LYV-2013.12.31-10K

 
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, 2013,
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  x    No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) 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.
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, 2013, 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 $2,213,000,000. (For purposes hereof, directors, executive officers and 10% or greater stockholders have been deemed affiliates).
On February 19, 2014, there were 200,100,820 outstanding shares of the registrant’s common stock, $0.01 par value per share, including 2,324,013 shares of unvested restricted stock awards and excluding 408,024 shares held in treasury.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of our Definitive Proxy Statement for the 2014 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.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
PART II
 
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
PART III
 
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
PART IV
 
ITEM 15.
 
 
 

Table of Contents

LIVE NATION ENTERTAINMENT, INC.
GLOSSARY OF KEY TERMS 
ADA
Americans with Disabilities Act of 1990
AOCI
Accumulated other comprehensive income (loss)
AOI
Adjusted operating income (loss)
Clear Channel
Clear Channel Communications, Inc.
Company
Live Nation Entertainment, Inc. and subsidiaries
DDA
United Kingdom's Disability Discrimination Act of 1995
DOJ
United States Department of Justice
FASB
Financial Accounting Standards Board
Front Line
Front Line Management Group, Inc.
FTC
Federal Trade Commission
GAAP
United States Generally Accepted Accounting Principles
IAC
IAC/InterActiveCorp
Liberty Media
Liberty Media Corporation
Live Nation
Live Nation Entertainment, Inc., formerly known as Live Nation, Inc., and subsidiaries
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.
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
Trust
The family trust of a former executive, of which the former executive is co-Trustee.
Trust Note
A note issued to the Trust as part of a prior acquisition. This note had been issued in exchange for shares of Ticketmaster’s series A convertible redeemable preferred stock held by this trust.
VIE
Variable interest entity
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
TicketsNow
TNow Entertainment Group, Inc.


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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 nearly 400 million fans across all of our platforms to over 240,000 events in approximately 33 countries in 2013.
We believe we are the largest producer of live music concerts in the world, based on total fans that attend Live Nation events as compared to events of other promoters, connecting nearly 60 million fans to almost 23,000 events for over 3,000 artists in 2013. Globally, Live Nation owns, operates, has exclusive booking rights for or has an equity interest in 148 venues, including House of Blues ® music venues and prestigious locations such as The Fillmore in San Francisco, the Hollywood Palladium, the Ziggo Dome 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 we sell. Ticketmaster provides ticket sales, ticket resale services and marketing and distribution globally through www.ticketmaster.com and www.livenation.com, numerous retail outlets and worldwide call centers. Ticketmaster serves clients worldwide across multiple event categories, providing 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. Our artist management companies manage musical artists and acts primarily in the rock, classic rock, pop and country music genres. As of December 31, 2013, we had over 60 managers providing services to approximately 240 artists.
We believe our global network is the world’s largest music marketing network for corporate brands and includes one of the world’s leading ecommerce websites, based on a comparison of gross sales of top internet retailers. In 2013, we had over 129 million customers in our database based on visitors to www.livenation.com and www.ticketmaster.com and our other online properties.
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 leverage our leadership position in live entertainment and our relationships with fans, venues, artists and advertisers to sell more tickets and grow our revenue, earnings and cash flow. We pay artists, venues and teams to secure


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content and tickets; we invest in technology to advance our ticketing, advertising and mobile platforms; and we are paid by sponsors and advertisers that want to connect their brands with our passionate fan base.
Our core businesses surrounding the promotion of live events include ticketing, sponsorship and advertising, and artist management. We believe our focus on growing these businesses will increase shareholder value as we continue to build all our revenue streams and achieve economies of scale with our global platforms. We also continue to strengthen our core operations, further expanding into additional global markets and optimizing our cost structure. Our strategy is to grow and innovate through the initiatives listed below.
•
Expand our Concert Platform. We will grow our fan base and increase our ticket sales by continuing to build our portfolio of global festivals, expanding our electronic dance music, or EDM, festival and show base, selectively growing into additional top global music markets and further building our market share in established markets.
•
Drive Conversion of Ticket Sales through Social and Mobile Channels. We are focused on selling tickets through a wide set of sales channels, including social media and mobile, and leveraging our extensive database we have built through www.livenation.com and www.ticketmaster.com to better reach consumers. We are continuing to shift marketing spend from traditional media outlets to social media and digital platforms to more effectively reach our fans and drive more ticket sales. We will continue to develop new tools for mobile devices in additional markets to make it easier for our fans to get information on live events and conveniently buy and sell tickets.
•
Grow Sponsorship and Advertising. Our goal is to continue to drive growth in this area and capture a larger share of the music sponsorship market. We will focus on expanding and developing new relationships with corporate sponsors to provide them with targeted strategic programs through our unique relationship with fans and artists, our distribution network of venues and our extensive ticketing operations and online presence. In addition, we have established one of the few ecommerce sites that has a substantial and growing online advertising platform. We will continue to look for new innovative products and offerings that give our sponsors and advertisers a unique ability to reach consumers through the power of live music.
•
Sell more Tickets and Drive Reductions in the Cost to Sell a Ticket. We will continue to invest in our ticketing platforms and related venue and fan products to strengthen the functionality of our system and drive additional ticket sales while also creating a more efficient system. We will also continue to deliver differentiated value to content owners and venues by leveraging ticket buyer data to effectively price and market shows, increasing attendance and optimizing revenues.
•
Build Secondary Ticket Volume. We will grow the volume of secondary tickets sold in partnership with content owners providing a trusted environment for fan ticket exchanges. We will expand and improve the availability of tickets on an integrated inventory basis allowing our fans to have a dependable, secure location to come to for all available tickets for an event.
•
Align Artist Management with Other Core Businesses. We believe that effective artist management provides a supply pipeline into our concert platform, supporting its growth. By increasing the services we deliver to our artist managers and their clients, including data, fan clubs and touring, we believe we can continue to build our market share in both artist management and concert promotion.
Our Assets
We believe we have a unique portfolio of assets that is unmatched in the live entertainment industry.
•
Fans. During 2013, our events were attended by nearly 60 million live music fans. Our database of our fans and their interests provides us with the means to efficiently market our shows to them as well as offer other music-related products and services. This fan database is an invaluable asset that we are able to use to provide unique services to 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 2013, we promoted shows or tours for over 3,000 artists globally. In addition, through our artist management companies, we manage approximately 240 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 other 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


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profiles hosted by approved third-party websites. We have also launched both Live Nation and Ticketmaster mobile apps that our fans can use to access event information and buy tickets.
•
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 65 cities in North America and 26 countries worldwide. In addition, we own, operate, have exclusive booking rights or have an equity interest in 148 venues located across six countries as of the end of 2013, 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 more than 60 festivals globally. In addition, we believe that our global ticketing distribution network with one of the largest ecommerce sites on the internet, approximately 6,800 sales outlets and 15 call centers serving more than 12,500 clients worldwide, makes us the largest ticketing network in the industry.
•
Sponsors. We employ a sales force of approximately 200 people that worked with approximately 750 sponsors during 2013, 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, Red Bull, Motorola, Ford and Coca-Cola (each of these brands is a registered trademark of the sponsor).
•
Employees. At December 31, 2013, we employed approximately 7,400 full-time employees who are dedicated to providing first-class service to our artists, fans, ticketing 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 contribution and transfer by Clear Channel of substantially all of its entertainment assets and liabilities to us. We completed the Separation on December 21, 2005, and became a publicly traded company on the New York Stock Exchange trading under the symbol “LYV.”
On January 25, 2010, we merged with Ticketmaster. Effective on the date of the Merger, Ticketmaster became a wholly-owned subsidiary of Live Nation and Live Nation, Inc. changed its name to Live Nation Entertainment, Inc.
Our Industry
We operate in five main industries within the live entertainment business, including live music events, venue operations, ticketing services, sponsorship and advertising sales and artist management and services.
The live music industry includes concert promotion and/or production of music events or tours. Typically, to initiate live music events or tours, booking agents directly contract with artists to represent them for defined periods. Booking agents then contact promoters, who will contract with them or directly with artists to arrange events. Booking agents generally receive fixed or percentage fees from artists for their services. Promoters earn revenue primarily from the sale of tickets. Artists 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 artists 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 artists 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, two to nine months typically elapse between initially booking artists and the first performances. Promoters, in conjunction with artists, 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 equipment.
Venue operators typically contract with promoters to rent their venues for specific events on specific dates and receive fixed fees or percentages of ticket sales as rental income. In addition, venue operators provide services such as concessions, parking, security, ushering and ticket-taking, and receive some or all of the revenue from concessions, merchandise, venue sponsorships, parking and premium seating.
Ticketing services include the sale of tickets primarily through online channels but also through phone, mobile devices, 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. The ticketing company will generally not earn a fee on these box office tickets. The ticketing company receives the cash for the ticket sales and related service charges at the time the ticket is


