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Live Nation Entertainment Inc (NYSE:LYV)
Q3 2019 Earnings Call
Oct 31, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, everyone. My name is Vickie, and I will be your conference facilitator for today. At this time, I would like to welcome everyone to the Live Nation Entertainment Third Quarter 2019 Conference Call. [Operator Instructions]

Before we begin, Live Nation has asked me to remind you that this afternoon's call will contain certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ, including statements related to the Company's anticipated financial performance, business prospects, new developments and similar matters.

Please refer to Live Nation's SEC filings, including the risk factors and cautionary statements included in the Company's most recent filings on forms 10-K, 10-Q and 8-K, for a description of risks and uncertainties that could impact the actual results. Live Nation will also refer to some non-GAAP measures on this call. In accordance with SEC Regulation G, Live Nation has provided a full reconciliation to the most comparable GAAP measures in their earnings release. The release reconciliation and other financial or statistical information to be discussed on this call can be found under the Financial Information section on Live Nation's website at investors.livenationentertainment.com.

It is now my pleasure to turn the conference over to Michael Rapino, President and Chief Executive Officer of Live Nation Entertainment.

Michael Rapino -- President and Chief Executive Officer

Good afternoon and welcome to our third quarter 2019 conference call. Live Nation delivered its highest AOI quarter ever, as we continue to scale our business globally and build on favorable supply/demand dynamics for live music. AOI grew 11% in the quarter and 13% year-to-date, outperforming a record Q3 last year and demonstrating the strength of our business model in today's experience-based economy. And in response to recent questions about consumer demand, we are seeing fan spending as strong as ever. In September, our amphitheater and arena shows actually closed stronger than shows in September of last year. And our fan spending on-site also showed ongoing growth.

At the center of our flywheel, the demand for live events continues to grow, as we have sold 92 million tickets through mid-October, up 6% or 5 million tickets compared to this time last year, and we are on track to nearly 100 million fans attend our show this year. And we have translated the fan growth into strong AOI gains on on-site spending, sponsorship and ticketing. As a result, as we wrap up a successful 2019, we are confident that we will deliver double-digit AOI growth for the year.

Looking at our Concerts business, year-to-date, we have had 73 million fans attend over 26,000 concerts, delivering $333 million in AOI, which is up 17% from last year. Our international business has been particularly robust this year, delivering much of the fan growth with a strong year for stadiums and theaters, while in the US, our arena and theater activity was also up. As we have grown our show volume and the breadth of artists we work with, we've also been more effective in pricing tickets closer to the market value, particularly with the platinum pricing tool. So far this year, we have had over 3,000 arena and amphitheater shows use platinum tickets, with a 54% increase in the number of platinum tickets sold per show.

Looking at our venue operations, we have furthered our focus on the fan experience, improving our hospitality across the board from our food and beverage offering to our lawn experience to VIP options. As a result, we have increased our average revenue per fan by $2.50 in our amphitheaters to over $29, while also increasing fan spending at festivals theaters and clubs.

As we continue building our expertise on on-site execution, we are finding more opportunities to build new venues or takeover operations of existing venues. And since the start of this year, we have added 36 venues to our portfolio, ranging from the Brooklyn Bowls in New York and Las Vegas to the Danforth Music Hall in Toronto and Sportpaleis in Belgium. As a result, we are confident in the success of our Concert flywheel for 2019. We will promote more shows, reach more fans, price more effectively and provide a better fan experience at our venues, which will then drive double-digit AOI growth for the business year.

Turning to Sponsorship, with the first days of Rock in Rio and a strong growth across our entire sponsorship platform, our high margin Sponsorship business delivered 18% AOI growth for the quarter and 13% year-to-date. We are the global leader in music sponsorship, delivering the unique value proposition of nearly 100 million fans on-site for brands looking to make a more direct connection with their customers.

