Live Nation Entertainment Inc (LYV) — Q4 2022 Earnings Call Transcript

Good afternoon, and thank you for joining us. In 2022, fans around the world continued to prioritize their spending on attending live events, particularly concerts. Our research consistently tells us that concerts are a top priority for discretionary spending and one of the last experiences fans will cut back on. We're seeing this play out in both our 2022 results and early indicators for 2023. With the strong demand last year in the concert business, we had 121 million fans attend our shows across 45 countries. In ticketing, we helped connect 550 million fans with their favorite artists, teams, and performers. In both cases, the majority of our growth came from international markets, further reinforcing the global nature of untapped fan demand and the opportunities we have for growth as we help artists reach more fans with their live music. Before getting into the details on our division, just to note that 2019 is the best comparison for us in terms of understanding our results. Most of our metrics will be relative to the full year 2019. In concerts, despite many markets still being closed for part of last year, we grew attendance by 24% to 121 million fans at 44,000 events, which drove revenue up 43% to $13.5 billion. This growth came from all markets and venue types. Every venue type from clubs and theaters to stadiums to festivals had double-digit attendance growth. We invested $9.6 billion in putting artist shows on in 2022, working with the largest superstars to artists just getting started and all those in between. This is up 45% and further reinforces our role as the largest contributor to our artist income. As part of this, we helped shift $700 million to artists with more market-value ticket pricing, even as the entry price to a show stayed below $35 in the U.S. Typically, 90% of ticket sales for Live Nation shows go to artists. This is particularly important as artists are increasingly reliant on touring as they get much smaller revenue shares from other music revenue streams. Part of our fan growth continues to come from the venues we operate globally, closed almost 50 million fans in 2022 with international markets again delivering the majority of our growth. In Venue Nation, we continued our focus on elevating the fan experience and providing a range of options for enhanced products and services. As a result, last year, we grew our average revenue per fan by 20% at all venue types. In ticketing, our strategy for success is simple. We focus on developing the leading software for venues to ensure we deliver the best enterprise platform. We invest tens of millions of dollars every year to continue innovating every aspect of ticketing technology products. Artists are the venue's largest clients, and we're regularly being asked to create new products to help address their ticketing needs. Amongst our innovations are products such as Verified Fan, designed to help artists cut down on resale, and we've seen this successfully for over 400 tours, including the most recent on-sales for Beyoncé, Madonna, and Morgan Wallen. Generally, Verified Fan on-sales have approximately 5% of inventory end up on resale sites versus 20% to 30% that is typical for non-Verified Fan on-sales. Venues and their artist clients see the results in ticket sales, which is a large part of why so many venues choose to work with us. Looking at our 2022 results, we grew fee-bearing ticket volume by 28% to $280 million, which in turn drove our fee-bearing GTV up by over 50% to $28 billion across 38 countries. As a result, our ticketing revenue was $2.2 billion, up 45%. Along with these results for the year, we signed 23 million net new tickets in 2022, 70% of which were with international clients, setting the stage for continued global growth. In our sponsorship business, we have seen that brands are as eager as fans to reengage with platforms. In 2022, we had 120 large strategic sponsors globally across our businesses, 32% more than we had in 2019, including brands like PayPal, GoPro, Google, and Snap. These large partners drove over 80% of our growth, with overall revenue up 64% to $1 billion. As with concerts and ticketing, our international markets led this growth with international sponsorship ROI up 70%. Looking ahead to 2023, as we announce our 2023 shows on sale, we continue to see strong consumer demand globally with no sign of any slowdown. We have four key leading indicators at this time of the year, all pointing towards another record year and even greater success in 2023. First, our deferred revenue at the end of 2022 was $2.7 billion, up 125% from 2019 and 18% from 2021, which benefited from a high volume of rescheduled shows. Next, as of mid-February, ticket sales for our shows this year exceeded 50 million fans, up 20% from this point last year with international growth of 25%. Then our global ticketing fee-bearing GTV is up 33% to $9.8 billion through the same period. And finally, over 70% of our planned sponsorship activity for the year is confirmed, again, up double digits relative to this time last year. Before I turn it over to Joe, I want to comment on the regulatory environment and industry reforms. On the regulatory front, the ticketing industry is more competitive than ever, and our market share has gone down, not up since the merger. Because of the competitive bidding process, venues regularly take more of the economics on every renewal as they set and keep a majority of the service fees. In signing the extended consent decree related to the Ticketmaster merger, we remain in constant conversations with the DOJ monitors and do not believe there have been any violations. On ticketing reforms, we believe that greater transparency on the entire ticketing ecosystem will improve the industry, and we’ve been engaging with policymakers to advocate for reforms. The biggest challenge facing the industry is chaos at the on-sale, where fans can't get the ticket at the price they are set yet they see pages of secondary sites with tickets five times the face value because of scalpers. This has been a big topic in the industry and conversations at the Pulse Live conference this week focused on how to protect the connection between the artists and their fans. To help drive progress, we launched the Fair Ticketing Act, which states that artists should decide on resale, that speculative tickets should be illegal, and that it needs to be industry-wide all-in pricing so fans see the full cost they are paying upfront. Artists create their music and their concerts. It's only fair to create their ticket and rules too. We will always be on the side of the artist, who is the best advocate for their career and their fan base. With that, I will turn the call over to Joe to take you through more details.

