Conference Q&A

The Feb. 10 Live Nation / Ticketmaster investors conference call regarding the companies’ merger included a Q&A section where several important issues were addressed. Below is a rough transcript of some of the interaction, with responses by Ticketmaster Chairman Barry Diller, Ticketmaster CEO Irving Azoff and Live Nation CEO Michael Rapino.

Q: Barry Diller said artist sets pricing. Irving, doesn’t Front Line have influence? And your thoughts on 360 deals .. will they be more or less aggressive in the future?

Azoff: The role of the manager is as adviser to the artist. All of our artists have agents, business managers and lawyers, so it’s a collaborative effort. Artists are very involved. I know of no major artist that doesn’t make the final decision and take an active participation in their ticket pricing.

As for 360 deals, I’m pretty open .. you look at each artist and their needs and you try to structure programs to help them achieve that. I think for certain artists we would look at all around deals in the future but it’s really on a case by case basis.

Does the Eventim deal survive the combination and if so, is SMG going to use the Eventim platform or Ticketmaster platform?

Rapino: We are looking to honor and work through our CTS relationship. We will be talking to [Eventim] on how to best maximize and honor that contract to service the customers.

What is the strategy during the review. Will LN ticketing stop going after new venue business during the review period and what about the deal with SMG?

Rapino: It’s business as usual until this deal is closed. We already laid out for our investors well beyond this that 2009, first and primarily, was servicing our own needs, making sure our amphitheatres and our shows and all of our inventory was on sale and working well for the summer. So, it’s business as usual. We have a bunch of shows selling for last month. We’ve had some learning curves, some hiccups and are adjusting daily to make sure our system is handling our summer load and it will be business as usual.

As for SMG, the first few deals don’t come up until later in 2009, so it will be business as usual with our platform until this deal closes.

Any change to the business fundamentals in respect to your comment on solid early ticket sales you made last month and on the $40 million synergy number, is that a first pass and do you expect more as you dig deeper into each other’s financials?

Rapino: On the first front, since the Citibank conference in Phoenix we reported year over year comparisons. A month later we can confidently say if we compare 2008 to 2009, time and date in terms of tickets sold, shows on sale, we are pacing online with last year. So we’re optimistic we’ll have a continued strong year in terms of ticket sales. Synergies, yes, we think conservatively $40 million. We think this has not only cost synergies but also revenue opportunities with combined entities well beyond the 40.

How long do think it will take to achieve synergies and where exactly is that coming from?

Kathy Willard, CFO, Live Nation: Our plan is the first year after the closing, total savings and it is going to come from a lot of the different groups within the different companies but I’m not going to be more specific on the call.

Promoters who are obviously competitors to Live Nation and who Ticketmaster has relationships with, I’m thinking people like AEG and Jam, any sort of commentary? Have you guys reached out to them in advance to get a sense of how comfortable they feel with the combination?

Azoff: Look, if you look at the other parts of the entertainment business, there are four broadcast networks, there’s plenty of room for plenty of promoters. And artists have loyalties to them, past present and future, and it will be business as usual, if not better. We think that it will be a more level playing field. There’s no real barrier of entry to anybody to expand their promotion areas.

In fact, we think this combination will bring lots of outside third party marketing resources that will allow people to do more shows. From our perspective, what I’m seeing at Ticketmaster, yes, the individual shows going on sale are doing really well but there aren’t as many shows going on sale. So the goal of this company is going to be get more artists to work and fill more venues and fill more seats. And, no, we did not reach out to AEG or Jam in particular for obvious reasons but when we do talk to any other promoter, and I’m going to stress this to them, and I know Michael is also, that it’s a time of great opportunity for the whole industry.

I was wondering if you can address some of the concerns that have popped up, and Barry, I think you’ve mentioned the secondary ticketing. There are some class action lawsuits that have come out. Related to that I was wondering along those lines ways to improve the consumer experience on the ticketing going forward that might prevent these algorithms that sop up all the supply at once.