As part of this, we continue to innovate new ways for brands to interact with fans on-site at our venues and festivals, with new programs such as the Bud Light branded photo installations at our amphitheaters or the Revlon roller rink at Lollapalooza. As a result, the sponsorship revenue has grown 11% year to date at our venues, while festival sponsorship has grown 31% year-to-date.

More broadly, growth is driven by our strategic sponsors all of whom utilize a range of our assets and span multiple years. Revenue from this group, which collectively accounted for 70% of our total sponsorship revenue, has grown 15% year-to-date. With over 95% of our expected sponsorship revenue for 2019 now contracted, we are confident that we will deliver Sponsorship AOI growth in the mid-teens for the full year.

Ticketmaster generated its highest AOI quarter ever, up 20% from last year and with 6% growth year-to-date, as every quarter in 2019 is one of the Top 10 GTV quarters ever. This growth continues to provide Ticketmaster the scale to invest in the evolution from paper tickets to digital, which is being demanded by venues and content, that are seeking greater control of their tickets and looking to develop a more direct connection with fans.

Our Presence rollout is pacing ahead of schedule, and we expect digital ticketing to be installed at over 700 venues, representing 120 million tickets by the end of this year and over 60% of the fans at digital-enabled events, now entering with their mobile devices.

And digital adoption is even greater in the NFL where 10 teams have now eliminated paper tickets and over 90% of fans for those games are using their mobile phones to get in. Digital ticketing has expanded our engagement with fans giving Ticketmaster a more direct connection providing for more effective marketing and targeted offers. The Ticketmaster app is now regularly in the Top 10 rankings for Entertainment in the Apple App Store, driving a 30% increase in app downloads this year.

This, combined with continued improvements in our mobile web experience, has led to further growth in mobile transactions, now accounting for 46% of ticket purchases globally, up 15% over last year. Digital ticketing is a strong demonstration of what Ticketmaster can be, providing the best ticketing platform for venues by delivering value well beyond the sale of the ticket, at the same time giving fans an ever-improving mobile-led purchasing and management experience. With these pieces coming together and continued growth in our Concerts activity, I expect we will deliver AOI growth at Ticketmaster in the mid-single digits for the full year.

As we approach the end of 2019, we are confident that our strong performance will deliver another record year of topline in AOI growth. All of our businesses; Concerts, Sponsorship and Ticketing, have delivered growth year-to-date. And based on their key operating metrics, we expect each to deliver record revenue and AOI for the full year. With an early look to next year, our 2020 pipeline is up substantially with over 1,500 stadium, arena and amphitheater shows booked already, up double digits from the same time last year. As we look forward, we continue seeing tremendous opportunity to expand our global concerts in festival business, drive further growth in on-site execution, sponsorship and ticketing.

With that, I will turn the call over to Joe, who will take you through additional details on the quarter and the divisions.

Joe Berchtold -- President

Thanks, Michael. Getting into our business segments. First, Concerts. Over the combined past two quarters, which represent our core concert season, AOI was up 9% and revenue up 2% year-on-year, as we grew attendance to 73 million fans at over 26,000 shows, up 3% and 11% respectively. As we discussed on our second quarter call, timing this year somewhat shifted to Q2 versus Q3. And as a result, for the third quarter attendance was 2 million lower than last year, resulting in slightly lower revenue and AOI.

Looking at the full-season though, every indicator we have is of a robust growing business. Our September results actually came in above our expectations, as our amphitheater and arena shows closed strongly and fan spending remained at high levels. This over-performance in ticket sales in the last two weeks before the shows, resulted in over $5 million of incremental AOI in our amphitheaters, relative to how the shows closed last year, demonstrating the continued strength of the Concerts business.

As Michael said, much of our fan growth this year has come from our international markets, particularly with the stadium lineup. At the same time, we are seeing growing demand throughout our broad portfolio of venue types. Globally, theater shows are our highest growth venues this year as fans continue to find new up and coming artists they are excited about and festivals remain the ultimate fan experience. And with the addition of Rock in Rio, the continued globalization of the Lollapalooza brand, and our over 100 other [Indecipherable], we expect attendance to be up double digits through over 10 million fans this year.