Thanks, Michael, and good afternoon, everyone. Given the uniqueness with our seasonality in 2022 after emerging from the pandemic, I will largely focus on our annual results. As with prior quarters, 2019 is the best comparison for us in terms of understanding our results; thus, much of our discussion will be relative to the full year 2019. For the company, our reported revenue of $16.7 billion for the year was $5.1 billion better than 2019, or an increase of 44%. On a constant currency basis, our revenue was $17.3 billion for the year. So there was roughly a 4% unfavorable impact due to the strengthening of the U.S. dollar, primarily against the euro and the pound. Our reported AOI of $1.407 billion for the year was also a record for the company, $465 million better than 2019, up 49%, led by an improvement of $345 million in ticketing and $226 million in sponsorship. On a constant currency basis, our full-year AOI was $1.464 billion. The FX impact was negative $57 million or 4%. And we have converted roughly 69% of this AOI to adjusted free cash flow of $967 million, leading to a year-end free cash balance of nearly $1.8 billion. Net income for the year was also a record at $296 million, $226 million better than 2019, resulting in earnings per share of $0.64. Let me give a bit more color on each division. First, in concerts, we had the most concert fans ever with 121 million fans attending our shows in 2022, up 24% compared to 2019 when we had close to 98 million fans. Show count was 43,600 events, up 8% compared to 2019, with more fans per show due to a heavier mix of stadium and festival events. As a result, our concerts revenue for the year grew by 43% to $13.5 billion, while we delivered $170 million of AOI. Looking a bit deeper at our fan metrics, we had strong growth across the board. Stadium attendance more than doubled to 18.4 million fans this year up from 7.8 million fans in 2019. Festival attendance was 13.2 million fans for the year, up over 30% from 2019, with premier events, including Rock in Rio in Brazil, Rock Werchter in Belgium, Reading & Leeds in the UK and Lollapalooza in Chicago. Arena, amphitheater, and club and theater attendance were all up double digits. Finally, our international fan count grew by nearly 50% in 2022, fueled by tremendous outdoor seasons in the UK and across Mainland Europe, and very strong growth in our South American markets as well as the addition of OCESA in Mexico. Giving you more details on ancillary per fan revenue by venue type, in our North America amphitheaters, ancillary per fan revenue was $37, an increase of $8 per fan over 2019 levels or over 25% growth. At our major festivals globally, increased spending on concessions, camping, and VIP experiences drove ancillary per fan revenue up nearly 30%. In our theaters and clubs in the U.S. and the UK, ancillary per fan revenue increased by 20% driven by higher concession sales, fast lane entry, night of show upgrades, and the move to cashless payments. As we have discussed in past quarters, we've had some headwinds associated with labor and supply chain cost pressures at venues we operate, notably amphitheaters and festivals as well as costs related to the reopening of our international markets during the year. Despite this, we still increased our per-fan profitability, taking into account our company-wide revenue streams for fans attending shows at our venues. We have seen these pressures subside in recent months and do not expect the same level of impact in 2023. With this, along with our ongoing revenue initiatives and continued cost focus, we expect to continue to grow per-fan profitability in 2023. Next, ticketing, where our numbers reflect sustained fan demand for the live experience. In 2022, we sold $281 million fee-bearing tickets, up 28% compared to 2019. It was the first year that our fee-bearing ticket sales exceeded non-fee-bearing ticket sales as we continue to build our global non-sports client base, particularly in international markets. With this increased ticket volume, GTV for the year was $27.5 billion, up 54% compared to 2019. Ours continues to be largely a primary ticketing business, with secondary ticketing accounting for only a mid-teens percentage of our overall GTV. With this activity level, revenues are over $2.2 billion for the year with AOI of $830 million. As we projected last quarter, we delivered full-year margins in the high 30s, coming in at 37%. On the pricing front, average ticket prices on primary tickets rose by 17% compared to 2019, driven by fan demand for the best seats at premier concert and sporting events. Secondary ticketing pricing also rose by 12% on average, and