10-K 1 d10k.htm FORM 10-K Form 10-K
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-K

 

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2010,

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 001-32601

 

 

LIVE NATION ENTERTAINMENT, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   20-3247759
(State of Incorporation)  

(I.R.S. Employer

Identification No.)

9348 Civic Center Drive

Beverly Hills, CA 90210

(Address of principal executive offices, including zip code)

(310) 867-7000

(Registrant’s telephone number, including area code)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class   Name of Each Exchange on which Registered

Common Stock, $.01 Par Value per Share;

Preferred Stock Purchase Rights

  New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    x  Yes    ¨  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    ¨  Yes    x  No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and 2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ¨  Yes    ¨  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer    x   Accelerated filer    ¨  

Non-accelerated filer    ¨

(Do not check if a smaller reporting company)

  Smaller reporting company    ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

On June 30, 2010, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the Common Stock beneficially held by non-affiliates of the registrant was approximately $1.2 billion. (For purposes hereof, directors, executive officers and 10% or greater stockholders have been deemed affiliates).

On February 22, 2011, there were 181,677,930 outstanding shares of the registrant’s common stock, $0.01 par value per share, including 2,339,524 shares of unvested restricted stock awards and excluding 772,743 shares held in treasury.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our Definitive Proxy Statement for the 2011 Annual Meeting of Stockholders, expected to be filed within 120 days of our fiscal year end, are incorporated by reference into Part III.

 

 

 


Table of Contents

LIVE NATION ENTERTAINMENT, INC.

INDEX TO FORM 10-K

 

         Page  
PART I   
ITEM 1.   

BUSINESS

    2   
ITEM 1A.   

RISK FACTORS

    22   
ITEM 1B.   

UNRESOLVED STAFF COMMENTS

    42   
ITEM 2.   

PROPERTIES

    42   
ITEM 3.   

LEGAL PROCEEDINGS

    42   
PART II   
ITEM 5.   

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES

    45   
ITEM 6.   

SELECTED FINANCIAL DATA

    46   
ITEM 7.   

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

    47   
ITEM 7A.   

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    75   
ITEM 8.   

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    76   
ITEM 9.   

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

    132   
ITEM 9A.   

CONTROLS AND PROCEDURES

    132   
ITEM 9B.   

OTHER INFORMATION

    134   
PART III   
ITEM 10.   

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

    134   
ITEM 11.   

EXECUTIVE COMPENSATION

    134   
ITEM 12.   

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

    134   
ITEM 13.   

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

    134   
ITEM 14.   

PRINCIPAL ACCOUNTING FEES AND SERVICES

    134   
PART IV   
ITEM 15.   

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

    135   


Table of Contents

LIVE NATION ENTERTAINMENT, INC.

GLOSSARY OF KEY TERMS

 

ADA    Americans with Disabilities Act of 1990
AEG    Anschutz Entertainment Group
AMG    Academy Music Holdings Limited Group
AOI    Adjusted operating income (loss)
Azoff Trust    The Azoff Family Trust of 1997, of which Irving Azoff is co-Trustee
Brand New Live    Brand New Live B.V.
Clear Channel    Clear Channel Communications, Inc.
Comcast    Comcast-Spectacor, L.P.
Company    Live Nation Entertainment, Inc. and subsidiaries
CPI    Concert Productions International
CPI Companies    CPI and related companies and subsidiaries
CTS    CTS Eventim AG
DDA    United Kingdom’s Disability Discrimination Act 1995
De-Lux    De-Lux Merchandise Company Limited
DF Concerts    DFC Holdings Limited
DOJ    United States Department of Justice
Dominion    Dominion Theatre Investments Limited
F&P Italia    Friends & Partners Italia S.r.l.
FASB    Financial Accounting Standards Board
FCPA    Foreign Corrupt Practices Act
FLMG   

FLMG Holdings Corp., a wholly-owned subsidiary of
Live Nation

FTC    Federal Trade Commission
Front Line    Front Line Management Group, Inc.
GAAP    United States Generally Accepted Accounting Principles
Gellman    Gellman Management LLC
Get Live 2    Get Live 2 S.r.l.
HOB    HOB Entertainment, Inc.
IAC    IAC/InterActiveCorp
IRS    United States Internal Revenue Service
KSC    KSC Consulting (Barbados) Inc.
Liberty Media    Liberty Media Corporation
Live in Italy    Live s.r.l.
Live Nation    Live Nation Entertainment, Inc., formerly known as Live Nation, Inc., and subsidiaries
LN—Haymon    Live Nation—Haymon Ventures, LLC
Luger    Lugerinc. AB
Mean Fiddler    Mean Fiddler Music Group, PLC
Merger   

Merger between Live Nation, Inc. and Ticketmaster
Entertainment, Inc. announced in February 2009 and consummated
in January 2010

Merger Agreement   

Agreement and Plan of Merger, dated February 10, 2009 and
consummated on January 25, 2010, between Live Nation, Inc. and
Ticketmaster Entertainment, Inc.

Mirage    Mirage Promotions FZ-LLC
MLK    Marek Lieberberg Konzertagentur
Moondog    Moondog Entertainment AB
OCI    Other comprehensive income (loss)
Paciolan    Paciolan, Inc.
Parcolimpico    Parcolimpico S.r.l.
SEC    United States Securities and Exchange Commission
Separation   

The contribution and transfer by Clear Channel of substantially all
of its entertainment assets and liabilities to Live Nation

Spincos   

Collective referral to Ticketmaster and other companies spun off from
IAC on August 20, 2008

Tecjet    Tecjet Limited
Ticketmaster   

For periods prior to May 6, 2010, Ticketmaster means Ticketmaster
Entertainment LLC and its predecessor companies (including
without limitation Ticketmaster Entertainment, Inc.); for periods on
and after May 6, 2010, Ticketmaster means the Ticketmaster
ticketing business of the Company

Ticketnet    Ticketnet S.A.
TicketsNow    TNow Entertainment Group, Inc.

 

1


Table of Contents

PART I

“Live Nation” (which may be referred to as the “Company”, “we”, “us” or “our”) means Live Nation Entertainment, Inc. and its subsidiaries, or one of our segments or subsidiaries, as the context requires.

Special Note About Forward-Looking Statements

Certain statements contained in this Form 10-K (or otherwise made by us or on our behalf from time to time in other reports, filings with the SEC, news releases, conferences, internet postings or otherwise) that are not statements of historical fact constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended, notwithstanding that such statements are not specifically identified. Forward-looking statements include, but are not limited to, statements about our financial position, business strategy, competitive position, potential growth opportunities, potential operating performance improvements, the effects of competition, the effects of future legislation or regulations and plans and objectives of our management for future operations. We have based our forward-looking statements on our beliefs and assumptions based on information available to us at the time the statements are made. Use of the words “may,” “should,” “continue,” “plan,” “potential,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “outlook,” “could,” “target,” “project,” “seek,” “predict,” or variations of such words and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to, those set forth under Item 1A.—Risk Factors as well as other factors described herein or in our quarterly and other reports we file with the SEC (collectively, “cautionary statements”). Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described in any forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements. We do not intend to update these forward-looking statements, except as required by applicable law.

 

ITEM 1. BUSINESS

Our Company

We believe that we are the largest live entertainment company in the world connecting approximately 200 million fans to over 100,000 events in approximately 40 countries.

We believe we are the largest producer of live music concerts in the world, based on total attendance at Live Nation events as compared to events of other promoters, connecting more than 47 million fans to over 21,000 events for over 2,300 artists in 2010. Globally, Live Nation owns, operates, has booking rights for and/or has an equity interest in 128 venues, including House of Blues ® music venues and prestigious locations such as The Fillmore in San Francisco, the Hollywood Palladium, the Heineken Music Hall in Amsterdam and the O2 Dublin.

We believe we are the world’s leading live entertainment ticketing sales and marketing company, based on the number of tickets sold. Ticketmaster provides ticket sales, ticket resale services, marketing and distribution globally through www.ticketmaster.com, numerous retail outlets and worldwide call centers. Established in 1976, Ticketmaster serves clients worldwide across multiple event categories, providing exclusive ticketing services for leading arenas, stadiums, professional sports franchises and leagues, college sports teams, performing arts venues, museums and theaters.

We believe we are one of the world’s leading artist management companies based on the number of artists represented. Front Line and their affiliates manage musical artists and acts primarily in rock, classic rock, pop and country music genres. As of December 31, 2010, Front Line had approximately 250 artists on its rosters and over 90 managers providing services to artists.

We believe the Company’s global network is the world’s largest music marketing network for corporate brands and includes one of the world’s top five ecommerce websites, based on comparison of leading internet retailers. In 2010, the Company drove over 26 million monthly unique visitors to www.livenation.com and www.ticketmaster.com and our other online properties.

 

2


Table of Contents

Our principal executive offices are located at 9348 Civic Center Drive, Beverly Hills, California 90210 (telephone: 310-867-7000). Our principal website is www.livenation.com. Live Nation is listed on the New York Stock Exchange, trading under the symbol “LYV”.

Our Strategy

Our strategy is to expand our presence in the world’s largest markets and leverage our leadership position in live entertainment and ecommerce to sell more tickets and grow our revenue streams surrounding the ticket purchase and live event. We pay artists, venues and teams to secure content and tickets and we provide the best access for fans to buy those tickets. Our business is converging around the online ticket purchase as a result of digital advances and our ability to aggregate and innovate how we deliver everything relevant about the artist, event and venue via one location.

Our core businesses surrounding the live event include ticketing and ecommerce, artist management, sponsorship and onsite ancillary spend. We believe our focus on growing these businesses will increase stockholder value as we increase our exposure to higher margin revenue streams. We are also strengthening our core operations by expanding into top global markets and optimizing our cost structure. We will continue to execute on this strategy through pursuing the objectives listed below.

 

   

Expand Ticketing and Online Services. Our goal is to strengthen our direct relationship with fans online through our leading live entertainment and ticketing destination websites: www.livenation.com and www.ticketmaster.com. Livenation.com offers an extensive inventory of live concerts, tickets and related products. Ticketmaster.com is the leading ticketing website and one of the world’s top five ecommerce sites and provides information about live events in the music, sports, theater and family categories and access to tickets for these events. We plan on growing our websites by improving the online fan experience, enhancing the ticket purchasing process, introducing upsell opportunities and generating additional revenue from online advertising and the sale of other goods and services. We plan on improving our ticketing software system over the next few years in order to strengthen the functionality of our system and give our clients a better overall experience. We are also developing systems and products that will leverage our extensive data on fan purchasing behaviors to help our clients sell more tickets.

 

   

Improve the Profitability of Our Live Event Business. We are seeking to improve the profitability of our core live event operations by lowering discretionary fixed costs, reducing event expenses, improving the price scaling of tickets and increasing ancillary sales per fan at all events and at all venues which we operate.

 

   

Grow Sponsorships. Our goal is to expand and develop new relationships with corporate sponsors by providing targeted strategic programs that deliver more value to the sponsor through our unique relationship with fans and artists, our distribution network of venues and our extensive ticketing operations and online presence.

 

   

Expand our Global Platform. We will selectively expand our business into top music markets and population centers around the world. Our focus internationally is on increasing our promoter and festival presence, extending our ticketing services and expanding our artist management. In North America, we continue to look for key opportunities for operation of strategic venues, to grow our festival presence and to expand through strategic partnerships.

Our Assets

We believe we have a unique portfolio of assets that is unmatched in the live entertainment industry.

 

   

Fans. During 2010, our events were attended by over 47 million live music fans. Our database provides us with the means to efficiently market our shows to these fans as well as offer them other music-related products and services. This database is an invaluable asset that we are able to use to service our artists and corporate clients.

 

   

Artists. We have extensive relationships with artists ranging from those acts that are just beginning their careers to established superstars. In 2010, we promoted shows or tours for approximately 2,300 artists globally. In addition, through our artist management companies, we manage approximately 250 artists. We believe our artist relationships are a competitive advantage and will help us pursue our strategy to develop additional ancillary revenue streams around the ticket purchase, live event and the artists themselves.

 

   

Online Services and Ticketing. We own and operate various branded websites, both in the United States and abroad, which are customized to reflect services offered in each jurisdiction. Our primary online websites, www.livenation.com and www.ticketmaster.com, together with our branded ticketing websites, are designed to promote ticket sales for live events and to disseminate event and related merchandise information online. Fans can access www.livenation.com and www.ticketmaster.com directly, from affiliated websites and through numerous direct links from banners and event profiles hosted by approved third party websites.

 

3


Table of Contents
   

Distribution Network. We believe that our global distribution network of promoters, venues and festivals provides us with a strong position in the live concert industry. We believe we have one of the largest global networks of live entertainment businesses in the world, with offices in 76 cities in North America and a total of 22 countries worldwide. In addition, we own, operate, have booking rights and/or have an equity interest in 128 venues located across six countries as of the end of 2010, making us, we believe, the second largest operator of music venues in the world. We also believe that we produce one of the largest networks of music festivals in the world with almost 30 festivals globally. In addition, we believe that our global ticketing services distribution network with one of the largest ecommerce sites on the internet, approximately 7,100 independent sales outlets and 18 worldwide call centers, serving more than 11,000 clients worldwide makes us the largest ticketing network in the industry.

 

   

Sponsors. We employed a sales force of approximately 200 people that worked with approximately 800 sponsors during 2010, through a combination of local venue related deals and national deals, both in North America and internationally. Our sponsors include some of the most well-recognized national and global brands including O2, State Farm, Red Bull and Coca-Cola.

 

   

Employees. At December 31, 2010, we employed approximately 6,500 full-time employees who are dedicated to providing first-class service to our artists, fans, ticketing venue clients and corporate sponsors. Many of our employees have decades of experience in promoting and producing live concerts, ticketing operations, sales and marketing, artist management and live event venue management.

Our History

We were incorporated in Delaware on August 2, 2005 in preparation for the spin-off of substantially all of Clear Channel’s entertainment assets and liabilities. The Separation was completed on December 21, 2005, at which point we became a publicly traded company on the New York Stock Exchange trading under the symbol “LYV”.

Our Merger with Ticketmaster

On January 25, 2010, we and Ticketmaster completed our Merger. As part of the Merger, Ticketmaster stockholders received 1.4743728 shares of Live Nation common stock for each share of Ticketmaster common stock they owned. Effective on the date of the Merger, Ticketmaster became a wholly-owned subsidiary of Live Nation named Ticketmaster Entertainment LLC and Live Nation, Inc. changed its name to Live Nation Entertainment, Inc. Subsequently, in connection with certain financing transactions completed on May 6, 2010, Ticketmaster was merged into the Company and the separate corporate existence of Ticketmaster ceased.

Under the terms of the agreement reached with the DOJ in connection with obtaining regulatory clearance for the Merger, we agreed to divest one of our ticketing subsidiaries, Paciolan, and to license the Ticketmaster ticketing system to AEG for a period of up to five years, in addition to other terms intended to protect competitive conditions in ticketing and promotions. In March 2010, we sold Paciolan to Comcast.

 

4


Table of Contents

Our Industry

We operate in four main industries within the live entertainment business, including live music events, ticketing software and services, artist management and artist services and venue operations.

The live music industry includes concert promotion and/or production of music tours. Typically, to initiate live music events or tours, booking agents directly contract with performers to represent them for defined periods. Booking agents then contact promoters, who will contract with them or directly with performers to arrange events. Booking agents generally receive fixed or percentage fees from performers for their services. Promoters earn revenue primarily from the sale of tickets. Performers are paid by the promoter under one of several different formulas, which may include fixed guarantees and/or a percentage of ticket sales or event profits. In addition, promoters may also reimburse performers for certain costs of production, such as sound and lights. Under guaranteed payment formulas, promoters assume the risks of unprofitable events. Promoters may renegotiate lower guarantees or cancel events because of insufficient ticket sales in order to reduce their losses. Promoters can also reduce the risk of losses by entering into global or national touring agreements with performers and including the right to offset lower performing shows against higher performing shows on the tour in the determination of overall artist fees.

For music tours, one to four months typically elapse between booking performers and the first performances. Promoters, in conjunction with performers, managers and booking agents, set ticket prices and advertise events. Promoters market events, sell tickets, rent or otherwise provide venues and arrange for local production services, such as stages and sets.

Venue operators typically contract with promoters to rent their venues for specific events on specific dates. Venue operators provide services such as concessions, parking, security, ushering and ticket-taking, and receive some or all of the revenue from concessions, merchandise, sponsorships, parking and premium seats. For the events they host, venue operators typically receive fixed fees or percentages of ticket sales, as well as percentages of total concession sales from the concessionaire and percentages of total merchandise sales from the merchandisers.

Ticketing services include the sale of tickets primarily through online channels but also through phone, outlet and box office channels. Ticketing companies will contract with venues and/or promoters to sell tickets to events over a period of time, generally three to five years. The ticketing company does not set ticket prices or seating charts for events as this information is given to them by the venue and/or promoter in charge of the event. The ticketing company generally gets paid a fixed fee per ticket sold or a percentage of the total ticket service charges. Venues will often also sell tickets through a local box office at the venue using the ticketing company’s technology; on these box office tickets, the ticketing company will generally not earn a fee. The ticketing company receives the cash for the ticket sales and related service charges at the time the ticket is sold and periodically remits these receipts to the venue and/or promoter after deducting their fee. As ticket purchases increase, related ticketing operating income generally increases as well.

Ticketing “resale” services refers to the sale of tickets by a holder who originally purchased the tickets from a venue, promoter or other entity, or a ticketing services provider selling on behalf of a venue, promoter or other entity. Generally, the ticket reseller is paid a service charge when the ticket is resold and the negotiated ticket value is paid to the holder.

Artist services primarily provides management services to music recording artists in exchange for a commission on the earnings of these artists. The artist manager negotiates on behalf of the artist and is paid a fee, generally as a percentage of the artist’s earnings. Artist services also sells merchandise associated with musical artists at live musical performances, to retailers and directly to consumers via the internet and also sells premium ticket packages. Artist services is highly seasonal, with profitability related to the timing of tours and merchandise sales. Peak seasons are typically in the summer and in the fall leading up to the holiday season.

The sponsorship and advertising industry within the live entertainment business involves the sale of international, national, regional and local advertising campaigns and promotional programs to a variety of companies desiring to advertise or promote their brand or product. The advertising campaigns typically include venue naming rights, on-site venue signage, online banner advertisements and exclusive partner rights in various categories such as beverage, hotel, and telecommunications. The promotional programs typically include event pre-sales and product on-site activation.

Our Business

We operate in five reportable business segments: Concerts, Ticketing, Artist Nation, eCommerce and Sponsorship. Prior to 2010, our reportable operating segments were North American Music, International Music and Ticketing. The Artist Nation segment is primarily made up of Front Line’s artist management and services businesses and our artist services

 

5


Table of Contents

business which was previously reported as a component of the North American Music segment. Information related to these operating segments and other operations for 2010, 2009 and 2008 is included in Note 18—Segment Data in the Notes to Consolidated Financial Statements in Item 8.

Concerts. Our Concerts segment principally involves the global promotion of live music events in our owned and/or operated venues and in rented third-party venues, the operation and management of music venues and the production of music festivals across the world. During 2010, our Concerts business generated approximately $3.4 billion, or 67.6%, of our total revenue. We promoted over 21,000 live music events in 2010, including artists such as U2, Roger Waters and Lady Gaga and through festivals such as Rock Werchter, Reading and Download. While our Concerts segment operates year-round, we experience higher revenue during the second and third quarters due to the seasonal nature of shows at our outdoor amphitheaters and international festivals, which primarily occur May through September.

As a promoter, we earn revenue primarily from the sale of tickets and pay performers under one of several formulas, including a fixed guaranteed amount and/or a percentage of ticket sales or event profits. For each event, we either use a venue we own and/or operate, or rent a third-party venue. Revenue is generally related to the number of events, volume of ticket sales and ticket prices. Event costs such as artist and production service expenses are included in direct operating expenses and are typically substantial in relation to the revenue. As a result, significant increases or decreases in promotion revenue do not typically result in comparable changes to operating income.

As a venue operator, we generate revenue primarily from the sale of food and beverages, parking, premium seating, rental income, venue sponsorships and ticket rebates or service charges earned on tickets sold through our internal ticketing operations for events we promote at our venues or by third parties under ticketing agreements. In our amphitheaters, the sale of food and beverages is outsourced and we receive a share of the net revenue from the concessionaire which is recorded in revenue with no significant direct operating expenses associated with it. Revenue generated from venue operations typically have a higher margin than promotion revenue and therefore typically have a more direct relationship to operating income.

As a festival operator, we typically book performers, secure festival sites, provide for third-party production services, sell tickets and advertise events to attract audiences. We also arrange for third-parties to provide operational services as needed such as concessions, merchandising and security. We earn revenue from the sale of tickets and typically pay performers a fixed guaranteed amount. We also earn revenue from the sale of food and beverages, camping fees, festival sponsorships and ticket rebates or service charges earned on tickets sold. For each event, we either use a festival site we own or rent a third-party festival site. Revenue is generally related to the number of events, volume of ticket sales and ticket prices. Event costs such as artist and production service expenses are included in direct operating expenses and are typically substantial in relation to the revenue. As a result, significant increases or decreases in festival promotion revenue do not typically result in comparable changes to operating income.

Ticketing. Our Ticketing segment is primarily an agency business that sells tickets for events on behalf of our clients and retains a convenience charge and order processing fee for our services. We sell tickets for our events and also for third-party clients including venues, promoters, sports leagues and teams, and museum and cultural institutions across multiple live event categories, providing exclusive ticketing services for leading arenas, stadiums, amphitheaters, music clubs, concert promoters, professional sports franchises and leagues, college sports teams, performing arts venues, museums and theaters. We sell tickets through a combination of websites, ticket outlets and telephone services. During the year ended December 31, 2010, we sold 76%,15% and 9% of primary tickets through these channels, respectively. During 2010, our Ticketing business generated approximately $1.0 billion, or 20.5% of our total revenue. Through all of our ticketing services, we sold almost 120 million tickets in 2010 and sold an additional 112 million tickets through our venue clients’ box offices and season ticket sales.

Our ticketing sales are impacted by fluctuations in the availability of events for sale to the public, which may vary depending upon event scheduling by our clients. Generally, the first and second quarters of the year experience the highest domestic ticketing revenue, earned primarily in the concerts and sports categories. International revenue is generally the highest in the fourth quarter of the year, earned primarily in the concerts category.

We generally enter into written agreements with individual clients to provide primary ticketing services for specified multi-year periods, typically ranging from three to five years. Pursuant to these agreements, clients generally determine what tickets will be available for sale, when such tickets will go on sale to the public and what the ticket face price will be. Agreements with venue clients generally grant us the right to sell tickets for all events presented at the relevant venue for which tickets are made available to the general public. Agreements with promoter clients generally grant us the right to sell tickets for all events presented by a given promoter at any venue, unless that venue is already covered by an existing exclusive agreement with our ticketing business or another ticketing service provider. Under our

 

6


Table of Contents

exclusive contracts, clients may not utilize, authorize or promote the services of third-party ticketing companies or technologies while under contract with us. While we generally have the right to sell a substantial portion of our clients’ tickets, venue and promoter clients often sell and distribute group sales and season tickets in-house. In addition, under many written agreements between promoters and our clients, the client often allocates certain tickets for artist, promoter, agent and venue use and do not make those tickets available for sale by us. We also generally allow clients to make a certain limited number of tickets available for sale through fan clubs, or other similar clubs, from which we generally derive no revenue unless selected by the club to facilitate the sales. As a result, we do not sell all of our clients’ tickets and the amount of tickets that we sell varies from client to client and from event to event, and varies as to any single client from year to year.

We currently offer ticket resale services through TicketsNow (in the U.S. and Canada), our TicketExchange service and GET ME IN! (in the U.K). Through TicketsNow and GET ME IN!, we enter into listing agreements with ticket resellers to post ticket inventory for sale at a purchase price equal to a ticket resale price determined by the relevant ticket reseller, plus an amount equal to a percentage of the ticket resale price and a pre-determined service fee. We remit the reseller-determined ticket resale price to the ticket resellers and retain the remainder of the purchase price. While we do not generally acquire tickets for sale on our own behalf, we may do so from time to time on a limited basis. In addition to enabling premium primary ticket sales, the TicketExchange service allows consumers to resell and purchase tickets online for certain events that were initially sold for our venue clients in the U.S., Europe and Canada who elect to participate in the TicketExchange service. Sellers and buyers each pay a fee that has been negotiated with the relevant client, a portion of which is shared with the client.

Artist Nation. Our Artist Nation segment primarily provides management services to music recording artists in exchange for a commission on the earnings of these artists. Our Artist Nation segment also sells merchandise associated with musical artists at live musical performances, to retailers, and directly to consumers via the internet and provides other services to artists. During 2010, our Artist Nation business generated approximately $362 million, or 6.9%, of our total revenue. Revenue earned from our Artist Nation segment is impacted to a large degree by the touring schedules of the artists we represent. Generally, we experience higher revenue during the second and third quarters as the period from May through September tends to be a popular time for touring events.

eCommerce. Our eCommerce segment manages our consumer websites, www.livenation.com and www.ticketmaster.com. Through our websites, we sell tickets to our own events as well as tickets for our ticketing services clients and disseminate event and related merchandise information online. This segment records a fee per ticket that is paid to it by the Ticketing segment on every ticket sold online via www.livenation.com and www.ticketmaster.com in the U.S. and Canada. During 2010, our eCommerce business generated approximately $88 million, or 1.7%, of our total revenue.

