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Live Nation, Inc. (NYSE:LYV)

Update Call

January 11, 2008 10:00 am ET

Executives

Michael Rapino – President, Chief Executive Officer & Director

Klaus-Peter Schulenburg – Chief Executive Officer of CTS Eventim

Bryan Perez – Chief Executive Officer of Global Digital

Nathan Hubbard – President of Ticketing

[Leanne Markay]

Analysts

David Kestenbaum – Morgan Joseph & Co., Inc.

Mark Wienkas – The Goldman Sachs Group, Inc.

John Blackledge – J.P. Morgan Securities, Inc.

Jeffrey Shelton – Natixis Bleichroeder

David C. Joyce – Miller Tabak & Co., LLC

Operator

My name is Marquette and I will be your conference facilitator today. At this time I would like to welcome everyone to the Live Nation Ticketing conference call. All lines have been placed on mute to prevent background noise. After the speakers’ remarks there will be a question and answer period. (Operator instructions). Before we begin Live Nation has asked me to remind you that this call will contain certain forward-looking statements that are subject to risk and uncertainties that could cause actual results to differ. Please refer to Live Nations’ SEC filing for a description of risks and uncertainties that could impact the actual results. Live Nation will also offer to some non-GAAP measures in this call. In accordance with SEC Regulation G Live Nation has provided a full reconciliation to most comparable GAAP measure and as a company presentation posted on its website. This presentation can be found on www.LiveNation.com under the about us section. It is now my pleasure to turn the floor over to your host Michael Rapino, Chief Executive Officer. Sir you may begin your conference.

Michael Rapino

Thank you everyone for joining us this morning. Today I am joined by Klaus-Peter Schulenberg, CEO of CTS Eventim our new ticketing partner, Bryan Perez our CEO of Global Digital and Nathan Hubbard our President of Ticketing. As many of you have followed the Live Nation transformation over the past two years already, know akey driver in our long term strategy has been to remove the barriers between our company and the customer, the music fan. I am happy to say that with our current ticketing deal expiring atthe end of the year we will have a fully operational new ticketing company and be able to reach a new milestone in this journey. For the first time ever Live Nation will control our most important asset the concert ticket. Through www.LiveNation.com we expect to sell more than 20 million tickets annually directly to music fans around the world. Through this activity we expect to strengthen the relationship we have with our customers, develop brand new revenue streams, maximize attendance at our events and build new alliance with corporate partners that have never been before possible. It is not an understatement to say that the deal with CTS to provide expertise and infrastructure for this new venture is revolutionary in scope and will have a profound affect on the global live music business and our bottom line. Hopefully we’ll be able to download the presentation at the investor site as we will now take you through some key highlights of the deal.

On Slide 4 - The launch of our new ticketing company next year we will have accomplished our vision of becoming a vertically integrated music company. The ticket to the live show is really the glue that brings the fan and the artist and all the ancillary opportunities up and down the value chain together. For the artist by virtue of our improved customer relationships and customer data we can better connect the artist with their fans so they can sell more products and tickets. For the fan we create a one stop shop for a variety of music related goods and services at the point of ticket purchase. And, for the sponsor we will be able to offer sponsor’s an end-to-end sponsor solution from the venue to direct band interaction. And, for Live Nation as a whole it evolves our model from a promoter service provider to an e-commerce retailer. We have now taken an artist relationship that provided us only four or five revenue streams in ticket sales and venue ancillary’s and can now expand that relationship into more revenue streams including ticket sponsorship, merchandise, fan clubs, DVD’s, etc.

On Slide 5 - We talk about the benefits of the relationship of owning and becoming a ticketing company. The ticketing business in itself will open up a variety of new opportunities for Live Nation. By controlling the ticket transaction we can more efficiently sell tickets to fans via direct marketing. We can now expand our sponsorship proposition. We expect to offer sponsors a comprehensive package from online advertising to on site events. Third we get to increase our poor concert margins. We have now eliminated the ticket distributor middle man, we can recapture their profit margin which will make our core concert business healthier and more competitive. Four, to date we have not participated in the secondary market with our new ticketing business we expect to enter this growing and highly profitable segment. Five, the launch of our ticketing business has opened up a whole new revenue stream for us as we can provide our current venue partners with a double value proposition of content and a superior ticketing platform.