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sold and periodically remits these receipts to the venue and/or promoter after deducting their fee. As ticket sales 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. Resale tickets are also referred to as secondary tickets. 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 managers primarily provide services to music recording artists to manage their careers. 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 sells merchandise associated with musical artists at live performances, to retailers and directly to consumers via the internet, as well as connect artists to corporate clients for events, and generally are paid a percentage of the artist’s earnings.
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 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. These promotional programs may include event pre-sales and on-site product activation.
Our Business
Our reportable segments are Concerts, Ticketing, Artist Nation and Sponsorship & Advertising.
Concerts. Our Concerts segment principally involves the global promotion of live music events in our owned 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 2013, our Concerts business generated approximately $4.5 billion, or 69.7%, of our total revenue. We promoted 22,900 live music events in 2013, including artists such as P!nk, Jay-Z, Jason Aldean, Maroon 5, Beyonce, Rihanna and One Direction and through festivals such as Rock Werchter, Electric Daisy Carnival, Reading and Download. While our Concerts segment operates year-round, we generally 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.
As a promoter, we earn revenue primarily from the sale of tickets and pay artists 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 or operate, or rent a third-party venue. Revenue is generally impacted by the number of events, volume of ticket sales and ticket prices. Event costs such as artist fees 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 concessions, parking, premium seating, rental income, venue sponsorships and ticket rebates or service charges earned on tickets sold through our internal ticketing operations or by third parties under ticketing agreements. In our amphitheaters, the sale of concessions 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 artists, secure festival sites, provide for third-party production services, sell tickets and advertise events to attract fans. 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 artists a fixed guaranteed amount. We also earn revenue from the sale of concessions, 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 impacted by the number of events, volume of ticket sales and ticket prices. Event costs such as artist fees and production service expenses are included in direct operating expenses and are typically substantial in relation to the revenue. Since the artist fees are typically fixed guarantees for these events, significant increases or decreases in festival promotion revenue will generally result in comparable changes to operating income.
Ticketing. Our Ticketing segment is primarily an agency business that sells tickets for events on behalf of its clients and retains a fixed fee or a percentage of the total convenience charge and order processing fee for its services. We sell tickets for our events and also for third-party clients across multiple live event categories, providing 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 websites, telephone, mobile apps and ticket outlets. During the year ended December 31, 2013, we sold 71%, 5%, 14% and 10% of primary tickets through these channels, respectively. Our Ticketing segment also manages our online activities including enhancements to our websites and bundled product offerings. During 2013, our Ticketing business generated approximately $1.4 billion, or 21.7%, of our total revenue, which excludes the face value of tickets sold. Through all of our ticketing services, we sold 149 million tickets in 2013 on


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which we were paid fees for our services. In addition, approximately 250 million tickets in total were sold using our Ticketmaster systems, through season seat packages and our venue clients’ box offices, for which we do not receive a fee. 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.
We sell tickets on behalf of our clients through our ticketing platforms across the world. In order to provide state-of-the-art ticketing technology services, we are currently in the process of re-platforming portions of our Ticketmaster ticketing system which we believe will result in an improved experience for our fans and better tools and information resources for our venue clients. We started this re-platforming for our North America business in 2011 and currently expect to start using the new technology at certain of our venue clients in 2015. In addition to providing improved technology products, we believe that once this re-platforming is complete and rolled out to our clients that it will allow us to also improve the efficiency of our ticketing systems and processes and therefore lead to cost reductions in ticketing.
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 and then tell us what tickets will be available for sale, when such tickets will go on sale to the public and what the ticket 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. Where we have 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 does 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 arrangements, 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 our integrated inventory platform, referred to as TM+, TicketsNow (in the United States and Canada), our TicketExchange service (in the United States, Europe and Canada) and GET ME IN! (in the United Kingdom). 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 ticket reseller plus an amount equal to a percentage of the ticket resale price and a pre-determined service fee. We remit the 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 for our venue clients 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 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 performances, to retailers and directly to consumers via the internet. During 2013, our Artist Nation business generated approximately $353 million, or 5.4%, 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 and 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.
Sponsorship & Advertising. Our Sponsorship & Advertising segment employs a sales force that creates and maintains relationships with sponsors, through a combination of strategic, international, national and local opportunities that allow businesses to reach customers through our concert, venue, artist relationship and ticketing assets, including advertising on our websites. We work with our corporate clients to help create marketing programs that drive their business goals and connects their brands directly with fans and artists. We also develop, book and produce custom events or programs for our client’s specific brands which are typically experienced exclusively by the client’s consumers. These custom events can involve live music events with talent and media, using both online and traditional outlets. During 2013, our Sponsorship & Advertising business generated approximately $285 million, or 4.4%, of our total revenue. We typically experience higher revenue in the second and third quarters as a large portion of sponsorships are typically associated with our outdoor venues and festivals which are primarily used in or occur during May through September.
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, online advertising 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


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advertisers. Our sponsorship programs include companies such as Starwood, American Express, Carlsberg, O2, Anheuser-Busch, Citi and Coca-Cola (each of the preceding brands is a registered trademark of the sponsor). 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.
Live Nation Venue Details
In the live entertainment industry, venue types 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, 2013, we had booking rights to one stadium in North America.
•
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, 2013, we owned eight, leased 27, operated six and had booking rights for ten 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, 2013, we owned one, leased three, operated three and had booking rights for three arenas located in North America, the United Kingdom, Ireland, the Netherlands and Italy.
•
Theaters—Theaters are indoor venues that are built primarily for music events but may include theatrical performances. 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 theaters can be used year-round, unlike most amphitheaters, they can generate annual profits similar to those of an amphitheater. 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, 2013, we owned seven, leased 24, operated five, had booking rights for 11 and an equity interest in one theaters located in North America, the United Kingdom and Ireland.
•
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 sized 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, 2013, we owned three, leased ten and had booking rights for nine 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 unique 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, 2013, 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 artists. 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 artists 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, 2013, 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.


7
Table of Contents

Venues
At December 31, 2013, we owned, leased, operated, had exclusive booking rights for 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 Presented by Cadillac Tri-State Concert Series
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

The Stone Pony Summer Stage
Amphitheater
Booking agreement
4,000

Convention Hall
Theater
Booking agreement
3,600

NYCB Theatre at Westbury
Theater
43-year lease that expires
December 31, 2034
2,800

Wellmont Theater
Theater
Booking agreement
2,600

Historic Paramount
Theater
Booking agreement
1,500

The Paramount
Theater
Booking agreement
1,500

Union County Performing Arts Center
Theater
Booking agreement
1,300

Roseland Ballroom
Club
Booking agreement
3,700

Irving Plaza Powered by Klipsch
Club
10-year lease that expires
October 31, 2016
1,100

Gramercy Theatre
Club
10-year lease that expires
December 31, 2016
600

The Stone Pony
Club
Booking agreement
600

Wonder Bar
Club
Booking agreement
300

LOS ANGELES, CA
2
 
 
 

San Manuel Amphitheater
Amphitheater
25-year lease that expires
June 30, 2018
65,000

Verizon Wireless Amphitheater
Amphitheater
20-year lease that expires
February 28, 2017
15,000

Hollywood Palladium
Theater
20-year lease that expires
January 31, 2027
3,500

The Wiltern
Theater
15-year lease that expires
June 30, 2020
2,300

FOX Performing Arts Center
Theater
3-year management agreement that expires November 30, 2016
1,600

House of Blues—Sunset Strip
House of Blues
13-year lease that expires
May 10, 2025
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

FirstMerit Bank Pavilion at Northerly Island
Amphitheater
10-year operating agreement that expires December 31, 2022
29,700

House of Blues—Chicago
House of Blues
Owned
1,300

Bottom Lounge
 
Club
Booking agreement
300



8
Table of Contents

Market and Venue
DMA®
Region
Rank
(1)
Type of Venue
Live Nation’s Interest
Estimated
Seating
Capacity
PHILADELPHIA, PA
4
 
 
 

Susquehanna Bank Center
Amphitheater
31-year lease that expires
September 29, 2025
25,000

Festival Pier (at Penn’s Landing)
Amphitheater
3-year license agreement that expired September 30, 2013 (currently negotiating new terms)
6,500

River Stage at Great Plaza—Penn’s Landing
Amphitheater
2-year license agreement that expired September 30, 2013 (currently negotiating new terms)
3,500

Tower Theater
Theater
Owned
3,100

Chestnut Street Theatre
Theater
Owned (currently not in operation)
2,400

The Fillmore
Theater
15-year lease (currently under construction)
2,600

Theatre of the Living Arts
 
Club
Owned
800

DALLAS—FORT WORTH, TX
5
 
 
 

Gexa Energy Pavilion
Amphitheater
30-year lease that expires
December 31, 2018
20,100

South Side Ballroom
Theater
Booking agreement
3,000

House of Blues—Dallas
House of Blues
15-year lease that expires
May 31, 2027
1,600

SAN FRANCISCO—
OAKLAND—SAN JOSE, CA
6
 
 
 

Shoreline Amphitheatre at Mountain View
Amphitheater
15-year lease that expires
December 31, 2020
22,000

Concord Pavilion
Amphitheater
10-year management agreement that
expires December 31, 2023
12,500

The Fillmore
Theater
10-year lease that expires
August 31, 2022
1,200

Nob Hill Masonic Center
Theater
18-year lease that expires
March 31, 2028
3,300

Punch Line Comedy Club—San Francisco
Club
5-year lease that expires
September 15, 2016
500

Cobb’s Comedy Club
Club
10-year lease that expires
October 31, 2015
200

BOSTON, MA
7
 
 
 

Xfinity Center
Amphitheater
Owned
19,900

Blue Hills Bank Pavilion
Amphitheater
Indefinite license agreement that
expires 18 months after notification
that pier is to be occupied for water
dependent use
4,900

Orpheum Theatre—Boston
Theater
15-year operating agreement that expires December 31, 2020
2,700

Paradise Rock Club
Club
10-year lease that expires
May 31, 2018
800

Brighton Music Hall
Club
10-year lease that expires
January 1, 2021
300

House of Blues—Boston
 
House of Blues
20-year lease that expires
February 28, 2029
2,400



9
Table of Contents

Market and Venue
DMA®
Region
Rank
(1)
Type of Venue
Live Nation’s Interest
Estimated
Seating
Capacity
WASHINGTON, DC
8
 
 
 

Jiffy Lube Live
Amphitheater
Owned
22,500

The Fillmore Silver Spring
Theater
20-year lease that expires
August 30, 2031
2,000

Warner Theatre
Theater
10-year lease that expires
December 31, 2023
1,900

sixth&i
Club
Booking agreement
800

ATLANTA, GA
9
 
 
 