Sponsorship. Our Sponsorship segment employs a sales force that creates and maintains relationships with sponsors, through a combination of strategic, international, national and local opportunities for businesses to reach customers through our concert, venue, artist relationship and ticketing assets. During 2010, our Sponsorship business generated approximately $162 million, or 3.2%, of our total revenue.

We believe that we have a unique opportunity to connect the music fan to corporate sponsors and therefore seek to optimize this relationship through strategic sponsorship programs. We continue to also pursue the sale of national and local sponsorships, both domestically and internationally, and placement of advertising, including signage and promotional programs. Many of our venues have venue naming rights sponsorship programs. We believe national and international sponsorships allow us to maximize our network of venues and to arrange multi-venue branding opportunities for advertisers. Our sponsorship programs include companies such as Starwood, Vodafone, Anheuser Busch, Coca-Cola, Citi® and American Express. Our local and venue-focused sponsorships include venue signage, promotional programs, on-site activation, hospitality and tickets, and are derived from a variety of companies across various industry categories.

Other. For 2010, our other businesses generated approximately $4 million, or less than one percent, of our total revenue.

2010 Acquisitions

Ticketmaster — In January 2010, we completed the merger of Ticketmaster, a global ticketing and artist services business including Front Line artist management, with and into a wholly-owned subsidiary of Live Nation pursuant to the Merger Agreement.

 

7


Table of Contents

LN—Haymon — In April 2010, we acquired the remaining 49% interest in, and control of, Live Nation—Haymon Ventures, LLC, a promotion company for live music and boxing events in the U.S.

Main Square Festival — In July 2010, we acquired an additional 24.5% interest in Live Nation France Festivals, the producer of the Main Square Festival in Arras, France. Our total ownership percentage in Main Square Festival is now 75.5%.

Get Live 2 — In July 2010, we acquired an additional 83% interest in Get Live 2, a joint venture which owns Parcolimpico which manages venues and facilities in Turin, Italy. Our total ownership percentage is now 93%.

Live in Italy — In July 2010, we acquired Live in Italy, which promotes and sells mainly hard rock and metal live music events throughout central and northern Italy and also promotes the largest metal festival in Italy.

Three Six Zero Grp Limited — In July 2010, we acquired a 50% non-controlling interest in Three Six Zero Grp Limited, an artist management business based in London.

SME Entertainment Group — In September 2010, we acquired a 50% interest in SME Entertainment Group, a Los Angeles-based firm that provides talent and production services for corporate events, private parties and charity functions.

Rock, Paper, Photo — In September 2010, we acquired a 50% non-controlling interest in Rock, Paper, Photo LLC, a business which engages in selling high-end photography of music, sports and fashion-related personalities both online and through mobile galleries.

Mirage — In September 2010, we acquired an additional 17.3% interest in Live Nation Middle East FZ-LLC which was formerly known as Mirage. Our total ownership percentage is now 82.3%.

B.A.D. Management — In September 2010, we acquired a 40% interest in B.A.D. Management LLC, an artist management business based in Nashville, Tennessee.

Gellman — In October 2010, we acquired a 50% interest in Gellman Management LLC which is an artist management business based in the U.S.

AMD — In November 2010, we acquired an additional 30% interest in Amsterdam Music Dome Exploitatie B.V., or AMD. AMD will be the exclusive lessee of a music venue that is expected to open in 2011 in the Netherlands. Our total ownership percentage is now 81%.

Ticketnet — In November 2010, we acquired Ticketnet, the second largest ticket retailer in France. Ticketnet also sells tickets in Belgium and Luxembourg.

Career — In December 2010, we acquired the remaining 50% interest in Career Artist Management, LLC, which is located in Los Angeles, California.

Marcy Musik — In December 2010, we acquired Marcy Musik Management, an artist management business located in the U.S. which includes certain artist relationships.

2010 Divestitures

Paciolan — In March 2010, we sold Paciolan, a ticketing services and software provider that offers ticketing solutions for clients across North America.

Cirkus — In December 2010, we sold Cirkus, a music theater in Sweden.

Pleasure PAAS Party and Pleasure Magazine — In December 2010, we sold our event assets in the Netherlands for the Pleasure PAAS Party, an indoor Latin/salsa event, and the associated magazine.

Live Nation Venue Details

In the live entertainment industry, venues generally consist of:

 

   

Stadiums—Stadiums are multi-purpose facilities, often housing local sports teams. Stadiums typically have 30,000 or more seats. Although they are the largest venues available for live music, they are not specifically designed for live music. At December 31, 2010, we had booking rights to one stadium in North America.

 

8


Table of Contents
   

Amphitheaters—Amphitheaters are generally outdoor venues with between 5,000 and 30,000 seats that are used primarily in the summer season. We believe they are popular because they are designed specifically for concert events, with premium seat packages and better lines of sight and acoustics. At December 31, 2010, we owned eight, leased 28, operated five and had booking rights for seven amphitheaters located in North America.

 

   

Arenas—Arenas are indoor venues that are used as multi-purpose facilities, often housing local sports teams. Arenas typically have between 5,000 and 20,000 seats. Because they are indoors, they are able to offer amenities that other similar-sized outdoor venues cannot, such as luxury suites and premium club memberships. As a result, we believe they have become increasingly popular for higher-priced concerts aimed at audiences willing to pay for these amenities. At December 31, 2010, we owned one, leased two, operated four and had booking rights for three arenas located in the United Kingdom, Ireland, The Netherlands, Italy and North America.

 

   

Music Theaters—Music theaters are indoor venues that are built primarily for music events. These venues typically have a capacity between 1,000 and 6,500. Because these venues have a smaller capacity than an amphitheater, they do not offer as much economic upside on a per show basis. However, because music theaters can be used year-round, unlike most amphitheaters, they can generate annual profits similar to those of an amphitheater. Music theaters represent less risk to concert promoters because they have lower fixed costs associated with hosting a concert and may provide a more appropriately-sized venue for developing artists and more artists in general. At December 31, 2010, we owned seven, leased 24, operated two, had booking rights for four and an equity interest in one music theater located in North America and the United Kingdom.

 

   

Clubs—Clubs are indoor venues that are built primarily for music events but may also include comedy clubs. These venues typically have a capacity of less than 1,000 and often without full fixed seating. Because of their small size, they do not offer as much economic upside, but they also represent less risk to a concert promoter because they have lower fixed costs associated with hosting a concert and also may provide a more appropriate size venue for developing artists. Clubs can also be used year-round and can therefore generate higher profits for the year, even though per show profits are lower. At December 31, 2010, we owned three, leased seven and had booking rights for three clubs in North America and the United Kingdom.

 

   

House of Blues—House of Blues venues are indoor venues that offer customers an integrated live music and dining experience. The live music halls are specially designed to provide optimum acoustics and typically can accommodate between 1,000 to 2,000 guests. A full-service restaurant and bar is located adjacent to the live music hall. We believe that the high quality of the food, service and atmosphere in our restaurants attracts customers to these venues independently from an entertainment event, and generates a significant amount of repeat business from local customers. At December 31, 2010, we owned two and leased ten House of Blues venues located in North America. One of the House of Blues venues is comprised of two buildings where we own one and lease the other. We have included this venue as an owned venue.

 

   

Festival Sites—Festival sites are outdoor locations used primarily in the summer season to stage day-long or multi-day concert events featuring several performers. Depending on the location, festival site capacities can range from 10,000 to 120,000. We believe they are popular because of the value provided to the fan by packaging several performers for a full-day or multi-day event. While festival sites only host a few events each year, they can provide higher operating income because we are able to generate income from many different services provided at the event and they have lower costs associated with producing the event and maintaining the site. At December 31, 2010, we owned four festival sites located in North America and the United Kingdom. One of the festival sites is comprised of two parcels of land where we own one and lease the other. We have included this site as owned.

 

   

Theatrical Theaters—Theatrical theaters are generally indoor venues that are built specifically for theatrical events, with substantial aesthetic and acoustic consideration. These venues typically have less than 5,000 seats. Additionally, given their size, they are able to host events aimed at niche audiences. At December 31, 2010, we leased one theatrical theater located in North America and operated one in Ireland.

 

9


Table of Contents

Venues

At December 31, 2010, we owned, operated, had booking rights for and/or had an equity interest in the following domestic and international venues primarily used for music events:

 

Market and Venue  

DMA®

Region

Rank

(1)

  Type of Venue    Live Nation’s Interest  

Estimated

Seating

Capacity

 

NEW YORK, NY

  1         

PNC Bank Arts Center

    Amphitheater   

22-year lease that expires

December 31, 2017

    17,500   

Nikon at Jones Beach Theater

    Amphitheater   

20-year license agreement that expires

December 31, 2019

    14,400   

NYCB Theatre at Westbury

    Music Theater   

43-year lease that expires

December 31, 2034

    2,800   

Irving Plaza

    Club   

10-year lease that expires

October 31, 2016

    1,000   

Gramercy Theatre

    Club   

10-year lease that expires

December 31, 2016

    600   

Roseland Ballroom

    Club    Booking agreement     3,700   

Foxwoods Theatre

      Theatrical Theater   

40-year lease that expires

December 31, 2038

    1,800   

LOS ANGELES, CA

  2         

San Manuel Amphitheater

    Amphitheater   

25-year lease that expires

June 30, 2018

    65,000   

Irvine Meadows/Verizon Wireless Amphitheater

    Amphitheater   

20-year lease that expires

February 28, 2017

    16,300   

Gibson Amphitheatre at Universal CityWalk

    Music Theater   

15-year lease that expires

September 9, 2014

    6,200   

Hollywood Palladium

    Music Theater   

20-year lease that expires

January 31, 2027

    3,500   

The Wiltern

    Music Theater   

15-year lease that expires

June 30, 2020

    2,300   

Avalon—Hollywood

    Club    Booking agreement     1,400   

House of Blues—Sunset Strip

    House of Blues   

10-year lease that expires

May 10, 2012

    1,000   

House of Blues—Anaheim

      House of Blues   

5-year lease that expires

January 31, 2016

    1,000   

CHICAGO, IL

  3         

First Midwest Bank Amphitheatre

    Amphitheater    Owned     28,600   

House of Blues—Chicago

      House of Blues    Owned     1,300   

PHILADELPHIA, PA

  4         

Susquehanna Bank Center

    Amphitheater   

31-year lease that expires

September 29, 2025

    25,000   

Tower Theater

    Music Theater    Owned     3,100   

Theatre of the Living Arts

    Club    Owned     800   

Chestnut Street Theatre

      Theatrical Theater    Currently not in operation     2,400   

DALLAS—FORT WORTH, TX

  5         

The Gexa Energy Pavillion

    Amphitheater   

30-year lease that expires

December 31, 2018

    20,100   

House of Blues—Dallas

      House of Blues   

15-year lease that expires

April 30, 2022

    1,600   

 

10


Table of Contents
Market and Venue  

DMA®

Region

Rank

(1)

  Type of Venue    Live Nation’s Interest  

Estimated

Seating

Capacity

 

SAN FRANCISCO—
OAKLAND—SAN JOSE, CA

  6         

Shoreline Amphitheatre

    Amphitheater   

15-year lease that expires

December 31, 2020

    22,000   

Sleep Train Pavilion at Concord

    Amphitheater   

4-year management agreement that

expired December 31, 2010 (currently

negotiating new terms)

    12,500   

Mountain Winery

    Amphitheater    Booking agreement     1,800   

The Fillmore

    Music Theater   

15-year lease that expires

August 31, 2012

    1,200   

Nob Hill Masonic Auditorium

    Music Theater   

18-year lease that expires

December 31, 2026

    3,300   

Punch Line Comedy Club—San Francisco

    Club   

5-year lease that expires

September 15, 2011

    500   

Cobb’s Comedy Club

      Club   

10-year lease that expires

October 31, 2015

    200   

BOSTON, MA

  7         

Comcast Center

    Amphitheater    Owned     19,900   

Bank of America Pavilion

    Amphitheater   

Indefinite license agreement that

expires 18 months after notification

that pier is to be occupied for water

dependent use

    4,900   

House of Blues—Boston

      House of Blues   

20-year lease that expires

February 28, 2029

    2,400   

ATLANTA, GA

  8         

Aaron’s Amphitheatre at Lakewood

    Amphitheater   

35-year lease that expires

December 31, 2034

    19,000   

Chastain Park Amphitheatre

    Amphitheater   

10-year lease that expired

December 31, 2010 (currently

negotiating new terms)

    6,400   

The Tabernacle

      Music Theater   

20-year lease that expires

January 31, 2018

    2,500   

WASHINGTON, DC

  9         

Jiffy Lube Live

    Amphitheater    Owned     22,500   

Warner Theatre

      Music Theater   

10-year lease that expires

September 30, 2012

    1,900   
HOUSTON, TX   10         

Cynthia Woods Mitchell Pavilion

    Amphitheater    Booking agreement     16,500   

Verizon Wireless Theater

    Music Theater   

15-year lease that expires

December 31, 2012

    2,900   

House of Blues—Houston

      House of Blues   

10-year lease that expires

October 31, 2018

    1,500   

DETROIT, MI

  11         

The Fillmore Detroit

    Music Theater   

15-year lease that expires

January 31, 2018

    2,900   

Saint Andrews Hall

      Club    Owned     800   

PHOENIX, AZ

  12         

Cricket Wireless Pavilion

    Amphitheater   

60-year lease that expires

June 30, 2049

    20,000   

Comerica Theatre

      Music Theater   

10-year lease that expires

December 31, 2016

    5,500   

 

11


Table of Contents
Market and Venue  

DMA®

Region

Rank

(1)

  Type of Venue    Live Nation’s Interest  

Estimated

Seating

Capacity

 

SEATTLE —TACOMA, WA

  13         

White River Amphitheatre

    Amphitheater   

25-year management agreement that

expires October 31, 2027

    20,000   

Maryhill Winery

      Music Theater    Booking agreement     4,000   

TAMPA—ST PETERSBURG—
SARASOTA, FL

  14         

1-800-ASK-GARY Amphitheatre at the Florida State Fairgrounds

      Amphitheater   

15-year lease that expires

December 31, 2018

    20,000   

MIAMI—FT LAUDERDALE, FL

  16         

Bayfront Park Amphitheater

    Amphitheater   

10-year management agreement that

expires December 31, 2018

    5,000   

Pompano Beach Amphitheater

    Amphitheater   

6-year management agreement that

expires November 25, 2015

    3,300   

The Fillmore Miami Beach at the Jackie Gleason Theater

    Music Theater   

10-year management agreement that

expires August 31, 2017

    2,700   

Revolution Live

      Club   

Booking agreement (currently

negotiating new terms)

    1,300   

DENVER, CO

  17         

Comfort Dental Amphitheatre

    Amphitheater   

20-year lease that expires

December 31, 2012

    16,800   

Fillmore Auditorium

      Music Theater    Owned     3,600   

CLEVELAND—AKRON, OH

  18         

Blossom Music Center

    Amphitheater   

15-year lease that expires

October 31, 2014

    19,600   

Time Warner Cable Amphitheater at Tower City

    Amphitheater   

6-year lease that expires

April 30, 2011

    5,500   

House of Blues—Cleveland

      House of Blues   

20-year lease that expires

October 31, 2024

    1,200   

ORLANDO—DAYTON BEACH—
MELBOURNE, FL

  19         

House of Blues—Orlando

      House of Blues   

15-year lease that expires

September 1, 2012

    2,100   

SACRAMENTO—
STOCKTON—MODESTA, CA

  20         

Sleep Train Amphitheatre

    Amphitheater    Owned     18,500   

Punch Line Comedy Club—Sacramento

      Club   

7-year lease that expires

December 31, 2012

    100   

ST. LOUIS, MO

  21         

Verizon Wireless Amphitheater—St. Louis

    Amphitheater    Owned     21,000   

The Pageant

      Music Theater    50% equity interest     2,300   

CHARLOTTE, NC

  23         

Verizon Wireless Amphitheatre Charlotte

    Amphitheater    Owned     18,800   

Road Runner Mobile Amphitheatre

    Amphitheater   

10-year lease that expires

June 12, 2019

    5,000   

The Fillmore Charlotte

      Music Theater   

10-year lease that expires

June 12, 2019

    2,000   

PITTSBURGH, PA

  24         
First Niagara Pavilion       Amphitheater   

45-year lease that expires

December 31, 2035

    23,100   

 

12


Table of Contents
Market and Venue  

DMA®

Region

Rank

(1)

  Type of Venue    Live Nation’s Interest  

Estimated

Seating

Capacity

 

RALEIGH—DURHAM, NC

  25         

Time Warner Cable Music Pavilion at Walnut Creek

    Amphitheater   

40-year lease that expires

October 31, 2030

    20,000   

Raleigh Amphitheater

      Amphitheater    Booking agreement     5,400   

INDIANAPOLIS, IN

  27         

Verizon Wireless Music Center Indianapolis

  Amphitheater    Owned     24,400   

The Lawn at White River State Park

    Amphitheater    Booking agreement     6,000   

Murat Theatre at Old National Centre

      Music Theater   

50-year lease that expires

September 4, 2045

    2,500   

SAN DIEGO, CA

  28         

Cricket Wireless Amphitheatre

    Amphitheater   

20-year lease that expires

October 31, 2023

    19,500   

SDSU Open Air Theatre

    Amphitheater    Booking agreement     4,800   

Viejas Arena

    Arena    Booking agreement     12,500   

House of Blues—San Diego

      House of Blues   

15-year lease that expires

May 31, 2020

    1,100   

HARTFORD—NEW HAVEN, CT

  30         

Comcast Theatre

    Amphitheater   

40-year lease that expires

September 13, 2034

    24,200   

Rentchler Field

    Stadium    Booking agreement     34,300   

Mohegan Sun Arena

    Arena    Booking agreement     9,000   

Toyota Presents Oakdale Theatre

      Music Theater    Owned     4,600   

KANSAS CITY, MO

  31         

Starlight Theatre

      Music Theater    Booking agreement     8,100   

CINCINNATI, OH

  33         

Riverbend Music Center

    Amphitheater    Booking agreement     20,500   

PNC Pavilion

    Amphitheater    Booking agreement     4,000   

Bogart’s

      Club   

10-year lease that expires

September 30, 2012

    1,500   

COLUMBUS, OH

  34         

Germain Amphitheater

      Amphitheater    Currently not in operation     20,000   

MILWAUKEE, WI

  35         

Alpine Valley Music Theatre

      Amphitheater   

21-year management agreement that

expires December 31, 2019

    35,300   

SAN ANTONIO, TX

  37         

Selma Amphitheater

      Amphitheater    Currently not in operation     19,300   

WEST PALM BEACH—
FORT PIERCE, FL

  38         

Cruzan Amphitheatre

      Amphitheater   

10-year lease that expires

December 31, 2015

    19,300   

BIRMINGHAM, AL

  40         

Verizon Wireless Music Center Birmingham

      Amphitheater    Owned     10,600   

LAS VEGAS, NV

  42         

Pearl Concert Theater at Palms Casino Resort

    Music Theater    Booking agreement     2,500   

House of Blues—Las Vegas

      House of Blues   

15-year lease that expires

March 1, 2014

    1,800   

 

13


Table of Contents
Market and Venue  

DMA®

Region

Rank

(1)

  Type of Venue    Live Nation’s Interest  

Estimated

Seating

Capacity

 

NORFOLK—PORTSMOUTH—
NEWPORT NEWS, VA

  43         

Virginia Beach Amphitheater

      Amphitheater   

30-year lease that expires

December 31, 2025

    20,000   

ALBUQUERQUE—
SANTA FE, NM

  46         

Hard Rock Casino Albuquerque Presents the Pavillion

    Amphitheater   

20-year lease that expires

April 16, 2021

    12,000   

Sandia Casino Amphitheater

      Music Theater    Booking agreement     4,200   

LOUISVILLE, KY

  50         

The Louisville Palace

      Music Theater    Owned     2,700   

BUFFALO, NY

  51         

Darien Lake Performing Arts Center

      Amphitheater   

25-year lease that expires

October 15, 2020

    21,800   

NEW ORLEANS, LA

  52         

House of Blues—New Orleans

      House of Blues   

One building owned and one building

under 35-year lease that expires

October 31, 2027

    1,000   

WILKES BARRE—SCRANTON, PA

  54         

Toyota Pavilion at Montage Mountain

      Amphitheater   

10-year lease that expires

December 31, 2011

    17,500   

ALBANY—SCHENECTADY—
TROY, NY

  58         

Saratoga Performing Arts Center

      Amphitheater   

5-year lease that expires

September 1, 2014

    25,200   

FLORENCE—MYRTLE BEACH, SC

  104         

House of Blues—Myrtle Beach

      House of Blues   

27-year lease that expires

May 31, 2025

    2,000   

YAKIMA—PASCO—RICHLAND—
KENNEWICK, WA

  126         

The Gorge Amphitheatre

      Amphitheater   

20-year lease that expires

October 31, 2023

    20,000   

WHEELING, WV—STEUBENVILLE,
OH

  159         

Jamboree in the Hills

      Festival Site    Owned     N/A   

TORONTO, CANADA

  N/A         

Molson Canadian Amphitheatre

      Amphitheater   

10-year lease that expires

December 31, 2020

    16,000   

VANCOUVER, CANADA

  N/A         

Rogers Arena

    Arena    Booking agreement     13,000   

Commodore Ballroom

      Club   

15-year lease that expires

July 31, 2014

    1,100   

BIRMINGHAM, ENGLAND

  N/A         

O2 Academy Birmingham

      Music Theater   

27-year lease that expires

September 25, 2034

    3,000   

BOURNEMOUTH, ENGLAND

  N/A         

O2 Academy Bournemouth

      Music Theater   

35-year lease that expires

July 17, 2034

    1,800   

BRIGHTON, ENGLAND

  N/A         

O2 Academy Brighton

      Music Theater    Currently not in operation     2,500   

 

14


Table of Contents
Market and Venue  

DMA®

Region

Rank

(1)

  Type of Venue    Live Nation’s Interest  

Estimated

Seating

Capacity

 

BRISTOL, ENGLAND

  N/A         

O2 Academy Bristol

      Music Theater   

25-year lease that expires

December 25, 2023

    1,900   

LEEDS, ENGLAND

  N/A         

O2 Academy Leeds

    Music Theater   

25-year lease that expires

June 23, 2026

    2,300   

Leeds Festival Site

      Festival Site    Owned     N/A   

LIVERPOOL, ENGLAND

  N/A         

O2 Academy Liverpool

      Music Theater   

34-year lease that expires

January 22, 2037

    1,200   

LONDON, ENGLAND

  N/A         

Wembley Arena

    Arena   

15-year management agreement

that expires March 31, 2021

    12,800   

O2 Academy Brixton

    Music Theater   

98-year lease that expires

December 24, 2024

    4,900   

O2 Academy Shepherds Bush Empire

    Music Theater    Owned     2,000   

O2 Academy Islington

      Music Theater   

25-year lease that expires

June 20, 2028

    800   

MANCHESTER, ENGLAND

  N/A         

O2 Apollo Manchester

      Music Theater    Owned     3,500   

NEWCASTLE, ENGLAND

  N/A         

O2 Academy Newcastle

      Music Theater   

99-year lease that expires

March 24, 2021

    2,000   

NOTTINGHAM, ENGLAND

  N/A         

Media

      Club    Currently not in operation     1,400   

OXFORD, ENGLAND

  N/A         

O2 Academy Oxford

      Music Theater   

25-year lease that expires

October 30, 2031

    1,000   

READING, ENGLAND

  N/A         

Little John’s Farm

      Festival Site    Owned     N/A   

SHEFFIELD, ENGLAND

  N/A         

Motorpoint Arena

    Arena   

18-year management agreement that

expires March 31, 2011

    11,300   

O2 Academy Sheffield

      Music Theater   

35-year lease that expires

January 9, 2043

    2,400   

SOUTHAMPTON, ENGLAND

  N/A         

Southampton Guildhall

      Music Theater   

25-year management agreement that

expires February 10, 2028

    1,800   

AMSTERDAM, THE NETHERLANDS

  N/A         

Heineken Music Hall

      Arena   

20-year lease that expires

December 31, 2027

    5,500   

GLASGOW, SCOTLAND

  N/A         

O2 Academy Glasgow

    Music Theater    Owned     2,500   

O2 ABC Glasgow

    Music Theater   

40-year lease that expires

August 24, 2039

    1,600   

King Tuts Wah Wah Hut

    Club    Owned     300   

Universe

    Club    Currently not in operation     200   

Balado Airfield (T in the Park)

      Festival Site   

One parcel owned/one parcel under a

10 year lease that expires

August 1, 2011

    N/A   

 

15


Table of Contents
Market and Venue  

DMA®

Region

Rank

(1)

  Type of Venue    Live Nation’s Interest  

Estimated

Seating

Capacity

 

CARDIFF, WALES

  N/A         

Cardiff International Arena

      Arena   

137-year lease that expires

December 31, 2131

    6,700   

DUBLIN, IRELAND

  N/A         

The O2 Dublin

    Arena    Owned     13,000   

Grand Canal Theatre

  N/A   Theatrical Theater   

5-year management agreement that

expires December 31, 2015

    2,000   

TURIN, ITALY

  N/A         

Palasport Olimpico

    Arena   

30-year management agreement that

expires November 25, 2039

    12,500   

Palavela

      Arena   

30-year management agreement that

expires November 25, 2039

    8,300   

 

(1)

DMA® region refers to a United States designated market area as of September 25, 2010. At that date, there were 210 DMA®s. DMA® is a registered trademark of Nielsen Media Research, Inc.

