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Live Nation Entertainment (NYSE:LYV)
Q4 2018 Earnings Conference Call
Feb. 28, 2019 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator  

Good day, and welcome to the fourth-quarter and full-year 2018 Live Nation earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to today's speakers. Please go ahead.

Michael Rapino -- President and Chief Executive Officer

Good afternoon, and welcome to our fourth-quarter and full-year 2018 conference call. I will make my comments today excluding the 2017 impacts of the $110 million legal settlement to keep our year-over-year numbers comparable. Live Nation delivered its eighth consecutive year of record results. Revenue was up 11%, AOI up 13% and free cash flow up 8%.

All our divisions, concerts, sponsorship and ticketing, delivered their strongest AOI results in the history of the company. Starting with our concert unit. Fans, more than ever, find the live experience, from club shows to arenas to festivals, a top entertainment choice and the best way to celebrate their favorite artists and show the experience with fans. In the U.S.

alone, over the past 10 years, consumer spend on live experiences has grown by $5 billion per year. We believe this ongoing trend will structurally continue to drive increased demand for concerts globally. As a result of the strong demand growth in 2018, we delivered double-digit attendance growth across our arenas, amphitheaters and theaters and clubs, continuing to grow our global market share, adding nearly seven million fans globally for a total of 93 million fans, driving concert revenue up 11% and AOI up 22%. Across all of the artists we work with, we invested over $6 billion to promote 35,000 shows in 40 countries, with Live Nation by far the largest financial supporter of artists in music.

In addition to growing our show count and attendance, our pricing and on-site initiatives also continued to grow our AOI. Average ticket prices for our amphitheater and arena shows increased by 13% in 2018 as front-of the-house pricing was up over 20%. Overall, across all our shows, price increases delivered over $350 million to artists who effectively captured more of the value from the shows. Once at the show, average per fan spend grew as well.

At our amphitheaters, spend grew by $3 to $27 per head as we added more high-end products, improved the quality of our food and beverage and increased the revenue we earn from parking and service fees. The strength of our business is continuing in 2019 with ticket sales for shows this year up double digits through mid-February, along with similar increases in confirmed amphitheater, arena and stadium show count. With this growth and our plans to further monetize our fan relationship, I expect this to translate to continued strong growth in concerts AOI in 2019. In our high-end sponsorship business, we grew both revenue and AOI by 13% in 2018.

Our top strategic sponsors have been a key driver of this growth with 75 sponsors collectively spending over $350 million to reach our fans, up 11% over 2017. Sponsorship at our festivals grew 13%. This growth was driven by new deals with brands including Heineken, Barclays, State Farm and Frito-Lay. All of this reinforces the power of our platform of 93 million fans and the continued shift by brands to invest in reaching fans during live experiences.

Research from our Power of Live white paper indicates that over 90% of fans believe that brands can enhance the live experience and over 60% of fans believe they are more likely to connect with brands at concerts. This reinforces that our shows offer brands a truly unique opportunity to connect with fans. With over 70% of budgeted sponsorship net revenue for the year already committed, pacing double digits ahead of last year this time, we are confident we will again deliver double-digit AOI growth for 2019. Ticketmaster continued growing its leadership position in ticketing in 2018 with fee-bearing GTV up 14% and total platform GTV up $33 billion.

This drove our 14% increase in ticketing revenue and AOI of 7%. Our top priority at Ticketmaster in 2018 was deploying our TM Presence product, which we see as our key for effectively unlocking the value of our customer relationship across ticketing, concerts and sponsorship business. By the end of 2018, we deployed Presence in over 200 venues, operating 20,000 events for 40 million fans, approximately half of whom used our digital tickets. We see our deployment in 2019 further accelerating and we are expecting to have Presence in over 500 venues by the end of the year with 125 million fans attending events at these buildings.

At that point, we will have covered 75% of major sports and Live Nation buildings, making Ticketmaster by far the global leader in digital tickets. At the same time, we continued to build our marketplace with the fourth quarter being our highest fee-bearing GTV quarter ever, selling over 60 million fee-bearing tickets in a quarter for the first time and delivering over $5 billion in fee-bearing GTV. Overall in 2018, Ticketmaster managed over 400,000 events, delivering almost 500 million tickets in 28 countries. We continue adding new clients to our marketplace who collectively added over 10 million new tickets in 2018.