thus the average secondary ticket price in the U.S. remained more than double that of a primary ticket. This shows the extent to which concerts and other live events remain priced below market value. We also saw revenue from non-service fees grow double digits as we further build ancillary revenue streams, including insurance, upgrades, and other upsells. Lastly, as Michael noted, we signed 23 million net new tickets and expect these client wins will help drive an increase in fee-bearing tickets sold for this year, positioning us for ongoing growth. Before leaving ticketing, I wanted to add a few comments on the regulatory front that Michael spoke to. There has been a lot of discussion lately about so-called junk fees. We tend to get thrown into that conversation because the compensation to venues to help run their businesses and to Ticketmaster for distributing tickets is separately called out as a service fee instead of embedded in the price of the ticket. Very few people understand that and even fewer understand that most of the money goes to the venues. They think the service charges are just some arbitrary add-on to Ticketmaster's pockets, which is not the case. We agree that real junk fees, hidden charges attached to goods and services that obscure the true price should be illegal. As one of the reasons we're advocating for legislation mandating all-in pricing where the consumer first sees the total price he or she is going to pay, as well as the breakdown of any fees. There are a range of other policy points that we're advocating for because we're strong proponents of artists' and content rights, but none of these have a direct material impact on our business. Finally, it was a record year for our sponsorship business with top-line revenue of $968 million, up 64%. Our AOI for this high-margin business was $592 million, up 62%. Looking back at sponsorship's growth during the year, our festival business increased by 75% and our platform integrations more than doubled. Once again, we had high growth in both on-site and online sponsorship of 61% and 64%, respectively, compared to 2019. Our international markets had an exceptional growth rate this year with AOI increasing by over 70% compared to 2019 due to greater festival activity across Europe and our expanding business in South America and Mexico. A few other points on 2023, while it's still very early in the year, based on current FX rates, we project very little impact on our revenue and AOI this year, less than 1%. We expect CapEx to be approximately $450 million this year, with two-thirds on revenue-generating projects, including new venue builds, renewals, and other organic investments to support our growth. This is slightly higher relative to the past few years as we come out of supply chain constraints and generally tight spend controls. However, as a percentage of revenue, this is well within our historical range and consistent with our growth trajectory. We ended the year with $2.3 billion of available liquidity between free cash and untapped revolver capacity, giving us sufficient flexibility to continue investing in growth. As you're aware, in January, we issued $1 billion principal amount of 3.8 percent convertible senior notes due in 2029. As part of that transaction, we then developed a hedge to increase the effective convert price to $144. We used roughly half the net proceeds to repurchase the 2.5% convertible notes that were due in 2023, meaning we expect minimal dilution from this convertible offering. We're comfortable with our leverage; over 85% of our debt is at a fixed rate with an average cost of debt of roughly 4.7%, positioning us well in this interest rate environment. In addition, the majority of our debt is long-dated, and nothing is maturing within the next 18 months. Given that we're at the beginning of the year, we want to provide you with more guidance on a few line items below AOI, which impact our earnings per share calculation. We anticipate the non-cash compensation will be largely in line with 2022, and acquisition transaction expenses will run about two-thirds of last year. As we continue our global expansion, we expect depreciation and amortization to grow by approximately $50 million for the year, evenly phased amongst the quarters. Given our recent financing, interest expense will increase to approximately $90 million per quarter. We're projecting accretion to be about 25% higher than last year, resulting from stronger forecasted future performance at a number of our joint ventures. We anticipate that NCI and income tax expense will grow in line with AOI. With that, let me open the call for questions.