Aaron’s Amphitheatre at Lakewood
Amphitheater
35-year lease that expires
December 31, 2034
19,000

Chastain Park Amphitheatre
Amphitheater
5-year lease that expires
December 31, 2015
6,400

The Tabernacle
Theater
20-year lease that expires
January 31, 2018
2,500

HOUSTON, TX
10
 
 
 

Cynthia Woods Mitchell Pavilion
Amphitheater
Booking agreement
16,500

Bayou Music Center
Theater
10-year lease that expires
December 31, 2022
2,900

House of Blues—Houston
House of Blues
10-year lease that expires
December 31, 2022
1,500

DETROIT, MI
11
 
 
 

The Fillmore Detroit
Theater
15-year lease that expires
January 31, 2018
2,900

Saint Andrew’s Hall
Club
Owned
800

PHOENIX, AZ
12
 
 
 

AK—Chin Pavilion
Amphitheater
60-year lease that expires
June 30, 2049
20,000

Comerica Theatre
Theater
10-year lease that expires
December 31, 2016
5,500

SEATTLE—TACOMA, WA
13
 
 
 

White River Amphitheatre
Amphitheater
25-year management agreement that
expires October 31, 2027
20,000

TAMPA—ST PETERSBURG—SARASOTA, FL
14
 
 
 

MidFlorida Credit Union Amphitheatre at the Florida State Fairgrounds
Amphitheater
15-year lease that expires
December 31, 2018
20,000

MINNEAPOLIS—ST PAUL, MN
15
 
 
 
Varsity Theater
Club
Booking agreement
900

MIAMI—FT LAUDERDALE, FL
16
 
 
 

Klipsch Amphitheatre at Bayfront Park
Amphitheater
10-year management agreement that
expires December 31, 2018
5,000

The Fillmore Miami Beach at the Jackie Gleason Theater
Theater
10-year management agreement that
expires August 31, 2017
2,700

Revolution Live
Club
Booking agreement
1,300

DENVER, CO
17
 
 
 

Fillmore Auditorium
Theater
Owned
3,600

ORLANDO—DAYTON BEACH— MELBOURNE, FL
18
 
 
 

House of Blues—Orlando
 
House of Blues
6-year lease that expires
September 30, 2019
2,100



10
Table of Contents

Market and Venue
DMA®
Region
Rank
(1)
Type of Venue
Live Nation’s Interest
Estimated
Seating
Capacity
CLEVELAND—AKRON, OH
19
 
 
 

Blossom Music Center
Amphitheater
15-year lease that expires
October 31, 2014
19,600

Jacobs Pavilion at Nautica
Amphitheater
Booking agreement
4,500

Hard Rock Rocksino Northfield Park
Theater
Booking agreement
2,600

House of Blues—Cleveland
House of Blues
20-year lease that expires
October 31, 2024
1,200

SACRAMENTO—
STOCKTON—MODESTO, CA
20
 
 
 

Sleep Train Amphitheatre—Wheatland
Amphitheater
Owned
18,500

Punch Line Comedy Club—Sacramento
Club
5-year lease that expires
December 31, 2017
100

ST. LOUIS, MO
21
 
 
 

Verizon Wireless Amphitheater—St. Louis
Amphitheater
Owned
21,000

The Pageant
Theater
50% equity interest
2,300

PITTSBURGH, PA
23
 
 
 

First Niagara Pavilion
Amphitheater
45-year lease that expires
December 31, 2035
23,100

RALEIGH—DURHAM, NC
24
 
 
 

Walnut Creek Amphitheatre
Amphitheater
40-year lease that expires
October 31, 2030
20,000

Red Hat Amphitheater
Amphitheater
Booking agreement
5,400

CHARLOTTE, NC
25
 
 
 

PNC Music Pavilion Charlotte
Amphitheater
Owned
18,800

Uptown Amphitheatre at NC Music Factory
Amphitheater
10-year lease that expires
June 12, 2019
5,000

The Fillmore Charlotte
Theater
10-year lease that expires
June 12, 2019
2,000

INDIANAPOLIS, IN
26
 
 
 

Klipsch Music Center
Amphitheater
Owned
24,400

Farm Bureau Insurance Lawn at White River State Park
Amphitheater
Booking agreement
6,000

Murat Theatre at Old National Centre
Theater
50-year lease that expires
September 4, 2045
2,500

Vogue
Club
Booking agreement
1,000

BALTIMORE, MD
27
 
 
 
Baltimore Soundstage
Club
Booking agreement
700

SAN DIEGO, CA
28
 
 
 

Sleep Train Amphitheatre—Chula Vista
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

Pechanga Theater
Theater
Booking agreement
1,200

House of Blues San—Diego
 
House of Blues
15-year lease that expires
May 31, 2020
1,100



11
Table of Contents

Market and Venue
DMA®
Region
Rank
(1)
Type of Venue
Live Nation’s Interest
Estimated
Seating
Capacity
HARTFORD—NEW HAVEN, CT
30
 
 
 

Comcast Theatre
Amphitheater
40-year lease that expires
September 13, 2034
24,200

Mohegan Sun Arena
Arena
Booking agreement
9,000

Toyota Presents Oakdale Theatre
Theater
Owned
4,600

KANSAS CITY, MO
31
 
 
 

Starlight Theatre
Theater
Booking agreement
8,100

MILWAUKEE, WI
34
 
 
 

Alpine Valley Music Theatre
Amphitheater
21-year management agreement
that expires December 31, 2019
35,300

CINCINNATI, OH
35
 
 
 

Riverbend Music Center
Amphitheater
Booking agreement
20,500

PNC Pavilion
Amphitheater
Booking agreement
4,000

Bogart’s
Club
10-year lease that expires
January 31, 2023
1,500

WEST PALM BEACH—
FORT PIERCE, FL
38
 
 
 

Cruzan Amphitheatre
Amphitheater
10-year lease that expires
December 31, 2015
19,300

AUSTIN, TX
40
 
 
 

Austin360 Amphitheater
Amphitheater
Booking agreement
15,000

LAS VEGAS, NV
42
 
 
 

House of Blues—Las Vegas
House of Blues
5-year lease that expires
January 1, 2019
1,800

HARRISBURG—LANCASTER—
LEBANON—YORK, PA
43
 
 
 

HERSHEYPARK Stadium
Stadium
Booking agreement
30,000

Sands Bethlehem Event Center
Theater
Booking agreement
3,500

BIRMINGHAM, AL
44
 
 
 

Oak Mountain Amphitheatre
Amphitheater
Owned
10,600

NORFOLK—PORTSMOUTH—
NEWPORT NEWS, VA
45
 
 
 

Farm Bureau Live at Virginia Beach
Amphitheater
30-year lease that expires
December 31, 2025
20,000

ALBUQUERQUE—
SANTA FE, NM
47
 
 
 

Isleta Amphitheater
Amphitheater
20-year lease that expires
April 16, 2021
12,000

Sandia Casino Amphitheater
Theater
Booking agreement
4,200

LOUISVILLE, KY
49
 
 
 

The Louisville Palace
Theater
Owned
2,700

Mercury Ballroom
Club
10-year lease (currently under construction)
1,000

NEW ORLEANS, LA
51
 
 
 

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



12
Table of Contents

Market and Venue
DMA®
Region
Rank
(1)
Type of Venue
Live Nation’s Interest
Estimated
Seating
Capacity
BUFFALO, NY
52
 
 
 

Darien Lake Performing Arts Center Concert Series Presented by Tops
Amphitheater
25-year lease that expires
October 15, 2020
21,800

WILKES BARRE—SCRANTON, PA
54
 
 
 

Toyota Pavilion at Montage Mountain
Amphitheater
10-year lease that expires
December 31, 2021
17,800

ALBANY—SCHENECTADY—
TROY, NY
58
 
 
 

Saratoga Performing Arts Center
Amphitheater
5-year lease that expires
September 2, 2019
25,200

FLORENCE—MYRTLE BEACH, SC
102
 
 
 

House of Blues—Myrtle Beach
House of Blues
27-year lease that expires
May 31, 2025
2,000

YAKIMA—PASCO—RICHLAND—
KENNEWICK, WA
124
 
 
 

The Gorge Amphitheatre
Amphitheater
20-year lease that expires
October 31, 2023
20,000

WHEELING, WV—STEUBENVILLE,
OH
157
 
 
 

Jamboree in the Hills Festival Site
Festival Site
Owned
N/A

LAKE CHARLES, LA
175
 
 
 
L'Auberge Resort Lake Charles Liquid Society
Amphitheater
Booking agreement
5,000

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
20-year lease that expires
July 31, 2019
1,100

BIRMINGHAM, ENGLAND
N/A
 
 
 

O2 Academy Birmingham
Theater
27-year lease that expires
September 25, 2034
3,000

BOURNEMOUTH, ENGLAND
N/A
 
 
 

O2 Academy Bournemouth
Theater
35-year lease that expires
July 17, 2034
1,800

BRIGHTON, ENGLAND
N/A
 
 
 

O2 Academy Brighton
Theater
30-year lease that expires
February 15, 2037 (currently not in operation)
2,500

BRISTOL, ENGLAND
N/A
 
 
 

O2 Academy Bristol
Theater
25-year lease that expires
December 25, 2023
1,900

LEEDS, ENGLAND
N/A
 
 
 

O2 Academy Leeds
Theater
25-year lease that expires
June 23, 2026
2,300

Leeds Festival Site
 
Festival Site
Owned
N/A



13
Table of Contents

Market and Venue
DMA®
Region
Rank
(1)
Type of Venue
Live Nation’s Interest
Estimated
Seating
Capacity
LIVERPOOL, ENGLAND
N/A
 
 
 

O2 Academy Liverpool
Theater
34-year lease that expires
January 22, 2037
1,200

Nation
Club
3-year lease that expires
March 6, 2016
2,900

LONDON, ENGLAND
N/A
 
 
 