I believe we have a tremendous opportunity for growth on a global basis, particularly in the 13 markets where we promote concerts but don't yet have a substantial ticketing operation. In 2018, we furthered our international expansion, establishing ticketing operations in Italy, ramping up our German operations and laying the groundwork for our expansion in Latin America. Ticketmaster continues to exceed expectations, both operationally and in its leadership position in digital ticketing, along with its ability to extend that leadership position globally and deliver continued profitable growth. In summary, 2018 was another strong year for Live Nation, building our global concert business and thereby driving growth in our high-margin venue, sponsorship and ticketing businesses.

We continue to see the tremendous power of live events with strong consumer demand and a robust supply of new and established artists hitting the road from clubs to stadium. Live is truly a unique entertainment form. It cannot be duplicated and creates lifetime memories that fans are craving more than ever in this experience economy. We believe the live business will continue to have strong growth for years to come as fans globally drive demand, artists are touring more and more and on-site spending, sponsorship and ticketing all benefit from the concerts flywheel.

In 2019, I expect us to further grow our global concert position while enhancing on-site hospitality and capturing more pricing opportunities. In sponsorship, we will continue to drive double-digit growth as more brands look for that direct connection with music fans. And as ticketing continues to transform to a truly digital ecosystem, it will benefit from continued growth in concert ticket sales and further expansion of our global footprint. We believe that the combination of macro trends and our demonstrated ability to execute are strong indicators of our ability to continue to grow the business for many years to come.

And with that, I will turn the call over to Joe to take you through additional details.

Joe Berchtold -- Chief Operating Officer

Thanks, Michael. Looking at our business segments, first, concerts. As Michael said, in 2018, we grew attendance by 8% to a record 93 million fans, promoting 19 of the top 25 global tours. As we have talked about over the past year, 2018 was a very strong year for arenas, amphitheaters and theaters and clubs, with all three building types up double digits in attendance.

Globally, we also continued growing our festival portfolio, adding seven festivals to give us a global portfolio of 104 festivals in 14 countries. As a result, we increased festival attendance by 6% to nearly nine million fans and now have 29 festivals that each attracted over 100,000 fans last year. Looking geographically, North America was the primary driver of our fan growth while internationally, the cyclically lower stadium attendance offset much of their strong arena and festival attendance growth. Looking specifically at the fourth quarter, while attendance and show count were up, our AOI was lower, heavily driven by a $15 million year-on-year increase in advertising expense related to 2019 shows.

This increased advertising spend is representative of a continued shift earlier on sales and is also one of the reasons we are optimistic about 2019 concert activity. For 2019, as Michael said, we are already seeing strong growth in ticket sales for shows this year. Sales are particularly strong in our international markets, which we expect to continue through the year, with North America also expected to keep growing. We see growth across all building types in 2019 with arenas globally, amphitheaters in North America and stadiums internationally all contributing to the increase.

Along with our fan growth, we will also be continuing our focus on pricing optimization and on site monetization in 2019. On pricing, with over 2,000 arena and amphitheater shows already on sale, we are seeing high-single-digit increases in front-of-house pricing, which I expect to continue or expand throughout the year. And while our on-site monetization won't start until the summer season, it remains a priority to continue our growth for the past few years with teams already working on specific amphitheater-by-amphitheater plans. Turning to our sponsorship and advertising business.

In 2018, we again delivered double-digit AOI growth, up 13% this year. This performance was reflective of strength across the board. North America and international sponsorship businesses were both up double digits and both sponsorship and online advertising also grew double digits. For the fourth quarter, revenue was up 20% and AOI was up 16%.

We saw particularly strong growth at our festivals in the fourth quarter, including Austin City Limits and Voodoo, while also launching a number of major programs for sponsors, including Google, Sony, Pepsi, Uber and T-Mobile. As we get into 2019, we expect to again deliver double-digit AOI growth for the year. As Michael indicated, we are pacing double digits ahead of this time last year and based on our current discussions with brands, we are expecting strong growth in our base of strategic sponsors as well as our on-site sponsorship, particularly at festivals. Finally, Ticketmaster.

Global GTV was up 7% for the quarter and up 8% for the full year, driven by fee-bearing GTV, which was up 12% and 14% for the quarter and year, respectively. Primary GTV, which accounts for almost 90% of overall fee-bearing GTV, was up 12% for the quarter and 14% for the full year. Secondary GTV was up 6% for the quarter and up 16% for the full year as we continue to take share in the North America secondary market. Throughout 2018, we continued to improve our mobile and app experiences, which is critical for our digital strategy.