Yes thanks for taking the question. You laid out your prescription for solving many of the structural issues in ticketing today. But there are a lot of elected officials and fans that think you're way too big despite the slipping share that you highlighted. And I want to know why both your ticketing and promotion business is so dominant? And why wouldn't a more competitive industry solve any of these issues at hand with the ticket buying experience?

Thanks Brandon. It's Joe. I think when you look at our business, both concerts and ticketing have been successful because they effectively serve their constituents. On the concert side, if you go back ten years, we and AG were roughly similar in size. We've had a focused strategy of super-serving the artist, which has led to our success in terms of continuing to work with more artists. In ticketing, we have the best product out there, full stop. Michael spoke to why it is we’ve been effective in continuing to work with a large number of venues because we have the best software platform for them, and we work with them to develop tools and products for artists who are their key constituents when figuring out where they're going to be touring. It's hard to answer your question regarding where we would be if we didn't have someone who developed such great tools for the venues and served the artists so well; I think we would have a smaller industry. We have consistently grown the industry through our approaches to the business, and overall, the ecosystem is better for it.

Okay. And then you talked about the amount of junk that's in ticket fees, and it's a huge concern for, I think, fans and regulators. The amount of fees or the percentage of fees that go into each ticket sale. Can you get a little more granular on why ticket prices are so high? What percentage of the fees goes to you and what is 'junk'? And then you have these growing junk fees, you're giving venues a bigger and bigger cut, and now there's the consumer and regulatory pressure; why should the investors be worried about the sustainability of the Ticketmaster and the Live Nation O&O venue ticket fees as we look to the future?

Yes. Just to correct, these aren't junk fees. Junk fees are low-value hidden fees that show up later. This is our version of the markup of the base wholesale price of the product that is shared by us and the venue. Amazon collects 50% of the retail price; Apple collects 30%. So this is a version of the money that goes to the venue for the services they provide, and to Ticketmaster for the services they provide. So it's not junk fees. What we've said is that the majority of the fees go to the venue. Typically, when you renew with a venue because of the competitive nature of the bidding process, more of the fees go to the venue. I don't think it makes much sense for us to give exact breakdowns because then, obviously, everybody below the average in the next discussion once they get to be above the average would be an issue. So it's not commercially wise for us to provide those specific numbers. But generally, that's been the trend, and that's what's been happening. The venue sets the fees, and the venues' costs have been going up, as have service fees. I think it would be a unique situation where you would tell the building what their fees could be. I think it's more likely you’d get all-in pricing where they see the total cost upfront quite transparently. Frankly, if you were to cap fees, what would end up happening is that you'd have increased rent and other costs for the artists as the venues need to recoup their costs as part of the ecosystem.

So you are saying if ticket prices or ticket fees were regulated, then ticket prices would just stay the same because they would just be passed on in another way?

Very possible that's what would happen, yes.