O2 Academy Brixton
Theater
98-year lease that expires
December 24, 2024
4,900

O2 Academy Shepherds Bush Empire
Theater
Owned
2,000

O2 Academy Islington
Theater
25-year lease that expires
June 20, 2028
800

MANCHESTER, ENGLAND
N/A
 
 
 

O2  Apollo Manchester
Theater
Owned
3,500

NEWCASTLE, ENGLAND
N/A
 
 
 

O2 Academy Newcastle
Theater
99-year lease that expires
March 24, 2021
2,000

NOTTINGHAM, ENGLAND
N/A
 
 
 

Media
Club
25-year lease agreement that expires on September 30, 2023 (currently not in operation)
1,400

OXFORD, ENGLAND
N/A
 
 
 

O2 Academy Oxford
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
5-year management agreement
that expires March 31, 2016
11,300

O2 Academy Sheffield
Theater
35-year lease that expires
January 9, 2043
2,400

SOUTHAMPTON, ENGLAND
N/A
 
 
 

O2 Guildhall Southampton
Theater
10-year management agreement
that expires February 10, 2023
1,800

AMSTERDAM, THE NETHERLANDS
N/A
 
 
 

Heineken Music Hall
Arena
20-year lease that expires
December 31, 2027
5,500

Ziggo Dome
Arena
20-year lease that expires
June 1, 2032
15,700

GLASGOW, SCOTLAND
N/A
 
 
 

O2 Academy Glasgow
Theater
Owned
2,500

O2 ABC Glasgow
Theater
40-year lease that expires
August 24, 2039
1,600

King Tuts Wah Wah Hut
Club
Owned
300

Universe
Club
25-year lease agreement that expires
on July 29, 2017 (currently not in operation)
200

Balado Airfield (T in the Park)
 
Festival Site
One parcel owned/one parcel under a 1-year lease that expires August 1, 2014
N/A



14
Table of Contents

Market and Venue
DMA®
Region
Rank
(1)
Type of Venue
Live Nation’s Interest
Estimated
Seating
Capacity
CARDIFF, WALES
N/A
 
 
 

Motorpoint Arena Cardiff
Arena
137-year lease that expires
December 25, 2131
6,700

DUBLIN, IRELAND
N/A
 
 
 

The O2 Dublin
Arena
Owned
13,000

Bord Gáis Energy Theatre
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

COPENHAGEN, DENMARK
N/A
 
 
 
Copenhagen Arena
Arena
30-year lease (currently under construction)
12,500

 
(1)
DMA® region refers to a United States designated market area as of September 28, 2013. At that date, there were 210 DMA®s. DMA® is a registered trademark of Nielsen Media Research, Inc.


15
Table of Contents

The following table summarizes the number of venues by type that we owned, leased, operated, had exclusive booking rights for or had an equity interest in as of December 31, 2013:
Venue Type
 
 Capacity
 
Owned
 
 Leased
 
Operated
 
Exclusive
Booking
Rights
 
Equity
Interest 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stadium
 
More than 30,000
 
—

 
—

 
—

 
1

 
—

 
1

Amphitheater
 
 5,000 - 30,000
 
8

 
27

 
6

 
10

 
—

 
51

Arena
 
 5,000 - 20,000
 
1

 
3

 
3

 
3

 
—

 
10

Theater
 
 1,000 - 6,500
 
7

 
24

 
5

 
11

 
1

 
48

Club
 
 Less than 1,000
 
3

 
10

 
—

 
9

 
—

 
22

House of Blues
 
 1,000 - 2,000
 
2

 
10

 
—

 
—

 
—

 
12

Festival Site
 
 N/A
 
4

 
—

 
—

 
—

 
—

 
4

Total active venues
 
 
 
25

 
74

 
14

 
34

 
1

 
148

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Venues currently under construction
 
—

 
3

 
—

 
—

 
—

 
3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Venues not currently in operation
 
1

 
3

 
—

 
—

 
—

 
4

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 events, 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;
•
our global footprint;
•
ticketing software and services;
•
our ecommerce site and associated database;
•
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, or financial, marketing, support, technical and other resources.
In the markets in which we promote music concerts, we face competition from both 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 Anschutz Entertainment Group, or AEG, and C3 Presents, in addition to numerous smaller regional companies and various casinos in North America and Europe. AEG operates under a number of different names including AEG Live, Concerts West, Goldenvoice 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 may have greater financial resources in those markets, which may enable them to gain a greater competitive advantage in relation to us.
In markets where we own or operate a venue, we compete with other venues to serve artists likely to perform in that general region. Consequently, touring artists have various alternatives to our venues when scheduling tours. Our main competitors in venue management include SMG, AEG, The Nederlander Organization and The Bowery Presents, in addition to


16
Table of Contents

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 and may have greater financial resources in those markets.
The ticketing services industry includes the sale of tickets primarily through online channels, but also through telephone, mobile devices and ticket outlets. As online and mobile 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.
We experience competition from other national, regional and local primary ticketing service providers to secure new venues and to reach fans for events. 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, has created more aggressive buying of primary tickets whereby brokers are using bot technology to attempt to buy the best tickets when they go on sale. The internet allows fans and other ticket resellers to reach a vastly larger audience through the aggregation of inventory on online resale websites and marketplaces, and provides 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 include primary ticketing companies such as Tickets.com, AXS, Paciolan, Inc., Veritix and CTS Eventim AG, online and event companies such as Eventbrite, eTix and Ticketfly and secondary ticketing companies such as StubHub.
In the artist management business, we compete with other artist managers both at larger talent representation companies, such as Red Light Management, 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 Bravado, Artist Arena and Global Merchandising Services.
Our main competitors at the local market level for sponsorships and advertising dollars include local sports teams, which often offer state of the art venues and strong local media packages, as well as festivals, theme parks and other local events. On the national level, our competitors include the major sports leagues that 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;
•
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;
•
compliance with United States Foreign Corrupt Practices Act, the United Kingdom Bribery Act 2010 and similar regulations in other countries;
•
hazardous and non-hazardous waste and other environmental protection laws;
•
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.
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.


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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 the DDA require that venues be constructed to permit persons with disabilities full use of a live entertainment venue. The ADA and the DDA may also require that certain modifications be made to existing venues to make them accessible to customers and employees who are disabled. In order to comply with the ADA, the 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 United States Foreign Corrupt Practices Act and the United Kingdom Bribery Act 2010 regarding anti-bribery regulations. These regulations make it illegal for us to pay, promise to pay or receive money or anything of value to, or from, any government or foreign public 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.
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. More recently, some jurisdictions have proposed legislation that would restrict ticketing methods, mandate ticket inventory disclosure and attack current policies governing season tickets for sports teams.
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 many of our trademarks in numerous 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, 2013, we had approximately 7,400 full-time employees, including 4,900 in North America and 2,500 international employees, of which approximately 7,200 were employed in our operations departments and approximately 200 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, 2013, we employed approximately 5,500 seasonal and/or part-time employees and during peak seasonal periods, particularly in the summer months, we employed as many as 13,000 seasonal employees in 2013. 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 or operated venues or at our promoted events could


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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 19, 2014.
 
 
 
 
 
Name
 
 
Age
 
 
Position
 
 
 
 
 
 
Michael Rapino
 
48
 
President, Chief Executive Officer and Director
 
 
 
 
 
Ron Bension
 
59
 
President–HOB Entertainment
 
 
 
 
 
Joe Berchtold
 
49
 
Chief Operating Officer
 
 
 
 
 
Mark Campana
 
56
 
President–North America Concerts, Regions North
 
 
 
 
 
Brian Capo
 
47
 
Chief Accounting Officer
 
 
 
 
 
Arthur Fogel
 
60
 
Chairman–Global Music and President–Global Touring
 
 
 
 
 
John Hopmans
 
55
 
Executive Vice President–Mergers and Acquisitions and Strategic Finance
 
 
 
 
 
Simon Lewis
 
50
 
President–Live Nation Europe-Sponsorship and Concerts
 
 
 
 
 
John Reid
 
52
 
President–Live Nation Europe-Concerts
 
 
 
 
 
Alan Ridgeway
 
47
 
President–International and Emerging Markets
 
 
 
 
 
Bob Roux
 
56
 
President–North America Concerts, Regions South
 
 
 
 
 
Michael Rowles
 
48
 
General Counsel and Secretary
 
 
 
 
 
Jared Smith
 
36
 
President–Ticketmaster North America
 
 
 
 
 
Russell Wallach
 
48
 
President–North America Sponsorships
 
 
 
 
 
Kathy Willard
 
47
 
Chief Financial Officer
 
 
 
 
 
Mark Yovich
 
39
 
President–Ticketmaster International
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.
Ron Bension is President of our HOB Entertainment 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 and from February 2008 to June 2009, he was Chief Executive Officer for SportNet.
Joe Berchtold is our Chief Operating Officer and has served in this capacity since April 2011. Prior to that, Mr. Berchtold was at Technicolor, where he was most recently President of Technicolor Creative Services, after joining them in 2003.
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 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.
Arthur Fogel is the Chairman of our Global Music group and President of our Global Touring division 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 after joining them in 1991.