We grew our app installed base by 40% year over year, giving us much greater reach for direct fan relationships. And sales of tickets via mobile devices continued to grow rapidly, up 35% for the year and accounting for over 40% of overall ticket sales. For the fourth quarter, Ticketmaster AOI was down slightly, impacted by onetime costs associated with the third-party vendor data breach that affected our marketplace in certain international markets. Much of these costs were in the fourth quarter and for the full year, these one-time costs totaled approximately $15 million.

To pre-empt the question on margins, obviously these data breach costs had a material impact on our 2018 margins. The majority of the remaining margin impact comes from two other factors. First, as Michael indicated, we are continuing to invest in expanding Ticketmaster's global footprint and we expect that any start-up market will have below average margins for a period of time as it scales. These markets are generally rapidly AOI-positive given our ability to get an allocation of Live Nation concert tickets, but initially at below average margins.

Secondly, as we continue to get more effective at data-driven marketing, we are spending more to grow our GTV. To be clear, the GTVs from free visits continued growing in 2018. The paid marketing-driven GTV grew even faster. As a result, margins were impacted despite the attractive profitability of the incremental GTV generated via this paid marketing.

So in summary, 2018 was a great year across all of our businesses and in 2019, we expect to continue growing all of the businesses. From a stadium standpoint, we see our growth continuing to be delivered primarily in the second and third quarters as most of our concert investments will be playing out in those quarters. The first and fourth quarters each account for less than 10% of our annual AOI, meaning that they will also have to absorb increased fixed costs associated with our overall growth against seasonally lower activity. On FX, we ended up with a negligible impact on AOI and revenue for 2018.

And at this point, we see very little impact on 2019. I will now turn the call over to Kathy to go through more on our financial results.

Kathy Willard -- Chief Financial Officer

Thanks, Joe, and good afternoon, everyone. I will start with our key highlights for the fourth quarter. Revenue increased by 12% to $2.6 billion. AOI was $69 million compared to $87 million in 2017 after adding back a $110 million legal accrual recorded in 2017.

As of December 31, our deferred revenue related to future shows was $1.1 billion, up 35% from the $816 million last year. Concerts, with a 12% increase, contributed the majority of the revenue growth in the quarter from increased arena and theater and club activity. Sponsorship and advertising revenue was up 20% from higher sponsor and online activity in North America. And ticketing revenue increased 15% from higher primary ticket volume.

Fourth-quarter AOI was lower in concerts due to the $15 million increase in advertising expense for 2019 shows that Joe mentioned. Sponsorships and advertising delivered 16% growth in AOI with higher online advertising in North America and growth in sponsorships internationally. Our operating loss was $90 million in the quarter, essentially flat to last year after adjusting for the legal accrual. The net loss for the quarter was $148 million compared to a loss of $137 million in the prior year before the legal accrual and a $56 million tax benefit related to tax reform changes in 2017.

For the 2018 full year, revenue was $10.8 billion, an 11% increase over 2017. AOI was $829 million for the full year, up 13% over our 2017 AOI of $735 million before the legal accrual. Free cash flow adjusted was $481 million, up 8% over last year without the legal accrual or 58% of AOI for the year. All our segments delivered double digit growth in revenue for 2018.

The majority of the increase was driven by concerts, up 11% from increased show count and attendance across arenas, amphitheaters and theaters and clubs. Sponsorship and advertising revenue was up 13% from growth in online advertising and sponsorship programs globally. And ticketing revenue increased by 14% from higher primary ticket volume, driven by concerts, along with increased secondary sales. Concerts AOI was up 22% as a result of more events and fans across arenas, amphitheaters, festivals and theaters and club and higher ancillary revenue per band in our amphitheaters.

Sponsorship and advertising AOI grew by 13%, in line with this higher revenue. And ticketing AOI grew 7% without the 2017 legal accrual, delivering growth in both primary and secondary ticket sales, although impacted by the cyber investigation costs incurred this year that Joe noted. Operating income was $273 million, up 35% over last year before the legal accrual, driven by our strong AOI growth. Our net income for the year was $60 million as compared to $48 million in 2017 before the legal accrual and the 2017 tax reform-related tax benefit.