At a base level we expect to generate an incremental $25 million in EBITDA just by taking ticketing in house and not even executing all of these additional opportunities. If we can execute on these additional opportunities we currently believe that EBITDA will double. Needless to say we are excited about the future of these opportunities as they begin to unfold.

On Slide 6 - deal summary - In North America, United States and Canada we will launch our own 100% owned ticketing company powered by CTS Eventim software which we exclusively license in the US and Canada. The new ticketing company will not only service tickets to our shows and our venues but will also provide service to third party venues. We will pay a license fee per ticket for our exclusive license of the CTS Eventim software for an initial period of 10 years. Which enables us to immediately have access to the worlds most technology advanced ticketing software, accelerate our ability to provide fans with a superior front end and accelerate our entrance into the third party market without spending a significant amount of up front capital on software development.

On the international front the ticketing business where the promoter typically controls the ticket is a different model for us. We make less money from ticketing overseas. Only 26% of our music related service fees comes from international operation. As a result we structured an agreement whereby CTS will provide us with a turn key back end solution for select international markets while we control the front end through our website, the customer data and the distribution of tickets all of our core objective. The term of this agreement mirrors the North America Agreement and it spans for 10 years.

On Slide 7 we talk about our new partner CTS. I personally have known Klaus Schulenberg for a long time dating back to my time running the international music business. I have known him to be an exceptionally strong operator and a pioneer. He has grown CTS Eventim successfully over the years into a kind of business that we would like to become, a unified promotion and ticketing company. He is committed to making our ticketing operation a success. The choice of CTS for us was clear. One, CTS is one of the most technology sophisticated ticketing platforms in the world. Use of this platform will allow us to jump start ticketing operations for providing our fans and artist with access to a superior service. Two, leveraging CTS platform enables us to focus on our core competency of music and doesn’t require us to become a software company overnight. In addition it accelerates our ability to provide third party ticketing services by arming us with a platform that is already capable of handling all types of clients from concerts to sports teams. Given the unique characteristics of the European market in which we operate the deal partners Live Nation with Europe’s largest ticketing company to fulfill these needs. I will now turn the discussion over to Klaus to talk a little bit about his company and his new software and operations.

Klaus-Peter Schulenburg

Good morning ladies and gentlemen this is Klaus Schulenburg calling from Germany. I would like to give you a little overview about our CTS Eventim Company. CTS Eventim is based in Munich and Hamburg in Germany and founded 1989, listed at the Frankfurt Stock Exchange since 2000. Last year we generated revenue of round about $500 million with an EBITDA of $67 million dollars and this year we expect everything much higher and our market cap is around $1 billion. We will provide Live Nation with an absolutely state of the art technology which is big in the year of 1999, 2000 and this is a three tiered client server technology which is fully scalable.

We served last year more than 60 million tickets in Germany for 100,000 events in 17 countries within Europe and what is special about it is the software is able to serve all Europe out of one database so it is possible to do cross water business in Europe. For example, I do not know if it is the same in the US as well, Airfare tickets are cheaper than concert tickets. So we see a lot of tourism with concert tickets when people from London going to a Madonna concert in Paris because they saw the artist already two or three times in London. We provide round about 600 employees in our ticketing sector where as 60 people are software specialist dedicated only to develop high scalable software and what is important is that our software is able to serve concerts promoters on one hand, sports clubs on the other hand and classical theatre opera houses on the other hand. So we serve more than 1,000 promoters in Europe, 200 Sports Team, the complete German Soccer Leagues, for example. 600 venues and around about 200 theatre clients.

I turn now to Slide number 10 and there you can see how our software is structured. What is important with our technology for example is as the ticket buyer you are able to buy the ticket to the very last minute, up to the beginning of the concert because you can request your ticket on your mobile, on your cell phone. We send a two dimensional bar code on to your cell phone and then it is scanned at the door and gives you access to the concert which is very, very popular in Europe at the moment. What is important as well and will change habits of buying tickets in theUS is that you can buy or select your ticket on www.CTS.com out of an interactive seating map. So, you are able for every concert which is on our software, you can go to the seating map for example, pick out from Row 1 Seat 3 and 4 you don’t like it and you choose instead Sow 1 you choose Row 4 Seat 6 and 7. Everything is possible technology wise. We provide an integrated secondary market tool as well which enables the auction and the resale of tickets. This is specific about our technology that again, you can select your secondary market ticket out of an interactive seating map. Especially what we do in Germany for season ticket holders when you can’t attend the concert or sporting match you just type in on our website, return your tickets and we issue a new ticket to the secondary market customer. This again is very important and on top of this we are dedicated to market concerts or we, for example inEurope had 60,000 online affiliates on the web to promote concerts. This is very important marketing tool and this is combined with state of the art customer relation management tool.

