow up 21%. Our core divisions of concerts, ticketing and advertising each delivered their strongest quarterly AOI results ever.

Our concert business is our flywheel, attracting 28 million fans to shows globally in the quarter, which drove record results in our ticketing, advertising and on-site business. Our performance demonstrates how Live Nation has created the most unparalleled live platform, leveraging concert scale to drive growth across the full Live ecosystem.

Our concert and ticketing sales continue to pace well ahead of last year and this gives us confidence that 2016 will be another year of record results for Live Nation overall and for each of the core divisions.

Looking at the concerts flywheel from the third quarter, we had 16% more fans attend over 6,000 shows, growing revenue by 27% and AOI by 38% year-on-year at constant currency. Year-to-date, we have grown our fan base by 16% to 56 million, on our way to what we expect to be a record-setting 70 million fans attending Live Nation concerts in 2016.

As we have discussed, increase in on-site monetization of been a major focus and year-to-date we've increased average per spend at our festivals and amphitheaters by 10%, while growing attendance 13% at these events, thereby, increasing total on-site spend by $70 million in constant currency. This high margin spend has been a key driver of our growth concerts profitability in 2016.

We've also benefited from ticket pricing initiatives, notably increase in price on the most attractive tickets and as a result, our average ticket price grew by 7% year-to-date. In our high-margin sponsorship business, we have continued to double-digit growth this year, with revenue up 13% and AOI up 10% year-to-date at constant currency. The core of our sponsorship and advertising business is the ability to reach those 70 million fans attending Live Nation shows this year, now at a scale greater than the NFL, NBA and NHL combined. With over 27 million of these fans in the hard to reach 18 to 34-year-old demographic, we provide a unique platform for brands looking to drive engagement and activation.

On the space of live bands, we leverage our database, profiling nearly 300 million fans to help brands more effectively target potential customers. And on top of that, we have built our ad platform of streaming live concerts and creating content around our festivals and shows. So far this year we have generated 3 billion views across Live Nation sites and platform partners including Snapchat, Facebook and YouTube, growing our ad units and providing brands with an amplified way to reach potential customers.

Our platform has proven particularly attractive to those global brands looking to reach customers at scale and through the third quarter, the 50 plus brands have spent over $1 million a year with us have increased their collective spend by 19% to over $225 million, which now accounts for 75% of our sponsorship revenue. As a result, our contracted net revenue for the year is up 12% through October and over 95% of our planned sponsorship under contract for the year. Given this, we're confident we will again delivered double digit AOI growth in our sponsorship and advertising business in 2016.

Ticketmaster continues building its position as the global ticketing market leader with 14% growth year-to-date in global GTV to $19 billion, on our way to over $27 billion for the year. Ticketmaster provides 480 million tickets to fans across 28 countries, making it by far the largest such marketplace. This has driven a 14% increase in ticketing revenue for the third quarter and a 9% increase in ticketing AOI. Investments in delivering efficient mobile purchase process continues to improve the fan experience, and year-to-date, app installs are up 44% to nearly 30 million and mobile ticket sales up 38% to 27% of all ticket purchases.

Similarly, our integrated secondary and primary ticketing offer continues to benefit fans. Allowing them to see their options in one location, driving secondary GTV up 33% year-to-date to over $1 billion.

With this success in selling tickets, Ticketmaster continues to attract new clients worldwide. This quarter we added 170 clients to our base of over 12,000, setting us up for the seventh consecutive year of growing ticket inventory. Going forward, we see attractive growth potential in ticketing as we continue creating new ticketing products, increasing conversion, and expanding our reach with APIs through our third party distributed commerce.

In summary, we continue to rapidly grow our concert fan base, which is demonstrating the effectiveness of our flywheel, driving double-digit growth in sponsorship, ticketing and on-site. And as we look forward, we see tremendous opportunities to continue global consolidation of our concert business with further growth and on-site advertising and ticketing. With that, I would turn the call over to Joe to take you through the additional details on the division performance.

Thanks Michael. Looking at our business segments, first concerts. Live Nation concerts revenue in the third quarter was up 27% and AOI was up 38% at constant currency. The revenue growth was driven by a 16% or 3.8 million fan increase in attendance for the quarter with a 4% increase in show count and 11% increase in attendance per show.