We recorded $78 million of accretion at redeemable noncontrolling interests in 2018. We currently expect this accretion to be approximately $45 million for 2019, which will be consistently spread across the quarters. We expect that amortization of non-recoupable ticketing contract advances in 2019 will be in line with the last few years of expense. Turning to our balance sheet, as of December 31, we had total cash of $2.4 billion, including $859 million in ticketing client cash and $903 million in net concert event-related cash, leaving a free cash balance of $610 million.

Net cash provided by operating activities was $942 million as compared to $624 million last year, with the increase driven by our higher event-related deferred revenue. For the full year, total capital expenditures were $251 million, roughly half of which was spent on revenue-generating items. For 2019, we currently expect our total capital expenditures to be approximately $300 million with a similar split to this year for revenue-generating expenditures. Our total net debt as of December 2018 was $2.8 billion with a weighted average cost of 4.2%.

Thank you for joining us today, and we will now open the call for questions. 

Questions and Answers:

Operator  

[Operator instructions] We'll go first to Amy Yong with Macquarie.

Amy Yong -- Macquarie Research -- Analyst

Good afternoon. So I guess, two questions, one for Joe first. When you talk about ticketing and expanding into international markets, how quickly do you think the margins on those fronts can match that on the U.S. side? And I guess, Michael, a lot of us remember from the Liberty Analyst Day, Live Nation hitting 125 million attendees.

What does that assume in terms of M&A and organic growth?

Joe Berchtold -- Chief Operating Officer

Amy, thanks, Joe here. With regards to the international market, so the first thing to remember on the international market is currently, the fee structure is fairly different on average than the U.S. Your typical service fee in the U.S. is around 20%.

Your typical service fee internationally is around 10%. So we talked in the past that one of the factors that we have going on is as we do grow our international markets, again, profitable markets adding to our AOI cash generation, they're structurally today at a lower margin on average than the U.S. market. And while we see some level of convergence over time, don't expect that to shift quickly.

Each of the markets, in terms of its maturation, hard to give you a one size fits all, but as I said, they do become AOI-positive pretty quickly with our concert allocations and then we grow it from there.

Michael Rapino -- President and Chief Executive Officer

And Amy, it's Michael. I'll jump in on TM. The one thing to think about also on ticketing outside of North America, it's probably let's call it 15 years behind. The U.S.

model was so advanced on a closed platform and just increasing service fees every $1 for 20 years. International, we see great growth in that some of those markets may only have $2 service fees today, but they all have great pricing potential for the next 10 years. So a lot of these markets today are a lower service fee because they literally are still distributing out of the local bank. They may have a retail strategy converting to online, but we also see international has a great opportunity, that is where we actually have great pricing power.

And every year, we're seeing the service fee going up to reflect kind of closer to the U.S. model over time. So great profit pool to grow internationally outside of U.S., Canada.

Joe Berchtold -- Chief Operating Officer

And Amy, let me start at your second question and Michael can chip in, the question of growing to 125 million fans from our 93 million fans, M&A versus organic. The complexity here, again, with us is we will often use M&A to enter a market. Buy a local, it could be relatively small for both promoters, but the one who is well-established in that market. And then we turn our engine of 80 tours that we're buying onto that area.

So whether we're talking about a local market here in North America or a promoter down in Argentina, we rapidly grow organically off of that initial platform that we're purchasing. So we end up with 70%, 80% organic growth as a result of that. But we do use -- absolutely use M&A for that initial entry point.

Michael Rapino -- President and Chief Executive Officer

Yes. I think, Amy, he took the words out. I mean, we historically have had a fairly balanced model well over -- majority of our business has to be organic, acquiring more tours globally, entering markets on our own and growing the overall business by selling more tickets to the current tour. And then we selectively, on bolt-on, still look at the global opportunity of a fragmented industry.

I think we used to have 30% global market share. So we'll continue to bolt-on, there's a few chunkier ones we'd look to acquire that could excel that, and organic. And those three combinations are how we doubled it over the last five, six years and we think we'll continue to execute both runway on bolt-on and organic.

Operator  

And we'll go next to Jason Bazinet with Citi.

Jason Bazinet -- Citi -- Analyst

I had a quick question on the secondary ticketing market. You mentioned you're gaining share. Do you mind just giving us just a quick snapshot of sort of how big do you think that market is and who the major players are and how you think you're being successful taking share so far?

Joe Berchtold -- Chief Operating Officer

Yes. So we gave some pretty specific numbers at our last Liberty presentation, so I'm going to try to remember all of those numbers. So I think what we did say is the secondary industry, over the past several years, has been growing at a pretty good clip, frankly, faster than we have been growing our ticket prices. And so we think there continues to be over $1 billion of price arbitrage that exists in our concert tickets alone.