I would like to turn to Slide 11 please the highlights of our company was serving the Soccer World Cup in 2006. There we could show how scalable our ticketing software is. We sold over 4 million tickets for this tournament but we were able to serve 30 million inquiries within the first hour when tickets sales started and there was no collapsing of websites. And, we are able today serve 3 million clients simultaneously, that means at the same time and we do this through this special service we are able to load distribution for 15,000 servers worldwide. There would be no collapsing on websites. On top of that we provide our RSID technology which we provided at the World Cup so that we personalized tickets. This was a very important tool to prevent ticket fraud at the tournament and there were almost none fraud tickets at the tournament. To come to an end I think we found or created a win-win situation. We enabled Live Nations to set up 100% ticketing company right from the beginning without having to invest in technology and software development which is not only a matter of money, it is a matter of know how as well which enables us at CTS to get into markets without having heavy investments and so we believe that we have a win-win technology. I may now pass over to Bryan Perez and Nathan Hubbard. Thank you very much.

Nathan Hubbard

On Slide 14 - We just wanted to start by giving everyone a quick refresher on how the ticketing business works here and internationally so that you can put the terms of our new deal with CTS in context. In North America the venue generally controls the ticket so that means if we promote for example the Van Halen show at Madison Square Gardens. We will work with Madison Square Gardens ticketing provider to sell the tickets at MSG and MSG will benefit from any service charges on those tickets. Live Nation would not directly participate in any meaningful way in the service charge on that ticket. If that same Van Halen show was instead at out our Jones B. Champ Theatre then we would participate in the service charge as we have the right to that ticket in our venue. Approximately half the tickets we sell in North America are in third parity buildings where we do directly participate in the service charge and in half are in our owned and operated venues. Internationally the structure is a bit different generally the promoter controls the ticket. In some markets such as Belgium the rights go with the venue but for the most part the tickets go with the promoter and as a result we already control most of our tickets internationally.

Another difference internationally is that the ticket service fees are generally significantly lower than they are in the US. Internet ticket sales are a lot lower and handled completely differently. For instance, in many countries the common practice is to order the ticket online and then pick it up at a retail outlet network distributed through a country. For us this means that having a strong European partner like CTS with a commitment to establishing an outlet network in each individual market is important. The upside in having our own ticketing company in Europe is less than in the US since promoters already own the ticket and it is less likely that they would be willing to use a competitors ticketing system.

On to Slide 15 - With that background we can look at our own statistics. This Slide breaks down the number of tickets we have in each major market by tickets that we control, that is tickets that are sold in our own and/or operated venues in the US, Canada and UK or tickets that we are the promoter for internationally. Secondly, it breaks tickets down via those tickets that we do not control. That is tickets for shows that we promote in third party venues in the US and Canada or tickets for shows that someone else controls internationally. In the US and Canada we believe that the venue that these ticket sales are in are prime candidates to become customers of our ticketing system in the future.

Lastly box office tickets. These are tickets that we sell in our box office that are not included in our service charge revenue rebate revenue but including in revenues at the venue level. We believe that hopefully through time we can move more box office tickets online as has been the annual trend. In total we have approximately 14 million controlled tickets will service ourselves in North America which today generate about $71 million adjusted of adjusted OIBIDA annually for us and 7 million controlled tickets internationally which generate about $18 million of adjusted OIBIDA annually.

On Slide 16 - I am going to provide you with a brief overview of the details with our agreement with CTS. First in the US and Canada. In the US and Canada we have an exclusive license for the CTS ticketing software. We can use this ticketing software to service our own tickets as well as those from third party venues. We believe that this give us a tremendous advantage when going after new ticketing clients as we have one of the most technologically sophisticated platforms around. The deal is structured as a simple licensing deal where we pay CTS a fee per ticket sold on the CTS system. This structure was critical to us to eliminate conflicts between the traditional ticketing provider and our objectives. We are now free to be as creative as we want to be around the fees the customer pays without having a ticketing partner solely invested in the current service fee model. In addition, the structure provides us with absolutely 100% control over the entire ticketing business, the user experience, all the distribution methods, the customer data, etc. All the conflicts that we have in our existing business are now gone.