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Simon Lewis is President of our Europe Sponsorship and Concerts divisions and has served in this capacity since November 2011. Prior to that, Mr. Lewis was President of our International Sponsorship division and had served in that capacity since joining us in 2003.
John Reid is President of our Europe Concerts division and has served in that capacity since January 2012. Prior to that, Mr. Reid was the Chief Executive Officer of Warner Music Europe and International Marketing from November 2010 to December 2011. From February 2007 to October 2010, Mr. Reid was the Vice Chairman Warner Music International and President Warner Music Continental Europe.
Alan Ridgeway is President of our International and Emerging Markets division and has served in this capacity since November 2011. Prior to that, Mr. Ridgeway was Chief Executive Officer of our International divisions from September 2007 to October 2011. 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.
Jared Smith is President of Ticketmaster’s North America division and has served in that capacity since May 2013. Prior to that, Mr. Smith served as Ticketmaster’s Chief Operating Officer from May 2010 to April 2013 and has worked for us or our predecessors since 2003.
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.
Mark Yovich is President of Ticketmaster’s International division and has served in this capacity since November 2011. Prior to that, Mr. Yovich served as Executive Vice President and General Manager of our International eCommerce division from January 2010 to October 2011. From 2006 to January 2010, Mr. Yovich served as our Vice President New Media-International Music and worked for us or our predecessors since 2000.
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.
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 business and operations, our leverage, our common stock, Ticketmaster’s spin-off from IAC and our merger with Ticketmaster. 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.


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Risks Relating to Our Business and Operations
Our business is highly sensitive to public tastes and is 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 is 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 at live music events, 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 management 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 two to nine 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 an artist 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 revenue we could have earned at booked venues. We have cancellation insurance policies in place to cover a portion of our losses if an artist 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 between key promoters, executives, agents, 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 management 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, including musical artists.
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 direct 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 management 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 artists, 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


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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 choose 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 venue 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 advent of new technology, particularly as it relates to online ticketing, has amplified this competition. The intense competition that we face in the ticketing industry could cause the volume of our ticketing services business to decline. As we are also a content provider and venue operator we may face direct competition 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 include those that are self-imposed, imposed as a result of agreements entered into with the FTC and the Attorneys General of several individual states, and statutory. These restrictions primarily relate to our TicketsNow business, and include: restrictions 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 resale 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 and in certain instances to create separate listings when a ticket being offered for resale 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 otherwise, may be adversely affected, which could in turn adversely affect our business, financial condition and results of operations.
The artist management 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 artists. In addition, certain of our arrangements with clients of our artist management 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 management 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 artists, which we may be unwilling or unable to pass through to our customers via ticket prices;
•
competitors’ offerings that may include 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;


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•
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 have been adversely affected by, among other things, variability in ticket sales, event profitability, overhead costs and high amortization of intangibles related to prior acquisitions. We incurred net losses of $36.0 million, $161.9 million and $70.4 million in 2013, 2012 and 2011, 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 maintain 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.
The following table sets forth our operating income (loss) for the last eight fiscal quarters:
Fiscal Quarter Ended
 
 
Operating
income (loss) 
 
 
 
(in thousands)
 
 
 
March 31, 2012
 
$
(42,803
)
June 30, 2012
 
$
42,968

September 30, 2012
 
$
104,515

December 31, 2012
 
$
(126,319
)
March 31, 2013
 
$
(33,189
)
June 30, 2013
 
$
97,806

September 30, 2013
 
$
126,037

December 31, 2013
 
$
(50,994
)
Our success depends, in significant part, on entertainment, sporting and leisure events and economic and other 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 periods of economic slowdown and recession, many consumers have historically reduced their discretionary spending and advertisers have reduced their advertising expenditures. The impact of economic 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. Many of the factors affecting the number and availability of live entertainment, sporting and leisure events are beyond our control. For instance, certain sports leagues have recently had labor disputes leading to threatened or actual player lockouts. Any such lockouts that result in shortened or canceled seasons would adversely impact our business to the extent that we provide ticketing services to the affected teams both due to the loss of games and ticketing opportunities as well as the possibility of decreased attendance following such a lockout due to adverse fan reaction.


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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 future deterioration in economic conditions, thereby possibly impacting our operating results and growth.
We operate in international markets which subject us to risks associated with the legislative, judicial, accounting, regulatory, political and economic risks and conditions specific to such markets, which could adversely affect our business, financial condition and results of operations.
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;
•
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.
In foreign countries in which we have operations, a risk exists that our employees, contractors or agents could, in contravention of our policies, engage in business practices prohibited by applicable United States laws and regulations, such as the United States Foreign Corrupt Practices Act, as well as the laws and regulations of other countries prohibiting corrupt payments to government officials such as the United Kingdom Bribery Act 2010. We maintain policies prohibiting such business practices and have in place global anti-corruption compliance programs designed to ensure compliance with these laws and regulations. Nevertheless, we remain subject to the risk that one or more of our employees, contractors or agents,


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including those based in or from countries where practices that violate such United States laws and regulations or the laws and regulations of other countries may be customary, will engage in business practices that are prohibited by our policies, circumvent our compliance programs and, by doing so, violate such laws and regulations. Any such violations, even if prohibited by our internal policies, could result in fines, criminal sanctions against us and/or our employees, prohibitions on the conduct of our business and damage to our reputation, which could adversely affect our business, financial condition and results of operations.
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, 2013, our international operations accounted for approximately 39% of our 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, Australian Dollar and Canadian Dollar, we experienced foreign exchange rate net losses of $2.5 million and $1.3 million in 2012 and 2011, respectively, which increased our net loss. We experienced a foreign exchange rate net gain of $2.7 million in 2013. 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 our results of operations and 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:
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use a significant portion of our available cash;
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issue equity securities, which would dilute current stockholders’ percentage ownership;
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incur substantial debt;
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incur or assume contingent liabilities, known or unknown;
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incur amortization expenses related to intangibles; and
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incur large accounting write-offs.
Such actions by us could adversely affect our results of operations and 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 complete the acquisition would depend on a variety of factors, and may include 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:
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integrating the operations, financial reporting, technologies and personnel of acquired companies;
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managing geographically dispersed operations;
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the diversion of management’s attention from other business concerns;
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the inherent risks in entering markets or lines of business in which we have either limited or no direct experience; and
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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 that currently exist or will be acquired in the future 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


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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 ticketing 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.
Failure to successfully complete the re-platforming of our Ticketmaster ticketing system in a timely or cost-effective manner could adversely affect our business, financial condition and results of operations.
We are currently in the process of re-platforming 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. As with any significant capital project, there are numerous factors, many of which are beyond our control, which could influence the ultimate costs and timing of the re-platforming project (for a discussion of these factors, see the risk factor related to costs associated with capital improvements below). 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. Similarly, there can be no assurance that the project, once completed, will yield the anticipated benefits. Notwithstanding the current re-platforming project, we may in the future be unable to devote financial resources to new technologies and systems that may become necessary or desirable. If any of the foregoing risks related to the re-platforming of our Ticketmaster ticketing system were to occur, our business, financial condition and results of operations could be adversely impacted.
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 festival sites that we own or rent could also result in claims, reducing operating income or reducing attendance at our events, which could cause 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 events 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.


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The success of our ticketing and ecommerce operations depends, in part, on the integrity of our systems and infrastructures and the protection of the data contained in such systems. System interruption, the lack of integration and redundancy in these systems and infrastructures and breaches or lapses in the security protecting these systems 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, 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 condition and results of operations.
In addition, any penetration of network security or other misappropriation or misuse of personal consumer information and data 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. In addition, security breaches or the inability to protect our data could lead to increased incidents of ticketing fraud and counterfeit tickets. 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. Recently, large retailers and website operators have been the victims of targeted security breaches resulting in the disclosure of large amounts of customer data, including credit card information. 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


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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 a reasonable cost, 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 technology including our ticketing systems. At December 31, 2013, we had property and equipment with a net book value of $706.8 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 a reasonable cost 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 a reasonable cost, 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, improve value and grow 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:
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availability of financing on favorable terms;
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advances in technology and related changes in customer expectations;
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unforeseen changes in design;
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increases in the cost of materials, equipment and labor;
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fluctuations in foreign exchange rates;
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litigation, accidents or natural disasters;
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national or regional economic changes;
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additional land acquisition costs;
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environmental or hazardous conditions; and
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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. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Uses of Cash.


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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:
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construction, renovation and operation of our venues;
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licensing, permitting and zoning, including noise ordinances;
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human health, safety and sanitation requirements;
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the service of food and alcoholic beverages;
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working conditions, labor, minimum wage and hour, citizenship and employment laws;
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compliance with the ADA and the DDA;
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historic landmark rules;
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compliance with the United States Foreign Corrupt Practices Act, the United Kingdom Bribery Act 2010 and similar regulations in other countries, as more particularly described above under the risk factor related to our international operations;
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hazardous and non-hazardous waste and other environmental protection laws;


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•
sales and other taxes and withholding of taxes;
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privacy laws and protection of personally identifiable information;
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marketing activities via the telephone and online; and
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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. While we attempt to conduct our business and operations in a manner that we believe to be in compliance with such laws and regulations, there can be no assurance that a law or regulation will not be interpreted or enforced in a manner contrary to our current understanding of the law or regulation. 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. Additionally, new legislation could be passed that may negatively impact our business, such as provisions that have recently been proposed in various jurisdictions that would restrict ticketing methods, mandate ticket inventory disclosure and attack current policies governing season tickets for sports teams.
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, Maryland 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 7—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 results of operations. 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 results of operations.
We depend upon unionized labor for the provision of some of our services and any work stoppages or labor disturbances could disrupt our business; potential union pension obligations could cause us to incur unplanned liabilities.
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 or operated venues or at our promoted events could have a material adverse effect on our business, financial condition and results of operations. We cannot predict the effect that a potential work stoppage would have on our business.
We participate in, and make recurrent contributions to, various multiemployer pension plans that cover many of our current and former union employees. Our required recurrent contributions to these plans could unexpectedly increase during the


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term of a collective bargaining agreement due to ERISA laws that require additional contributions to be made when a pension fund enters into critical status, which may occur for reasons that are beyond our control. In addition, we may be required by law to fulfill our pension withdrawal liability with respect to any multiemployer pension plans from which we may withdraw or partially withdraw. Our potential withdrawal liability will increase if a multiemployer pension plan in which we participate has significant underfunded liabilities. Any unplanned multiemployer pension liabilities could have a material adverse effect on our business, financial condition and results of operations.
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 & Advertising 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 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:
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construction of live music venues may result in cost overruns, delays or unanticipated expenses;
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desirable sites for live music venues may be unavailable or costly; and
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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 events and 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 2013, we spent approximately 3.9% of our revenue on marketing, including advertising. There can be no assurance that these marketing or advertising efforts 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 concession and merchandise sales. Poor weather can affect current periods as well as successive events in future periods.