The following table summarizes the number of venues by type that we owned, operated, had booking rights for and/or had an equity interest in as of December 31, 2010.

 

Venue Type

  

Capacity

  

Owned

  

Leased

  

Operated

  

Booking

Rights

  

Equity

Interest

  

Total

Stadium

   More than 30,000    -      -      -      1      -      1  

Amphitheater

   5,000 - 30,000    8      28      5      7      -      48  

Arena

   5,000 - 20,000    1      2      4      3      -      10  

Music Theater

   1,000 - 6,500    7      24      2      4      1      38  

Club

   Less than 1,000    3      7      -      3      -      13  

House of Blues

   1,000 - 2,000    2      10      -      -      -      12  

Festival Site

   N/A            4      -      -      -      -      4  

Theatrical Theater

   Less than 5,000    -      1      1      -      -      2  
                                

Total venues

      25      72      12      18      1      128  
                                

Venues not currently in operation

   3      3      -      -      -      6  

 

16


Table of Contents

Competition

Competition in the live entertainment industry is intense. We believe that we compete primarily on the basis of our ability to deliver quality music products, sell tickets and provide enhanced fan and artist experiences. We believe that our primary strengths include:

 

   

the quality of service delivered to our artists, fans and corporate sponsors;

 

   

our track record in promoting and producing live music events and tours both domestically and internationally;

 

   

artist relationships;

 

   

ticketing software and services;

 

   

distribution platform (venues);

 

   

the scope and effectiveness in our expertise of marketing and sponsorship programs; and

 

   

our financial stability.

Although we believe that our products and services currently compete favorably with respect to such factors, we cannot provide any assurance that we can maintain our competitive position against current and potential competitors, especially those with significantly greater brand recognition, financial, marketing, service, support, technical and other resources.

In the markets in which we promote music concerts, we face competition from promoters and venue operators. We believe that barriers to entry into the promotion services business are low and that certain local promoters are increasingly expanding the geographic scope of their operations.

Our main competitors in the live music industry include AEG, MLK, MSG Entertainment and C3 Presents, in addition to numerous smaller regional companies and various casinos in North America and Europe. Anschutz Entertainment Group operates under a number of different names including AEG Live, Concerts West and The Messina Group. Some of our competitors in the live music industry have a stronger presence in certain markets, have access to other sports and entertainment venues, and have greater financial resources, which may enable them to gain a greater competitive advantage in relation to us.

In markets where we own and/or operate a venue, we compete with other venues to serve artists likely to perform in that general region. Consequently, touring artists have significant alternatives to our venues in scheduling tours. Our main competitors in venue management include SMG and Anschutz Entertainment Group, in addition to numerous smaller regional companies in North America and Europe. Some of our competitors in venue management have a greater number of venues in certain markets as well as greater financial resources in those markets.

The ticketing services industry includes the sale of tickets primarily through online channels but also through phone, outlet and box office channels. As online ticket purchases increase, related ticketing costs generally decrease, which has made it easier for technology-based companies to offer primary ticketing services and standalone, automated ticketing systems that enable venues to perform their own ticketing services or utilize self-ticketing systems. In the online environment, we compete with other websites, online event sites and ticketing companies to provide event information, sell tickets and provide other online services such as fan clubs and artist websites. Our main competitors include Veritix®, Tickets.com, Outbox Technology Inc., Paciolan and CTS Eventim.

We experience competition from other national, regional and local primary ticketing service providers to secure new venues and to reach fans for events. The advent of online commerce has also contributed to the growth of resale ticketing services and the consolidation of the resale industry, which historically had been more fragmented and consisted of a significant number of local resellers with limited inventory selling through traditional storefronts. The internet has allowed fans and other ticket resellers to reach a vastly larger audience through the aggregation of inventory on online resale websites and marketplaces, and has provided consumers with more convenient access to tickets for a larger number and greater variety of events. We also face significant and increasing competition from companies that sell self-ticketing systems, as well as from venues that choose to integrate self-ticketing systems into their existing operations or acquire primary ticketing service providers. Our main competitors for online event sites include Tickets.com, as well as secondary ticketing companies such as Stubhub.

 

17


Table of Contents

In the artist management and services business, we compete with other artist managers both at large talent representation companies, such as CAA and William Morris Endeavor Entertainment, as well as smaller artist management companies and individuals. In the artist services business, we compete with companies typically only involved in one or a few of the services we provide. Some of these competitors include Bill Young Productions and Bravado.

Our main competitors at the local market level for sponsorships include local sports teams, which often offer state of the art venues and strong local media packages. Additionally, our competitors locally can include festivals, theme parks and other local events. On the national level, our competitors include the major sports leagues that all sell sponsorships combined with significant national media packages.

Government Regulations

We are subject to federal, state and local laws, both domestically and internationally, governing matters such as construction, renovation and operation of our venues, as well as:

 

   

licensing, permitting and zoning, including noise ordinances;

 

   

human health, safety and sanitation requirements;

 

   

the service of food and alcoholic beverages;

 

   

working conditions, labor, minimum wage and hour, citizenship and employment laws;

 

   

compliance with ADA and DDA;

 

   

compliance with U.S. FCPA and similar regulations in other countries;

 

   

sales and other taxes and withholding of taxes;

 

   

privacy laws and protection of personally identifiable information;

 

   

historic landmark rules; and

 

   

environmental protection.

We believe that we are in material compliance with these laws. The regulations relating to our food service in our venues are many and complex. A variety of regulations at various governmental levels relating to the handling, preparation and serving of food, the cleanliness of food production facilities and the hygiene of food-handling personnel are enforced primarily at the local public health department level.

We also must comply with applicable licensing laws, as well as state and local service laws, commonly called dram shop statutes. Dram shop statutes generally prohibit serving alcoholic beverages to certain persons such as an individual who is intoxicated or a minor. If we violate dram shop laws, we may be liable to third parties for the acts of the customer. Although we generally hire outside vendors to provide these services at our larger operated venues and regularly sponsor training programs designed to minimize the likelihood of such a situation, we cannot guarantee that intoxicated or minor customers will not be served or that liability for their acts will not be imposed on us.

We are also required to comply with the ADA, the DDA and certain state statutes and local ordinances that, among other things, require that places of public accommodation, including both existing and newly constructed venues, be accessible to customers with disabilities. The ADA and DDA require that venues be constructed to permit persons with disabilities full use of a live entertainment venue. The ADA and DDA may also require that certain modifications be made to existing venues in order to make them accessible to customers and employees who are disabled. In order to comply with the ADA, DDA and other similar ordinances, we may face substantial capital expenditures in the future.

We are required to comply with the laws of the countries we operate in and also the U.S. FCPA regarding anti-bribery regulations. These regulations make it illegal for us to pay or promise to pay money or anything of value to any government official for the purpose of directly or indirectly obtaining or retaining business. This ban on illegal payments and bribes also applies to agents or intermediaries who use funds for purposes prohibited by the statute.

We are required to comply with federal, state and international laws regarding privacy and the storing, sharing, use, disclosure and protection of personally identifiable information and user data. Specifically, personally identifiable information is increasingly subject to legislation and regulations in numerous jurisdictions around the world, the intent of which is to protect the privacy of personal information that is collected, processed and transmitted in or from the governing jurisdiction.

 

18


Table of Contents

From time to time, governmental bodies have proposed legislation that could have an effect on our business. For example, some legislatures have proposed laws in the past that would impose potential liability on us and other promoters and producers of live music events for entertainment taxes and for incidents that occur at our events, particularly relating to drugs and alcohol.

In addition, we and our venues are subject to extensive environmental laws and regulations relating to the use, storage, disposal, emission and release of hazardous and non-hazardous substances, as well as zoning and noise level restrictions which may affect, among other things, the hours of operations of our venues.

Intellectual Property

We create, own and distribute intellectual property worldwide. It is our practice to protect our trademarks, brands, copyrights, patents and other original and acquired works, ancillary goods and services. Our trademarks include, among others, the word marks “Live Nation,” “Ticketmaster,” “House of Blues” and “The Fillmore,” as well as the Live Nation, Ticketmaster, House of Blues, and The Fillmore logos. We have registered our most significant trademarks in many foreign countries. We believe that our trademarks and other proprietary rights have significant value and are important to our brand-building efforts and the marketing of our services. We cannot predict, however, whether steps taken by us to protect our proprietary rights will be adequate to prevent misappropriation of these rights.

Employees

As of December 31, 2010, we had approximately 6,500 full-time employees, including 4,100 domestic and 2,400 international employees, of which approximately 6,350 were employed in our operations departments and approximately 150 were employed in our corporate group.

Our staffing needs vary significantly throughout the year. Therefore, we also employ part-time and/or seasonal employees, primarily for our live music venues. As of December 31, 2010, we employed approximately 3,500 seasonal and/or part-time employees and during peak seasonal periods, particularly in the summer months, we employed as many as 14,000 seasonal employees in 2010. The stagehands at some of our venues and other employees are subject to collective bargaining agreements. Our union agreements typically have a term of three years and thus regularly expire and require negotiation in the course of our business. We believe that we enjoy good relations with our employees and other unionized labor involved in our events, and there have been no significant work stoppages in the past three years. Upon the expiration of any of our collective bargaining agreements, however, we may be unable to renegotiate on terms favorable to us, and our business operations at one or more of our facilities may be interrupted as a result of labor disputes or difficulties and delays in the process of renegotiating our collective bargaining agreements. In addition, our business operations at one or more of our facilities may also be interrupted as a result of labor disputes by outside unions attempting to unionize a venue even though we do not have unionized labor at that venue currently. A work stoppage at one or more of our owned and/or operated venues or at our promoted events could have a material adverse effect on our business, results of operations and financial condition. We cannot predict the effect that a potential work stoppage will have on our results of operations.

Executive Officers

Set forth below are the names, ages and current positions of our executive officers and other significant employees as of February 21, 2011.

 

Name

  

Age

  

Position

Michael Rapino

   45    President, Chief Executive Officer and Director

Irving Azoff

   63    Executive Chairman and Chairman of the Board

Ron Bension

   56    Chief Executive Officer—House of Blues, Clubs and Theaters

Mark Campana

   53    President—North America Concerts, Regions North

Brian Capo

   44    Chief Accounting Officer

Arthur Fogel

   57    Chief Executive Officer—Global Touring and Chairman—Global Music

John Hopmans

   52    Executive Vice President—Mergers and Acquisitions and Strategic Finance

 

19


Table of Contents

Name

  

Age

  

Position

Nathan Hubbard

   35    Chief Executive Officer—Ticketing

Thomas Johansson

   62    Chairman—International Concerts

Paul Latham

   50    Chief Operating Officer—International

Simon Lewis

   47    President—International Sponsorships

Alan Ridgeway

   44    Chief Executive Officer—International

Bob Roux

   53    President—North America Concerts, Regions South

Michael Rowles

   45    General Counsel and Secretary

Russell Wallach

   45    President—North America Sponsorships

Kathy Willard

   44    Chief Financial Officer

Michael Rapino is our President and Chief Executive Officer and has served in this capacity since August 2005. He has also served on our board of directors since December 2005. Mr. Rapino has worked for us or our predecessors since 1999.

Irving Azoff is our Executive Chairman along with serving on our board of directors and has served in these capacities since January 2010. He became Chairman of our board of directors in February 2011. From October 2008 to January 2010, Mr. Azoff was Chief Executive Officer of Ticketmaster. He also served on Ticketmaster’s board of directors since January 2009. Mr. Azoff has served as Chief Executive Officer of Front Line since its inception in January 2005.

Ron Bension is Chief Executive Officer of our House of Blues, Clubs and Theaters division and has served in this capacity since November 2010. Previously, Mr. Bension served as Chief Executive Officer for TicketsNow, a division of Ticketmaster, from January 2010 to November 2010. From June 2009 to October 2009, Mr. Bension was Chief Executive Officer of ProLink. Prior to that, from February 2008 to June 2009, he was Chief Executive Officer for SportNet and from December 2000 to May 2006, he was Chief Executive Officer of Tickets.com.

Mark Campana is President of our North America Concerts, Regions North division and has served in this capacity since October 2010. Prior to that, Mr. Campana served as President of our Midwest Region operations in North America Concerts. Mr. Campana has worked for us or our predecessors since 1980.

Brian Capo is our Chief Accounting Officer and has served in this capacity since December 2007. Prior to that, Mr. Capo served as a Senior Finance Director at BMC Software, Inc. from November 2005 to November 2007.

Arthur Fogel is the Chief Executive Officer of our Global Touring division and Chairman of our Global Music group and has served in this capacity since 2005. Mr. Fogel has worked for us or our predecessors since 1999.

John Hopmans is our Executive Vice President of Mergers and Acquisitions and Strategic Finance and has served in this capacity since April 2008. Previously, Mr. Hopmans served in several capacities at Scotia Capital including Managing Director, Industry Head, Private Equity Sponsor Coverage and as Managing Director, Industry Head, Diversified Industries since joining them in 1991.

Nathan Hubbard is the Chief Executive Officer of our Ticketing division and has served in this capacity since January 2008. Prior to that, Mr. Hubbard was Chief Executive Officer of Musictoday which was acquired by us in 2006.

Thomas Johansson is the Chairman of our International Concerts division and has served in this capacity since September 2004. Previously, Mr. Johansson served as the Chief Executive Officer of our subsidiary EMA Telstar Group, a company he founded in April 1969 and which our predecessor acquired in 1999.

Paul Latham is the Chief Operating Officer of our International divisions and has served in this capacity since January 2009. Mr. Latham has worked for us or our predecessors since 1984.

Simon Lewis is the President of our International Sponsorships division and has served in this capacity since joining us in 2003.

 

20


Table of Contents

Alan Ridgeway is the Chief Executive Officer of our International divisions and has served in this capacity since September 2007. From September 2005 to August 2007, Mr. Ridgeway was our Chief Financial Officer. Mr. Ridgeway has worked for us or our predecessors since 2002.

Bob Roux is President of our North America Concerts, Regions South division and has served in this capacity since October 2010. Prior to that, Mr. Roux served as President of our Southwest Region in North America Concerts. Mr. Roux has worked for us or our predecessors since 1990.

Michael Rowles is our General Counsel and has served in this capacity since March 2006 and as our Secretary since May 2007. Previously, Mr. Rowles served as General Counsel and Secretary of Entravision Communications Corporation since September 2000.

Russell Wallach is President of our North America Sponsorships division and has served in this capacity since July 2006. Prior to that, Mr. Wallach served as Executive Vice President of Sales and Marketing for us or our predecessors since joining in 1996.

Kathy Willard is our Chief Financial Officer and has served in this capacity since September 2007. From September 2005 to August 2007, Ms. Willard was our Chief Accounting Officer. Ms. Willard has worked for us or our predecessors since 1998.

Available Information

We are required to file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any materials we have filed with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our filings with the SEC are also available to the public through the SEC’s website at www.sec.gov.

You can find more information about us at our internet website located at www.livenation.com. Our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and any amendments to those reports are available free of charge on our internet website as soon as reasonably practicable after we electronically file such material with the SEC.

 

21


Table of Contents
ITEM 1A.     RISK FACTORS

You should carefully consider each of the following risks and all of the other information set forth in this Annual Report. The following risks relate principally to our leverage, our convertible notes, our business, our common stock, our separation from Clear Channel, our merger with Ticketmaster and our general business operations. These risks and uncertainties are not the only ones facing our company. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. If any of the risks and uncertainties develop into actual events, this could have a material adverse effect on our business, financial condition or results of operations. In that case, the trading price of our common stock could decline.

Risks Relating to Our Leverage

We have a large amount of debt and lease obligations that could restrict our operations and impair our financial condition.

As of December 31, 2010, our total indebtedness for borrowed money, excluding unamortized debt discounts and premiums, was approximately $1.756 billion. Our available borrowing capacity under the revolving portion of our senior secured credit facility at that date was approximately $250.7 million, with outstanding letters of credit of approximately $49.3 million. We may also incur significant additional indebtedness in the future.

Our substantial indebtedness could have adverse consequences, including:

 

   

making it more difficult for us to satisfy our obligations;

 

   

increasing our vulnerability to adverse economic, regulatory and industry conditions;

 

   

limiting our ability to obtain additional financing for future working capital, capital expenditures, mergers and other purposes;

 

   

requiring us to dedicate a substantial portion of our cash flow from operations to fund payments on our debt, thereby reducing funds available for operations and other purposes;

 

   

limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

 

   

making us more vulnerable to increases in interest rates;

 

   

placing us at a competitive disadvantage compared to our competitors that have less debt; and

 

   

having a material adverse effect on us if we fail to comply with the covenants in the instruments governing our debt.

To service our debt and lease obligations and to fund potential acquisitions, artist advances and capital expenditures, we will require a significant amount of cash, which depends on many factors beyond our control.

As of December 31, 2010, approximately $54.0 million of our total indebtedness (excluding interest) is due in 2011, $57.3 million is due in the aggregate for 2012 and 2013, $323.7 million is due in the aggregate for 2014 and 2015 and $1.321 billion is due thereafter. In addition, as of December 31, 2010, we had approximately $1.5 billion in operating lease agreements, of which approximately $104.0 million is due in 2011 and $98.4 million is due in 2012. See the table in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Commitments—Firm Commitments.

Our ability to service our debt and lease obligations and to fund potential acquisitions, artist advances and capital expenditures will require a significant amount of cash, which depends on many factors beyond our control. Our ability to make payments on and to refinance our debt will also depend on our ability to generate cash in the future. This is, to an extent, subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

We cannot assure you that our business will generate sufficient cash flow or that future borrowings will be available to us in an amount sufficient to enable us to pay our debt or to fund our other liquidity needs. We cannot predict the impact to our ability to access additional capital in light of the current uncertainty in the credit market. If our future cash flow from operations and other capital resources are insufficient to pay our obligations as they mature or to fund our liquidity needs, we

 

22


Table of Contents

may be forced to reduce or delay our business activities and capital expenditures, sell assets, obtain additional equity capital or restructure or refinance all or a portion of our debt on or before maturity. In addition, the terms of our existing debt, including our senior secured credit facility, and other future debt may limit our ability to pursue any of these alternatives.

These measures might also be unsuccessful or inadequate in permitting us to meet scheduled debt or lease service obligations. We may be unable to restructure or refinance our obligations and obtain additional equity financing or sell assets on satisfactory terms or at all. As a result, the inability to meet our debt or lease obligations could cause us to default on those obligations. Any such defaults could materially harm our financial condition and liquidity.

The agreement governing our senior secured credit facility and certain of our other indebtedness impose restrictions on us that limit the discretion of management in operating our business and that, in turn, could impair our ability to meet our obligations under our debt.

The agreements governing our senior secured credit facility and certain of our other indebtedness include restrictive covenants that, among other things, restrict our ability to:

 

   

incur additional debt;

 

   

pay dividends and make distributions;

 

   

make certain investments;

 

   

repurchase our stock and prepay certain indebtedness;

 

   

create liens;

 

   

enter into transactions with affiliates;

 

   

modify the nature of our business;

 

   

enter into sale-leaseback transactions;

 

   

transfer and sell material assets; and

 

   

merge or consolidate.

In addition, our senior secured credit facility includes other restrictions, including requirements to maintain certain financial ratios. Our failure to comply with the terms and covenants in our indebtedness could lead to a default under the terms of the governing documents, which would entitle the lenders to accelerate the indebtedness and declare all amounts owed due and payable.

These covenants could materially and adversely affect our ability to finance our future operations or capital needs. Furthermore, they may restrict our ability to expand, to pursue our business strategies and otherwise to conduct our business. Our ability to comply with these covenants may be affected by circumstances and events beyond our control, such as prevailing economic conditions and changes in regulations, and we cannot assure you that we will be able to comply. A breach of these covenants could result in a default under our debt. If there were an event of default under our outstanding indebtedness and the obligations thereunder accelerated, our assets and cash flow might not be sufficient to repay our outstanding debt and we could be forced into bankruptcy.

We depend on the cash flows of our subsidiaries in order to satisfy our obligations.

We rely on distributions and loans from our subsidiaries in order to meet our payment requirements under our obligations. If our subsidiaries are unable to pay dividends or otherwise make payments to us, we may not be able to make debt service payments on our obligations. We conduct substantially all of our operations through our subsidiaries. Our operating cash flows and consequently our ability to service our debt is therefore principally dependent upon our subsidiaries’ earnings and their distributions of those earnings to us and may also be dependent upon loans or other payments of funds to us by those subsidiaries. Our subsidiaries are separate legal entities and may have no obligation, contingent or otherwise, to pay any amount due pursuant to our obligations or to make any funds available for that purpose. In addition, the ability of our subsidiaries to provide funds to us may be subject to restrictions under our senior secured credit facility and may be subject to the terms of such subsidiaries’ future indebtedness, as well as the availability of sufficient surplus funds under applicable law.

 

23


Table of Contents

Any inability to fund the significant up-front cash requirements associated with our touring business could result in the loss of key tours.

In order to secure a tour, including global tours by major artists, we are often required to post a letter of credit or advance cash to the artist prior to the sale of any tickets for that tour. If we do not have sufficient cash on hand or capacity under our credit facility to advance the necessary cash or post the required letter of credit, for any given tour we would not be able to promote that tour and our touring business would be negatively impacted.

Risks Relating to our 2.875% Convertible Senior Notes

We may not have the funds necessary to finance the repurchase of the notes or to pay the cash payable upon a conversion (if we make the net share settlement election), or we may otherwise be restricted from making such payments, which may increase note holders’ credit risk.

In July 2007, we issued $220 million of 2.875% convertible senior notes due 2027 in a private placement in the United States to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. On July 15, 2014, July 15, 2017 and July 15, 2022, or in the event of a fundamental change (as defined in the indenture governing the notes), holders may require us to repurchase their notes at a price of 100% of the principal amount of the notes, plus accrued and unpaid interest, including contingent interest and additional amounts, to the repurchase date. In addition, at any time on or prior to June 15, 2027, we may irrevocably elect net share settlement of the notes, and thereafter we will be required to make a cash payment of up to $1,000 for each $1,000 in principal amount of notes converted. However, it is possible that we will not have sufficient funds available at such time to make the required repurchase or settlement of converted notes. In addition, some of our existing financing agreements contain, and any future credit agreements or other agreements relating to our indebtedness could contain, provisions prohibiting the repurchase of the notes under certain circumstances, or could provide that a fundamental change constitutes an event of default under that agreement, restrict our ability to make cash payments upon conversion of the notes or restrict the ability of our subsidiaries to make funds available to us for that purpose. If any agreement governing our indebtedness prohibits or otherwise restricts us from repurchasing the notes or making the cash payment upon conversion when we become obligated to do so, we could seek the consent of the lenders to repurchase the notes or settle the conversion or attempt to refinance the other debt. If we do not obtain such consent or refinance the debt, we would not be permitted to repurchase the notes or settle the conversion without potentially causing a default under the other debt. Our failure to repurchase tendered notes or to pay any cash payable on a conversion would constitute an event of default under the indenture, which might constitute a default under the terms of our other indebtedness.

The additional shares of common stock payable on any notes converted in connection with specified corporate transactions may not adequately compensate holders of notes for any loss they may experience as a result of such specified corporate transactions.

If certain specified corporate transactions occur on or prior to July 15, 2014, we will under certain circumstances increase the conversion rate on notes converted in connection with the specified corporate transaction by a number of additional shares of common stock. The number of additional shares of common stock will be determined based on the date on which the specified corporate transaction becomes effective and the price paid per share of our common stock in the specified corporate transaction. The additional shares of common stock issuable upon conversion of the notes in connection with a specified corporate transaction may not adequately compensate holders of notes for any loss they may experience as a result of such specified corporate transaction. Furthermore, holders of notes will not receive the additional consideration payable as a result of the increase in the conversion rate until the effective date of the specified corporate transaction or later, which could be a significant period of time after holders of notes have tendered their notes for conversion. If the specified corporate transaction occurs after July 15, 2014, or if the price paid per share of our common stock in the specified corporate transaction is less than the common stock price at the date of issuance of the notes or above a specified price, there will be no increase in the conversion rate. In addition, in certain circumstances upon a change of control arising from our acquisition by a public company, we may elect to adjust the conversion rate and, if we so elect, holders of notes will not be entitled to the increase in the conversion rate determined as described above.

The conditional conversion feature of the notes could result in holders of notes receiving less than the value of the common stock for which a note would otherwise be convertible.

Prior to July 15, 2027, the notes are convertible for shares of our common stock (or cash or a combination of cash and shares of our common stock) only if specified conditions are met. If the specific conditions for conversion are not met, holders of notes will not be able to convert their notes, and they may not be able to receive the value of the common stock or cash and common stock, as applicable, for which the notes would otherwise be convertible.

 

24


Table of Contents

Upon conversion of the notes, holders of notes may receive less proceeds than expected because the value of our common stock may decline after the exercise of the conversion right.