In terms of launch CTS is committed to making modifications to the platform we require to ready it for use in the US and Canada. And going forward, help us implement the system, integrate it with our own systems and train our personnel well in advance of the termination of our existing ticketing contracts. As we look to move into new markets in the future such as Mexico, South Central America, Australia, New Zealand and Japan, we have a right to bring this license deal there as well during the initial ten year term. This is important for us as we have a built in ticketing relationship that we can choose to use or not as we expand. In the United Kingdom the deal is sort of a hybrid of a traditional service deal and our license deal. In this market we will pay CTS a fixed fee per ticket in exchange for all the back end services. However, we will retain 100% control over all of our customer data, the fees charged to the customer, who sells tickets on which web site and so forth. With the maximum amount of flexibility we can have outwardly facing while working with CTS to provide all the back end services the technology infrastructure and the distribution infrastructure.

For most of the rest of our European presence CTS will provide us with again, a comprehensive back end service including a robust outlet network as it is important in these markets to service our tickets. We have a relatively low number of tickets in some of these markets and the infrastructure is more complex so CTS will be compensated accordingly with a more traditional ticketing deal where they will earn a portion of the service fee, have an allocation of tickets to sell on their website and share customer data with us. The exception being in the Netherlands where we’ll 100% control the customer data. However we still ultimately have the freedom as we do in other markets to do what we want with our customer facing proposition such as the decision on service fees as long as we adequately compensate CTS. Other European countries where we have existing ticketing relationships that cannot currently be replaced maybe brought on board at a later time.

Moving on to Slide 17 - On an economic basis, as we have said before once we are fully ramped we currently expect this ticketing opportunity will add an estimated minimum $25 million of adjusted OIBIDA to our business over what we are earning today with our existing relationships. This figure assumes that we do not change anything about the model but simply replicate the existing structure in house. It also does not include any benefit from any number of incremental revenue opportunities we now have at our disposal from entering third party ticketing markets to participating in secondary ticketing and yield management, ramping our sponsorship opportunities and a number of other ancillary opportunities. If these opportunities develop as we currently believe that they will the contribution to our adjusted OIBIDA and operating income could double. We expect to begin to build up our ticketing operations in 2008 by hiring new employees in IT, business development customer service training and so forth. We also currently expect to spend approximately $20 million in capital expenditures on things like hardware, new servers, computers and printers for our box offices In total in 2008 we currently expect ticketing to be a drag of about $15 million on adjusted OIBIDA as we ramp to benefit us by approximately $15 million in 2009 as the bulk of our North American tickets come online and by approximately $25 million annually in 2010 as the rest of our North American tickets and European tickets come online.

On Slide 18 - Incrementally and importantly we expect to grow our business through new opportunities such as third party ticketing. Because approximately half of our North American tickets and almost all of the tickets for our premium global tours for tour dates in North America are for shows that are not in our venues we have a very strong relationship with over 650 third party venues throughout the US and Canada that generate a significant amount of their profit from the highly attended shows that we promote like Madonna, U2, The Rolling Stones in their buildings. We believe that given the combination of content superior ticketing technology and customer data these venues are targeted clients for our new ticketing company as they role off their existing ticketing contracts. Albeit a small scale we’re already doing third party ticketing for our Music Today business. Music today has over 450 venue festival, promoter, artist and sports clients. Together these clients which include such high profile names as the John Paul Jones arena in Charlottesville, The Bonnaroo Music Festival, Kenney Chesny, The AT&T National which is a PGA event. Music Today sold over 1.6 million tickets in 2007. We have a dedicated staff that manages these clients, seeks out new business and serves them.

The publicly available data that we have give us a sense of broader market opportunity of tickets that come up off of contract annually in North America. In total we estimate that outside of Live Nation, Ticketmaster has about 74 million domestic tickets. They’ve said in presentation that approximately 15 to 20% of these tickets come up for renewal annually and they generate EBITDA of about $2.00 to $2.25 per ticket. Applying these figures to the entire ticketing market as a whole we believe that we will be able to generate meaningful incremental profit for our new ticketing business.