Arenas continue to be the top place to see the bigger shows and we expect to add another 1 million fans this year, as fans came to see such top acts as the Backstreet Boys, Ariana Grande and John Mayer. For the fourth quarter, we see continued fan growth, again, driven by our theater shows, but with AOI growth impacted by the cost structure in a seasonally lower period for concert activity.

So looking at the growth this year and an even bigger pipeline of shows for next year, combined with ongoing improvements in our on-site execution, we believe we are well set up for continued growth in Concerts.

Turning to our Sponsorship and Advertising business, in the third quarter Sponsorship AOI was up 18% and revenue was up 26%, primarily driven by on-site sponsorship as our brand partners continue to recognize the value of engaging with fans at our events. International markets drove the majority of our growth with the first weekend of Rock in Rio contributing to our performance this quarter. And given the 14% growth in sponsor-committed net revenue for the year, I'm confident we will deliver mid-teens AOI growth in Sponsorship for the full year.

Finally, Ticketmaster. For the quarter, Ticketmaster AOI was up 20% and revenue was up 5%. Level GTV was up 4% for the quarter driven by fee-bearing GTV, which was up 5%. As with our Concerts business, international drove our ticketing growth in the quarter with its fee-bearing GTV up 19%. Globally, primary GTV was up 6% for the quarter, while secondary GTV was flat. And as in the past, Concerts drove most of our primary GTV growth. In secondary, we saw growth in sports, particularly the NFL, the lower activity in North America Concerts, again, consistent with the Concerts timing we have discussed.

As another sign of success for the Ticketmaster platform, our open distribution strategy continue selling more tickets for clients off platform, up over 30% with 15 million tickets sold year-to-date. And to save you the question on margin, yes, we were up a fair bit this quarter, due in part to continued improvements in operational areas such as search marketing, and also because of some insurance recovery for the data breach issue last year. But our overall focus remains on growing the cash profitability of the ticketing business not be margin-focused, which is how we have consistently grown the business over the past several years and expect to continue being successful going forward.

In summary, we are confident that 2019 will be another year of record revenue in AOI results overall and for each of our businesses. We are also making progress on completing our OCESA acquisition. In August, we submitted the necessary request for approval to the two key regulatory agencies in Mexico, and are working through their process. And in September, CIE receive shareholder approval for the transaction. Pending the timing of the regulatory process, which is basically how many rounds of questions do they need to ask, we expect to complete the transaction between December and February, and we'll provide updates as we have more information to share.

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. Our key financial highlights for the third quarter of 2019, our revenue was down 2% to $3.8 billion. AOI increased 11% to $427 million, and operating income increased 11% to $260 million. Our revenue decline in the quarter was primarily driven by a foreign exchange negative impact and without this, our revenue in the quarter was flat to last year. This FX impact largely affected Concerts, which along with the timing shift in events from Q3 to Q2, drove a 4% decrease in revenue. Sponsorship revenue increased 26% from the addition of the first weekend of Rock in Rio in Brazil and overall growth in our on-site sponsorship program. And ticketing delivered a 5% increase in revenue, as strong international activity drove a 4% increase in global GTV.

AOI growth was 11% in the third quarter, driven mainly by Sponsorship, which was up 18% and ticketing, which was up 20%, as a result of the higher GTV along with an insurance recovery related to the third-party data breach incident last year, that we had not expected to receive in the quarter. This insurance recovery, along with the strength in amphitheater shows performance at the end of the quarter, as Joe noted previously, drove our outperformance relative to the AOI guidance we provided in July.

Our operating income increased by 11% for the third quarter over last year, driven by the increase in AOI. For the quarter, accretion of redeemable non-controlling interest was $24 million and our diluted earnings per share was $0.71.