If we elect to settle conversions other than solely in shares of common stock, including by making a net share settlement election, the conversion value that holders of notes will receive upon conversion of their notes are in part determined, subject to certain exceptions, by the average of the last reported sale prices of our common stock for the 20 trading days beginning on the second trading day immediately following the day the notes are tendered for conversion, or, if tendered within the 20 days leading up to the maturity date or a specified redemption date, beginning on the fifth day following the maturity date or the redemption date. Accordingly, if the price of our common stock decreases after holders of notes tender their notes for conversion, the conversion value they will receive may be adversely affected.

The conversion rate of the notes may not be adjusted for all dilutive events.

The conversion rate of the notes is subject to adjustment only for certain specified events, including, but not limited to, the issuance of stock dividends on our common stock, the issuance of certain rights or warrants, subdivisions, combinations, distributions of capital stock, indebtedness or assets, cash dividends and certain issuer tender or exchange offers. However, the conversion rate will not be adjusted for other events, such as an issuance of common stock for cash or acquisition, that may adversely affect the trading price of the notes or the common stock, or for a third-party tender offer.

Risks Relating to Our Business

Our business is highly sensitive to public tastes and dependent on our ability to secure popular artists and other live music events, and we and our ticketing clients may be unable to anticipate or respond to changes in consumer preferences, which may result in decreased demand for our services.

Our business is highly sensitive to rapidly changing public tastes and dependent on the availability of popular artists and events. Our live entertainment business depends in part on our ability to anticipate the tastes of consumers and to offer events that appeal to them. Since we rely on unrelated parties to create and perform live music content, any unwillingness to tour or lack of availability of popular artists could limit our ability to generate revenue. In particular, there are a limited number of artists that can headline a major North American or global tour or who can sell out larger venues, including many of our amphitheaters. If those artists do not choose to tour, or if we are unable to secure the rights to their future tours, then our business would be adversely affected. Our ticketing business relies on third parties to create and perform live entertainment, sporting and leisure events and to price tickets to such events. Accordingly, our ticketing business’ success depends, in part, upon the ability of these third parties to correctly anticipate public demand for particular events, as well as the availability of popular artists, entertainers and teams. Our artist services business could be adversely affected if the artists it represents do not tour or perform as frequently as anticipated, or if such tours or performances are not as widely attended by fans as anticipated due to changing tastes, general economic conditions or otherwise.

In addition, our live entertainment business typically books our live music tours one to four months in advance of the beginning of the tour and often agrees to pay an artist a fixed guaranteed amount prior to our receiving any revenue. Therefore, if the public is not receptive to the tour, or we or a performer cancel the tour, we may incur a loss for the tour depending on the amount of the fixed guarantee or incurred costs relative to any revenue earned, as well as foregone revenue we could have earned at booked venues. We have cancellation insurance policies in place to cover a portion of our losses if a performer cancels a tour but it may not be sufficient and is subject to deductibles. Furthermore, consumer preferences change from time to time, and our failure to anticipate, identify or react to these changes could result in reduced demand for our services, which would adversely affect our business, financial condition and results of operations.

Our business depends on relationships with key promoters, executives, managers, artists and clients and any adverse changes in these relationships could adversely affect our business, financial condition and results of operations.

The live music business is uniquely dependent upon personal relationships, as promoters and executives within live music companies such as ours leverage their existing network of relationships with artists, agents and managers in order to secure the rights to the live music tours and events which are critical to our success. Due to the importance of those industry contacts to our business, the loss of any of our promoters, officers or other key personnel could adversely affect our business. Similarly, the artist services business is dependent upon the highly personalized relationship between a manager and an artist, and the loss of a manager may also result in a loss in the artist represented by the manager, which could adversely affect our business. Although we have entered into long-term agreements with many of those individuals described above to protect our interests in those relationships, we can give no assurance that all or any of these key employees or managers will remain with us or will retain their associations with key business contacts.

 

25


Table of Contents

The success of our ticketing business depends, in significant part, on our ability to maintain and renew relationships with existing clients and to establish new client relationships. We anticipate that, for the foreseeable future, the substantial majority of our ticketing segment revenue will be derived from both online and offline sales of tickets. We also expect that revenue from primary ticketing services, which consist primarily of per ticket convenience charges and per order “order processing” fees, will continue to comprise the substantial majority of our ticketing segment revenue. We cannot provide assurances that we will be able to maintain existing client contracts, or enter into or maintain new client contracts, on acceptable terms, if at all, and the failure to do so could have a material adverse effect on our business, financial condition and results of operations.

Another important component of our success is our ability to maintain existing and to build new relationships with third-party distribution channels, advertisers, sponsors and service providers. Any adverse change in these relationships, including the inability of these parties to fulfill their obligations to our businesses for any reason, could adversely affect our business, financial condition and results of operations.

We face intense competition in the live music, ticketing and artist services industries, and we may not be able to maintain or increase our current revenue, which could adversely affect our business, financial condition and results of operations.

Our businesses are in highly competitive industries, and we may not be able to maintain or increase our current revenue due to such competition. The live music industry competes with other forms of entertainment for consumers’ discretionary spending and within this industry we compete with other venues to book performers, and, in the markets in which we promote music concerts, we face competition from other promoters and venue operators. Our competitors compete with us for key employees who have relationships with popular music artists and that have a history of being able to book such artists for concerts and tours. These competitors may engage in more extensive development efforts, undertake more far-reaching marketing campaigns, adopt more aggressive pricing policies and make more attractive offers to existing and potential artists. Our competitors may develop services, advertising options or music venues that are equal or superior to those we provide or that achieve greater market acceptance and brand recognition than we achieve. It is possible that new competitors may emerge and rapidly acquire significant market share.

Our ticketing business faces significant competition from other national, regional and local primary ticketing service providers to secure new and retain existing clients on a continuous basis. Additionally, we face significant and increasing challenges from companies that sell self-ticketing systems and from clients who are increasingly choosing to self-ticket, through the integration of such systems into their existing operations or the acquisition of primary ticket services providers or by increasing sales through facility box offices and season, subscription or group sales. We also face competition in the resale of tickets from online auction websites and resale marketplaces and from other ticket resellers with online distribution capabilities. The intense competition that we face in the ticketing industry could cause the volume of our ticketing services business to decline. In 2010, we entered into an agreement with AEG which provides them the ability to license our Ticketmaster ticketing technology to third-party clients, and we divested Ticketmaster’s Paciolan ticketing business, both of which further increase the competition that we face. Relatedly, as a result of our merger with Ticketmaster we may face direct competition, in the live music industry, with our prospective or current primary ticketing clients, who primarily include live event content providers. This direct competition with our prospective or current primary ticketing clients could result in a decline in the number of ticketing clients we have and a decline in the volume of our ticketing business, which could adversely affect our business, financial condition and results of operations.

In the secondary ticket sales market, we have restrictions on our business that are not faced by our competitors, which restrictions are both self-imposed and imposed as a result of agreements entered into with the FTC and the Attorneys General of several individual states. These restrictions primarily relate to our TicketsNow business, and include: a restriction on linking from our page on the www.ticketmaster.com website that informs consumers that no tickets were found in response to their ticket request to our TicketsNow re-sale website without first obtaining approval from the State of New Jersey as to any changes to our current Ticketmaster/TicketsNow linking practices; a restriction on using or allowing our affiliates to use domain names that, among other things, contain the unique names of venues, sports teams or performers, or contain names that are substantially similar to or are misspelled versions of same; a requirement to clearly and conspicuously disclose on the TicketsNow website (or any other resale website owned by us or on any primary ticketing website where a link or redirect to such a resale website is posted) that it is a resale website and ticket prices often exceed the ticket’s original price; and a requirement to make certain clear and conspicuous disclosures when a ticket being offered for re-sale is not “in-hand” as well as a requirement to monitor and enforce the compliance of third parties offering tickets on our websites with such disclosure requirements. Our competitors in the secondary ticket sales market are not, to our knowledge, bound by similar restrictions. As a result, our ability to effectively compete in the secondary ticket sales market, through our TicketsNow business or

 

26


Table of Contents

otherwise, may be adversely affected, which could in turn adversely affect our business, financial condition and results of operations.

The artist services industry is also a highly competitive industry. There are numerous other artist management companies and individual managers in the United States alone. We compete with these companies and individuals to discover new and emerging artists and to represent established acts. In addition, certain of our arrangements with clients of our artist services business are terminable at will by either party, leading to competition to retain those artists as clients. Competition is intense and may contribute to a decline in the volume of our artist services business, which could adversely affect our business, financial condition and results of operations.

Other variables that could adversely affect our financial performance by, among other things, leading to decreases in overall revenue, the number of sponsors, event attendance, ticket prices and fees or profit margins include:

 

   

an increased level of competition for advertising dollars, which may lead to lower sponsorships as we attempt to retain advertisers or which may cause us to lose advertisers to our competitors offering better programs that we are unable or unwilling to match;

 

   

unfavorable fluctuations in operating costs, including increased guarantees to performers, which we may be unwilling or unable to pass through to our customers via ticket prices;

 

   

our competitors may offer more favorable terms than we do in order to obtain agreements for new venues or ticketing arrangements or to obtain events for the venues they operate;

 

   

technological changes and innovations that we are unable to adopt or are late in adopting that offer more attractive entertainment alternatives than we or other live entertainment providers currently offer, which may lead to a reduction in attendance at live events, a loss of ticket sales or to lower ticket fees;

 

   

other entertainment options available to our audiences that we do not offer;

 

   

general economic conditions which could cause our consumers to reduce discretionary spending;

 

   

unfavorable changes in labor conditions which may require us to spend more to retain and attract key employees; and

 

   

unfavorable shifts in population and other demographics which may cause us to lose audiences as people migrate to markets where we have a smaller presence, or which may cause sponsors to be unwilling to pay for sponsorship and advertising opportunities if the general population shifts into a less desirable age or geographical demographic from an advertising perspective.

We have incurred net losses and may experience future net losses.

Our operating results from continuing operations have been adversely affected by, among other things, reduced ticket sales, event profitability, overhead costs and high amortization of intangibles related to prior acquisitions. Live Nation incurred net losses from continuing operations of approximately $203.8 million, $126.0 million and $333.5 million in 2010, 2009 and 2008, respectively. We may face reduced demand for our live music events, our ticketing software and services and other factors that could adversely affect our business, financial condition and results of operations in the future. We cannot predict whether we will achieve profitability in future periods.

Our operations are seasonal and our results of operations vary from quarter to quarter and year over year, so our financial performance in certain financial quarters or years may not be indicative of, or comparable to, our financial performance in subsequent financial quarters or years.

We believe our financial results and cash needs will vary greatly from quarter to quarter and year to year depending on, among other things, the timing of tours, tour cancellations, event ticket on-sales, capital expenditures, seasonal and other fluctuations in our operating results, the timing of guaranteed payments and receipt of ticket sales and fees, financing activities, acquisitions and investments and receivables management. Because our results may vary significantly from quarter to quarter and year to year, our financial results for one quarter or year cannot necessarily be compared to another quarter or year and may not be indicative of our future financial performance in subsequent quarters or years. Typically, we experience our lowest financial performance in the first and fourth quarters of the calendar year as our outdoor venues are primarily used, and our festivals primarily occur, during May through September. In addition, the timing of tours of top grossing acts can impact comparability of quarterly results year over year and potentially annual results. The timing of event on-sales by our ticketing clients can also impact this comparability.

 

27


Table of Contents

The following table sets forth Live Nation’s operating income (loss) for the last eight fiscal quarters:

 

Fiscal Quarter Ended

   Operating
income  (loss)
 
     (in thousands)  

March 31, 2009

   $ (88,259

June 30, 2009

   $ (8,135

September 30, 2009

   $ 108,399   

December 31, 2009

   $ (64,361

March 31, 2010

   $ (106,336

June 30, 2010

   $ 25,606   

September 30, 2010

   $ 103,106   

December 31, 2010

   $ (86,076

Our success depends, in significant part, on entertainment, sporting and leisure events and factors adversely affecting such events could have a material adverse effect on our business, financial condition and results of operations.

A decline in attendance at or reduction in the number of live entertainment, sporting and leisure events may have an adverse effect on our revenue and operating income. In addition, during past economic slowdowns and recessions, many consumers reduced their discretionary spending and advertisers reduced their advertising expenditures. The impact of slowdowns on our business is difficult to predict, but they may result in reductions in ticket sales, sponsorship opportunities and our ability to generate revenue. The risks associated with our businesses may become more acute in periods of a slowing economy or recession, which may be accompanied by a decrease in attendance at live entertainment, sporting and leisure events.

Our business depends on discretionary consumer and corporate spending. Many factors related to corporate spending and discretionary consumer spending, including economic conditions affecting disposable consumer income such as employment, fuel prices, interest and tax rates and inflation can significantly impact our operating results. Business conditions, as well as various industry conditions, including corporate marketing and promotional spending and interest levels, can also significantly impact our operating results. These factors can affect attendance at our events, premium seat sales, sponsorship, advertising and hospitality spending, concession and merchandise sales, as well as the financial results of sponsors of our venues, events and the industry. Negative factors such as challenging economic conditions, public concerns over terrorism and security incidents, particularly when combined, can impact corporate and consumer spending, and one negative factor can impact our results more than another. There can be no assurance that consumer and corporate spending will not be adversely impacted by current economic conditions, or by any further or future deterioration in economic conditions, thereby possibly impacting our operating results and growth.

We operate in international markets in which we have limited experience and which may expose us to risks not found in doing business in the United States.

We provide services in various jurisdictions abroad through a number of brands and businesses that we own and operate, as well as through joint ventures, and we expect to continue to expand our international presence. We face, and expect to continue to face, additional risks in the case of our existing and future international operations, including:

 

   

political instability, adverse changes in diplomatic relations and unfavorable economic conditions in the markets in which we currently have international operations or into which we may expand;

 

   

more restrictive or otherwise unfavorable government regulation of the live entertainment and ticketing industries, which could result in increased compliance costs and/or otherwise restrict the manner in which we provide services and the amount of related fees charged for such services;

 

   

limitations on the enforcement of intellectual property rights;

 

   

limitations on the ability of foreign subsidiaries to repatriate profits or otherwise remit earnings;

 

   

adverse tax consequences;

 

   

expropriations of property and risks of renegotiation or modification of existing agreements with governmental authorities;

 

   

diminished ability to legally enforce our contractual rights in foreign countries;

 

28


Table of Contents
   

limitations on technology infrastructure, which could limit our ability to migrate international operations to a common ticketing system;

 

   

lower levels of internet usage, credit card usage and consumer spending in comparison to those in the United States; and

 

   

difficulties in managing operations and adapting to consumer desires due to distance, language and cultural differences, including issues associated with (i) business practices and customs that are common in certain foreign countries but might be prohibited by United States law and our internal policies and procedures, and (ii) management and operational systems and infrastructures, including internal financial control and reporting systems and functions, staffing and managing of foreign operations, which we might not be able to do effectively, or if so, on a cost-efficient basis.

Our ability to expand our international operations into new jurisdictions, or further into existing jurisdictions will depend, in significant part, on our ability to identify potential acquisition candidates, joint venture or other partners, and enter into arrangements with these parties on favorable terms, as well as our ability to make continued investments to maintain and grow existing international operations. If the revenue generated by international operations are insufficient to offset expenses incurred in connection with the maintenance and growth of these operations, our business, financial condition and results of operations could be materially and adversely affected. In addition, in an effort to make international operations in one or more given jurisdictions profitable over the long term, significant additional investments that are not profitable over the short term could be required over a prolonged period.

Exchange rates may cause fluctuations in our results of operations that are not related to our operations.

Because we own assets overseas and derive revenue from our international operations, we may incur currency translation losses or gains due to changes in the values of foreign currencies relative to the United States Dollar. We cannot predict the effect of exchange rate fluctuations upon future operating results. For the year ended December 31, 2010, Live Nation’s international operations accounted for approximately 32% of its revenue. Although we cannot predict the future relationship between the United States Dollar and the currencies used by our international businesses, principally the British Pound, Euro and Canadian Dollar, Live Nation experienced foreign exchange rate net losses of $14.6 million and $39.9 million in 2010 and 2009, respectively, which had a negative effect on our operating income. We experienced a foreign exchange rate net gain of $0.2 million in 2008 which had a positive effect on our operating income. See Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

We may enter into future acquisitions and take certain actions in connection with such transactions that could affect the price of our common stock.

As part of our growth strategy, we expect to review acquisition prospects that would offer growth opportunities. In the event of future acquisitions, we could, among other things:

 

   

use a significant portion of our available cash;

 

   

issue equity securities, which would dilute current stockholders’ percentage ownership;

 

   

incur substantial debt;

 

   

incur or assume contingent liabilities, known or unknown;

 

   

incur amortization expenses related to intangibles; and

 

   

incur large accounting write-offs.

Such actions by us could harm our results from operations and adversely affect the price of our common stock.

We may be unsuccessful in our future acquisition endeavors, if any, which may have an adverse effect on our business; in addition, some of the businesses we acquire may incur significant losses from operations or experience impairment of carrying value. Our compliance with antitrust, competition and other regulations may limit our operations and future acquisitions.

Our future growth rate depends in part on our selective acquisition of additional businesses. A significant portion of our growth has been attributable to acquisitions. We may be unable to identify other suitable targets for further acquisition or make further acquisitions at favorable prices. If we identify a suitable acquisition candidate, our ability to successfully implement the acquisition would depend on a variety of factors, including our ability to obtain financing on acceptable terms and requisite government approvals. In addition, the credit agreement for our senior secured credit facility restricts our ability to make certain acquisitions. Acquisitions involve risks, including those associated with:

 

   

integrating the operations, financial reporting, technologies and personnel of acquired companies;

 

29


Table of Contents
   

managing geographically disbursed operations;

 

   

the diversion of management’s attention from other business concerns;

 

   

the inherent risks in entering markets or lines of business in which we have either limited or no direct experience; and

 

   

the potential loss of key employees, customers and strategic partners of acquired companies.

We may not successfully integrate any businesses or technologies we may acquire in the future and may not achieve anticipated revenue and cost benefits. Acquisitions may be expensive, time consuming and may strain our resources. Acquisitions may not be accretive to our earnings and may negatively impact our results of operations as a result of, among other things, expenses to pursue the acquisition and the incurrence of debt. In addition, future acquisitions that we may pursue could result in dilutive issuances of equity securities. Also, the value of goodwill and other intangible assets acquired could be impacted by one or more unfavorable events or trends, which could result in impairment charges. The occurrence of any of these events could adversely affect our business, financial condition and results of operations. In addition, we may choose to substantially reduce or discontinue the operations of any of our acquired businesses if we are unsuccessful in meeting these challenges. Any such shut-down could expose us to expenses associated with exiting from existing contracts and terminating employees, and could expose us to certain unknown liabilities that arise following the shut-down.

We are also subject to laws and regulations, including those relating to antitrust, that could significantly affect our ability to expand our business through acquisitions. For example, the FTC and the Antitrust Division of the DOJ with respect to our domestic acquisitions, and the European Commission (the antitrust regulator of the European Union) and the United Kingdom Competition Commission with respect to our European acquisitions, have the authority to challenge our acquisitions on antitrust grounds before or after the acquisitions are completed. State agencies may also have standing to challenge these acquisitions under state or federal antitrust law. Comparable authorities in other jurisdictions also have the ability to challenge our foreign acquisitions. Our failure to comply with all applicable laws and regulations could result in, among other things, regulatory actions or legal proceedings against us, the imposition of fines, penalties or judgments against us or significant limitations on our activities. In addition, the regulatory environment in which we operate is subject to change. New or revised requirements imposed by governmental regulatory authorities could have adverse effects on us, including increased costs of compliance. We also may be adversely affected by changes in the interpretation or enforcement of existing laws and regulations by these governmental authorities.

Our businesses may not be able to adapt quickly enough to changing customer requirements and industry standards.

The ecommerce industry is characterized by evolving industry standards, frequent new service and product introductions, enhancements and changing customer demands. We may not be able to adapt quickly enough and/or in a cost-effective manner to changes in industry standards and customer requirements and preferences, and our failure to do so could adversely affect our business, financial condition and results of operations. In addition, the continued widespread adoption of new Internet or telecommunications technologies and devices or other technological changes could require us to modify or adapt our respective services or infrastructures. Our failure to modify or adapt our services or infrastructures in response to these trends could render our existing websites, services and proprietary technologies obsolete, which could adversely affect our business, financial condition and results of operations.

In addition, we are currently in the process of re-architecturing our Ticketmaster ticketing system and migrating our international brands and businesses to a common ticketing platform in an attempt to provide consistent and state-of-the-art services across our businesses and to reduce the cost and expense of maintaining multiple systems, which we may not be able to complete in a timely or cost-effective manner. Delays or difficulties in making these changes to our ticketing systems, as well as any new or enhanced systems, may limit our ability to achieve the desired results in a timely manner. Also, we may be unable to devote financial resources to new technologies and systems in the future, which could adversely affect our business, financial condition and results of operations.

There is the risk of personal injuries and accidents in connection with our live music events, which could subject us to personal injury or other claims and increase our expenses, as well as reduce attendance at our live music events, causing a decrease in our revenue.

There are inherent risks involved with producing live music events. As a result, personal injuries and accidents have, and may, occur from time to time, which could subject us to claims and liabilities for personal injuries. Incidents in connection with our live music events at any of our venues or venues that we rent could also result in claims, reducing operating income or reducing attendance at our events, causing a decrease in our revenue. We have been subject to wrongful death claims and are currently subject to other litigation. While we maintain insurance policies that provide coverage within limits that are sufficient, in management’s judgment, to protect us from material financial loss for personal injuries sustained by persons at our venues or accidents in the ordinary course of business, there can be no assurance that such insurance will be adequate at all times and in all circumstances.

 

30


Table of Contents

The success of our ticketing and ecommerce operations depends, in part, on the integrity of our systems and infrastructures. System interruption and the lack of integration and redundancy in these systems and infrastructures may have an adverse impact on our business, financial condition and results of operations.

The success of our ticketing and ecommerce operations depends, in part, on our ability to maintain the integrity of our systems and infrastructures, including websites, information technology systems, call centers and distribution and fulfillment facilities. System interruption and the lack of integration and redundancy in our information systems and infrastructures of our ticketing operations may adversely affect our ability to operate websites, process and fulfill transactions, respond to customer inquiries and generally maintain cost-efficient operations. We may experience occasional system interruptions that make some or all systems or data unavailable or prevent our businesses from efficiently providing services or fulfilling orders. We lack documentation regarding certain components of our key ticketing software and systems operations and rely on certain key technology personnel to maintain such software and systems. The loss of some or all of such personnel could require us to expend additional resources to continue to maintain such software and systems and could subject us to frequent systems interruptions. We also rely on affiliate and third-party computer systems, broadband and other communications systems and service providers in connection with the provision of services generally, as well as to facilitate, process and fulfill transactions. Any interruptions, outages or delays in their systems and infrastructures, their businesses and/or third parties, or deterioration in the performance of these systems and infrastructures, could impair our ability to provide services, fulfill orders and/or process transactions. Fire, flood, power loss, telecommunications failure, hurricanes, tornadoes, earthquakes, acts of war or terrorism, other acts of God and similar events or disruptions may damage or interrupt computer, broadband or other communications systems and infrastructures at any time. Any of these events could cause system interruption, delays and loss of critical data, and could prevent us from providing services, fulfilling orders and/or processing transactions. While we have backup systems for certain aspects of our operations, disaster recovery planning by its nature cannot be sufficient for all eventualities. In addition, we may not have adequate insurance coverage to compensate for losses from a major interruption. If any of these adverse events were to occur, it could adversely affect our business, financial conditions and results of operations.

In addition, any penetration of network security or other misappropriation or misuse of personal consumer information could cause interruptions in our operations and subject us to increased costs, litigation and other liabilities. Network security issues could lead to claims against us for other misuse of personal information, such as for unauthorized purposes or identity theft, which could result in litigation and financial liabilities, as well as administrative action from governmental authorities. Security breaches could also significantly damage our reputation with consumers, ticketing clients and other third parties. It is possible that advances in computer capabilities, new discoveries, undetected fraud, inadvertent violations of company policies or procedures or other developments could result in a compromise of information or a breach of the technology and security processes that are used to protect consumer transaction data. As a result, current security measures may not prevent any or all security breaches. We may be required to expend significant capital and other resources to protect against and remedy any potential or existing security breaches and their consequences. We also face risks associated with security breaches affecting third parties with which we are affiliated or with which we otherwise conduct business. Consumers are generally concerned with security and privacy of the Internet, and any publicized security problems affecting our businesses and/or those of third parties may discourage consumers from doing business with us, which could have an adverse effect on our business, financial condition and results of operations.

The processing, storage, use and disclosure of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights.

In the processing of consumer transactions, we receive, transmit and store a large volume of personally identifiable information and other user data. The sharing, use, disclosure and protection of this information are governed by our respective privacy and data security policies. Moreover, there are federal, state and international laws regarding privacy and the storage, sharing, use, disclosure and protection of personally identifiable information and user data. Specifically, personally identifiable information is increasingly subject to legislation and regulations in numerous jurisdictions around the world, the intent of which is to protect the privacy of personal information that is collected, processed and transmitted in or from the governing jurisdiction. We could be adversely affected if legislation or regulations are expanded to require changes in business practices or privacy policies, or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business, financial condition and results of operations.