On the next Slide moving on to the secondary market. This is a market that has been much hyped over the last few years but we have not really been able to be a part of it. The title of this Slide is Secondary Market and Yield Management because we view these opportunities together. Right now we do very little, if anything, to dynamically price the seats in our venues. We for the most part three or so price tiers and we know from our customer research that that is not efficient. Stub Hub recently put out a list of the prices that they were able to achieve from their top sellers and if you compare the ticket prices that they got on those shows to average ticket prices reported by PollStar the secondary market was able to achieve more than two times the face value of these tickets. That is value that we believe should be going to the artist and the tour promoter.

Going forward we believe that we can participate in this market by not only better pricing our primary tickets but by also participating in the secondary market and the fee stream that comes along with it. In addition dynamic pricing may be helpful in allowing us to sell inventory that previously went unsold helping us better set the price at the intersection of supply and demand. Cleary, we will share these incremental profits with our artist clients but we believe that by entering the market we make the pie bigger for the artist and for ourselves. We estimate that the concert portion of the North American secondary market is around $500 million dollars and if you assume those tickets were sold at 100% premium to face that is $250 million of incremental revenue opportunity from better primary pricing. Of course, Live Nation shows are only a portion of this market. On the fee side if the average service fee is 15 to 25% as is custom there is $75 to $125 million in fee opportunity.

On Slide 20 - There are a number of additional ancillary opportunities that we can participate in that we currently do not today and one of the biggest of those is the sponsorship market. Right now we make very little from directly selling ticketing related sponsorships and based on conversations that we are engaged in at the moment we know this number has enormous growth potential. Now that we will have control of our own ticket inventory the sponsorship opportunities are extensive from distributing tickets exclusively at retail sponsor locations or sponsor websites to product tie-ins and contest with tickets. Once we have built a relationship with the fan through their ticket purchase we have the opportunity to provide additional value through any number of incremental products from fan club memberships, merchandise, music, travel and dining packages, parking, food and beverage vouchers, gift cards and more. All of these sales will be incremental to our projection.

I am going to turn it over now to Bryan Perez, our CEO of Global Digital to talk a little bit about execution.

Bryan Perez

Thanks Nathan. Switching gears we want to spend a few minutes explaining to you how we plan to role out ticketing in the US and Canada. The bottom line is that we are confident in our ability to execute selling tickets because it is our core business. It is what we do everyday. Hundreds of people in our company are tasked with doing it and they’re well equipped to handle this role out. In addition, having an expert partner like CTS with a superior software platform facilitates that even further. I personally lead the global digital team and have a background in ticketing to the time I have spent with Madison Square Garden and South West Sports group and then working with Major League Baseball Advanced Media on ticketing related initiatives and it isn’t for the last 2 and a half years I have been running Live Nation tickets and have rolled out our highly successful www.LiveNation.com platform.

Nathan will be responsible for the core ticketing execution and the strategy on the day-to-day basis and it goes to leverage his background as the former CEO of Music Today and merchandise fulfillment and ticketing business as he mentioned earlier. JoeMana is our CIO and is responsible for the technology implementation and integration. Joe came to us from www.Tickets.com where he was CTO and responsible for integrating over 11 different ticketing platforms. Hehas an extensive background in ticketing technology and operations and he’s already got a team of experts in the field. Obviously, CTS itself is a core component to the roll out. They are fully committed to help us launch by the year end and provide dedicated full time programmers to address our needs, training for our team, ongoing support; the full package there. Our teams have been preparing for this for months together already. The good news is that our incentives arein line. For every ticket that we sell they make money.

Moving on to Slide 24 - As a concert company we already have extensive, as I mentioned earlier, extensive North American ticketing network in place. We have 88 owned and operated venues which can serve as places to purchase tickets. We have a 500,000 square foot fulfillment center and call center infrastructure that handles customer service and sales for millions of orders a day located in Crozet, Virginia and that is going to serve as a base for many of our back room ticketing operations. Then again, most importantly we have over 100 dedicated full-time employees and 400 part-time box office employees that so nothing but eat sleep and breath ticketing every single day.

On Slide 25 - We talk about really the front door our new ticketing business is going to be helped by our already strong online presence. As we have mentioned in numerous presentations we already have the number two event website in North America and that significant traffic for the limited amount of exclusive inventory that we currently have. We expect to ramp up our online presence dramatically as our ticket sales increase and all those visitors come to www.LiveNation.com to purchase the ticket as opposed to other entities website. We are going to continue to provide fans with a fun easy to use, highly utility oriented place to find concert tickets and other artists products. I am going to turn it back over to Nathan and he can talk about specifics of the execution plan.

