Live Nation Entertainment, Inc. (LYV)

LYV 
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Live Nation Entertainment, Inc. (LYV)

February 27, 2013 4:55 pm ET

Executives

Michael Rapino - Chief Executive Officer, President, Director and Member of Executive Committee

Analysts

Benjamin Swinburne - Morgan Stanley, Research Division

Presentation

Benjamin Swinburne - Morgan Stanley, Research Division

All right. Okay. Good afternoon, my name is Ben Swinburne, Morgan Stanley's media analyst. Please note that important disclosures, including my personal holdings disclosures and Morgan Stanley disclosures, all appear on the handout available in the registration area and on the Morgan Stanley public website.

We're really excited to have with us, and I think for the first time in our conference, Live Nation Entertainment. We have CEO, Michael Rapino, to my left. Michael has been President and CEO of Live Nation since August 2005 and was instrumental in the merger of Ticketmaster and Live Nation to create the #1 live event company.

So, Michael, thanks for being here.

Michael Rapino

Thank you.

Benjamin Swinburne - Morgan Stanley, Research Division

So we timed the conference well, right after your earnings. So thanks for coming up this morning from L.A. Why don't I let you take the opportunity to tell the audience about what you think the key takeaways were from the results yesterday and, kind of, the outlook for 2013?

Michael Rapino

Given we're up 3%, it made the trip a little easier, so you never know when you go to bed, as you know.

Benjamin Swinburne - Morgan Stanley, Research Division

Right.

Michael Rapino

So we're proud, in 2012, we deliver what we said we're going to deliver. Since we merged these companies, we've had to get the economy right and our business model right. We're past that now. We had a good 2011, which was kind of the first year to prove to the market that the 2010 year was the exception to the rule. So delivering a second strong year of growth was important to get the consistency in the story and in our business.

Listen, what are we most proud about? At the end of the day, we're proud about the ability that we've been able to turn on free cash flow and grow that, and that's a big piece of what we want to get done over the next few years. But you don't grow cash flow if the main business isn't doing well. So I think the 2 highlights for us, the global strength of the industry. As big as we are, if the industry does well, the tide will rise and we will capture most of that upside. So the industry was strong globally. And as big as we are, proving to the market that we can still grow this business, both from adding incremental ticket sales to Ticketmaster and Live Nation, was great news for the team that we can still grow this business off our strong base.

Benjamin Swinburne - Morgan Stanley, Research Division

Great. Maybe you could take us through, sort of, the key industry trends that are growing your overall business and how -- why you're so positive about the next couple of years for the industry and yourself?

Michael Rapino

Listen, we are very fortunate that we work in an industry that people gathering together to watch a show, started way in the day of the caveman and will be going on long after we're all dead. I'm in a great industry. Unlike the recorded music or many others, I don't have a debate whether the strength of going to a live show will continue to be strong. We did joke yesterday, only when we're in either the reporters or analyst situations do we get asked, "Who's going to replace the Eagles?" When we sit with our core 20-year-old...

Benjamin Swinburne - Morgan Stanley, Research Division

There are no Eagles questions here today.

Michael Rapino

Or is it a fad? When you sit with your 20-year-old focus groups, they don't debate who's the next Eagles. They probably don't even know. But they know that they love Rihanna and Justin Timberlake and One Direction and Nicki Minaj. So we continue to see this is a strong, strong industry on a global basis. So the content supply, if you want to call it, is as strong as ever. Country music's on fire this year, and that's reinvented itself with Taylor Swift, with Jason Aldean selling out stadiums. Hip-hop, Jay-Z, Justin Timberlake, we sold out Wireless Festival in London in a day, in minutes, stadium date. You've got Rihannas and Pinks in the pop business selling out around the world. You got your Justin Biebers, your One Directions, for the kids, selling out. So the business is very diverse across from a 15-year-old through a 60-year-old. Business is strong.

Second great trend is -- in 2005, when we rolled this company out, we made $60 million in AOI, we did 8,000 shows and we were in a few countries. We said back then we wanted to figure out how to be a $500-million business, which we're basically almost there. We wanted to grow globally, which we're now in 41 countries. We wanted to have a global advertising business. We now have 800 sponsors and growing. And we want to grow our market share. And we -- everyone thought we were big then because we did 8,000 shows. We're almost doing 30,000 shows, and we've grown our ticket base, incredible amount over the 8 years.

We think the next 5 to 6 years is nothing but upside in the industry. Why? Because you have a strong supply of artists coming up every day. If you ask any consumer of the high-user group, a 24-year-old that goes 8 times a year, they're as excited about seeing Justin Timberlake as someone was seeing Elvis or the Beatles or any time in history going to that live show, which can't be duplicated. So I don't have any of the media issues of all of my counterparts. It's a product that can't be duplicated. The production values in the shows are greater than ever, and the reason it will continue to grow is it's a global business now. Everyone knows who Nicki Minaj is, even in Dubai, even in Cape Town. They didn't know 5 years ago or 10 years ago. The fan only knew about artists if the record label was in town promoting it. Today, I looked this morning, Rihanna has 80 million Facebook friends, and 60 million of them were outside of the U.S. So that's the globalization of the business. That's why we can sell now 100 Rihanna dates from Cape Town to Singapore and only about 30 in America, where it used to only be an American business. Every city from Singapore to you-name-the-city wants to be the entertainment destination. They want the Justin Timberlake show. They want to be the cool city. And usually, to be a big city, you've probably got to have a good entertainment base. And to do that, you've got to have U2s and Nicki Minajs showing up in your center.

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