We may also become exposed to potential liabilities as a result of differing views on the privacy of the consumer and other user data collected by us. Our failure or the failure of the various third-party vendors and service providers with which we do business to comply with applicable privacy policies or federal, state or similar international laws and regulations or any compromise of security that results in the unauthorized release of personally identifiable information or other user data could damage our reputation, discourage potential users from trying our products and services and/or result in fines and/or

 

31


Table of Contents

proceedings by governmental agencies and/or consumers, one or all of which could adversely affect our business, financial condition and results of operations.

Costs associated with, and our ability to obtain, adequate insurance could adversely affect our profitability and financial condition.

Heightened concerns and challenges regarding property, casualty, liability, business interruption and other insurance coverage have resulted from terrorist and related security incidents along with varying weather-related conditions and incidents. As a result, we may experience increased difficulty obtaining high policy limits of coverage at reasonable costs, including coverage for acts of terrorism and weather-related property damage. We have a material investment in property and equipment at each of our venues, which are generally located near major cities and which hold events typically attended by a large number of fans. We also have a significant investment in information technology systems including our ticketing systems. At December 31, 2010, we had property and equipment with a net book value of approximately $737.1 million.

These operational, geographical and situational factors, among others, may result in significant increases in insurance premium costs and difficulties obtaining sufficiently high policy limits with deductibles that we believe to be reasonable. We cannot assure you that future increases in insurance costs and difficulties obtaining high policy limits will not adversely impact our profitability, thereby possibly impacting our operating results and growth.

In addition, we enter into various agreements with artists from time to time, including long-term artist rights arrangements. The profitability of those arrangements depends upon those artists’ willingness and ability to continue performing, and we may not be able to obtain sufficient insurance coverage at reasonable costs to adequately protect us against the death, disability or other failure of such artists to continue engaging in revenue-generating activities under those agreements.

We cannot guarantee that our insurance policy coverage limits, including insurance coverage for property, casualty, liability, artists and business interruption losses and acts of terrorism, would be adequate under the circumstances should one or multiple events occur at or near any of our venues, or that our insurers would have adequate financial resources to sufficiently or fully pay our related claims or damages. We cannot guarantee that adequate coverage limits will be available, offered at reasonable costs, or offered by insurers with sufficient financial soundness. The occurrence of such an incident or incidents affecting any one or more of our venues could have a material adverse effect on our financial position and future results of operations if asset damage and/or company liability were to exceed insurance coverage limits or if an insurer were unable to sufficiently or fully pay our related claims or damages.

Costs associated with capital improvements could adversely affect our profitability and liquidity.

Growth or maintenance of our existing revenue depends in part on consistent investment in our venues and our technology. Therefore, we expect to continue to make substantial capital improvements to meet long-term increasing demand, value and revenue. We frequently have a number of significant capital projects underway. Numerous factors, many of which are beyond our control, may influence the ultimate costs and timing of various capital improvements, including:

 

   

availability of financing on favorable terms;

 

   

advances in technology and related changes in customer expectations;

 

   

unforeseen changes in design;

 

   

increases in the cost of materials, equipment and labor;

 

   

fluctuations in foreign exchange rates;

 

   

litigation, accidents or natural disasters;

 

   

national or regional economic changes;

 

   

additional land acquisition costs;

 

   

environmental or hazardous conditions; and

 

   

undetected soil or land conditions.

The amount of capital expenditures can vary significantly from year to year. In addition, actual costs could vary materially from our estimates if the factors listed above and our assumptions about the quality of materials, equipment or workmanship required or the cost of financing such expenditures were to change. Construction is also subject to governmental permitting processes which, if changed, could materially affect the ultimate cost.

 

32


Table of Contents

We may fail to adequately protect our intellectual property rights or may be accused of infringing upon intellectual property rights of third parties.

We may fail to adequately protect our intellectual property rights or may be accused of infringing upon intellectual property rights of third parties. We regard our intellectual property rights, including patents, service marks, trademarks and domain names, copyrights, trade secrets and similar intellectual property (as applicable) as critical to our success. We also rely heavily upon software codes, informational databases and other components that make up our products and services.

We rely on a combination of laws and contractual restrictions with employees, customers, suppliers, affiliates and others to establish and protect these proprietary rights. Despite these precautions, it may be possible for a third party to copy or otherwise obtain and use trade secrets or copyrighted intellectual property without authorization which, if discovered, might require legal action to correct. In addition, third parties may independently and lawfully develop substantially similar intellectual properties.

We have generally registered and continue to apply to register, or secure by contract when appropriate, our trademarks and service marks as they are developed and used, and reserve and register domain names as we deem appropriate. We consider the protection of our trademarks to be important for purposes of brand maintenance and reputation. While we vigorously protect our trademarks, service marks and domain names, effective trademark protection may not be available or may not be sought in every country in which we operate, and contractual disputes may affect the use of marks governed by private contract. Similarly, not every variation of a domain name may be available or be registered, even if available. Our failure to protect our intellectual property rights in a meaningful manner or challenges to related contractual rights could result in erosion of brand names and limit our ability to control marketing on or through the Internet using our various domain names or otherwise, which could adversely affect our business, financial condition and results of operations.

Some of our businesses have been granted patents and/or have patent applications pending with the United States Patent and Trademark Office and/or various foreign patent authorities for various proprietary technologies and other inventions. We consider applying for patents or for other appropriate statutory protection when we develop valuable new or improved proprietary technologies or identify inventions, and will continue to consider the appropriateness of filing for patents to protect future proprietary technologies and inventions as circumstances may warrant. The status of any patent involves complex legal and factual questions, and the breadth of claims allowed is uncertain. Accordingly, any patent application filed may not result in a patent being issued or existing or future patents may not be adjudicated valid by a court or be afforded adequate protection against competitors with similar technology. In addition, third parties may create new products or methods that achieve similar results without infringing upon patents that we own. Likewise, the issuance of a patent to us does not mean that its processes or inventions will not be found to infringe upon patents or other rights previously issued to third parties.

From time to time, we are subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of the trademarks, copyrights, patents and other intellectual property rights of third parties. In addition, litigation may be necessary in the future to enforce our intellectual property rights, protect trade secrets or determine the validity and scope of proprietary rights claimed by others. Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of management and technical resources, any of which could adversely affect our business, financial condition and results of operations. Patent litigation tends to be particularly protracted and expensive.

We are subject to extensive governmental regulation, and our failure to comply with these regulations could adversely affect our business, financial condition and results of operations.

Our operations are subject to federal, state and local statutes, rules, regulations policies and procedures, both domestically and internationally, which are subject to change at any time, governing matters such as:

 

   

construction, renovation and operation of our venues;

 

   

licensing, permitting and zoning, including noise ordinances;

 

   

human health, safety and sanitation requirements;

 

   

the service of food and alcoholic beverages;

 

   

working conditions, labor, minimum wage and hour, citizenship and employment laws;

 

   

compliance with the ADA and the DDA;

 

   

historic landmark rules;

 

   

hazardous and non-hazardous waste and other environmental protection laws;

 

33


Table of Contents
   

sales and other taxes and withholding of taxes;

 

   

privacy laws and protection of personally identifiable information;

 

   

marketing activities via the telephone and online; and

 

   

primary ticketing and ticket resale services.

Our failure to comply with these laws and regulations could result in fines and/or proceedings against us by governmental agencies and/or consumers, which if material, could adversely affect our business, financial condition and results of operations. In addition, the promulgation of new laws, rules and regulations could restrict or unfavorably impact our business, which could decrease demand for services, reduce revenue, increase costs and/or subject us to additional liabilities. For example, some legislatures have proposed laws in the past that would impose potential liability on us and other promoters and producers of live music events for entertainment taxes and for incidents that occur at our events, particularly relating to drugs and alcohol.

From time to time, federal, state and local authorities and/or consumers commence investigations, inquiries or litigation with respect to our compliance with applicable consumer protection, advertising, unfair business practice, antitrust (and similar or related laws) and other laws. Our businesses have historically cooperated with authorities in connection with these investigations and have satisfactorily resolved each such material investigation, inquiry or litigation. We and our TicketsNow business are currently subject to agreements with the States of New Jersey and Illinois and the FTC which govern, and in certain cases place limitations on, our ticketing resale practices. Our competitors in the secondary ticket sales market are not, to our knowledge, bound by such limitations and as a result, we may be at a competitive disadvantage. Other states and Canadian provinces have commenced investigations or inquiries regarding the relationship between us and TicketsNow and other aspects of our ticketing business. We have incurred significant legal expenses in connection with the defense of governmental investigations and litigation in the past and may be required to incur additional expenses in the future regarding such investigations and litigation. In the case of antitrust (and similar or related) matters, any adverse outcome could limit or prevent us from engaging in the ticketing business generally (or in a particular market thereof) or subject us to potential damage assessments, all of which could have a material adverse effect on our business, financial condition and results of operations.

Unfavorable outcomes in legal proceedings may adversely affect our business and operating results.

Our results may be affected by the outcome of pending and future litigation. Unfavorable rulings in our legal proceedings, including those described in Note 11—Commitments and Contingent Liabilities to our consolidated financial statements, may have a negative impact on us that may be greater or smaller depending on the nature of the rulings. In addition, we are currently, and from time to time in the future may be, subject to various other claims, investigations, legal and administrative cases and proceedings (whether civil or criminal) or lawsuits by governmental agencies or private parties, as further described in the immediately preceding risk factor. If the results of these investigations, proceedings or suits are unfavorable to us or if we are unable to successfully defend against third party lawsuits, we may be required to pay monetary damages or may be subject to fines, penalties, injunctions or other censure that could have a material adverse effect on our business, financial condition and operating results. Even if we adequately address the issues raised by an investigation or proceeding or successfully defend a third-party lawsuit or counterclaim, we may have to devote significant financial and management resources to address these issues, which could harm our business, financial condition and operating results.

We depend upon unionized labor for the provision of some of our services and any work stoppages or labor disturbances could disrupt our business.

The stagehands at some of our venues and other employees are subject to collective bargaining agreements. Our union agreements typically have a term of three years and thus regularly expire and require negotiation in the ordinary course of our business. Upon the expiration of any of our collective bargaining agreements, however, we may be unable to negotiate new collective bargaining agreements on terms favorable to us, and our business operations may be interrupted as a result of labor disputes or difficulties and delays in the process of renegotiating our collective bargaining agreements. In addition, our business operations at one or more of our facilities may also be interrupted as a result of labor disputes by outside unions attempting to unionize a venue even though we do not have unionized labor at that venue currently. A work stoppage at one or more of our owned and/or operated venues or at our promoted events could have a material adverse effect on our business, results of operations and financial condition. We cannot predict the effect that a potential work stoppage would have on our business.

We are dependent upon our ability to lease, acquire and develop live music venues, and if we are unable to do so on acceptable terms, or at all, our results of operations could be adversely affected.

Our Concerts and Sponsorship segments require access to venues to generate revenue from live music events. For these events, we use venues that we own, but we also operate a number of our live music venues under various agreements which include leases with third parties, ownership through an equity interest or booking agreements, which are agreements where we contract to book the events at a venue for a specific period of time. Our long-term success in the live music business will depend in part on the availability of venues, our ability to lease these venues and our ability to enter into booking agreements upon their expiration. As many of these agreements are with third parties over whom we have little or no control, we may be unable to renew these agreements or enter into new agreements on acceptable terms or at all, and may be unable to obtain favorable agreements with venues. Our ability to renew these agreements or obtain new agreements on favorable terms depends on a number of other factors, many of which are also beyond our control, such as national and local business conditions and competition from other promoters. If the cost of renewing these agreements is too high or the terms of any new agreement with a new venue are unacceptable or incompatible with our existing operations, we may decide to forego

 

34


Table of Contents

these opportunities. There can be no assurance that we will be able to renew these agreements on acceptable terms or at all, or that we will be able to obtain attractive agreements with substitute venues, which could have a material adverse effect on our results of operations.

We may continue to expand our operations through the development of live music venues and the expansion of existing live music venues, which poses a number of risks, including:

 

   

construction of live music venues may result in cost overruns, delays or unanticipated expenses;

 

   

desirable sites for live music venues may be unavailable or costly; and

 

   

the attractiveness of our venue locations may deteriorate over time.

Additionally, the market potential of live music venue sites cannot be precisely determined, and our live music venues may face competition in markets from unexpected sources. Newly constructed live music venues may not perform up to our expectations. We face significant competition for potential live music venue locations and for opportunities to acquire existing live music venues. Because of this competition, we may be unable to add to or maintain the number of our live music venues on terms we consider acceptable.

Our revenue depends in part on the promotional success of our marketing campaigns, and there can be no assurance that such advertising, promotional and other marketing campaigns will be successful or will generate revenue or profits.

Similar to many companies, we spend significant amounts on advertising, promotional, branding and other marketing campaigns for our live music events, the Live Nation, Ticketmaster, www.ticketmaster.com, www.livenation.com and other brand names and other business activities. Such marketing activities include, among others, promotion of ticket sales, premium seat sales, hospitality and other services for our events and venues and advertising associated with our distribution of related merchandise and apparel and costs related to search engine optimization and paid search engine marketing for our ecommerce sites. During 2010, we spent approximately 4.4% of our revenue on marketing, including advertising. There can be no assurance that such advertising, promotional, branding and other marketing campaigns will be successful or will generate revenue or profits.

Poor weather adversely affects attendance at our live music events, which could negatively impact our financial performance from period to period.

We promote and/or ticket many live music events. Weather conditions surrounding these events affect sales of tickets, concessions and merchandise, among other things. Poor weather conditions can have a material effect on our results of operations particularly because we promote and/or ticket a finite number of events. Due to weather conditions, we may be required to reschedule an event to another available day or a different venue, which would increase our costs for the event and could negatively impact the attendance at the event, as well as food, beverage and merchandise sales. Poor weather can affect current periods as well as successive events in future periods.

We may be adversely affected by the occurrence of extraordinary events, such as terrorist attacks.

The occurrence and threat of extraordinary events, such as terrorist attacks, intentional or unintentional mass-casualty incidents, natural disasters or similar events, may substantially decrease the use of and demand for our services and the attendance at live music events, which may decrease our revenue or expose us to substantial liability. The terrorism and security incidents in the past, military actions in foreign locations and periodic elevated terrorism alerts have raised numerous challenging operating factors, including public concerns regarding air travel, military actions and additional national or local catastrophic incidents, causing a nationwide disruption of commercial and leisure activities.

Following past terrorism actions, some artists refused to travel or book tours, which adversely affected our business. The occurrence or threat of future terrorist attacks, military actions by the United States or others, contagious disease outbreaks, natural disasters such as earthquakes and severe floods or similar events cannot be predicted, and their occurrence can be expected to negatively affect the economies of the United States and other foreign countries where we do business.

 

35


Table of Contents

Risks Relating to Our Common Stock

We cannot predict the prices at which our common stock may trade.

Our stock price has fluctuated between $2.47 and $18.75 over the past three years. The market price of our common stock may continue to fluctuate significantly due to a number of factors, some of which may be beyond our control, including:

 

   

our quarterly or annual earnings, or those of other companies in our industry;

 

   

actual or anticipated fluctuations in our operating results due to the seasonality of our business and other factors related to our business;

 

   

our loss of or inability to obtain significant popular artists or ticketing clients;

 

   

changes in accounting standards, policies, guidance, interpretations or principles;

 

   

announcements by us or our competitors of significant contracts, acquisitions or divestitures;

 

   

the publication by securities analysts of financial estimates or reports about our business;

 

   

changes by securities analysts of earnings estimates or reports, or our inability to meet those estimates or achieve any goals described in those reports;

 

   

the disclosure of facts about our business that may differ from those assumed by securities analysts in preparing their estimates or reports about us;

 

   

media reports, whether accurate or inaccurate;

 

   

the operating and stock price performance of other comparable companies;

 

   

overall market fluctuations; and

 

   

general economic conditions.

In particular, the realization of any of the risks described in these Risk Factors could have a significant and adverse impact on the market price of our common stock.

In addition, in the past, some companies that have had volatile market prices for their securities have been subject to securities class action suits filed against them. If a suit were to be filed against us, regardless of the outcome, it could result in substantial legal costs and a diversion of our management’s attention and resources. This could have a material adverse effect on our business, results of operations and financial condition.

Our corporate governance documents, rights agreement and Delaware law may delay or prevent an acquisition of us that stockholders may consider favorable, which could decrease the value of our common stock.

Our amended and restated certificate of incorporation and amended and restated bylaws and Delaware law contain provisions that could make it more difficult for a third party to acquire us without the consent of the board of directors. These provisions include restrictions on the ability of our stockholders to remove directors and supermajority voting requirements for stockholders to amend our organizational documents, a classified board of directors and limitations on action by our stockholders by written consent. In addition, the board of directors has the right to issue preferred stock without stockholder approval, which could be used to dilute the stock ownership of a potential hostile acquirer. Delaware law, for instance, also imposes some restrictions on mergers and other business combinations between any holder of 15% or more of our outstanding common stock and us. Although we believe these provisions protect our stockholders from coercive or otherwise unfair takeover tactics and thereby provide for an opportunity to receive a higher bid by requiring potential acquirers to negotiate with the board of directors, these provisions apply even if the offer may be considered beneficial by some stockholders.

Our amended and restated certificate of incorporation provides that, subject to any written agreement to the contrary, which agreement does not currently exist, Clear Channel will have no duty to refrain from engaging in the same or similar business activities or lines of business as us or doing business with any of our customers or vendors or employing or otherwise engaging or soliciting any of our officers, directors or employees. Our amended and restated certificate of incorporation provides that if any director and/or officer of the Company who is also a director and/or officer of Clear Channel acquires knowledge of a potential transaction or matter which may be a corporate business opportunity (a “corporate opportunity”) for both us and Clear Channel, we will generally renounce our interest in the corporate opportunity. Our amended and restated certificate of incorporation renounces any interest or expectancy in such corporate opportunity that will belong to Clear Channel, unless such opportunity is offered to a director and/or officer of the Company in writing solely in

 

36


Table of Contents

such person’s capacity as a director and/or officer of the Company. We have obtained a waiver of this provision to the extent it might apply to Irving Azoff, who is our Executive Chairman and is also a member of Clear Channel’s board of directors. Clear Channel will, to the fullest extent permitted by law, have satisfied its fiduciary duty with respect to such a corporate opportunity and will not be liable to us or our stockholders for breach of any fiduciary duty by reason of the fact that it acquires or seeks the corporate opportunity for itself, directs that corporate opportunity to another person or does not present that corporate opportunity to us. These provisions could make an acquisition of us less advantageous to a third party.

We have also adopted a stockholder rights plan intended to deter hostile or coercive attempts to acquire us. Under the plan, if any person or group acquires, or begins a tender or exchange offer that could result in such person acquiring, 15% or more of our common stock, and in the case of certain Schedule 13G filers, 20% or more of our common stock, and in the case of Liberty Media and certain of its affiliates, more than 35% of our common stock, without approval of the board of directors under specified circumstances, our other stockholders have the right to purchase shares of our common stock, or shares of the acquiring company, at a substantial discount to the public market price. Therefore, the plan makes an acquisition much more costly to a potential acquirer.

In addition, the terms of our senior secured credit facility provide that the lenders can require us to repay all outstanding indebtedness upon a change of control. These provisions make an acquisition more costly to a potential acquirer. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.

We have no plans to pay dividends on our common stock, which could affect its market price.

We currently intend to retain any future earnings to finance the growth, development and expansion of our business and/or to repay existing indebtedness. Accordingly, we do not intend to declare or pay any dividends on our common stock for the foreseeable future. The declaration, payment and amount of future dividends, if any, will be at the sole discretion of the board of directors after taking into account various factors, including our financial condition, results of operations, cash flow from operations, current and anticipated capital requirements and expansion plans, the income tax laws then in effect and the requirements of Delaware law. In addition, the agreement governing our senior secured credit facility includes restrictions on our ability to pay cash dividends without meeting certain financial ratios and obtaining the consent of the lenders. Accordingly, holders of common stock will not receive cash payments on their investment and the market price may be adversely affected.

Future sales or other issuances of our common stock could adversely affect its market price.

We have a large number of shares of common stock outstanding and available for resale beginning at various points in time in the future. Sales of a substantial number of shares of our common stock in the public market, or the possibility that these sales may occur, could cause the market price for our common stock to decline. As of December 31, 2010, there were 174.1 million shares of Live Nation common stock outstanding (including 3.0 million shares of unvested restricted stock awards and excluding 1.3 million shares held in treasury), 1.0 million shares issuable from unvested restricted stock unit and performance stock unit awards, 9.5 million shares of common stock issuable from options currently exercisable at a weighted average exercise price of $16.43 per share, 8.1 million shares issuable from the conversion of our 2.875% convertible notes and a warrant to purchase 0.5 million shares of common stock at an exercise price of $13.73.

We continually explore acquisition opportunities consistent with our strategy. These acquisitions may involve the payment of cash, the incurrence of debt or the issuance of common stock or other securities. Any such issuance could be at a valuation lower than the trading price of our common stock at the time. The price of our common stock could also be affected by possible sales of our common stock by hedging or arbitrage trading activity that may develop involving our common stock. The hedging or arbitrage could, in turn, affect the trading prices of our 2.875% convertible notes.

Conversion of our convertible notes may dilute the ownership interest of existing stockholders and may affect our per share results and the trading price of our common stock.

The issuance of shares of our common stock upon conversion of our convertible notes may dilute the ownership interests of existing stockholders. Issuances of stock on conversion may also affect our per share results of operations. Any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.

 

37


Table of Contents

We can issue preferred stock without stockholder approval, which could materially adversely affect the rights of common stockholders.

Our certificate of incorporation authorizes us to issue “blank check” preferred stock, the designation, number, voting powers, preferences and rights of which may be fixed or altered from time to time by the board of directors. Our subsidiaries may also issue additional shares of preferred stock. Accordingly, the board of directors has the authority, without stockholder approval, to issue preferred stock with rights that could materially adversely affect the voting power or other rights of the common stockholders or the market value of the common stock.

Risks Relating to the Separation

The Separation could result in significant tax liability to our initial public stockholders.

In connection with the Separation, Clear Channel received a private letter ruling from the IRS substantially to the effect that the distribution of our common stock to its stockholders qualified as a tax-free distribution for United States federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended, or the Code. Although a private letter ruling from the IRS generally is binding on the IRS, if the factual representations or assumptions made in the letter ruling request are untrue or incomplete in any material respect, we will not be able to rely on the ruling.

Furthermore, the IRS will not rule on whether a distribution satisfies certain requirements necessary to obtain tax-free treatment under Section 355 of the Code. Rather, the ruling is based upon representations by Clear Channel that these conditions have been satisfied, and any inaccuracy in such representations could invalidate the ruling. Therefore, in addition to obtaining the ruling from the IRS, Clear Channel also obtained a legal opinion that the Separation will qualify as a tax-free distribution for United States federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code. The opinion relies on the ruling as to matters covered by the ruling. In addition, the opinion is based on, among other things, certain assumptions and representations as to factual matters made by Clear Channel and us, which if incorrect or inaccurate in any material respect would jeopardize the conclusions reached by counsel in its opinion. The opinion is not binding on the IRS or the courts, and the IRS or the courts may not agree with the opinion.

Notwithstanding receipt by Clear Channel of the ruling and opinion of counsel, the IRS could assert that the Separation did not qualify for tax-free treatment for United States federal income tax purposes. If the IRS were successful in taking this position, our initial public stockholders could be subject to significant United States federal income tax liability. In general, our initial public stockholders could be subject to tax as if they had received a taxable distribution equal to the fair market value of our common stock that was distributed to them.

The Separation could result in significant tax-related liabilities to us.

As discussed above, notwithstanding receipt by Clear Channel of the ruling and the opinion of counsel, the IRS could assert that the Separation did not qualify for tax-free treatment for United States federal income tax purposes. If the IRS were successful in taking this position, Clear Channel could be subject to a significant United States federal income tax liability. In general, Clear Channel would be subject to tax as if it had sold our common stock in a taxable sale for its fair market value. In addition, even if the Separation otherwise were to qualify under Section 355 of the Code, it may be taxable to Clear Channel as if it had sold our common stock in a taxable sale for its fair market value under Section 355(e) of the Code, if the Separation were later deemed to be part of a plan (or series of related transactions) pursuant to which one or more persons acquire directly or indirectly stock representing a 50% or greater interest in Clear Channel or us. For this purpose, any acquisitions of Clear Channel stock or of our stock within the period beginning two years before the Separation and ending two years after, are presumed to be part of such a plan, although we or Clear Channel may be able to rebut that presumption.

Although such corporate-level taxes, if any, resulting from a taxable distribution generally would be imposed on Clear Channel, we have agreed in the tax matters agreement to indemnify Clear Channel and its affiliates against tax-related liabilities, if any, caused by the failure of the Separation to qualify as a tax-free transaction under Section 355 of the Code (including as a result of Section 355(e) of the Code) if the failure to so qualify is attributable to actions, events or transactions relating to our stock, assets or business, or a breach of the relevant representations or covenants made by us in the tax matters agreement. If the failure of the Separation to qualify under Section 355 of the Code is for any reason for which neither we nor Clear Channel is responsible, we and Clear Channel have agreed in the tax matters agreement that we will each be responsible for 50% of the tax-related liabilities arising from the failure to so qualify. Clear Channel reported a $2.4 billion capital loss as a result of the Separation. See Item 8. Financial Statements and Supplementary Data—Note 12—Related-Party Transactions—Relationship with Clear Channel for a more detailed discussion of the tax matters agreement between Clear Channel and us.