Over our key summer months across Q2 and Q3, we increased fan attendance by over 7 million. Just this growth on a standalone basis would make us the third largest promoter in the world. Our growth was led by five artists performing to over 1 million fans each so far this year, including Beyonce, Coldplay and Rihanna, all of whom perform both in the US and internationally as we continue expanding the global touring of our artists. And while our growth was led by stadium attendance of over 4 million fans so far this year, amphitheaters, arenas, festivals and theaters and clubs all increased their fan bases for the quarter.

From a geographic standpoint, North America drove much of the fan growth for the quarter with a very strong amphitheater business. Though for the full year, international fan growth continues to be over 20% year-on-year, with strong growth across all building types.

Looking to how we will finish up the year in concerts, through October, ticket sales for shows this year are up 14% to over $61 million, and while we have a number of very strong tours in the fourth quarter and expect to get to 70 million total fans for the year, it does imply from a timing standpoint of the overall activity level in Q3 is a bit shifted -- sorry, our overall activity level in Q4 is a bit shifted into Q3 this year.

As Michael discussed, we made great progress in growing our fan spending at the buildings we operate. Our US amphitheater spending is up 10% to over $22 per fan, our global festival spending is up a similar 10% to $17 per fan per day all at constant currency. Collectively, these on-site initiatives in our fan growth has been the key drivers of our great concerts performance so far this year, performance we believe will continue and be built upon in 2017 and beyond.

At Artist Nation, revenue was up 11% and AOI down $1.4 million in the third quarter at constant currency. Based on artist touring timing, we now expect the fourth quarter and full year to be down from last year, but to see a pickup in activity in 2017 as our management business continues to be a key strategic source to our concerts flywheel.

Turning to our sponsorship and advertising business, revenue for the third quarter grew by 10% and AOI was up 8% at constant currency. AOI in the quarter was impacted by a bad debt reserve and without this, AOI for the quarter would've been up 14% and for the year up 13% at constant currency.

Our advertising growth this year has been well balanced between sponsorship and online advertising, with both parts of the business growing contribution margin double digits year-to-date. On the sponsorship side, 14% growth in festival sponsorship continues to demonstrate the value our platform of 80 festivals worldwide provides the brands looking for direct engagement and activation with 18 to 34-year-old fans. And on the online advertising side, we're seeing the benefits from our breadth of content initiatives, live streaming, editorial content and other music related video as we broaden our distribution channels to now include Snapchat, Facebook, NextVR and Netflix.

Finally, Ticketmaster. For the quarter, Ticketmaster revenue was up 8% and AOI up 4% at constant currency. Primary ticketing fee bearing GTV was up 10% for the quarter and is up 15% year-to-date at constant currency. The GTV growth has been driven primarily by our concerts and arts segments, each of which is up approximate 20% year-to-date. Secondary ticketing GTV was up 13% for the quarter and is up 33% year-to-date at constant currency. Similarly, last year Q3 was our lowest growth quarter and we've already seen an acceleration of our growth for October as the NFL, NBA and 2017 concert onsales have kicked in. And with this North American international GTV each remains up 30% or more through October.

More broadly, the Ticketmaster platform has never been more effective at selling tickets for our clients. September was one of our top 10 GTV months ever and five of our top 10 GTV months in our history have taken place this year. At the same time, we continue building the effectiveness of Ticketmaster as a sales partner for content by leveraging the customer base and traffic of distribution partners, including Facebook, Groupon and Bandsintown. We have more than doubled the volume of tickets sold in the quarter via our API and year-to-date our channel partners have driven 34% more ticket sales than this point last year to over 8 million tickets. With our expected onsales for 2017 concerts in the fourth quarter, and it being our largest quarter for secondary, we expect to deliver double-digit GTV growth and high single digit AOI growth for the full year in ticketing, both at constant currency.