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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.
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, 2013, our total indebtedness, excluding unamortized debt discounts of $24.0 million and including debt premium of $8.6 million was $1.8 billion. Our available borrowing capacity under the revolving portion of our senior secured credit facility at that date was $266.9 million, with outstanding letters of credit of $68.1 million. We may also incur significant additional indebtedness in the future.
Our substantial indebtedness could have adverse consequences, including:
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making it more difficult for us to satisfy our obligations;
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increasing our vulnerability to adverse economic, regulatory and industry conditions;
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limiting our ability to obtain additional financing for future working capital, capital expenditures, mergers and other purposes;
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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;
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limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
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making us more vulnerable to increases in interest rates;
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placing us at a competitive disadvantage compared to our competitors that have less debt; and
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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 and ticketing advances and capital expenditures, we will require a significant amount of cash, which depends on many factors beyond our control.
As of December 31, 2013, $286.0 million of our total indebtedness (excluding interest and unamortized debt discount) is due in 2014, $95.3 million is due in the aggregate for 2015 and 2016, $101.3 million is due in the aggregate for 2017 and 2018 and $1.3 billion is due thereafter. In addition, as of December 31, 2013, we had $2.3 billion in operating lease agreements, of which $119.4 million is due in 2014 and $123.6 million is due in 2015. All long-term debt without a stated maturity date is considered current and is reflected here as due in 2014. 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 and ticketing 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. 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 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.


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These measures might also be unsuccessful or inadequate in permitting us to meet scheduled debt service or lease obligations. We may be unable to restructure or refinance our obligations and obtain additional debt or equity financing or sell assets on satisfactory terms or at all. Capital markets have been volatile in the recent past; a downturn could negatively impact our ability to access capital should the need arise. 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 agreements 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 there under 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 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. Our foreign subsidiaries generate a portion of our operating cash flows. Although we do not intend to repatriate these funds from our foreign subsidiaries in order to satisfy payment requirements in the United States, we would be required to accrue and pay United States federal and state income taxes on any future repatriations, net of applicable foreign tax credits. These taxes could be substantial and could have a material adverse effect on our financial condition and results of operations. 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.
Any inability to fund the significant up-front cash requirements associated with our touring and ticketing businesses could result in the loss of key tours or the inability to secure and retain ticketing clients.
In order to secure a tour, including global tours by major artists, we are often required to advance cash or post a letter of credit to the artist prior to the sale of any tickets for that tour. Additionally, to secure new, or retain existing, ticketing clients, we are often required by the client to make cash advances at the beginning and/or periodically during the term of the


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agreement. If we do not have sufficient cash on hand or capacity under our senior secured 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. Similarly, if we did not have enough cash on hand, or access to cash, required to advance to new ticketing clients or to continue to pay advances under existing ticketing agreements, our ticketing business would be negatively impacted.
Risks Relating to Our Common Stock
We cannot predict the prices at which our common stock may trade.
Our stock price has fluctuated between $7.14 and $19.94 over the past three fiscal 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, financial condition and results of operations.
Our corporate governance documents, rights agreement and Delaware law may delay, deter 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 supermajority voting requirements for stockholders to amend our organizational documents and to remove directors as well as 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.
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


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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. 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, 2013, there were 199.6 million shares of Live Nation common stock outstanding (including 2.2 million shares of unvested restricted stock awards and excluding 0.4 million shares held in treasury), 9.4 million shares of common stock issuable from options currently exercisable at a weighted average exercise price of $14.94 per share and 8.1 million shares issuable from the conversion of our 2.875% convertible notes.
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.
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 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 United States Internal Revenue Service, or 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.


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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 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.


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Risks Relating to the Merger
In connection with the Merger, we became subject to a court-imposed final judgment placing certain restrictions and obligations on us which could negatively impact our business.
In connection with the Merger, we became subject, through July 2020, to a court-imposed final judgment, or the Final Judgment, that places certain restrictions and obligations on us in order to address the issues the DOJ raised in its antitrust review of the Merger. 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.
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.
In connection with the Merger we also entered into a consent agreement with the Canadian Competition Commission, or the Canadian Consent Agreement, which has 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 through July 2020. 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.
ITEM  1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 2.    PROPERTIES
As of December 31, 2013, we own, operate or lease 85 entertainment venues and 100 other facilities, including office leases, throughout North America and 28 entertainment venues and 85 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 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
Information regarding our legal proceedings can be found in Part II—Financial Information—Item 8. Financial Statements and Supplementary Data—Note 7—Commitments and Contingent Liabilities.


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PART II—FINANCIAL INFORMATION
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 4,371 stockholders of record as of February 19, 2014. 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 our common stock on the New York Stock Exchange during the calendar quarter indicated.
 
 
Common Stock Market Price
 
 
High
 
Low
2012
 
 
 
 
First Quarter
 
$
11.00

 
$
8.54

Second Quarter
 
$
9.90

 
$
8.10

Third Quarter
 
$
9.76

 
$
8.37

Fourth Quarter
 
$
9.69

 
$
8.16

2013
 
 
 
 
First Quarter
 
$
12.68

 
$
9.37

Second Quarter
 
$
16.31

 
$
11.76

Third Quarter
 
$
18.93

 
$
15.53

Fourth Quarter
 
$
19.94

 
$
17.16

Dividend Policy
Since the Separation and through December 31, 2013, we have not declared or paid any dividends. We presently intend to retain any future earnings to finance the expansion of our business and to make debt repayments as they become due. 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 that 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.


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ITEM 6. 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.
 
Year Ended December 31,  
 
2013
 
2012
 
2011
 
2010
 
2009
 
(in thousands except per share data)
Results of Operations Data (1):
 
 
 
 
 
 
 
 
 
Revenue
$
6,478,547

 
$
5,819,047

 
$
5,383,998

 
$
5,063,748

 
$
4,181,021

Operating income (loss)
$
139,660

 
$
(21,639
)
 
$
18,337

 
$
(63,700
)
 
$
(52,356
)
Loss from continuing operations before income taxes
$
(5,137
)
 
$
(132,161
)
 
$
(96,627
)
 
$
(188,654
)
 
$
(114,678
)
Net loss attributable to common stockholders of Live Nation Entertainment, Inc.
$
(43,378
)
 
$
(163,227
)
 
$
(83,016
)
 
$
(228,390
)
 
$
(60,179
)
Basic and diluted loss from continuing operations attributable to common stockholders of Live Nation Entertainment, Inc.
$
(0.22
)
 
$
(0.87
)
 
$
(0.46
)
 
$
(1.36
)
 
$
(1.65
)
Cash dividends per share
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
As of December 31,  
 
2013
 
2012
 
2011
 
2010
 
2009
 
(in thousands)
Balance Sheet Data (1):
 
 
 
 
 
 
 
 
 
Total assets
$
5,683,521

 
$
5,290,806

 
$
5,077,344

 
$
5,195,560

 
$
2,341,759

Long-term debt, net (including current maturities)
$
1,808,887

 
$
1,740,005

 
$
1,705,261

 
$
1,731,864

 
$
740,069

Redeemable preferred stock
$
—

 
$
—

 
$
—

 
$
—

 
$
40,000

_________
(1)
Acquisitions and dispositions significantly impact the comparability of the historical consolidated financial data reflected in this schedule of Selected Financial Data.
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 2013, we continued to deliver growth in revenue, ticket sales, number of fans attending our concerts and operating results. Our revenue increased 11% compared to 2012 driven by an increase in our Concerts segment’s event activity as well as higher sales in our Sponsorship & Advertising segment. The Ticketing segment revenue was also up for the year, despite the revenue received in 2012 related to the London Olympics, driven by strong primary ticket sales in North America for concerts and sporting events as well as higher revenue from our resale business. Ticket sales for the year grew as a result of our strategy to drive attendance in our concert venues, expand our concert portfolio, and grow our core ticketing business, which resulted in an improvement to our operating results over 2012. We are currently in the process of re-platforming our Ticketmaster ticketing system in order to provide state-of-the-art technology services which will result in an improved experience for our fans and better tools and information resources for our venue clients. Once it is complete and rolled out to our clients, this re-platforming will also allow us to improve the efficiency of our ticketing systems and processes and therefore lead to cost reductions in ticketing. Our strategy remains focused on leveraging our leadership position in the live entertainment industry to reach fans through the live concert experience in order to sell more tickets and grow our sponsorship and advertising revenue,


