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Live Nation CFO: Pre-COVID demand ‘is coming back stronger than ever’

Live Nation President and CFO Joe Berchtold joins Yahoo Finance Live to discuss how the live entertainment industry is bouncing back after the damage from the coronavirus pandemic.

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SEANA SMITH: We have been talking about the reopening trade versus work from home. And now that we have a look at one of the companies that's rebounding from the pandemic, and even outpacing 2019's performance, Julie Hyman is here with Live Nation CFO Joe Berchtold. Julie?

JULIE HYMAN: Thanks, Seana. Appreciate it. And Joe, thank you so much for being here. You guys reported your numbers late last week, and you talked about selling a lot of tickets to concerts for this full year, up double digits, I think up by about 40% in terms of the numbers of tickets that you guys have sold.

Your CEO talked about multiple years of record growth coming for that business on the horizon. And Joe, obviously we have a big selloff going on in markets today. People are worried about the economy, clearly. So talk to me about that outlook, given what seems to be a worsening economic backdrop.

JOE BERCHTOLD: Sure. And thanks for having me on. Great to see you. I think one of the things that's great is we have a product that is so in demand right now. Coming out of the pandemic, the one thing that everybody knows they need to do is they need to get back out, they need to socialize, they need to interact. And where better than concerts to do it? So we're seeing that the demand that existed before COVID is coming back, and it's coming back stronger than ever.

Every signal that we see, in terms of tickets being sold for shows this year, the number of artists that want to get out on the road, when fans buy tickets, they want to buy the best tickets, when they come to the show, they want to spend money, have a great experience, continue to spend at the show. So every indicator we're seeing right now is saying that the demand is there. The demand looks to continue to be there over the course of this year. And we're already seeing some setup for next year that looks to be another great year.

JULIE HYMAN: And why do you think that is? You know, why do you think that you aren't seeing, for example, if you look at VIP packages or, as you say people, spending at shows, we have been looking not just in the concert business or the ticketing business, but everywhere for signs of trade-down among US consumers. Are you seeing-- it sounds like you're not seeing any sign of that.

JOE BERCHTOLD: We're not seeing that at all. And I think one thing to remember about our business is this is an industry that's been growing double-digit rates for the last 20 years. You look back over time, this has been a high-growth business. We've had a strong secular trend of shift from spend from goods to experiences.

You talk to any consumer that's a music lover, the going to the show is the high point of the connection with that artist. It's a night out with their friends. It's an affordable luxury that they can continue to do. It's historically performed very well in recessionary times. It's also performed well in inflationary times. So it's a product that, for decades now, has been a growth, a high priority. And we see it set up now to continue that run.

JULIE HYMAN: And Joe, lest people forget, you guys own Ticketmaster, too. So you've got the ticketing side of the business, which actually was faring even better in the quarter than the core concert business, and you've got a secondary business that is growing, as well, second, like, competing with the likes of StubHub, for example. What are you seeing in that business that's telling you also about consumers' willingness to pay up for tickets?

JOE BERCHTOLD: Yes. Well, first of all, you're right, Ticketmaster had a great quarter this first quarter. And all those tickets that were sold in the first quarter are going to be events, concerts that people are going to be going to this summer and into the fall. So we know we've sold those tickets now. And as we come into the summertime and we play those events off, that's when the concert business will really shine. That's when people will be coming and spending the money at the shows. So we know that's a good setup, a leading indicator to our concert business, as well as to our sponsorship and advertising business.

And the secondary, you're right, it tells us that, as much as the consumers have been buying the tickets at the price for the best seats, the secondary market has continued to grow even faster than the primary market. So that is one of our great signals that we have transparently real time the demand for our product, the secondary market. And it's showing that prices are going up even faster than they're going up in the primary market. So the demand is there. And we think that's a great leading indicator, a continued sign of where our business is headed.

JULIE HYMAN: I'm curious, do you guys make higher margins on that secondary ticketing versus the primary ticketing?

JOE BERCHTOLD: It's really a similar business. We, in our business model, align with content. So we align with the venues, the artists, the teams. And we work with them to make sure that we've got the most fan-oriented, safest platform out there for fans to buy tickets, whether they're primary tickets or secondary tickets. So it's all a model that we see as being very beneficial to the content owners, where we're trying to make sure they're getting paid what they're due for their events, the fans to have a good experience, and Ticketmaster there in the middle making that happen.

JULIE HYMAN: And then also, you guys have gotten into-- speaking of what the fans might be looking for, you guys have gotten into NFTs a little bit, as well, sort of either alongside or as the actual ticket. And I know there are other companies that are getting into this business, as well. Do you think that we will reach a point where all tickets-- because I know more and more of your tickets being sold are digital tickets-- will we get to a point where all tickets are NFTs or some kind of blockchain-based contract?

JOE BERCHTOLD: In some form, that is absolutely what will happen. And digital tickets is the first step in that. So digital tickets is making sure those rights are transferred, managed on a digital basis. You can add the NFT to it. You can create a visual that is your digital memorabilia. You can no longer have that ticket stub of yesterday.

So NFTs can fill a great spot, in terms of giving fans some memorabilia, giving them access to more direct connection to the artist. And then various forms of using blockchain technology over time, as it becomes more efficient, more scalable, will absolutely be how it is we continue to give the artist and the fan the direct connection and the control over their relationship.

JULIE HYMAN: And finally, Joe, I was surprised to see that your sponsorship and advertising business was robust in the first quarter. It's still a small part of your overall business, but sales were up double digits in the first quarter versus 2019. You've sold 90% of your planned sponsorships so far this year. And just quickly here, what we're seeing from the digital world is that sponsorships and sales, ad sales are going down. Why do you think you guys are doing better on that front?

JOE BERCHTOLD: Well, because we're a strategic business for brands that are figuring out how do they align their brands with their key customers. And with 100 million plus fans, we're a platform of scale that can deliver a very attractive audience to sponsors and advertisers. And they're not looking to just put out an ad impression. We're not a spot market purchase. We're a multiyear relationship business with the brands that we align with. And they're looking to figure out how do they enhance the experience for the concertgoer.

And it turn, that enhances their brand relationship with them. So whether it's Verizon putting in a 5G infrastructure at our venues to make a better experience for the fans there, it's Snap developing augmented reality opportunities at our festivals, at our concerts to enhance that experience, that's the sort of situation the brands are looking for now. How do they make it a real connection with the fans? On a multiyear basis. So we're not subject to those same spot market short-term fluctuations that you see with some others.

JULIE HYMAN: Interesting. Joe, thanks for being here. Really appreciate it. Joe Berchtold is the chief financial officer at Live Nation. Thanks a lot.