In summary, we're confident that 2016 will be another year of record top line and bottom line results overall and for each of our core businesses. We also expect to continue growing our free cash flow, enabling us to continue investing in these businesses for ongoing growth. On FX, Q3 revenue and AOI were impacted by about 1%, with the British pound turning sharply negative while other currencies were generally flat to slightly positive. In terms of seasonality, we expect Q4 as the percent of full year AOI to be in the same general range it was in from 2011 to 2014. And looking out at our earliest leading indicator for 2017, the number of booked stadium, arena and amphitheater shows were up double digits from this point last year pointing to continued success of our flywheel business model headed into 2017. I will now turn the call over to Kathy to go through more on our financial results.

Thanks Joe and good afternoon everyone. I will start with our results for the third quarter. Revenue increased by 21% to $3.17 billion and AOI was 14% higher than last year at $303 million. On a constant currency basis, revenue improved 23% to $3.22 billion and AOI was $304 million, up 15% over last year. Free cash flow was $251 million for the quarter, an increase of 21% over the third quarter of 2015.

As we enter the fourth quarter, our concerts deferred revenue for tickets sold for events in the future was $417 million as compared to $441 million in September last year. The majority of our revenue growth in the third quarter was driven by a 25% increase in concerts, with a significant increase in stadium activity globally, along with increased show count in both amphitheaters and arenas shows in North America.

Ticketing revenue was up 7% over last year with higher volume in both our primary and resale businesses. The growth in our concerts business also largely drove the 14% increase in AOI over last year. Operating income in the third quarter was $191 million, 25% higher than last year. And net income for the quarter was $111 million, up 25% over the third quarter of 2015, both driven by the increase in AOI.

Moving on to the results for the first nine months, revenue was $6.56 billion, an increase of 19% and AOI was up 17% to $557 million. On a constant currency basis, revenue improved by 21% to $6.65 billion and AOI was $562 million, an increase of 18%. Free cash flow was $373 million, 15% higher than last year.

The majority of our revenue growth for the nine months was again driven by the concert segment, which was up 23%, primarily from the increased activity across stadiums, arenas and amphitheaters. Ticketing revenue for the nine-months increased 12% with higher primary and resale volume. And sponsorship and advertising revenue was up 11%, from new clients and renewals of existing partnerships.

During the third quarter, as Joe mentioned, we recorded a bad debt reserve a $6 million related to a sponsorship client going out of business, which reduced the year-over-year AOI growth for the nine-months in the sponsorship and advertising segment by 3%. The 17% growth in AOI for the first nine months was primarily from the higher concerts activity and ticketing volume. All of our segments delivered growth in AOI during the period.

Operating income was $232 million, an increase of 35% over last year, driven by the increase in AOI. Net income for the first nine months was $104 million, more than double the net income for the same period in 2015. This increase is largely driven by our higher AOI, along with a net $14 million reduction in non-cash expenses related to foreign exchange impact on certain balance sheet accounts and other write-offs as compared to last year.

For the full year, we estimate that we will record approximately $50 million related to the accretion of redeemable non-controlling interests from certain acquisition related put call arrangements, which impacts the calculation of earnings per share. And finally, we expect the amortization of non-recoupable ticketing contract advances for 2016 to be in line with the total amount in 2015.

Moving to our balance sheet. As of September 30, we had total cash of $1 billion, which includes $547 million in ticketing client cash and $314 million in net concert event related cash, leaving a free cash balance of $179 million. Cash flow provided by operations was $120 million in the first nine months, compared to a use of cash of $15 million in the same period 2015. This increase was largely driven by higher operating results along with an improvement in net working capital.

Free cash flow was $373 million in the nine-month period, as compared to $325 million last year driven by our higher AOI, net of increases in maintenance CapEx and partner distributions. For full year 2016, we currently expect our free cash flow as a percentage of AOI to be similar to what it was in 2015. For the nine months, total capital expenditures were $121 million, with approximately half of that for revenue generating items. We currently expect total capital expenditures for the 2016 full year to be approximately $180 million to $185 million, with about 50% of that to be spent on revenue generating CapEx.

As of September 30, our total debt was $2 billion and our weighted average cost of debt was 4.3%. In October we refinanced our senior secured credit facility and 7% senior notes in order to take advantage of more favorable interest rates and terms. We issued $575 million of 4.875% senior notes due in 2024, along with a new $190 million term loan A and a $975 million term loan B. The interest rate on our term loan B improved from LIBOR plus 2.75% per year with a LIBOR floor of 0.75%, to LIBOR plus 2.5% with no floor.