Turning to our balance sheet. As of September 30, we had total cash of $1.8 billion, including $747 million in ticketing client cash and $642 million in net concert event-related cash, leaving free cash of $406 million. Net cash provided by operating activities for the nine months was $33 million compared to $256 million last year, primarily due to the timing of when payment obligations were due. Free cash flow adjusted for the nine months was $531 million in line with last year's $529 million.

Our conversion of AOI to free cash flow this year was reduced by the timing of distributions to our non-controlling interest partners and an increase in maintenance capex. Our total capital expenditures were $225 million for the first nine months, with $120 million spent on revenue-generating item. We expect total capital expenditures for 2019 to be approximately $325 million, with half going toward revenue-generating capex projects.

As of September 30th, our total deferred revenue related to future events was $952 million, an increase of 26% over the $759 million at this point last year. As of September 30th, our total debt was $2.8 billion and our weighted average cost of debt was 4.2%. Then in October, we issued $950 million of 4.75% senior notes due 2027 and amended our senior secured credit facility, including a new $950 million term loan B. In addition, we have an undrawn $500 million revolver and a $400 million delayed-draw term loan A. The proceeds from these transactions were used to redeem our $250 million of 5.375% senior notes due 2022 and to repay the outstanding balance of our existing term loan. After these repayments and other fees and expenses, we will have $527 million of incremental cash on the balance sheet. This will allow us to meet the cash portion of our purchase price for the OCESA acquisition along with funding other acquisition opportunity.

After this refinancing, our weighted average cost of debt remains at 4.2% and we estimate that our interest expense will initially increase by approximately $10 million in the fourth quarter as a result of this refinancing. For the remainder of 2019, we expect negative FX impacts of approximately 2% for revenue and 7% for AOI in the fourth quarter based on current rates. This FX headwind to AOI is largely driven by higher sponsorship activity in Brazil, Australia and New Zealand, which are all projected to be up 7% in the fourth quarter, and the euro and British pound, which are projected to be up 4% to 5%. Revenue has less of an impact as that mix is more heavily weighted to the US.

We have factored this FX impact into our full-year guidance that both Michael and Joe discussed, which takes into consideration our reported year-to-date results and our expectations for the fourth quarter. Consistent with where we projected it last quarter, we currently expect that free cash flow adjusted for the full year as a percentage of our 2019 AOI will be in the mid 50%s. Our accretion of redeemable non-controlling interest for the fourth quarter is projected to be approximately $26 million. And as a reminder, as you look forward to 2020, our Rock in Rio festival which is there in Q3 and Q4 this year, is a bi-annual festival, and will therefore not take place next year.

Thank you for joining us today. Operator, we will now open the call for question.

Questions and Answers:

Operator

Thank you. [Operator Instructions] We'll go first to David Karnovsky with J.P. Morgan.

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

Hi, thanks for taking the questions. You highlighted getting questions around consumer demand. I think maybe some of this pertains to macro and possibly recession risk. I -- the last time there was a downturn, Live Nation was a pretty different company than it is today. So I'd be interested to know how you feel Live is positioned [Phonetic]. Should we enter a softer economic period at some point?

Joe Berchtold -- President

Hey, David, this is Joe. I'll start that. First again, as we gave with some of our numbers, we have seen whatever periodic retail slowness in September or anything else, that the market is looked at, we have not seen that impact at all, an impact at end of this year. As I gave the numbers, it was stronger than September of last year. So we're feeling very good holding up.

In general, as you said, we think we are a very different company than we were 10 years ago. We think our understanding of the consumer, our level of sophistication associated with pricing, understanding different consumer segments, our ability to execute on-site, are all substantially higher. So we feel like our capabilities have certainly continued to develop and that these structural tailwinds that we have in shift and have some beautiful experience of globalization of our business, all trends that we threw a lot of demand support under any economic scenario.

Michael Rapino -- President and Chief Executive Officer

[Indecipherable] we're seeing also what is on sale for next year. Festivals and shows that are already on sale for next summer are showing strong demand. No weakness at all in terms of the consumer buying the ticket. As well as Joe said, people come into shows in September, spending at the show. So we haven't seen any push back at all. Business is usual from a sales perspective.