Historically, Brandon, there was a division on what the artist was charging the consumer and what were the added revenue streams or fees that were going to be added on top of that. It’s kind of in search state historically. But now, as you know, we've said it many times, the artist takes most of that ticket fee base. So the way that the venue, the promoter, or the ticketing company earn their revenue fees is through that extra fee. You're right we would love more to just make it all in pricing. So the consumer is very clear from the beginning that the true cost to go see the show isn't $25; it's $50 because that's how all of the participants need to participate for that show to happen. Now, if someone said, you know what, those $25 fees, you shouldn't have them. Well, then the venue you would say, okay, artist, the rent isn't $50,000 anymore; it's $100,000. And the fees would add up, and suddenly that ticket price wouldn't be $25; it would be $50 at face value. So it is inefficient. That's why we're a big proponent of all-in pricing and all our pricing at the beginning of the process, which you don't see right now on most companies other than ours. We believe that we all want to know the true cost of seeing the show when we start shopping. We wish that would be mandated tomorrow across the board; that would relieve a lot of the stress, the consumer's perception that there's this magical extra fee added on that is not part of the overall show cost.

Got it. Thanks for the explanation.

And to your point on Live Nation owned and operated, just to hammer the point home is you're right. If someone said tomorrow, you can't charge 20% service fees on your amphitheater, you have to be $10, well then the $75,000 house rent that we charge Argus would become $100,000. So we couldn't – we wouldn't absorb the cost. We still have to pay staff and capital to run the building; thus, we have to find revenue in other means. The true cost of going to a show and making the show happen isn't the full price all-in. We just need to now market that upfront better.

Hi. Thank you. Michael, I think over the years we've become accustomed to seeing some level of criticism against Live Nation or Ticketmaster from politicians and trade press; this has certainly elevated lately though. So I wanted to ask what actions you were thinking about taking to be more proactive in managing the public perception or your relationship with lawmakers that could maybe help limit what's become a periodic concern for investors.

Yes, it's a great question. First, I want to kind of look at where the drama that gets created. If you kind of zoom out, we did 550 million tickets last year. About 540 million of those were happy customers that were seamlessly delivered. About 10 million of those are from five tours historically a year, that have this incredible demand where supply and demand are out of whack, and it creates lots of tension and unhappy customers. That's kind of always been the historic challenge in the business. At Live Nation Ticketmaster, historically we've really been a B2B business. Our Ticketmaster job is to service the venue and our concert job is to service the artists. We've done a fabulous job building those businesses and having very happy customers. Part of that proposition historically has been to take a bit of the heat at the front end. When the ticket prices are high, when the service fees are high, if the demand supply is out of whack, Ticketmaster has historically been the one that's taken the punch or the ticket seller in general. If you look at all ticket companies, all their NPL scores are all kind of the same. There's only two customers, as Fred Rosen famously said, the one that got the ticket is happy and all the ones that didn't are upset. So you can never make everyone happy. But absolutely, we've got to start adjusting on our B2C side. We’ve got to get much more engaged on our government relations and our PR side. We've historically not had a big incentive to shout out loud that venues are charging high service fees or artist costs are expensive; that hasn't been a big business incentive to date. But I think now education is paramount. We've got to go out and do a much better job. So the policymakers and some consumers understand how the business operates and how we all have a hand on the wheel, and we probably need to do a better job going forward. One of the real challenges is that this core problem has been highlighted recently. For 40 years, there's always been a show that has not enough tickets available, and a fan was unhappy. Obviously, in the last while, I think which has set the nuclear chaos on this on-sale is the secondary business. You know what happens on those four or five big-demand tours a year? That passionate fan, which is the hallmark of our business, thank God, fans are passionate; they're more passionate about the artist's relationship than they are about sports or anything else. They're committed, and they want to see that artist at all costs. Now what's happening is you announce an on-sale. I think Irving said it famously yesterday; we haven't even announced the U2 on-sale yet. We haven't announced when the dates will play. But secondary sites have U2 dates up with tickets for sale. So the consumer on these high demand on-sales has really been upset and doesn't understand the process. Why are there so many tickets on spec selling sites? Why is there a situation where if I don't get a ticket, there are five pages of scalper sites selling tickets for five times the face value? They wonder if Ticketmaster must have given them tickets. This doesn't seem fair. That's really highlighted how the digital ticket going online to add to a SeatGeek, StubHub, Vivid, the big scalpers with all of their ways of getting tickets before and after. That’s become very apparent online. They don't understand why they couldn't get a ticket and why there are so many tickets on the secondary market. I think that’s the part that we've got to lean in on. We did that today with the Fair Act. I would tell you, sitting at the industry conference at Polestar yesterday, if any of you want to hear the panel between Irvin, Garth Brooks, Jim Dolan, and the DOJ ex-employee, it was fabulous because it shows a united music industry in that conference yesterday was venue, promoters, managers, agents, and artists. I would say it was the most excited and united I've ever seen them in the sense that we've got to stand up as an industry. Artists historically have not been great at lobbying together and the only lobbyists that exist are the Ticket Broker Association, and they've done a good job. But you will see us lean forward a lot more on education reform, and then ultimately, the part that matters the most is just being better at our products. We still are the best in the game right now. We're the only ones that have developed Verified Fan products to try to stop the secondary box. We're going to get better and better at that. We're going to be more transparent and do new products on the Live Nation venue side that will lead the industry. You'll see a lot more action from our side pushing back and leaning forward and ultimately better products with the artists. I would tell you that if there's one place you want to be standing right now, it's where we are. We work for the artists; they're united behind us. We're doing a fabulous job for them. Scalpers have done a great job hijacking the narrative. Obviously, when the CEO of SeatGeek starts to witness this, we’ve not done a good job, but we're going to move forward this year much more aggressively, telling the artist side of the story. I think the FAIR Act is a good start at that.