If you look at the marketplace, we obviously have a two-headed strategy. One strategy is to create a compelling product on Ticketmaster that offers both the primary and secondary tickets. The other strategy, which is at least as important to us, is to continue to get more effective at that initial primary ticket pricing and transfer as much of the economics as possible into the artist's pocket, which continues to attract them to tour more and be out there generating more shows, more fans for our overall flywheel strategy. So going forward, I think it would be our expectation that we would see less growth certainly in the secondary market as we continue to focus on that primary pricing.

I think that the competitors in this space are pretty well known. Obviously, StubHub, they're better in the United States. But for us, it's really a matter of how do we continue to best serve the artists and the fans with the right products.

Operator  

And we'll go next to Brandon Ross with BTIG.

Brandon Ross -- BTIG -- Analyst

Maybe following up on Amy a little bit. You did a number of international acquisitions since Q4 started, I think nine. And you mentioned strength next year being driven by international. Are we now at a point where you see international becoming the real growth engine of the company? And maybe you could talk about what markets you're investing in internationally and why? And then I have a follow-up.

Michael Rapino -- President and Chief Executive Officer

I'll start and Joe can fill in some pieces. I don't think we've done anything that we haven't been executing for a while. We still believe that the U.S., Canadian market, let's put those two together, still have growth ahead. We are still underserviced in markets as we've talked before about.

We still have opportunities to build more of our businesses in a lot of the A -- in the A markets. We have low market share in a lot of big markets. So U.S. still has great potential.

We still think sponsorship is a double-digit growth business in America and we think the concert business continues to be on-site, hospitality, real estate expansion, incredible, frothy opportunity in the U.S. So don't want -- it's not an either/either where we continue to execute with great confidence, but we're going to continue to invest in America. But we absolutely have always said that it's a global business. And as we build out the pipe in 40 countries, when we look at all the other cities around the world where we have no market share or low, as we put in the best promoter and a ticketing platform and our global concerts, which then follow usually sponsorship and ticketing, where we have that model down in major cities and when we got those three to four legs of that stool in the land and Cape Town and Rio, we know we can build a $10 million to $20 million business.

So there are a whole bunch of opportunities international where we don't have the four legs. We might have one leg, that's why you see us buy a festival in a major market and a major promoter in a different market. As we fill out the legs, great opportunity organically will happen through our scale. So we'll be doing that for the next five to 10 years.

We'll be talking about 30% market share and lots of opportunity to build international business platform. It's behind America in a lot of the ways. I just mentioned on ticketing. So we see it probably has a higher growth potential from unsophisticated in both sponsorship, ticketing and venue development.

So all three of those, you will see opportunities over the years. Call that the apparatus we want to get built. The consistent demand that we know is Rihanna can sell out anywhere and that's the part that makes our model unique. So continue growing international.

That will be a great story for us for many years to come. We're diverse enough now that for a certain market that's having a good or bad day, we'll be OK. We have enough risk aversion. And the U.S.

will continue to have a deeper bench to grow on also.

Brandon Ross -- BTIG -- Analyst

Great. And then I was wondering if you could take us through your current real estate strategy. You have per caps up significantly over the past few years and the company has gotten bigger with more balance sheet capacity. With that in mind, do you expect to accelerate the growth of O&O venues over the coming years?

Michael Rapino -- President and Chief Executive Officer

Yes. I think the -- I'll explain it slightly different than -- I really don't recall all five of your questions, Brandon. Is that the...

Joe Berchtold -- Chief Operating Officer

No, you only get two out of six.

Michael Rapino -- President and Chief Executive Officer

All right. I just read it on Twitter.

Brandon Ross -- BTIG -- Analyst

Just some housekeeping, if you like.

Michael Rapino -- President and Chief Executive Officer

No, no, that's fine. No, it's a valid point. We absolutely see a huge opportunity. If you look at our core business model, I'm sure people are sick of the phrase -- and I do appreciate the book, you and Rich, of let me patent flywheel long before any other businesses.