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

Thanks, very helpful. And then, you highlighted an additional 36 venues year-to-date. How much of [Indecipherable] you anticipate accelerating this strategy, the specific type of venue that you're more focused on? And then finally I have been interested to get your view on improved [Phonetic] hospitality and how that adds to the portfolio?

Michael Rapino -- President and Chief Executive Officer

All right, I'll take a shot. You've come across a little multiple there. So I think I got to adjust for this. We've always been in the on-site business and our most profitable businesses are festivals where we get to count multiple revenue streams in our amphitheaters, all 50 of them that we have in America. Those will be our highest margin Concert venues or Concert business. So we've always been expanding and locking and leasing and managing Concert venues. We've had a portfolio of theaters and clubs, [Indecipherable], well over 100 of them now around the world. We've been managing those for the last 15 years or so. We like those businesses as they continue to be high on our per head sponsorship and our ticketing. So we're continually looking at any Concert venue from 500 feet of the amphitheaters. It's a pure-play Concert venues where our content can leverage our relationship into multiple revenue streams by managing or leasing or building that music venue. So on a global basis, we continue to look at them as great returns and then the places that our flywheel comes to life, the most leverageable in terms of content sponsorship and ticketing.

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

Okay. And just anything on Group. I'm not sure if it came through another question.

Michael Rapino -- President and Chief Executive Officer

Group, yeah. So it's terrible. We've been talking about them in the last few years on our hospitality, food and beverage business, is we are a very large food and beverage business on our own. But you just spun our food and beverage business this afternoon, [Indecipherable] hospitality and food and beverage in terms of our revenue and pull-through. A big part of our revenue hospitality strategy is to continue to make sure we understand the high-end consumer and the hospitality around VIP and servicing that customer well. Our core DNA knows how to put a lot of people through buildings in an efficient manner and service them. We want to get more skill sets to understand how to take care of the -- the VIP high-end customer, how best to set up the VIP, what does that VIP flow look like, how best to monetize the customers that want a better and higher experience or unique experience?

So that will -- Dave is an expert in business in Miami and he's very successful at what he does. He's tested it at the Miami Dolphin Stadium with this platform there. So we look at him and other skill sets like that, that we bring those in-house, open our platform to them, they will help us design, build and expand our VIP hospitality business in our current portfolio.

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

Okay, thank you.

Operator

And we'll go next to Benjamin Swinburne with Morgan Stanley.

Benjamin Swinburne -- Morgan Stanley -- Analyst

Thank you. Good afternoon. Just first on digital ticketing. You talked about Presence being ahead of schedule. Can you talk a little bit about what's driving that? Is that demand-driven or your ability to deploy that technology faster? And clearly it's resonating with consumers. You can see it in the app download data. Can you help us think about the financial benefits to the Company over the longer term as that scales to become a majority or a vast majority in your ticketing business?

Joe Berchtold -- President

Sure, this is Joe. I'll give it a start. First of all, in terms of the pace and [Indecipherable] to point out, there's two things. One is, I think we've been successful because of how effective [Indecipherable] with the NFL as well as our own well being. We're just seeing tremendous demand by other venues that are saying, we don't want to get that behind. We want shift to digital, so we can be getting that consumer data, understanding better control of the ticket as well. And our processes for deploying the system is actually going to the venue, changing the access control systems. I mean, we've gotten that working well very quickly. So I think that is -- whether it's over the course of this year to move our target for installations from 500 to 600 now to 700 installations.

In terms of the long-term impact, clearly just for Ticketmaster, it's a fundamentally different value proposition that it provides to its venues now. It's no longer just selling the tickets, but it is providing important data service. So that's an important piece of just what Ticketmaster is. And then we talked through their multitude of uses that the data will provide, support Ticketmaster in our Concert business in terms of the effectiveness of their marketing, their ability to provide much more targeted information demand based on what we think they are interested in. It will be very important to our venue strategy in terms of being able to make offers to people based on what their app behavior is, it will be important for sponsors for them to directly tie in sponsor segments, customer segments and targets with few odd 100 million people are on-site. So the ability to do all of those things over the next several years, I think, will be tremendously important throughout the entire Company.