After repayment of our existing senior secured credit facility and the 7% senior notes, along with related redemption premiums, interest and fees, we added an approximate $257 million of cash to our balance sheet for future investment in our business. We also increased our revolving line of credit from $335 million to $365 million, which remains undrawn. As a result, our annual cash interest expense will be reduced initially by approximately $2 million and our weighted average cost of debt will decrease from 4.3 % to 3.8%.

We will record a loss on extinguishment for this refinancing in the fourth quarter of 2016 which we currently estimate to be between $14 million and $17 million. Thank you for joining us today and we will now open the call for questions. Operator?

(Operator Instructions)

David Karnovsky, JPMorgan.

Two questions. First on ancillary revenue, you're now largely through two seasons with Legends as your concession partner at some of your North America amps, could you give a sense for how far along you think you are driving higher net revenue per fan and how much opportunity remains at the amphitheaters and then at maybe some of your other venue types? And then secondly, your release mentioned that you have been able to increase prices for the best seats at your concerts, in the past you mentioned the price in the front of the house close to the market should allow you to lower prices for the back of the house, which should, in theory, increase attendance. Just wondering if this is a dynamic you are seeing play out? Thanks.

I will start and Joe can jump in. On the ticketing, I think it's a double strategy. I think we have kind of stated over the last few years that just generally getting better at dynamically pricing the house -- the concert business historically has been a very simplistic pricing model, three or four different tiers for the same concert on all the same markets. So we have been a big advocate over the last few years of pricing the house differently on a Friday night versus a Monday, in New York versus Chicago, and also adding as many different scalings to the house as you can, through the purchase cycle. So we've done it on both sides.

We had great success on the Groupon side and looking at the discounted lower end of the ticketing business and that's driven purchase. And we think we have the start of a huge opportunity as everyone talks about the VIP, secondary - $8 billion, all of those facts that are used that there's a little a big piece of business the customers and scalpers are accessing through our content.

So we think we have a lot of opportunity on the front end of the house to keep pricing it through VIP platinum P1, so the artists can share in the upside versus the secondary business, and we think as we also lower and look at discounts and ways to price the bottom end of the house, we have been driving overall gross per show as well as ticket sales per share. So both of them working as planned, and we think the big runway still ahead of us is, we know that there is still hundreds of millions of dollars in secondary ticket revenue on top of what we are charging for P1s to-date that provides opportunity.

And David, this is Joe. On the ancillary, first of all, we have been very happy with Legends. They've done a great job ramping up and improving the offering to fans at our amphitheaters. As we talked last year was them getting their feet wet, making a few improvement. This year was really making those improvements at scale, experimenting at scale with wine bars, grab and go, craft beers, generally improved offering and we've shown you the numbers from their doing that.

That said, we absolutely believe we are still in the second, third inning of the improvements and we continue to benchmark ourselves against a well performing ballclub and what could spend some per caps there in the $30 plus range and you see us in the $20's. And I think as we continue to improve the offer both for the mass offer, as well as continue to target the VIP high end people that want the great experience on the night out, that between those two areas, we'll continue to be aggressive in driving the per cap spend for over the next few years.

Okay, thanks a lot.

Ben Mogil, Stifel.

Hi good afternoon, thanks for taking my question. So I have two of them. First one, so Michael, in the prepared remarks -- or actually they're probably in the press release, you talk about the extra artist payments that you are able to make to artists this year through a tie to the increase in ticket price. Somewhat similar to hear companies call out how much they are paying their suppliers, so maybe you can frame that a little bit more for us. Should we assume that the splits you've had with the artists are unchanged and that this increase is something that you're going to share in as well? Are you trying to give a sense of, from a competitive positioning, obviously the more money an artist gets the more likely they are to tour with you? Sort of curious around the commentary around the artist extra payments this year.

Nothing structural about the comment. Nothing new on the splits. We absolutely like to remind the artists and the community that we spend over $3 billion to $4 billion a year paying the artists for their art. And I think as you see a lot of the other battles going on in the business, we've always believed that Live Nation could be an artist centric and having the artist aligned to our agenda has helped us grow the overall pie. But first and foremost, you have to pay the artist for his art. And that comment was just showing you as we increase our business, the artist is doing well, as well as our core business of growing our profitability.

