Live Nation Entertainment, Inc. (LYV)

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Live Nation Entertainment, Inc. (LYV)

Deutsche Bank's DbAccess 21st Annual Media and Telecom Conference

March 05, 2013 2:45 pm ET

Executives

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

Presentation

Unknown Analyst

Get started. Thanks, everyone, for coming. Next up is Mike Rapino, President and CEO of Live Nation. Michael, thanks very much for coming today.

Michael Rapino

Thank you.

Question-and-Answer Session

Unknown Analyst

I thought where it would make sense to get started is just talk a little bit about your businesses for those in the audience, familiar with your story as well. What are the divisions? How big are they? Where's the biggest opportunities?

Michael Rapino

Okay. So overall, Live Nation Entertainment is made up of what we call our 3 core businesses. Our first business is the Live Nation Concert company, second is the Ticketmaster business and third is our Live Nation sponsorship division. Those 3 businesses are the core of our AOI and revenue. We also have our Artist Nation division, which is our management division, which supports the Concert division. So with 3 divisions, market leaders in all 3, I'm proud to say, and growing. Opportunity-wise, we've been successful since we merged these companies and growing our revenue over 15%. We've grown our AOI 25%, free cash flow about 70%. So the synergies of bringing these together over the last 3 years has started to come to life. Opportunities are both a global perspective. We're now in 41 countries and counting. We continue to roll out whether it's a Concert or Ticketmaster division in a new, emerging market.

And the second and most important probably driver of growth is going to be around our technology in Ticketmaster. If you think of our business in aggregate, if you really want to simplify it all down, we wake up every day trying to sell 400 million tickets and counting, whether that's in the Concert or Ticketmaster, for a client or not. The more those tickets that we sell, obviously the ecosystem then monetizes it. So we're looking to expand the 400 million geographically, new products. And we're looking to convert more consumers that abandon their part along the journey. The 400 million tickets and counting, that's our core job. We get there a few ways.

Unknown Analyst

You talked about the merger of Live Nation and Ticketmaster about 2 years ago. Do you feel like integration is fully completed, there are more to do?

Michael Rapino

Yes, we are well behind the integration. They're still separate businesses that have benefits across them. So Ticketmaster was its own business. It was the biggest business that we had probably could put some real effort behind. It was a business that has -- that does currently and had a very old software. They had a cultural set that was more transaction-based and consumer-focused. The Ticketmaster was in a 5-year decline. We've been losing its AOI $10 million, $20 million a year for 5 years. Its renewal rates were down. We're proud to say that in the last 2 years, we now have over 100% renewable and we reversed the AOI trend for the last 2 years and growing. But really structurally, we had to look at Ticketmaster and look at its core asset. And the strength of that brand is it's the third largest eCommerce site in the world, with 12,000 clients. The opportunity there was we weren't looking at that business as you would look at a normal eCommerce business with that intent that says, "Geez, 200 million consumers buying at this site, 95% abandoning the cart, 15% to 16% conversion." How do we get into some best practices as the Amazons and others that we look at? How do we look at that as a consumer-based business? And our main goal there is to convert a customer when they come to that site to shop. And we've got to start thinking about the purchase flow from a consumer perspective, not a historical transaction. So our biggest kind of effort, first, to find a clear vision for that company. We put new leadership in, a deep bench strength around the technology, hired over 500 employees, hired a lot of employees to bring in the new breed of young technology guys. They're thinking about that site. It's a technology business. And third was clearly to find a product strategy with a platform and the product releases and invest those dollars, which we're now in 2/3 of our way through but really an effort that had been neglected at Ticketmaster for years. And that was our first strategic mandate that we have to upgrade this platform to be able to continue to grow in the future.

Unknown Analyst

So why don't we dive into that. I think you've announced $100 million over 3 years. Is that the investment on the platform?

Michael Rapino

On the Jetson part, on the platform, yes. We call it Jetson, but yes.

Unknown Analyst

So why don't you walk through how far along that you are, what exactly it is you're doing and where you hope it leads?

Michael Rapino

So if you simplify down Ticketmaster's current 20-plus-year-old platform, it's an enterprise server-based platform that has no flexibility. It's been known and it's fabulous on consistency. So at 10 a.m., it doesn't crash when 1 million people try to buy a U2 ticket. Unfortunately, it's got really no capability to be flexible. You can't build on top. It's not web-based. So our goal from Day 1 was we needed a new web-based platform that could meet the needs of the marketplace that we could build on top of that -- that we could build apps on top of, that we could look to really innovate our product. So we have a project called Jetson. We're 2/3 or 66%, 60% through right now of our platform rebuild, which at the core is about inventory search and commerce. We hope to have that completed mostly by the end of the year. That will give us the foundation of a new technology, a new platform, a much more open platform, where some of the opportunities start to come from now. So if you have an open platform that you can build business apps on, your 12,000 clients can interact with that platform versus today. Everything we do is what we call a completely self-managed system. We have to do everything for our client. Down to if the Miami Arena wants to change a ticket from $79 to $69, they have to call us and our programmers go in and put $79 to $69. They can't build their shows. They can't manage their inventory. They can't see data. They can do nothing. Obviously, we want our clients a lot more involved in the process. One, selfishly, it helps our cost reduction. Two, it makes them smarter. So a lot of our business apps that we're rolling out now that are inventory let themselves manage to manifest themselves, price it, provide them data, provide them upsells. If you want more data, there's a cost for that. So our biggest mandate is first put -- get in place a proper set of tools for our clients to manage their venues, their pricing, their manifest. The second win on that is the platform lets us build our online -- our mobile store with today's technology and be able to upgrade and continually add features and functionalities to meet the market needs. So we'll see the platform done by the end of the year. Then we start our transition of 12,000 clients. That alone will produce, on the basics, about a $0.35 a ticket savings to our core business model. The second is we've started to release new products, the products to the consumer, which is our big one we're going to launch in July. And we'll talk about that when you -- when we get into the secondary piece.

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