Benjamin Swinburne -- Morgan Stanley -- Analyst

Got it. That's helpful. And just maybe one follow up. The show pipeline for next year as you highlighted is up double digits. I know it's too early to talk about 2020 in a lot of detail, but does that suggest that events will be up double digits next year, because you also have a fairly sizable acquisition which should close as well? I don't know if I'm over-extrapolating, but just thought I'd ask.

Joe Berchtold -- President

Sure. A couple of things, first of, we haven't built in OCESA in our numbers yet, because of the uncertainty over plus or minus a few months in terms of the timing. And so I think we also deviate in terms of the on sale, would not have included them, because we're not yet exchanging that data with them. I think what you can take from between up [Phonetic] double digits at this point is two things, one is, it looks very strong for next year, both in terms of the volume and then as Michael said, the early demand for what we do have put on sale, is also very strong. And two is, you're continuing the trend of seeing some shift into the fourth quarter in terms of timing with some of the on-sale. So I don't think we're ready to declare the exact amount that we're going to be up, but what we're feeling very good is, we're starting to turn the focus to 2020 shifts.

Benjamin Swinburne -- Morgan Stanley -- Analyst

Great. Thank you.

Operator

And we'll go next to David Joyce with Evercore ISI.

David Joyce -- Evercore ISI -- Analyst

Thank you. A couple of questions. First, on the deferred revenue being up 26%, what would that look like excluding the one-week of Rock in Rio that falls in this quarter? And could you discuss other comparable planning events that would be impacting the Concert performance for the fourth quarter? And then secondly on capex, if you could talk about some of the components of the -- the revenue generating capex, what have you been doing on the real estate side there? Thank you.

Kathy Willard -- Chief Financial Officer

So on the deferred revenue, yeah, Rock in Rio would be in there, but remember Rock in Rio as festivals are, largely sponsorship-driven and we haven't given any specific breakdown. The second weekend would be in Q4. What we said on the other comments are that Q4 is largely -- it's going to be theater and clubs-driven. So that would be part of it, and then you'll also be seeing some of the impact to be on-sales for next year in there as well. As far as the capex, rev-gen is going to be highly around, but we suddenly added 36 venues there, as part of that's going to be running through that continued enhancement along the Ticketmaster technology as well.

David Joyce -- Evercore ISI -- Analyst

Great.

Joe Berchtold -- President

[Indecipherable] is probably hospitality. [Indecipherable] that's a lot about growth in per caps. And we will give you specific numbers at the end, but also at our festivals, at our theaters and clubs. So all of that is clearly priorities on our in rev-gen capex.

David Joyce -- Evercore ISI -- Analyst

Right. Okay. Thank you.

Operator

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

Brandon Ross -- LightShed -- Analyst

Hello?

Joe Berchtold -- President

Go ahead, Brandon.

Brandon Ross -- LightShed -- Analyst

Okay, sorry. We're having some phone troubles here. We're a start-up, you know. So on Sponsorship, you lowered your guide for the year from mid --to mid-teens from mid-to-high. I guess you said that consumers are in great shape. But I just wanted to make sure you're finding the same with advertisers and sponsors, or is there anything to read into their vis-a-vis, the demand for Rock in Rio? And then on ticketing, I think your Q4 ticketing guide implies flat AOI year-to-year. How do we reconcile that with your increased show pipelines for next year and this continued trend to a shift in timing to Q4 on sales from Q1?