 

38


Table of Contents

We could be liable for income taxes owed by Clear Channel.

Each member of the Clear Channel consolidated group, which includes Clear Channel, us and our subsidiaries through December 21, 2005, and Clear Channel’s other subsidiaries, is jointly and severally liable for the United States federal income tax liability of each other member of the consolidated group. Consequently, we could be liable in the event any such liability is incurred, and not discharged, by any other member of the Clear Channel consolidated group. Disputes or assessments could arise during future audits by the IRS in amounts that we cannot quantify. In addition, Clear Channel recognized a capital loss for United States federal income tax purposes in connection with the Separation. If Clear Channel were unable to deduct such capital loss for United States federal income tax purposes as a result of any action we take following the Separation or our breach of a relevant representation or covenant made by us in the tax matters agreement, we have agreed in the tax matters agreement to indemnify Clear Channel for the lost tax benefits that Clear Channel would have otherwise realized if it were able to deduct this loss. See Item 8. Financial Statements and Supplementary Data—Note 12—Related-Party Transactions—Relationship with Clear Channel.

Risks Relating to the Spin-off from IAC

If the spin-off of Ticketmaster from IAC or one or more of the Spincos were to fail to qualify as a transaction that is generally tax-free for United States federal income tax purposes, we may be subject to significant tax liabilities.

In connection with IAC’s spin-off of each of the Spincos, IAC received a private letter ruling from the IRS regarding the qualification of these spin-offs as transactions that are generally tax-free for United States federal income tax purposes. IAC’s spin-off of each of the Spincos is referred to collectively as the IAC spin-offs. IAC also received an opinion of counsel regarding certain aspects of the transaction that were not covered by the private letter ruling. Notwithstanding the IRS private letter ruling and opinion of counsel, the IRS could determine that one or more of the IAC spin-offs should be treated as a taxable distribution if it determines that any of the representations, statements or assumptions or undertakings that were included in the request for the IRS private letter ruling are false or have been violated or if it disagrees with the conclusions in the opinion of counsel that are not covered by the IRS ruling. In addition, if any of the representations, statements or assumptions upon which the opinion of counsel was based were or become inaccurate, the opinion may be invalid.

If any of the IAC spin-offs were to fail to qualify as a transaction that is generally tax-free for United States federal income tax purposes, then IAC would incur material income tax liabilities for which we, as successor-in-interest to Ticketmaster could be liable. Under applicable federal income tax rules, Ticketmaster is severally liable for any federal income taxes imposed on IAC with respect to taxable periods during which Ticketmaster was a member of IAC’s consolidated federal income tax return group, including the period in which the IAC spin-offs were consummated. Under the tax sharing agreement that Ticketmaster entered into with IAC and the other Spincos, Ticketmaster generally is required to indemnify IAC and the other Spincos for any taxes resulting from the spin-off to the extent such amounts resulted from (i) any act or failure to act by Ticketmaster described in the covenants in the tax sharing agreement, (ii) any acquisition of equity securities or assets of Ticketmaster or (iii) any breach by Ticketmaster of any representation or covenant contained in the spin-off documents or in the documents relating to the IRS private letter ruling and/or tax opinions. Corresponding indemnification provisions also apply to the other Spincos. Ticketmaster is entitled to indemnification from IAC, among other things, if, Ticketmaster is liable for, or otherwise required to make a payment in respect of, a spin-off tax liability for which Ticketmaster is not responsible under the tax sharing agreement and, if applicable, is unable to collect from the Spinco responsible for such liability under the tax sharing agreement. Ticketmaster’s ability to collect under these indemnity provisions would depend on the financial position of the indemnifying party.

Certain transactions in IAC, Ticketmaster, or other Spinco equity securities could cause one or more of the IAC spin-offs to be taxable to IAC and may give rise to indemnification obligations of Ticketmaster under the tax sharing agreement.

Current United States federal income tax law creates a presumption that any of the IAC spin-offs would be taxable to IAC if it is part of a “plan or series of related transactions” pursuant to which one or more persons acquire directly or indirectly stock representing a 50% or greater interest (by vote or value) in IAC or a Spinco (including Ticketmaster). Acquisitions that occur during the four-year period that begins two years before the date of a spin-off are presumed to occur pursuant to a plan or series of related transactions, unless it is established that the acquisition is not pursuant to a plan or series of transactions that includes the spin-off.

These rules limited Ticketmaster’s ability during the two-year period following the Spin-off to enter into certain transactions that might have otherwise been advantageous to us and our stockholders, particularly issuing equity securities to satisfy financing needs, repurchasing equity securities, and, under certain circumstances, acquiring businesses or assets with

 

39


Table of Contents

equity securities or agreeing to be acquired. Under the tax sharing agreement, there were restrictions on Ticketmaster’s ability to take such actions for a period of 25 months from the day after the date of the spin-off. Entering into the merger agreement with Live Nation did not violate these restrictions because, prior to entering into the agreement, Ticketmaster provided IAC with an unqualified opinion of tax counsel contemplated by the tax sharing agreement and IAC confirmed that the opinion was satisfactory to IAC. We believe that we did not take any actions during the two-year period following the spin-off that compromised the tax-free nature of that transaction. However, the statutes of limitations related to these tax periods remain open, and if taxing authorities successfully assert tax claims against IAC related to the spin-off, it could give rise to indemnification obligations of Ticketmaster under the tax sharing agreement.

In addition to actions of IAC and the Spincos (including Ticketmaster), certain transactions that are outside their control and therefore not subject to the restrictive covenants contained in the Tax Sharing Agreement, such as a sale or disposition of the stock of IAC or the stock of a Spinco by certain persons that own five percent or more of any class of stock of IAC or a Spinco could have a similar effect on the tax-free status of a spin-off as transactions to which IAC or a Spinco is a party.

As a result of these rules, even if each IAC spin-off otherwise qualifies as a transaction that is generally tax-free for United States federal income tax purposes, transactions involving Spinco or IAC equity securities (including transactions by certain significant stockholders) could cause IAC to recognize taxable gain with respect to the stock of the Spinco as described above. Although the restrictive covenants and indemnification provisions contained in the tax sharing agreement are intended to minimize the likelihood that such an event will occur, one or more of the IAC spin-offs may become taxable to IAC as a result of transactions in IAC or Spinco equity securities. As discussed previously, we, as successor-in-interest to Ticketmaster could be liable for such taxes under the tax sharing agreement or under applicable federal income tax rules.

In connection with the Merger, Ticketmaster received (i) two unqualified opinions of tax counsel (one dated as of the date of execution of the definitive merger agreement and one dated as of the closing date of the Merger) that the transaction as contemplated in the definitive merger agreement would not have an adverse tax effect on the spin-off, and (ii) IAC’s written acknowledgement that the closing date opinion was in form and substance satisfactory to IAC. However, the IRS may disagree with the conclusions in these opinions of counsel and determine that the Merger caused the Spin-off to be taxable to IAC. Were this to occur and that position were sustained, we, as successor-in-interest to Ticketmaster would be required to make material indemnification payments to IAC.

The spin-off agreements were not the result of arm’s length negotiations.

The agreements that Ticketmaster entered into with IAC and the other Spincos in connection with the IAC spin-offs, including the separation and distribution agreement, tax sharing agreement, employee matters agreement and transition services agreement, were established by IAC, in consultation with the Spincos, with the intention of maximizing the value to IAC’s then-current shareholders. Accordingly, the terms for Ticketmaster may not be as favorable as would have resulted from negotiations among unrelated third parties.

Risks Relating to the Merger

In connection with the Merger, we became subject to a Final Judgment imposing certain obligations and restrictions on us which could negatively impact our business.

On July 30, 2010, the United States District Court for the District of Columbia approved and entered a Final Judgment relating to the Merger that imposes certain obligations on us in order to address the issues the DOJ raised in its antitrust review of the Merger. Among other things, the Final Judgment required us to offer a license to the Ticketmaster ticketing technology to AEG and to divest Ticketmaster’s Paciolan ticketing business. We have entered into a license agreement with AEG and sold Paciolan to Comcast, thus satisfying those two requirements. Prospectively, pursuant to the Final Judgment, we have agreed to abide by certain behavioral remedies that prevent us from engaging in retaliatory business tactics or improper tying arrangements and to provide periodic reports to the DOJ about our compliance with the Final Judgment. The Final Judgment is in effect and will bind us until July 30, 2020.

During the duration of the Final Judgment, we are restricted from engaging in certain business activities that, absent the Final Judgment, would be lawful for us to undertake. Our inability to undertake these business strategies could disadvantage us when we compete against firms that are not restricted by any such order. Our compliance with the Final Judgment therefore creates certain unquantifiable business risks for us.

 

40


Table of Contents

Also on January 25, 2010, we entered into a Consent Agreement with the Canadian Competition Commission, or the Canadian Consent Agreement, which had the effect of imposing essentially the same terms as the Final Judgment on our business in Canada. The Canadian Consent Agreement will remain in effect for ten years following the date of the agreement. The Canadian Consent Agreement creates similar risks for us, both in terms of creating potential enforcement actions and in limiting us from pursuing certain business practices.

 

 

41


Table of Contents
ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

 

ITEM 2. PROPERTIES

As of December 31, 2010, we own, operate or lease 88 entertainment venues and 104 other facilities, including office leases, throughout North America and 21 entertainment venues and 65 other facilities internationally. We believe our venues and facilities are generally well-maintained and in good operating condition and have adequate capacity to meet our current business needs. We have a fifteen-year lease ending June 30, 2020 for our corporate headquarters in Beverly Hills, California, used primarily by our executive and domestic operations management staff.

Our leases are for varying terms ranging from monthly to multi-year. These leases can typically be for terms of three to five years for our office leases and 10 to 20 years for our venue leases, and many provide for renewal options. There is no significant concentration of venues under any one lease or subject to negotiation with any one landlord. We believe that an important part of our management activity is to negotiate suitable lease renewals and extensions.

 

ITEM 3. LEGAL PROCEEDINGS

CTS Arbitration

Live Nation Worldwide, Inc., or Live Nation Worldwide, and CTS were parties to an agreement, or the CTS agreement, pursuant to which CTS was to develop and Live Nation Worldwide licensed or agreed to use ticketing software or ticketing platforms. Under the agreement, CTS was to develop software to be licensed to Live Nation Worldwide to provide ticketing services in the United States and Canada. The CTS agreement also generally required Live Nation Worldwide to use CTS’s ticketing platforms in certain European countries so long as CTS’s existing platforms were appropriately modified to meet local market conditions. As of June 13, 2010, Live Nation Worldwide terminated the CTS agreement because CTS materially breached the agreement by failing to deliver a North American ticketing system that met the contractual requirements of being a “world class ticketing system . . . that fits the needs of the North American market,” and by failing to deliver a ticketing system for the United Kingdom and other European countries that fit the needs of those markets as required by the CTS agreement.

For North America, had CTS performed on the CTS agreement, it would have been generally entitled to receive, during the then 10-year term of the CTS agreement, a per ticket license fee upon the sale of certain tickets that Live Nation Worldwide or any of certain of its subsidiaries, which are collectively referred to as the Live Nation Worldwide entities, controlled and had the right to distribute by virtue of certain promotion and venue management relations. This per ticket fee for events in North America was payable to CTS regardless of whether the Live Nation Worldwide entities chose to use the CTS ticketing platform, Ticketmaster’s ticketing platform or another ticketing platform for the sale of such controlled tickets. For events in certain European countries, not including the United Kingdom, Live Nation Worldwide generally was required, during a 10-year term, to exclusively book on the CTS ticketing platform all tickets that the Live Nation Worldwide entities had the right to distribute (or, to the extent other ticketing platforms were used, Live Nation Worldwide was generally required to pay to CTS the same fee that would have been payable had the CTS platform been used). For events in the United Kingdom, Live Nation Worldwide was required, for a 10-year term, to (i) book on the CTS ticketing platform all tickets controlled by Live Nation Worldwide entities that are not allocated by Live Nation Worldwide for sale through other sales channels and (ii) to offer for sale on the CTS UK website a portion of the tickets controlled by the Live Nation Worldwide entities. Finally, the CTS agreement obligated Live Nation Worldwide and CTS to negotiate a set of noncompete agreements that, subject to legal restrictions, could have precluded Live Nation Worldwide from offering primary market ticketing services to third parties in certain European countries during the term of the CTS agreement.

In April 2010, CTS filed a request for arbitration with the International Court of Arbitration of the International Chamber of Commerce, or ICC, pursuant to the CTS agreement. In its request for arbitration, CTS asserts, among other things, that (i) the terms of the CTS agreement, including the North America per ticket license fee, European exclusivity obligations and United Kingdom distribution obligations described above, apply to tickets sold and distributed by Ticketmaster, (ii) Ticketmaster’s sales and distribution of tickets following the completion of the Merger have resulted in various breaches of Live Nation Worldwide’s obligations under the CTS agreement, (iii) Live Nation has failed to allocate the proper number of tickets to CTS’s system in the United Kingdom and (iv) the Merger and our subsequent actions have breached the implied covenant of good faith and fair dealing. In its request for arbitration, CTS seeks relief in the form of a declaration that Live Nation and Live Nation Worldwide are in breach of the CTS agreement and the implied covenant of good faith and fair dealing, specific performance of Live Nation Worldwide’s obligations under the CTS agreement, and unspecified damages resulting from such breaches. We expect that when CTS specifies its damages claims, they will include damages for royalties that would have been paid over the contemplated 10-year term of the CTS agreement, on Ticketmaster-controlled tickets (as well as tickets controlled by Live Nation Worldwide or any of certain of its subsidiaries), and for competitive injuries due to Ticketmaster’s operations in Europe.

In May 2010, we responded to CTS’s request for arbitration and filed counterclaims asserting that CTS breached the CTS agreement by failing to provide ticketing platforms that met the standard required by the CTS agreement for the North American and European markets. We are seeking relief primarily in the form of damages and a declaration that we validly terminated the CTS agreement based on CTS’s material breaches. We deny that CTS is entitled to collect damages for royalties that would have been paid over the full 10-year term of the CTS agreement, on Ticketmaster-controlled tickets, and for competitive injuries due to Ticketmaster’s operations in Europe. The matter has been assigned to an arbitrator and a hearing has been scheduled to commence in July 2011. We intend to vigorously defend the action.

Live Concert Antitrust Litigation

We were a defendant in a lawsuit filed by Malinda Heerwagen in June 2002 in U.S. District Court. The plaintiff, on behalf of a putative class consisting of certain concert ticket purchasers, alleged that anti-competitive practices for concert promotion services by us nationwide caused artificially high ticket prices. In August 2003, the District Court ruled in our favor, denying the plaintiff’s class certification motion. The plaintiff appealed to the U.S. Court of Appeals. In January 2006, the Court of Appeals affirmed, and the plaintiff then dismissed her action that same month. Subsequently, twenty-two putative class actions were filed by different named plaintiffs in various U.S. District Courts throughout the country, making claims substantially similar to those made in the Heerwagen action, except that the geographic markets alleged are regional, statewide or more local in nature, and the members of the putative classes are limited to individuals who purchased tickets to concerts in the relevant geographic markets alleged. The plaintiffs seek unspecified compensatory, punitive and treble damages, declaratory and injunctive relief and costs of suit, including attorneys’ fees. We have filed our answers in some of these actions and have denied liability. In April 2006, granting our motion, the Judicial Panel on Multidistrict Litigation transferred these actions to the U.S. District Court for the Central District of California for coordinated pre-trial proceedings. In June 2007, the District Court conducted a hearing on the plaintiffs’ motion for class certification, and also that month the Court entered an order to stay all proceedings pending the Court’s ruling on class certification. In October 2007, the Court

 

42


Table of Contents

granted the plaintiffs’ motion and certified classes in the Chicago, New England, New York/New Jersey, Colorado and Southern California regional markets. In November 2007, the Court extended its stay of all proceedings pending further developments in the U.S. Court of Appeals for the Ninth Circuit. In February 2008, we filed with the District Court a Motion for Reconsideration of its October 2007 class certification order. In October 2010, the District Court denied our Motion for Reconsideration and lifted the stay of all proceedings. We intend to vigorously defend all claims in all of the actions.

Ticketing Fees Consumer Class Action Litigation

In October 2003, a purported representative action was filed in the Superior Court of California challenging Ticketmaster’s charges to online customers for shipping fees and alleging that its failure to disclose on its website that the charges contain a profit component is unlawful. The complaint asserted a claim for violation of California’s Unfair Competition Law, or UCL, and sought restitution or disgorgement of the difference between (i) the total shipping fees charged by Ticketmaster in connection with online ticket sales during the applicable period, and (ii) the amount that Ticketmaster actually paid to the shipper for delivery of those tickets. In August 2005, the plaintiff filed a first amended complaint, then pleading the case as a putative class action and adding the claim that Ticketmaster’s website disclosures in respect of its ticket order-processing fees constitute false advertising in violation of California’s False Advertising Law. On this new claim, the amended complaint seeks restitution or disgorgement of the entire amount of order-processing fees charged by Ticketmaster during the applicable period. In April 2009, the Court granted the plaintiff’s motion for leave to file a second amended complaint adding new claims that (a) Ticketmaster’s order processing fees are unconscionable under the UCL, and (b) Ticketmaster’s alleged business practices further violate the California Consumer Legal Remedies Act. Plaintiff later filed a third amended complaint, to which Ticketmaster filed a demurrer in July 2009. The Court overruled Ticketmaster’s demurrer in October 2009.

The plaintiff filed a class certification motion in August 2009, which Ticketmaster opposed. In February 2010, the Court granted certification of a class on the first two causes of action, which allege that Ticketmaster misrepresents/omits the fact of a profit component in its shipping and order processing fees. The class would consist of California consumers who purchased tickets through Ticketmaster’s website from 1999 to present. The Court denied certification of a class on the third and fourth causes of action, which allege that Ticketmaster’s shipping and order processing fees are unconscionably high. In March 2010, Ticketmaster filed a Petition for Writ of Mandate with the California Court of Appeal, and plaintiffs also filed a motion for reconsideration of the Superior Court’s class certification order. In April 2010, the Superior Court denied plaintiffs’ Motion for Reconsideration of the Court’s class certification order, and the Court of Appeal denied Ticketmaster’s Petition for Writ of Mandate. In June 2010, the Court of Appeal granted the plaintiffs’ Petition for Writ of Mandate and ordered the Superior Court to vacate its February 2010 order denying plaintiffs’ motion to certify a national class and enter a new order granting plaintiffs’ motion to certify a nationwide class on the first two claims. In September 2010, Ticketmaster filed its Motion for Summary Judgment on all causes of action in the Superior Court, and that same month plaintiffs filed their Motion for Summary Adjudication of various affirmative defenses asserted by Ticketmaster. In November 2010, Ticketmaster filed their Motion to Decertify Class.

In December 2010, the parties entered into a binding term sheet that provides for the settlement of the litigation and the resolution of all claims set forth therein. The settlement remains subject to preliminary and final approval by the Court. The plaintiffs are currently expected to file a motion for preliminary settlement approval on or after February 28, 2011. Ticketmaster and its parent, Live Nation Entertainment, Inc., have not acknowledged any violations of law or liability in connection with the matter, but have agreed to the settlement in order to eliminate the uncertainties and expense of further protracted litigation. Pursuant to the terms of the settlement, among other things, Ticketmaster will pay the fees of the claims administrator as well as the plaintiffs’ attorneys’ fees and certain costs that are approved by the Court and subject to a set maximum, and class members who meet certain conditions will be entitled to receive from Ticketmaster a cash payment and/or discounts off one or more future ticket purchases. The individual and aggregate values of each option are subject to set maximums. Ticketmaster will also make certain changes to disclosures on our website. As of December 31, 2010, we have accrued $21.2 million, our best estimate of the probable costs associated with this settlement. This liability includes an estimated redemption rate. Any difference between our estimated redemption rate and the actual redemption rate we experience will impact the final settlement amount; however, we do not expect this difference to be material.

Canadian Consumer Class Action Litigation Relating to TicketsNow

In February 2009, five putative consumer class action complaints were filed in various provinces of Canada against TicketsNow, Ticketmaster, Ticketmaster Canada Ltd. and Premium Inventory, Inc. All of the cases allege essentially the same set of facts and causes of action. Each plaintiff purports to represent a class consisting of all persons who purchased a ticket from Ticketmaster, Ticketmaster Canada Ltd. or TicketsNow from February 2007 to present and alleges that Ticketmaster conspired to divert a large number of tickets for resale through the TicketsNow website at prices higher than

 

43


Table of Contents

face value. The plaintiffs characterize these actions as being in violation of Ontario’s Ticket Speculation Act, the Amusement Act of Manitoba, the Amusement Act of Alberta or the Quebec Consumer Protection Act. The Ontario case contains the additional allegation that Ticketmaster and TicketsNow’s service fees run afoul of anti-scalping laws. Each lawsuit seeks compensatory and punitive damages on behalf of the class. We intend to vigorously defend all claims in all of the actions.

United States Consumer Class Action Litigation Relating to TicketsNow

From February through June 2009, eleven purported class action lawsuits asserting causes of action under various state consumer protection laws were filed against Ticketmaster and TicketsNow in U.S. District Courts in California, New Jersey, Minnesota, Pennsylvania and North Carolina. The lawsuits allege that Ticketmaster and TicketsNow unlawfully deceived consumers by, among other things, selling large quantities of tickets to TicketsNow’s ticket brokers, either prior to or at the time that tickets for an event go on sale, thereby forcing consumers to purchase tickets at significantly marked-up prices on TicketsNow.com instead of Ticketmaster.com. The plaintiffs further claim violation of the consumer protection laws by Ticketmaster’s alleged “redirecting” of consumers from Ticketmaster.com to TicketsNow.com, thereby engaging in false advertising and an unfair business practice by deceiving consumers into inadvertently purchasing tickets from TicketsNow for amounts greater than face value. The plaintiffs claim that Ticketmaster has been unjustly enriched by this conduct and seek compensatory damages, a refund to every class member of the difference between tickets’ face value and the amount paid to TicketsNow, an injunction preventing Ticketmaster from engaging in further unfair business practices with TicketsNow and attorney fees and costs. In July 2009, all of the cases were consolidated and transferred to the U.S. District Court for the Central District of California. The plaintiffs filed their consolidated class action complaint in September 2009, to which Ticketmaster filed its answer the following month. In July 2010, Ticketmaster filed its Motion for Summary Judgment. We intend to vigorously defend all claims in all of the actions.

Litigation Relating to the Merger of Live Nation and Ticketmaster

Ticketmaster and their Board of Directors were named as defendants in a pair of lawsuits filed in February 2009 in the Superior Court of California challenging the Merger. These actions were consolidated by court order in March 2009. The consolidated complaint, as amended, generally alleges that Ticketmaster and its directors breached their fiduciary duties by entering into the Merger Agreement without regard to the fairness of its terms to the Ticketmaster stockholders and in return for illicit payments of “surplus” Live Nation stock. It also alleges that the joint proxy statement/prospectus of Live Nation and Ticketmaster contained material omissions and misstatements. The plaintiffs moved for a preliminary injunction barring the completion of the Merger in December 2009, which motion was denied at a hearing held later that month. The Ticketmaster and Live Nation stockholders each approved the Merger in January 2010, and the Merger was consummated later that same month. In April 2010, the parties reached a settlement which the court preliminarily approved in July 2010. In November 2010, the Court gave final approval to the settlement and entered a Final Judgment and Order of Dismissal with Prejudice, thereby concluding the litigation.

Other Litigation

From time to time, we are involved in other legal proceedings arising in the ordinary course of our business, including proceedings and claims based upon violations of antitrust laws and tortious interference, which could cause us to incur significant expenses. We have also been the subject of personal injury and wrongful death claims relating to accidents at our venues in connection with our operations. As required, we accrued our estimate of the probable settlement or other losses for the resolution of any outstanding claims. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, including, in some cases, estimated redemption rates for the settlement offered, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to these proceedings. In addition, under our agreements with Clear Channel, we have assumed and will indemnify Clear Channel for liabilities related to our business for which they are a party in the defense.

 

44


Table of Contents

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock was listed on the New York Stock Exchange under the symbol “LYV” on December 21, 2005. There were 5,006 stockholders of record as of February 22, 2011. This figure does not include an estimate of the indeterminate number of beneficial holders whose shares may be held of record by brokerage firms and clearing agencies. The following table presents the high and low sales prices of the common stock on the New York Stock Exchange during the calendar quarter indicated.

 

     Common Stock
Market Price
 
     High      Low  

2009

     

First Quarter

   $ 6.55       $ 2.47   

Second Quarter

   $ 6.07       $ 2.55   

Third Quarter

   $ 8.88       $ 3.98   

Fourth Quarter

   $ 8.96       $ 6.33   

2010

     

First Quarter

   $ 14.82       $ 8.59   

Second Quarter

   $ 16.90       $ 10.41   

Third Quarter

   $ 11.72       $ 8.17   

Fourth Quarter

   $ 12.09       $ 9.03   

Dividend Policy

Since the Separation and through December 31, 2010, we have not declared or paid any dividends. We presently intend to retain future earnings, if any, to finance the expansion of our business. Therefore, we do not expect to pay any cash dividends in the foreseeable future. Moreover, the terms of our senior secured credit facility limit the amount of funds which we will have available to declare and distribute as dividends on our common stock. Payment of future cash dividends, if any, will be at the discretion of our board of directors in accordance with applicable law after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, plans for expansion and contractual restrictions with respect to the payment of dividends.