Okay. And then for Joe, just on the quarter, the sponsorship AOI margin was a little lower than we normally see. I think there were some festivals and amp shows that got scheduled later. So I'm wondering if there was a mix factor there. And then just free cash flow conversion for the year; I think it was like 10% higher than you had expected? I'm wondering if you could walk through the drivers of that and how sustainable that might be. Thanks.

Yes. I think we finished up a fantastic year. As I've told you guys in the past, I don't overly read too much into this quarter's specific comparisons. You've got a lot of moving pieces. We obviously had some changes in the business with the addition of OCESA, a lot of impact last year. The timing of APAC closed most of the year, and Europe only opened in the second half. It was really just some timing shifts, nothing to read particularly into it or to read as a go-forward indication on the margin side. And then as you said, our free cash flow came in very strong as the conversion to AOI. I think it was a little higher than expected, in part, just the overall AOI level gave us some leverage on that. Some of the below-the-line pieces were a bit lower than what we expected. So I think we outperformed last year in that free cash flow conversion.

Hey. Great, thank you. Maybe on the demand front for Michael. Thanks for the commentary on ticket sales being up 20% year-over-year on a global basis so far this year. I was hoping you could expand on that a little bit by talking more about what you're seeing in demand so far through February, particularly in markets that were open this time last year, like the U.S., Canada, and maybe parts of Europe? Have consumer pricing trends remained stable versus what you saw last year as growth accelerated or decelerated, especially now that we're lapping some of the reopening benefits that we saw in 2022?

Thanks, Stephen.

I'll start.

Go ahead, Joe.

As Michael said, we're up 20% this year relative to where we were at this point last year. That's even with last year having the benefit of all those rescheduled shows, totaling around 20 million fans. About 20 million fans got rescheduled. We think half of those would have happened last year anyway, but that means the 20% growth comp is against an inflated number. If you will, the actual growth is even stronger than that. As we noted in the release – within that, international is up around 25%, which would mean that North America is still up high teens. So very good growth. If you look just at the ticket sales sold in January through mid-February this year on a global basis, we've sold roughly twice the number of tickets as we sold last year. So even looking at the most recent activity continues to be very robust globally.