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while continuing to optimize our cost structure. We believe that as the leading, global live event and ticketing company we are well-positioned to serve artists, teams, fans and venues.
Our Concerts segment delivered a 17% increase in revenue compared to last year through increased amphitheater and arena attendance as well as acquisitions. The number of fans was up 19% globally, driven by the higher amphitheater activity, more events in newer markets like Australia, as well as the growth in our festival and arena businesses in both North America and Europe. Our overall Concerts operating results increased for the year due to improved profitability from this higher activity across the portfolio. In addition, our Concerts operating results were impacted positively by a $24.8 million gain recognized on the disposal of operating assets related to a theater in New York and a $14.1 million insurance recovery for storm damage to one of our venues from Hurricane Sandy. We will continue to look for expansion opportunities, both domestically and internationally, as well as ways to market our events more effectively in order to continue to expand our fan base and geographic reach and to sell more tickets.
Our Ticketing segment revenue for the year increased 2% compared to last year due to higher ticket sales for concert and sporting events in the United States as well as an increase in our resale business. Overall, the number of tickets sold during the year increased 1% due largely to higher ticket sales domestically. Tickets sold through our mobile applications nearly doubled as compared to last year as we implemented new features in 2013 that are expected to drive further expansion of mobile ticket transactions. Globally for the year, 14% of our total tickets were sold via mobile devices. Ticketing operating results for the year were driven by strong domestic ticket sales, including those for our owned or operated venues, as well as increased activity in our resale business. Despite the increased revenue and ticket sales, our overall operating income was down due to higher costs from investments in our technology platforms and increased amortization of non-recoupable ticketing advances in 2013. We will continue to invest in a variety of initiatives aimed at improving the ticket buying process and overall fan and venue client experience.
Our Artist Nation segment revenue decreased 12% for the year as compared to last year primarily due to the decision in July of this year by the Concerts segment to expand their premium ticket packages and no longer outsource VIP ticket sales to Artist Nation. Lower amortization in 2013, primarily due to a $62.7 million impairment of intangibles recognized in 2012, partially offset by higher compensation expenses led to a year-over-year improvement in operating results for the segment. Our Artist Nation segment is focused on serving our existing artists as well as developing new relationships with top artists and extending the various services we provide.
Our Sponsorship & Advertising segment revenue increased 15% over the prior year driven by higher sponsorship revenue generated from festivals and custom events as well as higher online advertising revenue. Overall operating income improved 10% for the year driven by the higher sales. An increase in custom events in North America, which have higher direct costs, as well as higher fixed costs for Sponsorship & Advertising led to the slight reduction in operating margins. Our extensive on-site and online reach, global venue distribution network, artist relationships and ticketing operations are the key to securing long-term sponsorship agreements with major brands and we continue to expand these assets while extending further into new markets internationally.
Overall, our net loss for the year was impacted by a loss on extinguishment of debt of $36.3 million due to the redemption of our 8.125% senior notes through the issuance of additional notes under our existing 7% senior notes and the refinancing of and amendment to our senior secured credit facility. Partially offsetting the loss on extinguishment of debt was a reduction of interest expense for the year resulting from the redemptions of our 10.75% senior notes in 2012 and our 8.125% senior notes in 2013 through the issuance of 7% senior notes in both years.
We continue to be optimistic about the long-term potential of our company and are focused on the key elements of our business model - expand our concert platform, drive conversion of ticket sales through social and mobile channels, grow our sponsorship and online revenue, sell more tickets for our Ticketmaster clients, both primary and secondary, while driving reductions in the ticketing cost structure and continue to align our artist management group with our other core businesses.
Segment Overview
Our reportable segments are Concerts, Ticketing, Artist Nation and Sponsorship & Advertising.
Concerts
Our Concerts segment principally involves the global promotion of live music events in our owned 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. Revenue and related costs for events are generally deferred and recognized when the event occurs. All advertising costs incurred during the year for shows in future years are expensed at the end of the year.


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To judge the health of our Concerts segment, we primarily monitor the number of confirmed events in our network of owned or operated and third-party venues, talent fees, average paid attendance and advance ticket sales. In addition, at our owned or operated venues, we monitor attendance, ancillary revenue per fan and premium ticket sales. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods on a constant currency basis.
Ticketing
The Ticketing segment is primarily an agency business that sells tickets for events on behalf of its clients and retains a convenience charge and order processing fee for its services. We sell tickets through websites, telephone, mobile apps 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. Our Ticketing segment also manages our online activities including enhancements to our websites and bundling product offerings. Through our websites, we sell tickets to our own events as well as tickets for our ticketing clients and provide event information. Revenue related to ticketing service charges are recognized when the ticket is sold except for our own events where we control ticketing and then the revenue is deferred and recognized as the event occurs.
To judge the health of our Ticketing segment, we primarily review the gross transaction value and the number of tickets sold through our ticketing operations, average convenience charges and order processing fees, the number of clients renewed or added and the average royalty rate paid to clients who use our ticketing services. In addition, we review the number of visits to our websites, the overall number of customers in our database, the number of tickets sold via mobile apps and through our secondary offerings along with the revenue related to the sale of other products on our websites. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods on a constant currency basis.
Artist Nation
The Artist Nation segment primarily provides management services to music artists in exchange for a commission on the earnings of these artists. Our Artist Nation segment also sells merchandise associated with music artists at live performances, to retailers and directly to consumers via the internet. Revenue earned from our Artist Nation segment is impacted to a large degree by the touring schedules of the artists we represent and 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 annual commissions earned for each artist represented and the percentage of top artists on tour or with planned album releases as these activities tend to drive higher revenue. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods on a constant currency basis.
Sponsorship & Advertising
Our Sponsorship & Advertising segment employs a sales force that creates and maintains relationships with sponsors, through a combination of strategic, international, national and local opportunities that allow businesses to reach customers through our concert, venue, artist relationship and ticketing assets, including advertising on our websites. We work with our corporate clients to help create marketing programs that drive their business goals and connects their brands directly with fans and artists. We also develop, book and produce custom events or programs for our client’s specific brands which are typically experienced exclusively by the client’s consumers. These custom events can involve live music events with talent and media, using both online and traditional outlets. We typically experience higher revenue in the second and third quarters as a large portion of sponsorships are typically associated with our outdoor venues and festivals which are primarily used in or occur during May through September.
To judge the health of our Sponsorship & Advertising segment, we primarily review the average revenue per sponsor, the total revenue generated through sponsorship arrangements, the percentage of expected revenue under contract and the online revenue received from sponsors advertising on our websites. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods on a constant currency basis.


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Consolidated Results of Operations
 
 
Year Ended December 31,
 
% Change
2013 vs 2012
 
% Change
2012 vs 2011
 
2013
 
2012
 
2011
 
 
 
(in thousands)
 
 
 
 
Revenue
$
6,478,547

 
$
5,819,047

 
$
5,383,998

 
11%
 
8%
Operating expenses:
 
 
 
 
 
 
 
 
 
Direct operating expenses
4,680,507

 
4,151,277

 
3,789,488

 
13%
 
10%
Selling, general and administrative expenses
1,226,892

 
1,143,632

 
1,111,969

 
7%
 
3%
Depreciation and amortization
368,923

 
429,557

 
343,018

 
(14)%
 
25%
(Gain) loss on disposal of operating assets
(38,259
)
 
(514
)
 
978

 
*
 
*
Corporate expenses
94,385

 
113,364

 
112,157

 
(17)%
 
1%
Acquisition transaction expenses
6,439

 
3,370

 
8,051

 
*
 
*
Operating income (loss)
139,660

 
(21,639
)
 
18,337

 
*
 
*
Operating margin
2.2
%
 
(0.4
)%
 
0.3
%
 
 
 
 
Interest expense
111,659

 
123,740

 
120,414

 
 
 
 
Loss (gain) on extinguishment of debt
36,269

 
(460
)
 
—

 
 
 
 
Interest income
(5,071
)
 
(4,170
)
 
(4,215
)
 
 
 
 
Equity in earnings of nonconsolidated affiliates
(856
)
 
(9,921
)
 
(7,742
)
 
 
 
 
Other expense, net
2,796

 
1,333

 
6,507

 
 
 
 
Loss before income taxes
(5,137
)
 
(132,161
)
 
(96,627
)
 
 
 
 
Income tax expense (benefit)
30,878

 
29,736

 
(26,224
)
 
 
 
 
Net loss
(36,015
)
 
(161,897
)
 
(70,403
)
 
 
 
 
Net income attributable to noncontrolling interests
7,363

 
1,330

 
12,613

 
 
 
 
Net loss attributable to common stockholders of Live Nation Entertainment, Inc.
$
(43,378
)
 
$
(163,227
)
 
$
(83,016
)
 
 
 
 
_________
*
Percentages are not meaningful.


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Key Operating Metrics 
 
Year Ended December 31,
 
2013
 
2012
 
2011
Concerts (1)
 
 
 
 
 
Total estimated events:
 
 
 
 
 
North America
15,582

 
14,942

 
15,526

International
7,270

 
6,996

 
6,718

Total estimated events
22,852

 
21,938

 
22,244

Total estimated fans (rounded):
 
 
 
 
 
North America
38,009,000

 
32,079,000

 
31,060,000

International (2)
21,527,000

 
17,915,000

 
16,803,000

Total estimated fans
59,536,000

 
49,994,000

 
47,863,000

Ancillary net revenue per attendee:
 
 
 
 
 
North America amphitheaters
$
18.44

 
$
18.56

 
$
18.11

International festivals
$
17.69

 
$
15.55

 
$
16.62

Ticketing (3)
 
 
 
 
 
Number of tickets sold (in thousands):
 
 
 
 
 
Concerts
76,524

 
75,372

 
71,632

Sports
30,059

 
28,760

 
27,055

Arts and theater
19,112

 
19,961

 
21,891

Family
16,628

 
15,970

 
14,248

Other (4)
6,529

 
7,669

 
6,541

 
148,852

 
147,732

 
141,367

Gross transaction value of tickets sold (in thousands)
$
9,352,673

 
$
9,146,254

 
$
8,441,230

Number of customers in database (rounded)
129,585,000

 
119,592,000

 
110,208,000

Sponsorship & Advertising
 
 
 
 
 
Sponsorship revenue (in thousands)
$
212,869

 
$
191,773

 
$
179,734

Online advertising revenue (in thousands)
$
71,823

 
$
56,148

 
$
51,057

 _________

(1) 
Events generally represent a single performance by an artist. Fans generally represent the number of people who attend an event. Festivals are counted as one event in the quarter in which the festival begins but number of fans is based on the days the person was present at the festival and thus can be reported in multiple quarters. Events and fan attendance metrics are estimated each quarter.
(2) 
In prior years, estimated fans for international festivals was based on the number of fans who purchased a ticket.  In 2013, we are reporting estimated fans for international festivals based on the number of fans who attend the festival to be consistent with all other events.  Prior period amounts have been adjusted to reflect the current period presentation.  This adjustment resulted in increases in estimated fans of approximately 1.2 million and 1.1 million for the years ended December 31, 2012 and 2011, respectively.
(3) 
The number and gross transaction value of tickets sold includes primary tickets only and excludes tickets sold for the 2012 Olympics. These metrics include tickets sold during the period regardless of event timing except for our promoted events in our owned or operated venues and in certain European territories where these tickets are reported as the events occur. The total number of tickets sold reported above for 2013, 2012 and 2011 excludes approximately 250 million, 255 million and 256 million, respectively, of tickets sold using our Ticketmaster systems, through season seat packages and our venue clients’ box offices, for which we do not receive a fee.
(4) 
Other category includes tickets for comedy shows, facility tours, donations, lectures, seminars and cinemas.