You just nailed that one. So yes, we have a big flywheel of concerts and we're going to wake up every year finding new and adjacent businesses that we can monetize because of the flywheel. No one in the world has 30,000 shows and almost 100 million people walking in the door. So that's why we believe in the U.S.

and onward we'll have -- it's endless growth opportunities. One of them happens to be the venue, the real estate. For many years, we were happy putting our content in someone else's venue and getting a ticket fee and selling tickets at the door. A lot of times, as we've said in our different analyst meetings, when the content ends up in my amphitheater or my festival or my theater and club, we even make more money because we're now counting more revenue streams.

And we look now at the real estate market in America, the advantage we have is there's way more real estate than there are artists. And if you are a developer right now with a shopping mall to a development site, you no longer are probably asking the movie theater to be your tenant. You're probably coming to Live Nation saying, "I'd love you to build a 2,000-seat, a 4,000-seat, a 6,000-seat. I'd love you to be part of our development because that's the vibrant part of the experience we're creating." So what we're doing now is when those meetings happen is say we're not happy just to ticket for your building.

We want have equity value in that position and operate and run it to maximize all of the value that can be created from our $6 billion a year. So instead of maybe paying somebody millions a year to lease their building to run it while we fill it, there are times wherein we work at those strategies in real estate where our content is the entire reason the building is being financed or the building is growing in value. We should capture not just the content, not just the food and beverage, but the equity value of the real estate holdings over time, too. So we're seeing more and more opportunities where our flywheel is putting us in a position to have some equity ownership and control in some great assets that are completely down the middle – completely down the line of a concert live venue and you will see us explore more of being more -- of leveraging our content.

Brandon Ross -- BTIG -- Analyst

OK. Just for you, I'm going to ask a quick short-term one. "A Star is Born" did quite well at the box. Should we expect this to contribute in 2019 as you recognize downstream revenues from that film?

Michael Rapino -- President and Chief Executive Officer

Well, it will be our first time with movie accounting, so we'll see what all these look like, but I would say, just in general, we are thrilled with this division. I just mentioned it earlier. We have scale. We have artist relationships, great stories to be told.

So we started a new division organically. I think we've done five now. We've probably got 10 to 15 projects in the pipeline of artists telling great live stories or movies or documentaries or festival stories or et cetera. So we really think that division is obviously a much higher margin business than the concert space, but it's a real capital-intense business, but ultimately it's a great marketing platform for our artists, our shows and our Artist Nation division.

So I really think we're not really worried in 2019. It will be a small overall contribution to our agenda and AOI. Over time, we think it's a -- with Artist Nation, we think it's a nice high margin ancillary business to our core mission that will be a positive impact. Ultimately, on its own, we'll make AOI to be positive.

Much like we learned with Artist Nation and others, they also end up feeding mother ship. So Artist Nation's "A Star is Born" is probably the single greatest marketing exercise we could have did for our sponsorship division. If you are in that division, those kinds of things just really send the flare very high and get you in the CMO meeting and other conversations that you haven't been before. So we'll look at the pieces, always in the end of ancillary business.

It gets us one more tour, one more sponsor or one more ticketing contract and makes high margin AOI. It's a triple win.

Operator  

We'll go next to David Karnovsky with JPMorgan.

David Karnovsky -- J.P. Morgan -- Analyst

Just on ticketing, in the release you mentioned growth the driver is concerts sales and expansion of your global footprint. I was wondering if you could provide any commentary on the sports side and how you view that contributing in 2019.

Joe Berchtold -- Chief Operating Officer

Sure. I mean, the sports side is obviously key historical foundation to the ticketing business that, as we've talked, sports is also on probably a more static level. There's not a lot of growth in terms of the number of teams or the number of games played in a season for the major sports. So it's really been the concerts business that has driven the great growth over the past several years of ticketing.

Again, we've given the statistics several times, around 80% of fee-bearing GTV growth coming from the concerts business. So it's critical on the sports side. As they've built incredible arenas, their stadiums, they're looking to continue to fill those buildings every night not just when the games are played. Those provide platforms for the tours, the artists that we work with to continue to put on more shows.

And it's through putting on those more shows that we've been able to grow the business. So it's not the sports directly. It's the sports indirectly that's been the unlocker of a lot of Ticketmaster's growth.

David Karnovsky -- J.P. Morgan -- Analyst

OK. And then just on the leading indicators, I think event deferred revenue is up 35%, though you did mention earlier on sales this year. Just wondering how to think about that number maybe on a like-for-like basis assuming more consistent on-sale periods.

Joe Berchtold -- Chief Operating Officer

I think that's the challenge. You can't assume consistent on-sale because there's no exactness to that. We said that we're up double digits both -- up double digits in terms of concert events and tickets sold through mid-February. So that, to us, is the key leading indicator that we're off to a good start for this year.