Yes. And my commentary is similar. We are just amazed at the resilience of the customer this year. I think we all lived the November air pocket thesis, and everyone's view was whether 2022 was an exception to the rule. Could we keep growing? Where was the customer? Was it just a bubble? We're seeing nothing but strong growth demand everywhere in the world right now. We're up right now with stadiums in Asia, South America, Eastern Europe; all of our festivals are outperforming last year around the world. Our clubs and theaters are doing well. Our on-site spend in most of those clubs and theaters continue to track in the right direction. In this business, you always worry about how the superstars are going to sell out, and how is the rest of the business going to do? That's kind of the meat and potatoes of our business. How are the amphitheater shows? How is all the middle stuff going to do? We're just seeing incredible strength right now across the board on our festivals, our big festivals and our niche festivals, our theaters, and clubs. We think this is going to be a continual buyer for consumers. Let's zoom out and forget about the 3% of shows that will consume political tweaks. 97% of our shows are very affordable for consumers. We're still incredibly affordable compared to the best ball game, a dinner, a night out, or a theme park. So we think that plays in. We haven't seen any pullback. We've seen more demand top to bottom on a global basis, and we think that will rise through this year.

Great. And then maybe one more on regulation for Joe. You recently made a notable hire on the legal front. Could you talk about the rationale for that hire and update us on where you stand in the process for any potential investigation with the DOJ?

We're delighted. We hired Dan Wall, for those of you who didn't see it, who joined us formally following his retirement from Latham at the end of January. This is actually a conversation Dan and I started in May of 2019 at BottleRock. So Dan was planning on retiring from Latham, found working with us to be an exciting and fun business. We talked about that in 2020; he would announce his retirement and come join us. Like many others, his plans were upended, so he didn’t retire until January, but this has been in the works now for three years that Dan wanted to do. He'll be instrumental in our ongoing discussions. He's been in non-stop dialogue with the DOJ for the past 13 years. He understands exactly the questions they ask and their motivations. He just put together an op-ed piece that everyone should certainly read that was in Polestar today, laying out on a factual basis as opposed to so many analysts and pundits that people refer to, making broad statements about the DOJ, their process, the consent decree, and risks of us being broken up. He does a fantastic job of laying out in very specific detail why many of those beliefs are unfounded and increases the burden on anyone making those broad speculation statements to disprove what he lays out there.

Okay. Thank you for that.

Yes. Thank you. Building off what you said earlier, Michael, about one of your main ticketing competitors testifying against you. Just in light of the Fair Ticketing Act, do you think there's any political will in the United States to allow primary ticketing players like Live Nation to help artists utilize their digital ticketing technology to impose controls on the resale of tickets?

Well, I believe that the artist has the best shot when they unite around their IP. The U.S. is probably about the only country in the world that doesn't have some level of regulation. Most other countries have said, 'Geez, if the artist wants to charge $300 for an underpriced product for the fan to get a cheaper ticket, why would a middleman be able to make $1,000? That doesn't seem logical.' Most IP, if you look at the artist, you wouldn't be able to think of how much work Netflix is doing on password sharing just to save $7.99. So there is a lot of pent-up artist dissatisfaction where they’re underpricing their product every day. We're pretty much the only product in the world that's worth more the second it's sold. I think they've done that for the betterment of their fan base. And like everyone else, they've seen now the sunlight online on the abuse taken on their IP. I like our position; I like standing with the artist. I think the artists, Irving, you saw it yesterday with Garth. I believe the artist will have more control over their tickets, like the PROJAM model. This doesn't mean you’re not going to transfer the tickets. We believe that tickets should have a fair exchange platform, and you should be able to exchange and sell tickets. If an artist doesn't care about secondary, then great, let it be open. If you do care and want to limit it, you want to cap it at 30%, 20%. I believe the artist, since they’re making the decision on how to underprice their product for the benefit of the fan, should have a seat at saying how it goes to market. We think the good news in all of that that's gone on in the last while, don't let a crisis go unused. This has created much news, as painful as it is for us some days. The genie is out of the bottle. We were kind of suppressed and on the back foot, not wanting to talk out loud too much about a lot of this business while we serve our customers. I think the champagne bottle has been popped. I think artists, I thought yesterday, were very unique. You'll see we've been all sleeping while the scalpers have done a fabulous job lobbying. I think they got woken up yesterday and recently. The artists and the venue, remember, have a stake in this, especially sports. May Kim was also very clear yesterday; he talks a lot about the artist IP. We think that's a valid position. We believe that artists or content owners will be able to have more control over how and when tickets are sold, and I think that's a big step forward.