That's great, thanks Michael. And then one, I'm not sure for Michael or for Joe, on the ticketing, you certainly had nice growth in the secondary gross transaction value, and it looks like year-to-date you are in the same ZIP Code as a StubHub instead of obviously, being significantly larger. So when you look at the secondary market, are you seeing the market grow and both of you are taking decent share? Maybe could talk about the market growth as well the competitive dynamics between the two of you and if there are any other players that you want to talk about as well.

I think absolutely the market continues to grow. But we're taking share, no question. And StubHub, I think this year had reasonable growth coming off some issues they had last year. But our focus is really just our belief that if we gave fans a great offer, if we give them a great product and it all starts with that product, primary and secondary together, leveraging the scale that we have, people coming to Ticketmaster and our ability to reach those fans by direct marketing to them, that we will continue to grow and take share regardless of what everybody else does in the market.

That's great, thanks Michael, thanks Joe.

John Janedis, Jefferies.

Joe, your comments around bookings for 2017 were helpful given how strong this year has been to-date and I guess the potential for next year is slow. So understanding you're not going to guide, is there any reason why bookings would come in significantly earlier for next year relative to this year?

No, I think we're on a similar cycle as we were on last year. We just see a great pipeline of shows next year and wanted to make sure everybody understood that, that we didn't get some view, but this year was unusual in the volume of activity that we had, and we are looking to enter next year very strongly.

Okay that's helpful, thanks, and then separately I guess, given the ongoing currency of macro headlines, can you give us an update on your international M&A pipeline?

I love this. (laughter) Yes, let us lay it out for you. I think our pipeline on M&A continues to be whether it's in America or international. We will continue to look to build our scale and our core business, whether it's a promoter in Nashville that can excel our business, a festival in America or South America, we continue to look at promoters as well as festivals that can excel our inventory and that we can manage and build our flywheel around. So we have an ongoing, always an ongoing active list, and we think we can continue to add a lot of bolt-ons that will continue to drive our overall scale at the right return.

Thanks, guys.

Jason Bazinet, Citi.

Thanks, can I just go back to the per cap spending objectives? I think you guys have laid out this five dollar per guest bogey. When you say you're on the second or third inning now, does that imply that we have sort of booked $1-ish of that so far off of that goal?

Well no, again, we've got a lot of fans. So what we've done is in our amphitheaters and in our festivals, we grew it -- each of those about $2 per fan this year from the numbers I gave you. That represents roughly 50 million fans between those buildings that we operate where we have those initiatives with Legends on the amphitheater side and various folks on the festival side. So I'm just speaking macro, general terms. We've tested, we've tested at scale, we've delivered some results. There is now the opportunity to take to full rollout and scale some of those learnings as well as continue to increase the merchandising we're doing for all fans, and a big step still to come in how we're delivering the experience on the VIP high end.

Okay, thank you.

Doug Arthur, Huber Research.

Couple questions. Looking at the margin in the concert business in the third quarter, obviously that is a number that's been moving up a lot that's been one of your objectives. But the big number this quarter, how much of that is just sort of an extraordinary mix of tours out there this year and how much of it is sustainable? And then I have a follow up.

Sure. Obviously we've had a very good season in our amphitheater seg. And along with a lot of the --

Woah, did you get that, Doug? (laughter)

I heard it.

I think it was record, actually. (laughter) Better check those sources.

Sorry, joking aside, we talked about the on-site ancillary spend, a lot of that is higher margin spend in terms of how that flows through for us. So nothing extraordinary in terms of the talent or the splits or the payments or anything like that on the artist side. Really, I think you are seeing the pickup is more because of the ancillary growth than anything else.

Okay, so that's follows into my second question which is, we have beaten around here a little bit, but your average revenue per attendee in this quarter approached almost $90 on average for all attendees. How much of that is a function of the mix in the quarter because you had big stadium action in both Q2 and Q3 as opposed to the ticketing strategies and the ancillary or is it all of the above?