Operator  

We'll go next to Drew Borst with Goldman Sachs.

Drew Borst -- Goldman Sachs -- Analyst

I wanted to ask about Ticketmaster Presence and see if you'd be willing to put some parameters around what type of contribution to AOI could come from Presence over 2019 or maybe even what kind of contribution it provided in the fourth quarter as you scaled up that business?

Joe Berchtold -- Chief Operating Officer

Yes. The economics for us of Presence versus other systems, digital tickets versus pay for tickets, is the same economics for us, so it's not going to be a direct impact on the AOI. Ultimately, what it is, is by increasing the volume of data, the quality of data that we have on every fan and on their behavior, the increased ability to reach out and target and interact with those fans while they're on-site because of that digital connection will unlock our sponsorship and the value of those 93 million fans that we have to the brands and will unlock our ability to better market great products and ultimately convert those fans into additional purchases. So it's not directly the Presence rollout itself.

Drew Borst -- Goldman Sachs -- Analyst

OK. And then as a follow-up, I noticed that a recent announcement of SMG, which is a big venue operator, you formed a joint venture with AEG, I'm just wondering if you could just talk about whether what sort of impact that may or may not have on your business. I think if I'm not mistaken, SMG is a Ticketmaster customer right now, but maybe if you just talk about it, if it has any impact and then maybe broader, strategically what it means.

Michael Rapino -- President and Chief Executive Officer

Yes. It will have no impact on our day-to-day business. So we're not chasing the conference center management business. It's a scale venue management business.

That's not what we do. But between the two of them, the buildings that they do have, we have an existing Ticketmaster contract with SMG. We fill their buildings, the ones that they own, Manchester and et cetera. And we received a call the minute that was a public announcement from them to reassure us that us continuing to fill their buildings and ticketing their business is a huge strategic imperative of theirs.

And we've always looked at AEG facilities or SMG as partners. They all need us to put more shows and fill those venues that they're managing and they have all probably experimented elsewhere and ended up realizing Ticketmaster also happens to sell them the most tickets. They're managing those buildings for someone else generally. That someone else doesn't care about competition.

They care about results. So the reason we're the largest supplier to AEG's facility business or SMG or others is because it's good business for both of us. So they've got a business to run. We'll continue to be a good supplier to them.

And in return, I would assume a ticketing partner forward. So no effect from us. We continue to think that we'll grow our business equally well. We've been growing it in both of those companies over the last five years.

Operator  

We'll go next to David Joyce with Evercore ISI.

David Joyce -- Evercore ISI -- Analyst

A question on the venue types and the volume of shows. There was some impact from the fourth quarter on having fewer stadium events. How should we think about it this year in terms of size of venues and what that should do for margins on the concerts side and if you have any visibility on that impact quarterly? And then secondarily on Rock in Rio, just wanted to think about how that will impact you financially this year. I know it bridges two quarters later in the year.

And what are your thoughts on expanding that again as that festival has done in the past?

Joe Berchtold -- Chief Operating Officer

So I'll try to take that three- or four-part venue question, David. So one of the things that we said is that growth this year is expected in amphitheaters in North America and the arenas globally and stadiums internationally. Last year, we grew our amphitheaters in North America. And you saw -- if you want to talk about margin, margin benefiting concerts simply because you have all of those food and beverage and other ancillary per fan revenue streams directly associated with our amphitheater business.

As we talked about, that's the most profitable fan when we can monetize them in all those ways in our own buildings, so that helps the overall margin, if you will. I don't -- because as we've told you many times in the past, we don't obsess on margin. We obsess on growing the AOI. I couldn't tell you the exact margin ramification, certainly not by quarter, but I could tell you that I do expect us to benefit and continue to grow the AOI of the amphitheaters and their continued growth, and that's largely a Q2, Q3 period.

And you will see the same with festivals as we continue to grow our festival business, again, benefiting from those attractive on-site spending, again, Q2, Q3. So a lot of the benefits from the concert growth we'll continue to see fall primarily in those second and third quarters.

David Joyce -- Evercore ISI -- Analyst

And then on the Rock in Rio, how that should impact you this year? And do you have plans yet for how you would be alternating in other markets like Las Vegas or Portugal as it's been done before?