 

45


Table of Contents
ITEM 6. SELECTED FINANCIAL DATA

 

     2010     2009     2008     2007     2006  

(in thousands except per share data)

          

Results of Operations Data (1):

          

Revenue

   $ 5,063,748      $ 4,181,021      $ 4,085,306      $ 3,635,389      $ 3,200,929   

Operating Expenses:

          

Direct operating expenses

     3,658,310        3,357,245        3,299,444        2,943,311        2,636,425   

Selling, general and administrative expenses

     1,014,491        617,709        618,577        553,259        430,548   

Depreciation and amortization

     321,666        158,118        140,039        107,428        113,656   

Goodwill impairment

     -        9,085        269,902        -        -   

Loss (gain) on sale of operating assets

     374        (2,983     1,131        (20,735     (9,873

Corporate expenses

     110,252        58,160        53,506        45,854        33,863   

Acquisition transaction expenses

     22,355        36,043        -        -        -   
                                        

Operating income (loss)

     (63,700     (52,356     (297,293     6,272        (3,690

Interest expense

     116,527        66,365        70,104        64,297        36,790   

Loss on extinguishment of debt

     21,315        -        -        -        -   

Interest income

     (3,771     (2,193     (8,575     (12,115     (10,024

Equity in (earnings) losses of nonconsolidated affiliates

     (4,928     (1,851     (842     7,737        1,330   

Other expense (income)--net

     (4,189     1        (245     (66     (500
                                        

Loss from continuing operations before income taxes

     (188,654     (114,678     (357,735     (53,581     (31,286

Income tax expense (benefit)

     15,154        11,333        (24,257     8,729        18,003   
                                        

Loss from continuing operations

     (203,808     (126,011     (333,478     (62,310     (49,289

Income (loss) from discontinued operations, net of tax

     (4,228     76,277        95,653        54,990        30,056   
                                        

Net loss

     (208,036     (49,734     (237,825     (7,320     (19,233

Net income attributable to noncontrolling interests

     20,354        10,445        1,587        7,869        12,209   
                                        

Net loss attributable to Live Nation Entertainment, Inc.

   $ (228,390   $ (60,179   $ (239,412   $ (15,189   $ (31,442
                                        

Basic and diluted net income (loss) per common share attributable to common stockholders:

          

Loss from continuing operations attributable to Live Nation Entertainment, Inc.

   $ (1.36   $ (1.65   $ (4.39   $ (1.02   $ (0.94

Income (loss) from discontinued operations attributable to Live Nation Entertainment, Inc.

     (0.03     0.92        1.25      $ 0.80      $ 0.46   
                                        

Net loss attributable to Live Nation Entertainment, Inc.

   $ (1.39   $ (0.73   $ (3.14   $ (0.22   $ (0.48
                                        

Cash dividends per share

   $ -      $ -      $ -      $ -      $ -   
                                        
     As of December 31,  
     2010     2009     2008     2007     2006  

(in thousands)

          

Balance Sheet Data (1):

          

Total assets

   $ 5,195,560      $ 2,341,759      $ 2,476,723      $ 2,749,820      $ 2,225,002   

Long-term debt, net (including current maturities)

   $ 1,731,864      $ 740,069      $ 824,120      $ 753,017      $ 639,146   

Redeemable preferred stock

   $ -      $ 40,000      $ 40,000      $ 40,000      $ 40,000   

Live Nation Entertainment, Inc. stockholders’ equity

   $ 1,364,416      $ 652,317      $ 677,853      $ 942,097      $ 642,269   

 

 

(1) Acquisitions and dispositions significantly impact the comparability of the historical consolidated financial data reflected in this schedule of Selected Financial Data.

The Selected Financial Data should be read in conjunction with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

46


Table of Contents
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations together with the audited consolidated financial statements and notes to the financial statements included elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed under 1A.—Risk Factors and other sections in this Annual Report.

Executive Overview

In January 2010, we completed our merger with Ticketmaster, which we believe will allow the combined company to capitalize on multiple opportunities created by bringing together a global concert business, global live event ticketing operations and a leading artist management company. Moving forward our strategy is centered on expanding our presence in the world’s largest markets, leveraging our leadership position in live entertainment and ecommerce to sell more tickets and grow our revenue streams surrounding the ticket purchase and live event, and continuing to optimize our cost structure.

The combined company is well-positioned to better serve artists, teams, fans and venues as we drive innovation across our platform, including strengthening our eCommerce operations and improving the ticket purchase experience and capitalizing on the depth and size of our fan databases. At the end of 2010, the majority of the integration efforts and staffing reductions were complete. We are focused on our evolving operations and executing our growth strategy.

We saw overall weakness in the concert industry in 2010, as the volume of ticket sales declined year over year and decreased our overall attendance by 4.9 million, or 9.4%. However, successful promotions helped drive consistent year over year on-site spending at our owned and operated amphitheaters. Internationally, we saw strong festival results including an increase in the net ancillary revenue per attendee at these festivals as well.

Reduced ticket sales impacted our Ticketing segment as well, with ticket volumes declining by 7.6% overall compared to prior year combined sales, as our ticketing clients, in aggregate, experienced ticket sales declines. During 2010, we began executing a series of initiatives aimed at improving the ticket buying experience for live event fans including rolling out interactive seat maps and expanding our digital distribution capabilities such as mobile and social media.

Our eCommerce segment generated improved results primarily due to the Merger and increased sales of advertising on Ticketmaster.com. During 2010, we began strategically enhancing our online storefront and improving the functionality of our site, so that we can capture incremental upsell opportunities to drive future growth. Our average combined monthly unique visitors increased 3.2% in 2010 to 26.1 million and we continued to grow our online advertising.

Our Sponsorship segment continued to generate growth despite the challenging environment, as average sponsorship per sponsor increased in 2010 as compared to the prior year. We continued to leverage our extensive on-site and online reach, global venue distribution network, artist relationships and ticketing operations to secure long-term sponsorship agreements with major brands.

The Artist Nation segment was impacted by reduced touring by the artists it serves in both the management and services businesses. However, we continued to grow our artist roster through new signings and strengthened our management team by securing additional artist managers. We are actively pursuing strategic acquisitions to grow our international footprint.

We remain optimistic about the long-term future of the company. Despite current macro-economic challenges including constrained consumer spending and the resulting decline in ticket sales, we remain focused on maximizing our direct connection with millions of fans and further improving the products and services we provide to our clients. We will build on the value of our four main levers surrounding the live event – ticketing/ecommerce, artist management, sponsorship and onsite ancillary spend. We are also focused on expanding our presence in the world’s largest entertainment markets, while reducing our exposure to smaller, less profitable markets. We intend to leverage our fan database and use it to drive increased ticket sales through better marketing, increase our value to advertisers through better ad targeting and drive new revenue by providing insights on fan purchasing behaviors to our ticketing clients. We also intend to increase ticket sales by helping our clients more efficiently price and market live events and by expanding our digital distribution presence.

 

47


Table of Contents

Our History

We were incorporated in Delaware on August 2, 2005 in preparation for the spin-off of substantially all of Clear Channel’s entertainment assets and liabilities. The Separation was completed on December 21, 2005, at which point we became a publicly traded company on the New York Stock Exchange trading under the symbol “LYV”.

Our Merger with Ticketmaster

On January 25, 2010, we and Ticketmaster completed our Merger. As part of the Merger, Ticketmaster stockholders received 1.4743728 shares of Live Nation common stock for each share of Ticketmaster common stock they owned. Effective on the date of the Merger, Ticketmaster became a wholly-owned subsidiary of Live Nation named Ticketmaster Entertainment LLC and Live Nation, Inc. changed its name to Live Nation Entertainment, Inc.; subsequently, in connection with certain financing transactions completed on May 6, 2010, Ticketmaster was merged into the Company and the separate corporate existence of Ticketmaster ceased.

Under the terms of the agreement reached with the DOJ in connection with obtaining regulatory clearance for the Merger, we agreed to divest our ticketing subsidiary, Paciolan, and to license the Ticketmaster ticketing system to AEG, for a period of up to five years, in addition to other terms intended to protect competitive conditions in ticketing and promotions. In March 2010, we sold Paciolan to Comcast.

Segment Overview

Our reportable segments are Concerts, Ticketing, Artist Nation, eCommerce and Sponsorship. Prior to 2010, our reportable operating segments were North American Music, International Music and Ticketing. In 2010, subsequent to the Merger, we reorganized our business units and the way in which these businesses are assessed and therefore changed our reportable segments. Our businesses formerly reported as North American Music and International Music are now allocated primarily to the Concerts segment with a portion allocated to our Sponsorship segment. Our business formerly reported as Ticketing remains in the Ticketing segment in 2010 with the exception of the allocation to our eCommerce segment of a fee per ticket for every ticket sold online in the U.S. and Canada, along with online advertising. The Artist Nation segment is primarily made up of Front Line’s artist management business and our artist services business which was previously reported as a component of the North American Music segment. These changes were made to be consistent with the way the chief operating decision makers are now managing the business after the Merger with Ticketmaster.

The segment results for all periods presented have been reclassified to conform to the current year presentation.

Concerts

Our Concerts segment principally involves the global promotion of live music events in our owned and/or operated venues and in rented third-party venues, the operation and management of music venues and the production of music festivals across the world. While our Concerts segment operates year-round, we experience higher revenue during the second and third quarters due to the seasonal nature of shows at our outdoor amphitheaters and festivals, which primarily occur May through September.

To judge the health of our Concerts segment, we primarily monitor the number of confirmed events in our network of owned and/or operated and third-party venues, talent fees, average paid attendance and advance ticket sales. In addition, at our owned and/or operated venues, we monitor attendance, ancillary revenue per fan and premium seat sales. For business that is conducted in foreign markets, we compare the operating results from our foreign operations to prior periods on a constant dollar basis.

Ticketing

The Ticketing segment is primarily an agency business that sells tickets for events on behalf of our clients and retains a convenience charge and order processing fee for our services. We sell tickets through a combination of websites, telephone services and ticket outlets. Our ticketing sales are impacted by fluctuations in the availability of events for sale to the public, which may vary depending upon scheduling by our clients. Generally, the first and second quarters of the year experience the highest domestic ticketing revenue, earned primarily in the concerts and sports categories. Generally, international ticketing revenue is highest in the fourth quarter of the year, earned primarily in the concerts category.

 

48


Table of Contents

To judge the health of our Ticketing segment, we primarily review the number of tickets sold through our ticketing operations, the percentage of visitors to our websites that buy tickets, the number of clients and the average royalty rate paid to clients who use our ticketing services.

Artist Nation

The Artist Nation segment primarily provides management services to music recording artists in exchange for a commission on the earnings of these artists. Our Artist Nation segment also sells merchandise associated with musical artists at live musical performances, to retailers, and directly to consumers via the internet and also provides other services to artists. Revenue earned from our Artist Nation segment is impacted to a large degree by the touring schedules of the artists we represent. Generally, we experience higher revenue during the second and third quarters as the period from May through September tends to be a popular time for touring events.

To judge the health of our Artist Nation segment, we primarily review the average annual earnings of each artist represented, commissions earned by individual managers, planned album releases and future touring schedules.

eCommerce

Our eCommerce segment manages our online, or eCommerce, activities including enhancements to our websites, bundling product offerings and online advertising at our websites. Through our websites, we sell tickets to our own events as well as tickets for our ticketing services clients and disseminate event and related merchandise information online. This segment records a fee per ticket that is paid to it by the Ticketing segment on every ticket sold online via www.livenation.com and www.ticketmaster.com in the U.S. and Canada.

To judge the health of our eCommerce segment, we primarily review the number of unique visitors to our websites, the overall number of customers in our database and the online revenue received from sponsors advertising on our websites.

Sponsorship

Our Sponsorship segment employs a sales force that creates and maintains relationships with sponsors, through a combination of strategic, international, national and local opportunities for businesses to reach customers through our concert, venue, artist relationship and ticketing assets.

To judge the health of our Sponsorship segment, we primarily review the average revenue per sponsor and the total revenue generated through sponsorship arrangements.

See further discussion of our segments in Item 1. Business—Our Business.

 

49


Table of Contents

Consolidated Results of Operations

 

     Year Ended December 31,     % Change     % Change  
     2010     2009     2008     2010 vs. 2009     2009 vs. 2008  

(in thousands)

          

Revenue

   $ 5,063,748      $ 4,181,021      $ 4,085,306        21     2

Operating expenses:

          

Direct operating expenses

     3,658,310        3,357,245        3,299,444        9     2

Selling, general and administrative expenses

     1,014,491        617,709        618,577        64     -   

Depreciation and amortization

     321,666        158,118        140,039        *        13

Goodwill impairment

     -        9,085        269,902        *        *   

Loss (gain) on sale of operating assets

     374        (2,983     1,131        *        *   

Corporate expenses

     110,252        58,160        53,506        90     9

Acquisition transaction expenses

     22,355        36,043        -        (38 )%      *   
                            

Operating loss

     (63,700     (52,356     (297,293     22     (82 )% 

Operating margin

     (1.3 )%      (1.3 )%      (7.3 )%     

Interest expense

     116,527        66,365        70,104       

Loss on extinguishment of debt

     21,315        -        -       

Interest income

     (3,771     (2,193     (8,575    

Equity in earnings of nonconsolidated affiliates

     (4,928     (1,851     (842    

Other expense (income)—net

     (4,189     1        (245    
                            

Loss from continuing operations before income taxes

     (188,654     (114,678     (357,735    

Income tax expense (benefit):

          

Current

     40,175        19,584        (28,355    

Deferred

     (25,021     (8,251     4,098       
                            

Loss from continuing operations

     (203,808     (126,011     (333,478    

Income (loss) from discontinued operations, net of tax

     (4,228     76,277        95,653       
                            

Net loss

     (208,036     (49,734     (237,825    

Net income attributable to noncontrolling interests

     20,354        10,445        1,587       
                            

Net loss attributable to Live Nation Entertainment, Inc.

   $ (228,390   $ (60,179   $ (239,412    
                            

 

 

Notes: Acquisitions and dispositions significantly impact the comparability of the historical consolidated financial data reflected in this schedule of Consolidated Results of Operations.

Non-cash and stock-based compensation expense of $27.1 million, $7.2 million and $8.3 million is included in corporate expenses and $34.5 million, $9.5 million and $27.0 million is included in selling, general and administrative expenses for the years ended December 31, 2010, 2009 and 2008, respectively. A nominal amount and ($0.7) million is included in discontinued operations for the years ended December 31, 2009 and 2008, respectively. There was no non-cash and stock-based compensation expense included in discontinued operations for the year ended December 31, 2010. The non-cash and stock-based compensation expense for 2010, 2009 and 2008 includes expenses related to stock option and restricted stock grants as well as incentive bonuses being paid in stock in lieu of cash.

 

* Percentages are not meaningful.

 

50


Table of Contents

Key Operating Metrics

 

     Year Ended December 31,  
     2010            2009            2008  

Concerts

            

Estimated Events:

            

North America:

            

Owned and/or operated amphitheaters

     1,011           958           1,058   

Owned and/or operated all other

     10,201           9,917           9,746   

Other events

     2,907           3,336           4,214   

International:

            

Festivals

     26           24           27   

Owned and/or operated all other

     4,622           4,414           4,137   

Other events

     2,323           3,050           2,985   
                              

Total estimated events

     21,090           21,699           22,167   
                              

Estimated Attendance (rounded) :

            

North America:

            

Owned and/or operated amphitheaters

     9,430,000           10,056,000           10,457,000   

Owned and/or operated all other

     6,950,000           5,684,000           7,193,000   

Other events

     14,223,000           17,136,000           18,617,000   

International:

            

Festivals

     1,286,000           1,130,000           1,160,000   

Owned and/or operated all other

     5,989,000           5,821,000           5,063,000   

Other events

     9,384,000           12,321,000           9,624,000   
                              

Total estimated attendance

     47,262,000           52,148,000           52,114,000   
                              

Ancillary net revenue per attendee:

            

North America amphitheaters

   $ 17.57         $ 17.96         $ 16.49   

International festivals

   $ 15.95         $ 14.81         $ 14.42   

Ticketing (in thousands)

            

Number of tickets sold:

            

Concerts

     63,428         53     10,084         100     -   

Sports

     22,094         18     -         -        -   

Arts & theater

     18,559         15     -         -        -   

Family

     11,409         10     -         -        -   

Other

     4,408         4     -         -        -   
                              
     119,898         100     10,084         100     -   
                              

Gross value of tickets sold (in thousands):

            

Concerts

   $ 4,173,309         $ 552,752         $ -   

Sports

     1,132,469           -           -   

Arts & theater

     1,252,640           -           -   

Family

     494,168           -           -   

Other

     175,231           -           -   
                              
   $ 7,227,817         $ 552,752         $ -   
                              

Sponsorship

            

Sponsorship revenue recognized (in thousands)

   $ 161,742         $ 161,042         $ 159,320   

Estimated average sponsorship dollars per sponsor (rounded)

   $ 204,000         $ 190,000         $ 190,000   

 

 

Note: Events generally represent a single performance by an artist. Attendance generally represents the number of fans who were present at an event. Festivals are counted as one event in the quarter in which the festival begins but attendance is split over the days of the festival and can be split between quarters. Events and attendance metrics are estimated each quarter.

Events listed above include events in our owned and/or operated venues as well as events we promote in third-party venues. Excluded from the table above are events and attendance that occurred in the North American theatrical business that was sold in January 2008, our motor sports business that was sold in September 2008 and our United Kingdom theatrical business that was sold in October 2009.

The number and gross value of tickets sold includes primary tickets only.

 

51


Table of Contents

Our January 2010 Merger significantly impacted the comparability of the ticketing metrics reflected in this schedule of Key Operating Metrics.

 

52


Table of Contents

Revenue

Our revenue increased $882.7 million, or 21%, during the year ended December 31, 2010 as compared to the prior year. Excluding the decreases of approximately $37.5 million related to the impact of changes in foreign exchange rates, revenue increased $920.2 million, or 22%. Overall increases in revenue were primarily due to increases in our Ticketing, Artist Nation and eCommerce segments of $978.3 million, $110.7 million and $71.7 million, respectively, driven by the incorporation of the Ticketmaster results after the completion of the Merger partially offset by a decrease in our Concerts segment of $266.0 million.

Our revenue increased $95.7 million, or 2%, during the year ended December 31, 2009 as compared to the prior year. Excluding the decreases of approximately $179.8 million related to the impact of changes in foreign exchange rates, revenue increased $275.5 million, or 7%. Overall increases in revenue were primarily due to increases in our Ticketing, Concerts and Artist Nation segments of $44.6 million, $27.9 million and $22.7 million, respectively.

More detailed explanations of the changes for the years ended 2010 and 2009 are included in the applicable segment discussions contained herein.

Direct operating expenses

Our direct operating expenses increased $301.1 million, or 9%, during the year ended December 31, 2010 as compared to the prior year. Excluding the decreases of approximately $28.8 million related to the impact of changes in foreign exchange rates, direct operating expenses increased $329.9 million, or 10%. Overall increases in direct operating expenses were primarily due to an increase in our Ticketing segment of $478.3 million driven by the incorporation of the Ticketmaster results after the completion of the Merger partially offset by a decrease in our Concerts segment of $191.9 million.

Our direct operating expenses increased $57.8 million, or 2%, during the year ended December 31, 2009 as compared to the prior year. Excluding the decreases of approximately $150.1 million related to the impact of changes in foreign exchange rates, direct operating expenses increased $207.9 million, or 6%. Overall increases in direct operating expenses were primarily due to increases in our Concerts and Artist Nation segments of $25.9 million and $21.1 million, respectively.

Direct operating expenses include artist fees, ticketing client royalties, show-related marketing and advertising expenses along with other costs.

More detailed explanations of the changes for the years ended 2010 and 2009 are included in the applicable segment discussions contained herein.

Selling, general and administrative expenses

Our selling, general and administrative expenses increased $396.8 million, or 64%, during the year ended December 31, 2010 as compared to the prior year. Excluding the decreases of approximately $2.7 million related to the impact of changes in foreign exchange rates, selling, general and administrative expenses increased $399.5 million, or 65%. Overall increases in selling, general and administrative expenses were primarily due to increases in our Ticketing, Artist Nation and eCommerce segments of $297.3 million, $57.3 million and $24.1 million, respectively, driven by the incorporation of the Ticketmaster results after the completion of the Merger.

Our selling, general and administrative expenses decreased $0.9 million, or 2%, during the year ended December 31, 2009 as compared to the prior year. Excluding the decreases of approximately $19.7 million related to the impact of changes in foreign exchange rates, selling, general and administrative expenses increased $18.8 million, or 3%. Overall decreases in selling, general and administrative expenses were primarily due to decreases in our Sponsorship and Concerts segment of $5.1 million and $3.0 million, respectively, partially offset by an increase in our Ticketing segment of $7.6 million.

More detailed explanations of the changes for the years ended 2010 and 2009 are included in the applicable segment discussions contained herein.

Depreciation and amortization

Our depreciation and amortization increased $163.5 million during the year ended December 31, 2010 as compared to the prior year. Excluding the decreases of approximately $0.1 million related to the impact of changes in foreign exchange rates, depreciation and amortization expense increased $163.6 million. Overall depreciation and amortization expense increased primarily due to increases in depreciation and amortization in our Ticketing and Artist Nation segments of $121.3 million and $31.6 million, respectively. These overall increases are primarily driven by the addition of the definite-lived intangible assets due to the incorporation of the Ticketmaster results after the completion of the Merger. During 2010, we recorded an impairment charge of $43.6 million related primarily to a HOB club, a theatrical theater, a trade name and an artist revenue-generating contract.

 

53


Table of Contents

Our depreciation and amortization increased $18.1 million, or 13%, during the year ended December 31, 2009 as compared to the prior year. Excluding the decreases of approximately $3.8 million related to the impact of changes in foreign exchange rates, depreciation and amortization expense increased $21.9 million, or 16%. Overall depreciation and amortization expense increased primarily due to increases in depreciation and amortization in our Concerts and Ticketing segments of $9.8 million and $5.7 million, respectively. During 2009, we recorded an impairment charge of $10.5 million related to several venues.

More detailed explanations of the changes for the years ended 2010 and 2009 are included in the applicable segment discussions contained herein.

Goodwill impairment

We test goodwill for impairment annually, generally as of October 1, using a two-step process. The first step, used to screen for potential impairment, compares the fair value of the reporting unit with its carrying amount, including goodwill. The second step, employed for any reporting unit that fails the first step, is used to measure the amount of any potential impairment and compares the implied fair value of the reporting unit with the carrying amount of goodwill. We also test goodwill for impairment in other periods if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

In 2009, we recorded deferred tax liabilities of $9.1 million with an offset to goodwill primarily in connection with our 2006 acquisition of HOB. Since the goodwill for a reporting unit within our Concerts operating segment was fully impaired during 2008, we immediately recorded an impairment charge of $9.1 million.

In 2008, while we were performing our annual goodwill impairment test, we experienced a significant decline in our market capitalization. Based upon the results of this impairment test, we recorded an impairment charge of $269.9 million related to a reporting unit within our Concerts operating segment which represented all of the remaining goodwill previously recorded for this reporting unit. Also in 2008, in connection with the sale of our non-core events business (classified as discontinued operations), we recorded a $13.0 million goodwill impairment charge related to the goodwill for this business as a component of operating expenses in discontinued operations as it was determined that those assets were impaired since the estimated undiscounted cash flows, based on expected sales proceeds associated with those assets, were less than their carrying value.

Loss (gain) on sale of operating assets

We recorded a net loss on sale of operating assets of $0.4 million during the year ended December 31, 2010 as compared to a net gain of $3.0 million for the prior year. The net loss in 2010 is primarily the result of the $5.2 million loss resulting from our sale of Paciolan in the first quarter of 2010 partially offset by gains of $4.3 million on the sale of a music theater in Sweden and the final settlement received for the 2009 sale of a music theater in London.

We recorded a net gain on sale of operating assets of $3.0 million during the year ended December 31, 2009 as compared to a net loss of $1.1 million for the prior year. The net gain recorded in 2009 included $2.2 million on the sales of our 20% equity investment in MLK and a music theater in West Virginia.

Corporate expenses

Corporate expenses increased $52.1 million, or 90%, during the year ended December 31, 2010 as compared to the prior year primarily due to $11.2 million in incremental non-cash compensation expense associated with equity awards exchanged or accelerated in connection with the Merger, $4.7 million of severance cost associated with the reorganization of our business units subsequent to the Merger and $35.8 million in incremental expense resulting from the expansion of corporate functions and other costs as a result of the Merger.

Corporate expenses increased $4.7 million, or 9%, during the year ended December 31, 2009 as compared to the prior year primarily due to additional compensation driven by improved performance.