It is all of the above, clearly. But you can parse out, we said it was a couple dollars per fan on the ancillary. So a lot of that is going to be your stadiums, and then within the stadiums, the conversation we have been having about really focused on how we price particularly the front of the house, capture the value to reduce the leakage that goes into the secondary that the artist doesn't benefit from. And that further takes that up in stadiums, but also that takes place in amphitheaters and arenas.

Got it, okay, thank you.

David Joyce, Evercore ISI.

Thank you. In terms of the better pricing of the house, how much further throughout your footprint are you able to roll out the strategies and learnings?

Let's leave the theater and clubs separate. But all amphitheater, arena and stadium shows just given every day that the secondary business is transparent and the live online is an opportunity for the manager and the promoter and the agent to figure out how to capture more of it. So I would say all -- the thematic overall in every conversation we have about a tour or a show, with the manager and an agent is how do we make sure we capture more of the marketplace.

So I would say that -- we have said it over the last couple of years, it's a slower process because the fragmented business of a lot of managers and a lot of agents and a lot of artists, but overall thematically every artist, most manager/agent show represents a huge upside potential if they price the house to demand. And we think we have -- year after year it will grow bit by bit as we increase the platinum, whether it's VIP, however the tool is but we think most of our shows still have a huge opportunity on the revenue side.

Thanks. And on the sponsorship and advertising side, granted, you called out the British pound currency impacts, but are there any regions where the sponsors are stepping up some activity or maybe pulling back that we should be thinking of?

It's Joe, not at all. When we call it out in particular sponsorship side, that's the piece that was really hit by the pound when you look at the different divisions, and that's just the -- where we have a lot of festivals. So where we have a lot of growth in our sponsorship business. And that's really all there is to it. And we're not seeing anything else geographically that would cause us any issues.

Okay. And just a final housekeeping question for Kathy, you mentioned after your refinancing the $250 million of extra cash on hand, is that incremental to the $179 million of free cash at the end of the quarter?

Yes it is. Because that $179 is as of September and we completed the refinancing at the end of October.

Great. Thank you very much.

Kyle Evans.

Hi, thanks. You've made good progress growing your business with the 50 plus brands that spend over $1 million a year with you, and you've got 95% visibility on them for the year. What is the average length of those contracts and what kind of visibility do you have going into next year? And I've got a follow up, thanks.

So if I split sponsorship from advertising, sponsorship is about two thirds of our business. The majority of those contracts are multi-year, anywhere from two to four years, probably on average. And on the online advertising side, it tends to be shorter leadframe, generally within the year. So across all that, you'd expect to enter by the time you're somewhere in the Q1 you have north of 50% of your revenue booked for the year.

Okay, thanks. And my follow up is, if you have started telling the fraud free integrated primary secondary ticketing story to consumers, I have missed it. It sounds very compelling. When you expect to push that out and get after StubHub? Thanks.

Was it fraud free? I missed the --

I guess what I'm saying is, you have a unique -- because you own the barcodes you have a better chance at -- nothing is fraud free right?

Right.

But you have a pretty compelling value proposition to make relative to StubHub on the integrated and because you can do a better job on the fraud front. I don't feel like you have told that story to consumers yet. First off, am I right? Second off, when will you do that?

We have what I would say is, we have not said it in a -- using TV commercials, broad media approach. I think if you look on sites or you look in some of the email communication we do, absolutely it is been communicated.

Clearly, we work with all of our clients to figure out for their fan bases, particularly on season side, what's the right way to communicate with the season-ticket holders around where and how they should be selling their tickets. And I think it's going to be more of an organic ramp up in terms of how we do that. We're not planning on doing it using TV commercials.

Okay, thank you.

Rich Tullo, Albert Fried.

Hi, congratulations on a great quarter and thank you for taking my question. As I look at concert numbers, international is down a bit, by roughly -- are you listening? Hello?

Yes.

Okay, international is down a bit by something like 200 events year-on-year, but attendance is up nicely, so can you explain what's going on there? And are you rationalizing international and positioning for better growth?

No. No rationalizing. We're growing the business. Whether we have 200 shows, what will most likely be at the lower end, club theater style, that aren't overly relevant to the revenue, but as far as our core arena business, stadium business over there and bigger theaters continue aggressive growth mandate is what we've been doing there. And we had a very good year in 2016 growing overall attendance and at our key festivals.