Nathan Hubbard

Over the next 12 months we will continue to execute on our plan. Obviously, we are already well down the path on this plan. Some of the key steps will include hiring additional personal which will ramp over the course of 2008. Many of these candidates have already been identified and many already hired. We will work with CTS to localize their software for unique US needs and develop any specific special applications for our use. We are expanding our data center, installing the ticketing software and integrating it with our internal systems. We will outfit all of our venues with new computers, printers, high speed internet and wireless access. We will train our call center personnel. We expect to use a combination of internal and external call center resource. Discussions that we are having with external call centers are already well under way. We will scale our ticketing fulfillment operation. These will be based at the Music Today facility in Crozet, Virginia. Music Today as we discussed already fulfills annually over 2 million tickets and a 1.5 million orders.

On Slide 27 - on distribution in North America we are going to empower www.LiveNation.com with exclusive inventory and expand on the progress you have seen us make over the last year as an e-commerce site. Approximately 60% of our tickets are already online and we have deep relationships with these customers already. For every ticket that we sold in 2007 we had 3.2 unique visitors to our website. Again, that is with little or any exclusive ticketing inventory on our site. We spend about $150 million each year marketing our shows and directing fans to buy tickets. Obviously, going forward we will be directing them to www.LiveNation.com or box office or other distribution partners. Directing email marketing is one of our core competencies today during 2007 we sent over 650 millions emails in the US to our fan database alone. For tickets not sold via the internet but sold via outlets and phone we plan to replace our existing distribution points with our own retail partners and these conversations are already well under way. In addition, as we discussed when we utilize a combination of in house and third party call centers to meet the telephone sales and service needs. We are very confident that the combination of our existing team and CTS expertise will allow us to execute extremely effectively in the coming year.

On the international side on Slide 28 CTS Eventim will provide us with a turn key ticketing solution and as Klaus mentioned they are committed to establish satisfactory distribution networks in each market which is a critical component of the European ticketing. We have the utmost confidence in Europe’s largest ticketing provider as CTS already has a presence in 17 markets and they are experts in rolling out new markets for clients.

I am going to turn the call back over to Michael to provide some closing remarks and then we will open the call up for questions.

Michael Rapino

As you can tell we are excited about the potential of our new ticketing business and believe that we will create tremendous value for our shareholders and fans. We will now open it up for questions.

Question-and-Answer Session

Operator

(Operator instructions) Our first question comes from David Kestenbaum of Morgan Joseph.

David Kestenbaum – Morgan Joseph & Co., Inc.

Can you give us some kind of idea what the per ticket fee that you are going to be charged by your vendor is? Some kind of color on that and will it be in Dollars or Euros? Can you start with that and then can you talk about your retail strategies? Because I don’t think you got into much as far as distributing the tickets.

Michael Rapino

On the service fee we expect at this point to continue to be market price and competitive with other ticketing operations out there so we don’t see any dramatic increase or decrease in that strategy to date. We obviously work with the artist directly so we have a new way of thinking about the service fees since we’ll look to wrap it into one price and have more input from the artist. We don’t consider pricing to be a competitive proposition that we’ll lead with whether it is through less or more of the price.

Nathan Hubbard

I think the second part of your question was about our retail strategy and I think you will see us in the coming months roll out our consumer model as we get closer to launch. We certainly believe that the content we have is extremely attractive to a variety of retail distribution partnerships and that we can bring some unique things like exclusivity to some of those partners. So as we get closer down the road in the year you will see us roll that out.

Michael Rapino

But David as it relates to the fee that we are paying CTS, for competitive reasons we are not really discussing that right now so we have tried to give you some kind of net bottom line guidance in lieu of that.

Operator

Our next question comes from Mark Wienkas from Goldman Sachs.

Mark Wienkas – The Goldman Sachs Group, Inc.

The question on pricing is just what happens in general. The general concert industry pricing trends and then the implications or impact of Live Nation controlling the ticketing domestically at least and all the pricing with respect to the transition toward dynamic pricing what do you think happens to [inaudible] as you move from the three tier pricing model to more dynamic pricing?