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Revenue
Our revenue increased $659.5 million, or 11%, during the year ended December 31, 2013 as compared to the prior year. The overall increase in revenue was primarily due to an increase in our Concerts segment of $646.8 million. Excluding the decrease of approximately $3.9 million related to the impact of changes in foreign exchange rates, revenue increased $663.4 million, or 11%. The impact of changes in foreign exchanges rates was not significant to the segments.
Our revenue increased $435.0 million, or 8%, during the year ended December 31, 2012 as compared to the prior year. The overall increase in revenue was primarily due to increases in our Concerts and Ticketing segments of $364.2 million and $54.7 million, respectively. Excluding the decrease of approximately $100.4 million related to the impact of changes in foreign exchange rates, revenue increased $535.4 million, or 10%.
More detailed explanations of these changes are included in the applicable segment discussions below.
Direct operating expenses
Our direct operating expenses increased $529.2 million, or 13%, during the year ended December 31, 2013 as compared to the prior year. The overall increase in direct operating expenses was primarily due to an increase in our Concerts segment of $555.0 million. Excluding the decrease of approximately $3.2 million related to the impact of changes in foreign exchange rates, direct operating expenses increased $532.4 million, or 13%. The impact of changes in foreign exchanges rates was not significant to the segments.
Our direct operating expenses increased $361.8 million, or 10% during the year ended December 31, 2012 as compared to the prior year. The overall increase in direct operating expenses was primarily due to increases in our Concerts and Ticketing segments of $328.5 million and $32.7 million, respectively. Excluding the decrease of approximately $77.4 million related to the impact of changes in foreign exchange rates, direct operating expenses increased $439.2 million, or 12%.
Direct operating expenses include artist fees, event production costs, ticketing client royalties, show-related marketing and advertising expenses, along with other costs.
More detailed explanations of these changes are included in the applicable segment discussions below.
Selling, general and administrative expenses
Our selling, general and administrative expenses increased $83.3 million, or 7%, during the year ended December 31, 2013 as compared to the prior year. The overall increase in selling, general and administrative expenses was primarily due to an increase in our Concerts segment of $63.0 million. Excluding the decrease of approximately $0.3 million related to the impact of changes in foreign exchange rates, selling, general and administrative expenses increased $83.6 million, or 7%. The impact of changes in foreign exchanges rates was not significant to the segments.
Our selling, general and administrative expenses increased $31.7 million, or 3%, during the year ended December 31, 2012 as compared to the prior year. The overall increase in selling, general and administrative expenses was primarily due to an increase in our Concerts segment of $34.1 million. Excluding the decrease of approximately $15.1 million related to the impact of changes in foreign exchange rates, selling, general and administrative expenses increased $46.8 million, or 4%.
More detailed explanations of these changes are included in the applicable segment discussions below.
Depreciation and amortization
Depreciation and amortization decreased $60.6 million, or 14%, during the year ended December 31, 2013 as compared to the prior year. The overall decrease in depreciation and amortization was primarily due to decreases in our Concerts and Artist Nation segments of $13.2 million and $73.1 million, respectively, offset partially by an increase in our Ticketing segment of $24.9 million. There was no significant impact of changes in foreign exchange rates on depreciation and amortization.
Our depreciation and amortization increased $86.5 million, or 25%, during the year ended December 31, 2012 as compared to the prior year. The overall increase in depreciation and amortization was primarily due to increases in our Concerts and Artist Nation segments of $13.1 million and $65.3 million, respectively. Excluding the decrease of approximately $2.4 million related to the impact of changes in foreign exchange rates, depreciation and amortization expense increased $88.9 million, or 26%.
More detailed explanations of these changes are included in the applicable segment discussions below.


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Gain on disposal of operating assets
Gain on disposal of operating assets for the year ended December 31, 2013 was $38.3 million consisting primarily of a $24.8 million gain recognized in our Concerts segment from the May 2013 sale of a theater in New York. In addition, we recognized a gain in our Concerts segment of $14.1 million in connection with insurance recoveries for storm damage sustained to an amphitheater located in New York.
Corporate expenses
Corporate expenses decreased $19.0 million, or 17%, during the year ended December 31, 2013 as compared to the prior year primarily from a reduction in stock-based compensation and expense related to payments on the Trust Note due to the resignation of an executive on December 31, 2012.
Acquisition transaction expenses
Acquisition transaction expenses were $6.4 million, $3.4 million and $8.1 million during the years ended December 31, 2013, 2012 and 2011, respectively. All years include current year acquisition costs that vary based on the size and number of acquisitions in the year and ongoing litigation costs relating to the Merger. In addition, 2011 was reduced by changes in the fair-value of acquisition-related contingent consideration.
Interest expense
Interest expense decreased $12.1 million, or 10%, during the year ended December 31, 2013 as compared to the prior year primarily due to lower interest cost driven by the August 2012 redemption of the 10.75% senior notes and the August 2013 redemption of the 8.125% senior notes offset by the interest costs from the 7% senior notes issued in August 2012 and 2013.
Interest expense increased $3.3 million, or 3%, for the year ended December 31, 2012 as compared to the prior year primarily due to additional term loan B borrowings under our senior secured credit facility and the costs related to the issuance in 2012 of the 7% senior notes and redemption of the 10.75% senior notes.
Our debt balances and weighted-average cost of debt, excluding unamortized debt discounts of $24.0 million and including debt premium of $8.6 million, were $1.8 billion and 4.3%, respectively, at December 31, 2013.
Loss (gain) on extinguishment of debt
We recorded a loss on extinguishment of debt of $36.3 million for the year ended December 31, 2013 in connection with the refinancing of the term loans under our senior secured credit facility and the redemption of our 8.125% senior notes in August 2013. These obligations were paid with proceeds from incremental term loans under our amended senior secured credit facility and the issuance of additional 7% senior notes.
Equity in earnings of nonconsolidated affiliates
Equity in earnings of nonconsolidated affiliates decreased $9.1 million during the year ended December 31, 2013 as compared to the prior year primarily due to impairment charges of $9.2 million recorded in 2013 related to investments in a concert promoter located in Europe and an ecommerce business.
Other expense, net
Other expense includes the impact of changes in foreign exchange rates of $2.8 million and $5.1 million in net losses for 2013 and 2011, respectively, and a net gain of $1.4 million for 2012.
Income taxes
For 2013, we had a net tax expense of $30.9 million on a loss before income taxes of $5.1 million compared to a net tax expense of $29.7 million on a loss before income taxes of $132.2 million for 2012. In 2013, income tax expense primarily included $27.8 million related to tax expense for foreign entities and $3.9 million current tax expense for state and local income taxes. The net increase in 2013 tax expense as compared to 2012 is principally due to higher earnings attributable to the 2012 acquisitions of foreign entities.
Our 2012 effective tax rate of (22)% represented a net tax expense of $29.7 million on a loss before income taxes of $132.2 million compared to our 2011 effective tax rate of 27% which represented a net tax benefit of $26.2 million on a loss before income taxes of $96.6 million for the years ended December 31, 2012 and 2011, respectively. In 2012, income tax expense included $19.5 million related to tax expense for foreign entities, $3.9 million current tax expense for state and local income taxes, $4.0 million deferred state income tax primarily related to blended state rate changes and other tax expense of approximately $2.3 million. The net increase in 2012 tax expense as compared to 2011 is principally driven by the 2011 valuation allowance release of $39.5 million related to the federal tax consolidation in 2011 of Front Line with the Company’s other domestic operations.


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Table of Contents

Net income attributable to noncontrolling interests
Net income attributable to noncontrolling interests increased $6.0 million during the year ended December 31, 2013 as compared to the prior year primarily due to improved operating results from certain artist management businesses driven by an impairment in 2012 offset partially by lower operating results from certain concert promotion businesses.
Net income attributable to noncontrolling interests decreased $11.3 million during the year ended December 31, 2012 as compared to the prior year primarily due to reduced operating results of certain artist management businesses resulting from an impairment of a client/vendor relationship intangible in 2012.
Concerts Results of Operations
Our Concerts segment operating results were, and discussions of significant variances are, as follows:
 
Year Ended December 31,
 
% Change
2013 vs 2012
 
% Change
2012 vs 2011
 
2013
 
2012
 
2011
 
 
 
(in thousands)
 
 
 
 
Revenue
$
4,517,191

 
$
3,870,371

 
$
3,506,188

 
17%
 
10%
Direct operating expenses
3,829,991

 
3,274,951

 
2,946,410

 
17%
 
11%
Selling, general and administrative expenses
632,614

 
569,570

 
535,500

 
11%
 
6%
Depreciation and amortization
132,386

 
145,552

 
132,441

 
(9)%
 
10%
Gain on disposal of operating assets
(38,927
)
 
(453
)
 
(880
)
 
*