Diller: Well, first of all, the class action. What can I say about class action lawsuits that have no merit, chasing cars down the road. The situation that happened has been much misunderstood. What really happened was, there was an actual tech glitch in the system that had nothing to do with the availability of tickets. It had to do with, I think, VISA that couldn’t process the data. So it kind of froze the system for a bit. When it froze the system, essentially what Ticketmaster screens said was it couldn’t do anything. It couldn’t process tickets and another screen came up and said you could go back, try your thing again, you could modify, etcetera, and on the other side of the screen it said you could also go to TicketsNow, which is our reseller, sister company.

It was confusing. But it was confusion, though, not out of Ticketmaster saying tickets were not available and therefore pushing people to its reseller site. That was not Ticketmaster’s intention. But there were people who misunderstood. What we did is that anybody who bought tickets at a higher price, we’ll make them good for that. There was no real controversy here. The issue is, there is a secondary market. That has existed for a long time. Now it’s called secondary, usually even called scalpers. That is a reality. Has been a reality for a long time where all sorts of practices go on.

What Ticketmaster has done in entering the business is try and make it transparent and will continue to make it more transparent and to make it secure. Ticketmaster is not in the business of denying primary tickets to anyone in order to push them to the secondary marketplace. That is the policy of Ticketmaster. It will continue to make improvements so there is a ringing clarity between the two. But that’s the policy of the company. We don’t push people to the secondary market other than when the house is sold out, let’s say.

Again, I think this is just such a sexy issue. Ticketmaster is never perceived to be on the side of the angels because in fact, there are only so many tickets. It’s got tickets to sell and when they’re finished selling, people get angry. That’s understandable. That’s just part of the life of being in that part of the service business. I do think the noise around this was wildly overdone. The timing was unfortunate, that’s what happens in life. You’re getting ready to finish a transaction and up comes a computer glitch that gets promoted, let’s say. In any event, that’s a fairly longwinded answer but I do want to get all of this on the record that we are going to explain and explain and explain, and make all of this clear to all constituencies.

We had a situation in New York where Congress, I think Sen. Schumer, went out and made statements that were factually untrue. In detail untrue, which is unfortunate but hardly unknown. And we’re going to keep setting the record straight. We’re going to be proactive here.

I just wanted to get some more clarity on the Live Nation side, the ticketing platform. Yesterday, as it relates to a Jimmy Buffett onsale, when we did a little bit of work on the ticketing platform that was behind the onsale, it seemed the majority of venues, including Live Nation venues, were actually being ticketed by Ticketmaster. So, was just wondering if there was any recent change on who’s processing tickets for Live Nation or if it’s always been a similar ratio in the past.

Rapino: Just to clarify, we are full steam ahead on our ticketing platform. We’ve been doing that since January and no secret that ticketing on a scalable basis on Saturday morning at 10 o’clock, when a Phish tour is put on and 1 million people try to hit your Web site is one heck of a technology challenge.

We’ve had a few learning curves. The structure is perfect. The ticketing system will work. We’re fully confident. We go on sale this weekend with Coldplay. We’ve got a bunch of shows going up all throughout our system for Coldplay and we’ve been selling hundreds of thousands of tickets since January. I think even Phish tour, but the end of the day, even though we had a 10 o’clock stumble for a short period, we still sold over 250,000 tickets by the end of the day.

But we do sell 50 percent of our tickets for concerts in Ticketmaster buildings, which people get confused on. So there are a lot of shows that are a Live Nation show that are still sold on Ticketmaster’s system because of their relationships with certain venues and we have been striving to find a balance on Ticketmaster’s platform, it’s Web site. It’s the largest in the world. It’s a huge front door. We think there’s an opportunity, regardless of this merger aside, that we should be using their front door and their audience to help also be a marketing arm for our tickets and vice versa. So we have been exploring ways to use their front door to sell some tickets for our shows as well as our front door to sell tickets showing up in their buildings.

That’s just a smart business move. They’re on a distribution basis, but we’ll continue to use our platform for our shows. We’ll show by show decide if we need to allocate some of those tickets to Ticketmaster, some of those go to the artist Web site, some of them go to MusicToday, and the best means for the artist to sell its product is by a case by case basis.