Michael Rapino

We believe that is the great opportunity of the industry. The very unsophisticated model of the industry to date is very clear on why Stub Hubs and secondary markets have exploded. In an efficient market in any other industry in the world you would not be having this type of action happening where people are making more money selling your product day two than they are at the retail strategy. We know on eBay that we would be one of the very few items out of there entire roster where our product is sold the next day for a higher value than it was at retail. Most of the real world would figure out how to adjust there retail strategy and dynamic price to capture that and not have an outside participant participate in the upside. So, now it is just part of controlling the inventory which we always have controlled we just have not had a motivated competency inside to think about the retail strategy for the pricing. We now believe that dynamic pricing will help drive the overall revenue up for us and our profit up for us as we get to participate in the secondary market or as most people believe over time the secondary and the primary merge and we become a much more efficient ticket selling company as in the airlines or hotel rooms or other models that have assets that are depreciable at the end of the night. We now start thinking about our inventory in those terms, having all the levers to adjust daily, hourly now we really become somebody that is driving our inventory based on consumer instant information and provide opportunity to price the product and sell through every ticket to the last minute of the show.

Mark Wienkas – The Goldman Sachs Group, Inc.

So recently a lot of states have changed there ticketing laws which limit the restrictions on reselling so I guess with those changes you are contemplating all of that. And, then I guess what is the reason? Why would the customer that would today choose to go and sell there ticket on Stub Hub choose to instead go to Live Nation? Can you force that transaction or no?

Nathan Hubbard

I think it is largely about efficiency for them. Because we have the primary ticketing system we take the delivery mechanism out of the equation and put it in the hands of the consumer, we can cancel a bar code and reissue it immediately. Not only do we kind of guarantee the official nature of the ticket because we see this ticket coming both in and then reissuing it. We make that immediacy of, “I paid for it and it is in my hand,” now available for the customer.

Mark Wienkas – The Goldman Sachs Group, Inc.

The fees are generally consistent?

Michael Rapino

Yes.

Mark Wienkas – The Goldman Sachs Group, Inc.

Sorry, one last follow-up. On Slide 17 you talked about the incremental initial hit to EBITDA in 2008 and then the bump in 2009. Is that to read the bump in 2009 at $15 million or $30 million? This looks to the baseline forecast such that if 2008 core EBITDA were, lets pick a number, index it at 100 that it would be instead 85 and then the next year the bump of 15 wouldn’t just take it to 100 it would be 115. That is actually a $30 million dollar incremental change.

[Leanne Markay]

The core numbers, this is based on just our 2006 numbers as a core so just applying that and saying.

Mark Wienkas – The Goldman Sachs Group, Inc.

Applying the 2006 base to each one of those?

[Leanne Markay]

Correct. Exactly.

Operator

Our next question comes from John Blackledge of J.P. Morgan.

John Blackledge – J.P. Morgan Securities, Inc.

Just wondering the $25 million in incremental EBITDA is fully bloated when you have all of your ticketing, he Ticketmaster stuff is over with. And then looking at he incremental opportunity of that other $25 million is the market venues, is that the biggest part of it and can you start to negotiate or can you of the 15% of the Ticketmaster tickets that come up on an annual basis can we start to see some impact in 2009? And then just wondering what the annual maintenance cap ex is going to be?

Nathan Hubbard

Let me answer your question about some of the ancillary. For us I think the largest components are sponsorship. Certainly the third party opportunity we’ll look at as being large. We do think there is opportunity in 2009 and as we said today we are working with a number of third party clients through our existing Music Today business, we are already in discussions with other third party clients. So that is a very real and present opportunity for us.

[Leanne Markay]

You can see at the bottom of Slide, John that we expect, there $30 million of incremental initial cap ex of hardware, a lot of hardware, mostly servers, computers and then $3 million in the years that we don’t have to replace that hardware or software. So you’ll see reinvestment cycle over time as we have to upgrade those platforms.

Operator

Our next question comes from Jeffrey Shelton of Natixis

Jeffrey Shelton – Natixis Bleichroeder

My first question is for Klaus if he is still on the line. I was curious as to what he felt the biggest challenges in importing the ticketing platform to work with Live Nation are?

Klaus-Peter Schulenburg

We are used to set ups new ticketing platforms in countries, for example we change our complete ticketing platform in Germany from 1999 to 2000 and we are very experienced in this. There was not one day where ticket sales were stopping and we have almost one year to set up everything and I don’t foresee any major problems.