Kathy Willard -- Chief Financial Officer

So on Rock in Rio, I think it was outlined in the 8-K pretty clearly, but we do not consolidate that at this point. So it's equity earnings when the event happens.

Joe Berchtold -- Chief Operating Officer

And then there aren't -- the plans that are out there have been announced. There's the events in Brisbane. No other events have been announced at this point.

Operator  

We'll go next to Ryan Sundby with William Blair.

Ryan Sundby -- William Blair and Company -- Analyst

Michael, you talked about adding more stools to international markets. I guess, in the 13 markets where you promote shows that don't have ticketing operations yet, is there a common kind of barrier that exists that keeps you out of those?

Michael Rapino -- President and Chief Executive Officer

No. It's been resources, time, execution. We have a prioritized list. And with the first three or four years that we bought Ticketmaster, we had 14 platforms.

So a lot of it was just getting all of our back-end enterprise platform rebuilt. So we couldn't move into new markets with a common platform to adjust it for currency and taxes and retail. But we have a robust platform now and we're just rolling out market by market in our prioritized list. It's just people, energy and time to get it done.

No companies exist that would have a big enough market share on a global basis that would inhibit it. They're usually local operators or local ticketing companies. They may have a leadership position, but our content usually lets us come in with a strong position. So you'll see us adding market-by-market and we're building within the markets we're in brick by brick over the next few years.

Ryan Sundby -- William Blair and Company -- Analyst

Got it. That's helpful. And then on Presence, how micro can you go with that? Is the 500 venues and the 75% of major sports by building, is that the big chunk of it? Or are you pushing this down to the club level over the next couple of years? I'm just curious how far you can go with that.

Joe Berchtold -- Chief Operating Officer

Yes, absolutely. We foresee this becoming the standard of our access control entry and how it is we distribute and manage tickets. So the focus is getting the large ones first, which then drives pull to Ticketmaster for the adoption as opposed to being out there trying to push it everywhere, but starting with Live Nation from amphitheaters to clubs and theaters and the major sports teams and then going as wide as possible from there. It's just the same thing as Michael just said.

It's just then a matter of prioritization, execution to get to all of them.

Operator  

And we'll go next to Doug Arthur with Huber Research.

Doug Arthur -- Huber Research -- Analyst

Just to understand the fourth quarter a little bit better, Kathy, you had $15 million step-up in marketing, which you highlighted in the third quarter, and the bulk of the $15 million on the data breach was in the fourth quarter. So is that a fair way to look at it? And then are we done on these or is the marketing going to continue for a while?

Kathy Willard -- Chief Financial Officer

So yes. It's a fair way to look at it on the fourth quarter, but I mean, we market every show, right? So the normal accounting for show accounting is that the advertising expense is expensed when the show happens except at year end that we have to expense anything that's on the balance sheet for future shows. So you're always going to have that effect every fourth quarter just like we have and...

Michael Rapino -- President and Chief Executive Officer

And Doug, that's a good thing, but you want that number to be high, which we don't spend marketing unless we have the show. So the good news is that you look at that number and say then they have a lot of shows that went on sale that will monetize in '19. So it is an accounting that we have to actually true it up at the end of the year.

Kathy Willard -- Chief Financial Officer

And then on the investigation, the cost of investigation continues, so we would expect to have some level of expenses in 2019. We just haven't given you specifics on that.

Joe Berchtold -- Chief Operating Officer

We do expect -- but do expect it to be somewhat less than the $15 million. At this point, in the millions, but it will certainly continue and it won't be material in the scheme of things.

Operator  

[Operator instructions] And we have no further questions at this time. I'll turn the call back to our speakers for any additional or closing remarks.

Michael Rapino -- President and Chief Executive Officer

Thank you, everybody. We'll talk to you soon.

Operator  

[Operator signoff]

Duration: 50 minutes

Call Participants:

Michael Rapino -- President and Chief Executive Officer

Joe Berchtold -- Chief Operating Officer

Kathy Willard -- Chief Financial Officer

Amy Yong -- Macquarie Research -- Analyst

Jason Bazinet -- Citi -- Analyst

Brandon Ross -- BTIG -- Analyst

Michael Rapino -- President and Chief Executive Officer

David Karnovsky -- J.P. Morgan -- Analyst

Drew Borst -- Goldman Sachs -- Analyst

David Joyce -- Evercore ISI -- Analyst

Ryan Sundby -- William Blair and Company -- Analyst

Doug Arthur -- Huber Research -- Analyst

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