Acquisition transaction expenses

Acquisition transaction expenses decreased $13.7 million during the year ended December 31, 2010 as compared to the prior year primarily due to completion of the Merger partially offset by changes in the fair value of acquisition-related contingent consideration.

 

54


Table of Contents

Acquisition transaction expenses increased $36.0 million during the year ended December 31, 2009 as compared to the prior year primarily due to costs associated with the Merger. In accordance with the new accounting provisions for business combinations that we adopted in January 2009, these costs are now required to be expensed as incurred beginning in 2009.

Interest expense

Interest expense increased $50.2 million, or 76%, for the year ended December 31, 2010 as compared to the prior year primarily due to higher debt balances, from the debt obtained in the Merger, and higher average interest rates.

Interest expense decreased $3.7 million, or 5%, for the year ended December 31, 2009 as compared to the prior year primarily due to lower debt balances and decreases in average interest rates.

Our debt balances and weighted average cost of debt, excluding the debt discount on convertible senior notes and the debt premium on the 10.75% senior notes, were $1.756 billion and 6.0%, respectively, at December 31, 2010, and $832.9 million and 5.3%, respectively, at December 31, 2009.

Loss on extinguishment of debt

We recorded a loss on extinguishment of debt of $21.3 million for the year ended December 31, 2010, related to the replacement of our senior secured credit facilities in May 2010 with a new credit agreement that provides for $1.2 billion in total credit facilities and redemption of our redeemable preferred stock.

Interest income

Interest income did not change significantly for the year ended December 31, 2010 as compared to the prior year.

Interest income decreased $6.4 million during the year ended December 31, 2009 as compared to the prior year primarily due to lower excess cash invested in money market funds and other short-term investments.

Equity in (earnings) losses of nonconsolidated affiliates

Equity in earnings of nonconsolidated affiliates increased $3.1 million for the year ended December 31, 2010 as compared to the prior year, primarily due to income from our investment in a ticketing business in Mexico acquired as part of the Merger.

Equity in earnings of nonconsolidated affiliates did not change significantly for the year ended December 31, 2009 as compared to the prior year.

Other expense (income)—net

Other expense (income)—net was income of $4.2 million for the year ended December 31, 2010 primarily due to the impact of changes in foreign exchange rates of $2.8 million in 2010.

Income taxes

Our 2010 effective tax rate of 8% represented net tax expense of $15.2 million compared to our 2009 effective tax rate of 10% which represented a net tax expense of $11.3 million for the years ended December 31, 2010 and 2009, respectively. In 2010, income tax expense includes $10.1 million related to statutory expense for entities outside of the U.S. and for Front Line, which files a separate U.S. Federal tax return apart from the Company’s other domestic operations, $4.9 million related to state tax expense, $1.5 million tax expense for true-ups, $3.1 million tax benefit related to valuation allowance release and other tax expense of approximately $1.8 million. The net increase in 2010 tax expense as compared to 2009 is principally driven by higher tax benefits recognized in 2009 related to settlements of uncertain tax positions.

Our effective tax rate for 2009 was 10% as compared to an effective tax rate of 7% for 2008. The higher net tax expense as compared to the 2008 tax benefit is principally driven by the tax benefit for a portion of U.S. operations in 2008 attributable to the gain on sale of certain discontinued operations.

Discontinued operations

In January 2008, we completed the sale of substantially all of our North American theatrical business, which included the assets of the North American theatrical presenting business and certain theatrical venues, to Key Brand Entertainment Inc. and its lenders for a gross sales price of $90.4 million. After fees, expenses, an adjustment to replace the show cash of the North American theatrical business that was previously removed from the operations and utilized by us and other

 

55


Table of Contents

adjustments, we received $18.5 million of proceeds in 2008, net of cash sold and transaction costs, and an additional $12.6 million in 2009. The sale of the North American theatrical business resulted in a total pre-tax gain of $17.8 million.

In September 2008, we sold our motor sports business to Feld Acquisition Corp., a wholly-owned subsidiary of Feld Entertainment, Inc. for a gross sales price of $175.0 million in cash, subject to certain net working capital and other post-closing adjustments, in addition to a performance-based contingent payment of up to $30.0 million over a five-year period commencing with calendar year 2009. After estimated fees, expenses and other adjustments, we received $166.5 million of net proceeds, excluding the contingent payment. The sale of the motor sports business resulted in a pre-tax gain of $145.0 million.

In October 2008, we sold our non-core events business along with rights to certain DVD projects to Events Acquisition Corporation, which is owned by Michael Cohl who is a former director and executive officer of the Company. The events business included rights or investments in certain non-music and exhibition-style events. We will receive approximately $15.4 million for the events business, DVD projects and other rights, in addition to performance-based contingent payments and undistributed profits related to future periods. We recorded a $0.8 million pre-tax gain in discontinued operations and a $0.7 million loss in continuing operations. In the third quarter of 2008, we recorded a $29.2 million impairment related to the events business, including a $13.0 million impairment of goodwill, and also a $1.5 million impairment related to the DVD projects.

In October 2009, we sold our remaining theatrical venues and operations in the United Kingdom to The Ambassador Theatre Group Limited for a gross sales price of $148.7 million. After fees, expenses, and a working capital adjustment, we received $111.3 million of net proceeds. The sale of the U.K. theatrical business resulted in a tax-free gain of $56.6 million in the fourth quarter of 2009. For the year ended December 31, 2010, we reported an additional $4.2 million of expense related to the sale.

Our discontinued operations reported income before loss (gain) on disposal of $21.7 million for the year ended December 31, 2009 and a loss before loss (gain) on disposal of $4.1 million for the year ended December 31, 2008. We recorded a loss on disposal of $4.2 million and gains on disposal of $54.6 million and $99.8 million for the years ended December 31, 2010, 2009 and 2008, respectively. The gain on disposal for 2008 is net of tax of $64.6 million.

Net income attributable to noncontrolling interests

Net income attributable to noncontrolling interests increased $9.9 million during the year ended December 31, 2010 as compared to the prior year primarily due to better operating results for AMG, Tecjet and the O2 Dublin.

Net income attributable to noncontrolling interests increased $8.9 million during the year ended December 31, 2009 as compared to the prior year primarily due to better operating results for DF Concerts, Angel Festivals Limited and the O2 Dublin.

 

56


Table of Contents

Concerts Results of Operations

Our Concerts segment operating results were, and discussions of significant variances are, as follows:

 

                       % Change     % Change  
     Year Ended December 31,     2010 vs. 2009     2009 vs. 2008  
     2010     2009     2008              

(in thousands)

          

Revenue

   $ 3,438,350      $ 3,704,322      $ 3,676,392        (7 )%      1

Direct operating expenses

     2,910,334        3,102,212        3,076,264        (6 )%      1

Selling, general and administrative expenses

     524,672        510,975        513,925        3     (1 )% 

Depreciation and amortization

     139,129        129,742        119,944        7     8

Goodwill impairment

     -        9,085        269,902        *        *   

Loss (gain) on sale of operating assets

     (4,848     (2,969     227        *        *   

Acquisition transaction expenses

     (2,424     1,117        -        *        *   
                            

Operating loss

   $ (128,513   $ (45,840   $ (303,870     *        (85 )% 
                            

Operating margin

     (3.7 )%      (1.2 )%      (8.3 )%     

Adjusted operating income **

   $ 15,366      $ 99,846      $ 110,825        (85 )%      (10 )% 

 

 

* Percentages are not meaningful.
** Adjusted operating income (loss) is discussed in more detail and reconciled to operating income (loss) below.

Year Ended 2010 Compared to Year Ended 2009

Concerts revenue decreased $266.0 million, or 7%, during the year ended December 31, 2010 as compared to the prior year. Excluding the decrease of $33.2 million related to the impact of changes in foreign exchange rates, revenue decreased $232.8 million, or 6%, primarily due to an overall decrease in events and attendance for stadiums and arenas, a decrease in average attendance for amphitheaters and a reduction in revenue of $8.4 million related to the effect of our divestiture of two music theaters and a club in September 2009 and a music theater in Sweden in December 2010. Offsetting these decreases were strong festival operations internationally and an increase in revenue of $10.5 million related to our acquisitions of Brand New Live in February 2009, Tecjet in March 2009 and Parcolimpico in November 2009.

Concerts direct operating expenses decreased $191.9 million, or 6%, during the year ended December 31, 2010 as compared to the prior year. Excluding the decrease of $27.1 million related to the impact of changes in foreign exchange rates, direct operating expenses decreased $164.8 million, or 5%, primarily due to lower expenses associated with the decreased events along with $4.6 million less expense due to the divestitures noted above. Partially offsetting these decreases were incremental direct operating expenses of $2.8 million related to the acquisitions noted above and a $13.4 million write-down related to certain artist advances.

Concerts selling, general and administrative expenses increased $13.7 million, or 3%, during the year ended December 31, 2010 as compared to the prior year. Excluding the decrease of $2.6 million related to the impact of changes in foreign exchange rates, selling, general and administrative expenses increased $16.3 million, or 3%, due to higher costs related to salaries, insurance claims and new locations in 2010, $5.8 million in severance relating to two reorganizations in North America and $6.3 million in incremental expenses related to the acquisitions noted above. Partially offsetting these increases were decreases in selling, general and administrative expenses of $2.4 million relating to the divestitures noted above.

Concerts depreciation and amortization increased $9.4 million, or 7%, during the year ended December 31, 2010 as compared to the prior year primarily due to an impairment charge of $31.2 million recorded in 2010 related to a House of Blues club and an artist contract intangible along with increased amortization expense relating to our April 2010 acquisition of the remaining 49% interest in LN—Haymon. Partially offsetting these increases were decreases relating to $9.7 million of impairments recorded during 2009 related to two theaters, four clubs and a theater development project that was no longer being pursued.

Concerts recorded a goodwill impairment of $9.1 million in 2009 in connection with our 2006 acquisition of HOB.

 

57


Table of Contents

Concerts gain on sale of operating assets was $4.8 million for the year ended December 31, 2010, primarily due to a $4.3 million gain on the sale of a music theater in Sweden and the final settlement received for the 2009 sale of a music theater in London.

Concerts acquisition transaction expenses decreased by $3.5 million during the year ended December 31, 2010 as compared to the prior year primarily due to the $3.1 million adjustment recorded in 2010 related to the change in fair value of acquisition-related contingent consideration.

The increase in operating loss for Concerts was primarily related to the reduced show results for stadiums, arenas and amphitheaters along with the write-down related to certain artist advances, partially offset by strong festival results.

Year Ended 2009 Compared to Year Ended 2008

Concerts revenue increased $27.9 million, or 1%, during the year ended December 31, 2009 as compared to the prior year. Excluding the decrease of $162.1 million related to the impact of changes in foreign exchange rates, revenue increased $190.0 million, or 5.2%, primarily due to stronger festivals in the United Kingdom and Belgium, and strong stadium shows for global touring artists U2 and Madonna. We also experienced higher promotion revenue in Spain, the Netherlands and Denmark driven by strong stadium events, a rental income increase due to the reopening of the O2 in Dublin in December 2008, incremental revenue related to the opening of our House of Blues clubs in Houston and Boston and increased attendance and average ticket prices at third-party venues. We had incremental revenue of $66.2 million related to the effect of our acquisitions which include DF Concerts in April 2008, De-Lux in October 2008, Brand New Live in February 2009 and Tecjet in March 2009. Partially offsetting these increases was an overall decrease in the events and attendance for North American amphitheaters, theaters and clubs, a reduction in special events at our House of Blues clubs, and a reduction of $39.7 million relating to our divestitures of F&P Italia in September 2008 and three Boston venues in September 2009.

Concerts direct operating expenses increased $25.9 million, or 1%, during the year ended December 31, 2009 as compared to the prior year. Excluding the decrease of $138.8 million related to the impact of changes in foreign exchange rates, direct operating expenses increased $164.7 million, or 5.4%, primarily due to incremental direct operating expenses of $58.9 million related to the effect of our acquisitions noted above, additional expenses due to the reopening of the O2 Dublin and the opening of two House of Blues clubs, increases in expense related to stronger festival performance, increased attendance at third-party venues and higher promotion revenue. These increases were partially offset by lower expenses associated with the decreased number of events for North American amphitheaters, theaters and clubs and House of Blues clubs special events along with a decline of $34.5 million related to the impact of the dispositions noted above.

Concerts selling, general and administrative expenses decreased $3.0 million, or 1%, during the year ended December 31, 2009 as compared to the prior year. Excluding the decrease of $18.3 million related to the impact of changes in foreign exchange rates, selling, general and administrative expenses increased $15.3 million, or 3%, due to incremental expenses of $6.7 million related to the acquisitions noted above and higher compensation costs driven in part by improved performance. Partially offsetting these increases were reductions in expenses due to cost-saving initiatives and $2.4 million related to the dispositions noted above.

Concerts depreciation and amortization increased $9.8 million, or 8%, during the year ended December 31, 2009 as compared to the prior year primarily due to an impairment of $9.7 million recorded during 2009 related to two theaters, four clubs and a theater development project that was no longer being pursued.

Concerts recorded a goodwill impairment of $9.1 million in 2009 in connection with our 2006 acquisition of HOB and $269.9 million in 2008 related to projected earnings for a reporting unit which represented all of the remaining goodwill previously recorded for this reporting unit.

The decrease in operating loss for Concerts in 2009 was primarily a result of the 2008 goodwill impairment.

 

58


Table of Contents

Ticketing Results of Operations

Our Ticketing segment operating results were, and discussions of significant variances are, as follows:

 

                       % Change      % Change  
     Year Ended December 31,     2010 vs. 2009      2009 vs. 2008  
     2010     2009     2008               

(in thousands)

           

Revenue

   $ 1,039,886      $ 61,622      $ 16,973        *         *   

Direct operating expenses

     502,375        24,056        9,370        *         *   

Selling, general and administrative expenses

     325,664        28,381        20,823        *         36

Depreciation and amortization

     131,533        10,275        4,580        *         *   

Loss on sale of operating assets

     5,186        5        -        *         *   

Acquisition transaction expenses

     780        -        -        *         *   
                             

Operating income (loss)

   $ 74,348      $ (1,095   $ (17,800     *         (94 )% 
                             

Operating margin

     7.1     (1.8 )%      (104.9 )%      

Adjusted operating income (loss) **

   $ 231,367        9,453        (11,715     *         *   

 

 

* Percentages are not meaningful.
** Adjusted operating income (loss) is discussed in more detail and reconciled to operating income (loss) below.

Year Ended 2010 Compared to Year Ended 2009

Ticketing revenue increased $978.3 million during the year ended December 31, 2010 as compared to the prior year primarily due to the Merger. Revenue related to ticketing service charges for our events where we control ticketing is deferred and recognized as the event occurs.

Ticketing direct operating expenses increased $478.3 million during the year ended December 31, 2010 as compared to the prior year primarily due to the Merger.

Ticketing selling, general and administrative expenses increased $297.3 million during the year ended December 31, 2010 as compared to the prior year primarily due to the Merger which includes $23.0 million of expense related to legal settlement accruals.

Ticketing depreciation and amortization increased $121.3 million during the year ended December 31, 2010 as compared to the prior year primarily due to the $115.7 million increase resulting from our Merger including a $10.0 million impairment relating to an indefinite-lived intangible asset trade name, as well as $4.5 million related to the acceleration of depreciation expense for the CTS ticketing platform assets that are no longer in use.

Ticketing loss on sale of operating assets of $5.2 million during the year ended December 31, 2010 is primarily due to the sale of Paciolan in March 2010.

The increase in operating income for Ticketing was primarily due to the addition of the Ticketmaster ticketing operations.

Year Ended 2009 Compared to Year Ended 2008

Ticketing revenue increased $44.6 million during the year ended December 31, 2009 as compared to the prior year primarily due to increased service charge revenue from our ticketing services. Revenue related to ticketing service charges for our owned and/or operated venues is recognized as the event occurs. 2009 represented the first full year of our stand-alone ticketing operations.

Ticketing direct operating expenses increased $14.7 million during the year ended December 31, 2009 as compared to the prior year due to costs associated with our expanded ticketing operations.

Ticketing selling, general and administrative expenses increased $7.6 million, or 36%, during the year ended December 31, 2009 as compared to the prior year primarily due to increased salary costs and maintenance expense related to the operations of our ticketing services and website management. We began the build-out of our ticketing infrastructure at the

 

59


Table of Contents

beginning of 2008, therefore, the costs during 2008 did not reflect a fully-loaded cost base necessary for running our ticketing operations.

Ticketing depreciation and amortization expense increased $5.7 million during the year ended December 31, 2009 as compared to the prior year primarily due to depreciation expense related to software and infrastructure for our ticketing and website platforms. Depreciation on our ticketing system did not begin until the system launched in December 2008.

The decreased operating loss for Ticketing was primarily a result of increased revenue, net of expenses, from ticket service charges for events that occurred in 2009 sold by our ticketing operations. Partially offsetting these increases were higher selling, general and administrative and depreciation expenses related to our ticketing platform as we had just begun building our ticketing infrastructure in early 2008.

Artist Nation Results of Operations

Our Artist Nation segment operating results were, and discussions of significant variances are, as follows:

 

                       % Change     % Change  
     Year Ended December 31,     2010 vs. 2009     2009 vs. 2008  
     2010     2009     2008              

(in thousands)

          

Revenue

   $ 362,159      $ 251,499      $ 228,830        44     10

Direct operating expenses

     233,016        202,281        181,169        15     12

Selling, general and administrative expenses

     93,995        36,692        37,006        *        (1 )% 

Depreciation and amortization

     41,520        9,963        8,629        *        15

Loss (gain) on sale of operating assets

     20        9        (5     *        *   

Acquisition transaction expenses

     6,277        -        -       
                            

Operating income (loss)

   $ (12,669   $ 2,554      $ 2,031        *        26
                            

Operating margin

     (3.5 )%      1.0     0.9    

Adjusted operating income **

   $ 46,553        12,846        10,655        *        21

 

 

* Percentages are not meaningful.
** Adjusted operating income (loss) is discussed in more detail and reconciled to operating income (loss) below.

Year Ended 2010 Compared to Year Ended 2009

Artist Nation revenue increased $110.7 million, or 44%, during the year ended December 31, 2010 as compared to the prior year primarily due to incremental revenue of $160.9 million related to our Merger partially offset by a decline in sales of tour merchandise revenue driven by the timing of artist tours.

Artist Nation direct operating expenses increased $30.7 million, or 15%, during the year ended December 31, 2010 as compared to the prior year primarily due to incremental direct operating expenses of $72.3 million related to our Merger partially offset by a decline in tour merchandise expense driven by the timing of artist tours.

Artist Nation selling, general and administrative expenses increased $57.3 million during the year ended December 31, 2010 as compared to the prior year primarily due to incremental selling, general and administrative expenses related to our Merger.

Artist Nation depreciation and amortization increased $31.6 million during the year ended December 31, 2010 as compared to the prior year primarily due to incremental amortization expense related to definite-lived intangible assets resulting from our Merger.

Artist Nation acquisition transaction expenses were $6.3 million for the year ended December 31, 2010 primarily due to changes in the fair value of acquisition-related contingent consideration.

The increase in operating loss for Artist Nation was related to the decline in sales of tour merchandise and the impact of reduced touring schedules on the business acquired in the Merger.

 

60


Table of Contents

Year Ended 2009 Compared to Year Ended 2008

Artist Nation revenue increased $22.7 million, or 10%, during the year ended December 31, 2009 as compared to the prior year primarily due to increased tour merchandise revenue driven by the timing of artist tours including U2 and Madonna.

Artist Nation direct operating expenses increased $21.1 million, or 12%, during the year ended December 31, 2009 as compared to the prior year primarily due to increased tour merchandise expense driven by the timing of artist tours including U2 and Madonna.

The increase in operating income for Artist Nation was primarily a result of the increase in tour merchandise resulting from the timing of artists tours.

eCommerce Results of Operations

Our eCommerce segment operating results were, and discussions of significant variances are, as follows:

 

                       % Change     % Change  
     Year Ended December 31,     2010 vs. 2009     2009 vs. 2008  
     2010     2009     2008              

(in thousands)

          

Revenue

   $ 87,858      $ 16,205      $ 9,242        *        75

Direct operating expenses

     11,093        3,228        3,149        *        3

Selling, general and administrative expenses

     41,520        17,440        16,976        *        3

Depreciation and amortization

     7,474        5,240        2,399        43     *   
                            

Operating income (loss)

   $ 27,771      $ (9,703   $ (13,282     *        (27 )% 
                            

Operating margin

     31.6     (59.9 )%      (143.7 )%     

Adjusted operating income (loss) **

   $ 36,165        (4,247     (10,656     *        (60 )% 

 

 

* Percentages are not meaningful.
** Adjusted operating income (loss) is discussed in more detail and reconciled to operating income (loss) below.

Year Ended 2010 Compared to Year Ended 2009

eCommerce revenue increased $71.7 million during the year ended December 31, 2010 as compared to the prior year primarily due to the $70.2 million increase resulting from our Merger.

eCommerce direct operating expenses increased $7.9 million during the year ended December 31, 2010 as compared to the prior year primarily due to the $6.8 million increase resulting from our Merger.

eCommerce selling, general and administrative expenses increased $24.1 million during the year ended December 31, 2010 as compared to the prior year primarily due to the $20.7 million increase resulting from our Merger.

eCommerce depreciation and amortization increased $2.2 million, or 43%, during the year ended December 31, 2010 as compared to the prior year primarily due to the $0.7 million increase resulting from our Merger along with additional depreciation expense in 2010 relating to enhancements to our websites and online storefront.

The increased operating income for eCommerce was primarily a result of our Merger.

Year Ended 2009 Compared to Year Ended 2008

eCommerce revenue increased $7.0 million, or 75%, during the year ended December 31, 2009 as compared to the prior year primarily due to online sponsorship revenue and per ticket fees received from the Ticketing segment for tickets sold online through our internal ticketing operations.

eCommerce depreciation and amortization increased $2.8 million during the year ended December 31, 2009 as compared to the prior year primarily due to depreciation of software for our website platforms.

 

61


Table of Contents

The decrease in operating loss for eCommerce was primarily a result of sponsorships and ticket fees resulting from the launch of our internal ticketing operations in late 2008.

Sponsorship Results of Operations

Our Sponsorship segment operating results were, and discussions of significant variances are, as follows:

 

                       % Change     % Change  
     Year Ended December 31,     2010 vs. 2009     2009 vs. 2008  
     2010     2009     2008              

(in thousands)

          

Revenue

   $ 161,742      $ 161,042      $ 159,320        -        1

Direct operating expenses

     28,355        44,917        39,724        (37 )%      13

Selling, general and administrative expenses

     25,939        20,179        25,273        29     (20 )% 

Depreciation and amortization

     255        341        203        (25 )%      68

Loss on sale of operating assets

     6        -        -        *        *   
                            

Operating income

   $ 107,187      $ 95,605      $ 94,120        12     2
                            

Operating margin

     66.3     59.4     59.1    

Adjusted operating income **

   $ 108,058        95,946        95,003        13     1

 

 

* Percentages are not meaningful.
** Adjusted operating income (loss) is discussed in more detail and reconciled to operating income (loss) below.

Year Ended 2010 Compared to Year Ended 2009

Although there was no significant change in revenue, Sponsorship direct operating expenses decreased $16.6 million, or 37%, during the year ended December 31, 2010 as compared to the prior year primarily due to higher fees paid to artists related to tour sponsorship agreements in 2009. Excluding the expense relating to artist tour sponsorships, direct operating and selling, general and administrative expenses in total decreased $1.3 million during the year ended December 31, 2010 as compared to the prior year. In 2010, we have changed the pay structures of many of our sponsorship sales force from a commission structure to a salary plus bonus structure in order to properly align sales incentives with the overall growth drivers and goals of the Company. This has caused a decrease in direct operating expenses and an increase in selling, general and administrative expenses.

Overall, Sponsorship operating income increased $11.6 million, or 12%, for the year ended December 31, 2010 as compared to the prior year primarily driven by higher international festival sponsorships.

Year Ended 2009 Compared to Year Ended 2008

Sponsorship revenue increased $1.7 million, or 1%, during the year ended December 31, 2009 as compared to the prior year primarily due to increased sales. Sponsorship direct operating expenses increased $5.2 million, or 13%, during the year ended December 31, 2009 as compared to the prior year primarily due to increased tour sponsorships in 2009 resulting in an increase of fees paid to artists related to those tour sponsorship agreements. Sponsorship selling, general and administrative expenses decreased $5.1 million, or 20%, during the year ended December 31, 2009 as compared to the prior year primarily due to increased cost allocations to eCommerce based on an allocation of time spent on revenue-generating activities.

Overall, Sponsorship operating income remained relatively flat with an increase of $1.5 million, or 2%, for the year ended December 31, 2009 as compared to the prior year.

 

62


Table of Contents

Other Results of Operations

Our other operating results were, and discussions of significant variances are, as follows:

 

                       % Change     % Change  
     Year Ended December 31,     2010 vs. 2009     2009 vs. 2008  
     2010     2009     2008              

(in thousands)

          

Revenue

   $ 4,324      $ 4,859      $ 6,498        (11 )%      (25 )% 

Direct operating expenses

     -        (170     984        *        *   

Selling, general and administrative expenses

     2,701        4,042        4,574        (33 )%      (12 )% 

Depreciation and amortization

     1,362