Jeffrey Shelton – Natixis Bleichroeder

Will you have a dedicated team supporting the platform.?

Klaus-Peter Schulenburg

Absolutely. We have already started to customize the platform for US needs and our software was sort of beneficial because our software is multi lingual multi currency and as a user of our software you can easily set up your own language like English, German, Spanish, French or whatever.

Jeffrey Shelton – Natixis Bleichroeder

Second Michael, the big argument with Ticketmaster was over direct control over the customer obviously, you will have that now. Can you talk a little bit about what incremental revenue and EBITDA you’ve seen from your limited efforts to date as to when you actually control the customer? And am I right in thinking that that $25 million in incremental does not include any of that.

Michael Rapino

Yes you are right. The fundamental strategy over the last year in soliciting a new partner or renewing with Ticketmaster was all about we needed to control our tickets. Now that is a couple of folds not only control the consumer and have that database but just also control the allocation of the ticket which is the second part which is very important meaning, to date we do not have a lot of flexibility to take our tickets and give them to Target or Wal-Mart and let them sell them for a huge sponsorship premium to us. We think that not only the control of the consumer and have a direct interaction is a great marketing efficiency for our core business.

Remember that we spend close to $100 million dollars a year marketing concerts around the world. The market is very efficient. We spend less than 5% online where 70% of our consumers are actually finding about our concerts online. We believe over time we will shift a lot of our print and radio advertising to a much more efficient direct consumer model which will help our core concert business become a much more affective marketing business. It is just simple strategy that if Jimmy Buffet plays every year why wouldn’t we talk to those 300,000 consumers directly versus every year going with a radio and print inefficient campaign to try and get 90% of those consumers back.

So, number one owing the consumer is just really all about understanding the consumer purchase pattern and having a continual dialogue to grow our core margin concert business. Two is sponsorship. Now we can control our tickets and we can decide whether those tickets are sold at www.LiveNation.com or whether they are sold at Verizon. However, we want to use those tickets to find the most efficient way to market and monetize them we can now do. And three, the beautiful outcome out of all that is because we are the largest promoter in the world we happen to be the largest suppliers to venues in the world of content we instantly become a very legitimate number two or three largest ticketing company in the world overnight with an attractive content proposition because we are filling these venues with shows every day of the week. That is the fragmentation and consolidation of the value chain happens we happen to be standing as the largest content supplier in the world with over 10,000 concerts and 1,000 artists with a now a number two or three ticketing platform in the world. We think the real opportunity that we are being very conservative on is how quickly we will grow our third party new business through new venues that have already expressed great interest in being in business with an alternative.

Jeffrey Shelton – Natixis Bleichroeder

On that topic Ticketmaster does lots of sports ticketing do you envision competing on that front as a third party provider.

Michael Rapino

We believe that our customer, the venue operator who we have a very long and local relationship with and would probably be their number one business partner in terms of bringing 20,30, 40 concerts a year to there venue and driving there bottom line. When we are in business with them we will be in business with there full ticketing platform.

Operator

Our final question comes from David Joyce of Miller Tabak

David C. Joyce – Miller Tabak & Co., LLC

A couple of questions – one, if you could please describe the kind of hurdles that would be involved in CTS moving into countries in which you currently don’t operate such as in Australia and other parts of Asia? secondly just on accounting housekeeping if you could describe the expenses involved that take you from revenue down to EBITDA and the difference between EBITDA and operating income if that is just the depreciation on the Cap ex.

Nathan Hubbard

I will tackle the first part of your question which was around brining the platform into new markets. I think we are not concerned at all. The key hurdles are just around building the infrastructure and I think CTS has a proven track record of doing extremely well through various countries throughout Europe.

[Leanne Markay]

Then on how the P&L will shape up it will just be revenue and then we will have a variable licensing fee that we pay on a per ticket basis and then we have our own fixed costs operating expenses for developing the ticketing platform. Then in terms of the difference between adjusted OIBIDA and operating income it is just depreciation amortization really and we put a reconciliation on the last Slide of the deck.

Operator

At this time there appear to be no further questions.

Michael Rapino

Thank you everybody.

Operator

Thank you this does conclude today’s teleconference. You may now disconnect from the call.

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