Rich, this is Joe. Just again to repeat the fact as I gave it is, year-to-date through three quarters, international fan attendance is up 20% year-on-year, and we've had growth in all building types in terms of fan attendance.

Okay. On the ancillaries, how much of that $2 incremental is due to VIP versus merchant services at the lower tier?

It would be mostly -- most of our business is food and beverage is where we're going to grow most of our business, and quite honestly most of it is wet. Because experientially at a concert, one likes to have a beer or another. So our business and where we focus mostly is on our food and beverage, is where the $2 is mostly coming from and where we think we still have a huge opportunity ahead of us.

Thank you very much. Appreciate it.

Thanks.

Brandon Ross, BTIG Financial Services.

Hi guys, thanks for taking the question. Couple of questions on ticketing. First, a few weeks back, the Sports Business Journal reported that the NFL owners had agreed not to extend their primary ticketing deals past 2017 as they looked at new ticketing models for their teams. I think the NFL ticket exchange deal is also up at the end of 2017. Are you guys involved in the creation of this new ticketing model, and if not, are you worried the NFL could create their own ticketing company like Major League Baseball did?

And then, on secondary ticketing, it seems that you meaningfully decelerated in secondary growth in the quarter. I know you said that we'll see a re-acceleration in the next quarter, but was there a reason for the deceleration? With more domestic concerts in the quarter we thought there might be a further acceleration due to primary, secondary integration. And then I have one on the media business, after.

So on the NFL, we're very aligned to their process. It's very typical that the leagues when they are making these decisions try to rally all of the owners and have a step back. So we're involved. We ticket most of the football stadiums as well as we had a corporate NFL deal on secondary. And we're involved in the process and we will evaluate at the end as we look forward, as the process gets underway, what's best for us and them. But right now we continue to have great conversations and we fill a lot of their stadiums so I think we will look at that and we'll know further sometime next year. On the secondary --

On the secondary, again, to be clear Brandon, I didn't just say we'll generally improve in Q4, what I said is October had an acceleration from Q3. So it's not it's not to come, it actually is what's happened over the past month. Part of what exists for us is, if you remember our deals, as you just said with the NFL, with the NBA, and then we tend to have high performance really driven at the concert on-sale or the first week of the on-sales drives a lot of that integrated secondary activity. So all -- and you'll see their 2017 concert on-sales much more in Q4 than Q3. So we just have a natural period of much greater activity which we'll leverage all the fans coming to the Ticketmaster site in Q4 than we had in Q3.

Great. And then just on the media business, especially video, to-date you have made smaller investments, seemingly to extend your sponsorship and advertising business and have mostly used third-party platforms. Do you think there is an opportunity to build a larger media business for you guys with new revenue streams and do you foresee a continuation of a distributed video strategy or could we see more in the owned platform in the future, such as the Live Nation app? Thanks.

Brandon, as we've discussed, we think -- most people are going through that content isn't core to their DNA, publishing to the eyeballs right now is kind of the risk free version. So we like taking our festivals and our content and publishing them on and selling them through the published arms, whether it's our Snapchat deal with our festivals, or selling our Justin Timberlake concert movie to Netflix, or the show we sold to HBO on one of our concerts, or Facebook Live.

So we think our core businesses to take our 26,000 shows, create a great opportunity for advertisers to access 70 million fans on site and any way we can amplify those shows and add more ad units to our portfolio, we think the best model right now is to put those festivals on a Snapchat medium and drive advertising and incremental advertising that way. We always double up and we share our content on LN.com and our app, but like most people are looking to -- our core is our concerts and the publishing path for us is the way that we can get much better eyeballs and be more -- and drive more ad units right now for our current ad users.

If there was a great platform with scale, great; but I don't think you will see us use our balance sheet to try to create an AXS TV or concert TV or spend a fortune trying to be destination driven. I think our job is where we're going to make most of our money on 26,000 shows and 70 million people showing up, selling advertisers who want to be part of the on-site, and then amplifying on-site through the great publishing strategy where we can also monetize it without having to build a pipe.

Got it. Thank you very much.

Thank you everyone in this concludes the Live Nation Entertainment third-quarter 2016 earnings call. You may now disconnect.

Thank you.