Thanks, Michael, for that. And Joe, I just had one on your CapEx spend for 2023 to $450 million. So one-third of that on maintenance CapEx implies flat with 2019, and then two-thirds implies 50% growth, I think, above 2022 levels, and 82% growth above 2019 levels. Can you provide some more color here on what those investments are? Is this in the Venue Nation business? Also, any color on the hurdle rate you guys factor into this capital spend would be appreciated?

Yes. A lot of the growth is certainly in the Venue Nation side. As you can imagine in 2020 and 2021, we had a substantial amount of deferred CapEx that we needed to catch up on. In 2022, we faced a lot of supply chain constraints and had to prioritize where to use the scarce resources. That was a limiting factor. So, there's some catch-up on the maintenance side of it. The returns are really more on the revenue-generating side than the maintenance side. Most of the maintenance is required for continuous operations and health and safety issues. Our growth side has return requirements well above our cost of capital; I haven’t given specific ones. It differs a bit by project, whether it’s a brand-new project, or adding a new bar at a venue. Those are opportunities that we think continue to present themselves as we expand our global footprint.

I just had a question on Concert's AOI per fan. I know you called out some of the headwinds, reopening costs, and inflation for the venues you own, and said it would get better. But can you frame what a reasonable AOI per fan is? I think it was $1.40 this year, and maybe $2.50 or something back in 2019?

Yes. I don't think Concerts AOI per fan is a logical way to look at it, Jason. As we’ve talked about our business, we’ve discussed it across multiple pieces. You need to view it as concerts plus sponsorship plus ticketing AOI per fan, which we've grown. What we've said is that the concert business has been hit by some of these cost increases, supply chain constraints, and increased costs on some of the inputs. Despite that, we've increased overall profitability per fan by executing on-site while fans attend shows at our venues, and by dramatically increasing our sponsorship per fan and growing some of our ticketing revenue per fan, including the non-service fee side. We see it more holistically, recognizing there will be some puts and takes in a given year, certainly in the business.

But I also want to give some color there. Just to remind everyone, when we sat here a year ago, we didn't think we were going to be open in the summer. We had no staff. We ran 100 miles an hour to get open for May, hired 20,000 staff; every tour concert couldn't find staff, double costs for generators. We were running hard last year. We overpaid staff, and suppliers, and it was tough last year. We still delivered incredible numbers, but we're now back to that 2019 level of staff in place, costs have all come down, and we expect 2023 to reflect beyond a continual normal business.

Can I just ask one follow-up? Do you think the right way to look at it is that there's some sort of permanent shift in profit pools towards sponsorship and advertising and ticketing and away from concerts?

I think it's premature to say that. Let me give you another piece on what hit us with concerts last year. We had those. I talked about the 20 million fans for shows that got rescheduled. Those are shows that went on sale in 2019 or early 2020 and were priced at the price level for those shows back then. Fast forward a couple of years later; nobody was repricing the rescheduled shows, and yet the market, particularly for the best tickets has moved up substantially. In 2022, you were operating a good chunk of the business with a 2019-2020 revenue stream against the 2022 cost structure. That's not going to replicate itself. That was a one-time unusual event. Wait until this year plays out before drawing conclusions off a single data point.

Thank you, everyone.