Joe Berchtold -- President

On the first question, there is absolutely no shift in our overall outlook on Sponsorship. The only change is our previous guidance was constant currency. But we saw a lot of modeling, if you -- if people try and understand constant versus recorded. So we shift this guidance to reporting currency and we gave you very explicitly -- Kathy, the fact that you're up 7% in Brazil, Australia, New Zealand. You reported 5% in Great Britain and Europe. So it's just that math that's happening and in fact, being changed where the numbers are. No change in terms of what we are giving in constant currency versus reported.

Brandon Ross -- LightShed -- Analyst

What's the demand?

Joe Berchtold -- President

So the demand is -- it's -- absolutely no change and no deterioration. In terms of the second, without getting too [Indecipherable], there is still some timing if you work down in terms of exact on-sales for ticketing and then ticketing, again you're going to have some of the same issues in terms of some of the FX impact. But overall, again, we're seeing robust show pipeline and robust consumer demand when we do put them show -- sorry, when we do put shows on sale. It's just a matter of when exactly they are all going to get put on-sale. So we have a lot of shows that we have confirmed with the artists that they will be touring. We have contract with them, we're scheduling them. We don't -- we have not declared whether those actual tours are going on sale in Q4 or Q1.

Kathy Willard -- Chief Financial Officer

And we're comping up a large Q4 last year on ticketing. So just keep that in mind, in your whole...

Brandon Ross -- LightShed -- Analyst

Got it. Thanks for the questions.

Operator

And we'll go next to Khoa Ngo with Jefferies.

Khoa Ngo -- Jefferies LLC -- Analyst

Hi, good afternoon, everyone. Thanks for taking my questions. The first question is just around, you mentioned the strength of the consumer and you're not seeing any slowdown there. Can you maybe just frame up how much headroom you have on your ability [Technical Issues]?

Joe Berchtold -- President

I think most recent numbers will be available. We think there is still probably about a $1 billion of price arbitrage if we look at the secondary market as a guide for market value of ticket prices relative to how we price tickets. And we absolutely believe that one of the factors during any economic slowdown is that, that provides a buffer. And that arbitrage gets eaten away before some of the fundamental demand. It's our ticket, so that absolutely is a [Indecipherable] that gets us some greater comfort as we think about different economic cycles.

In terms of digital ticketing, the rollout, I think by the end of this year we will have 80% of the major building. One gating factor is if you're not going to have your NBA [Phonetic] in your sales teams at mid season, so are getting a shift before the start of the season, they won't shift between now and the end of the year. It would be -- they may take a break again during their next cycle, and then it's just a matter of getting to a lot of the smaller building there.

Michael Rapino -- President and Chief Executive Officer

It's Michael. Just on pricing, just to give some narrative, now -- the press likes to talk sometimes about the ticket pricing of the high shows. Overall Concerts are at very affordable price points. If you look at the average ticket price in the $60, average fan go to two or three shows a year, it's still a very affordable lifetime memory versus a trip or a vacation. So in the recession, we see that the consumer may pull back on high-ticket items. You may not go on a vacation, you may need to go back on a new car, but to take his kids to Taylor Swift or his wife to a show of his friends, it's still a very, very affordable option that we know, because they are lifetime moments and Kodak moments in your life. They still make sure they go to that local show at the arenas or stadium or amphitheater, because it's still incredibly affordable even if they're in a slight pullback on [Indecipherable].

Now, I say that it is also means we have -- why we believe the ticket is completely still under-priced, why there's $8 million to $10 million in the secondary market on an ongoing basis. We still think that the front of the house is wildly underpriced and year-over-year we will make progress with the artists to keep pricing it better, taking some of that high-end opportunity into his pocket, as well as lowering price in the back end to get better full capacity. So overall, we think the show is still a very affordable option in life. It's cheaper than a good dinner and the big picture with great pricing opportunity given we still think it is a very low-priced option if you compare it to a an NBA game, a night at the theater, a front-row seat at the -- at an NFL game etc. So we think Concerts is underpriced, locked the room for pricing, still affordable to everybody, no matter where their economic situation lies and we think the second area is the proof that we have upside.

Khoa Ngo -- Jefferies LLC -- Analyst

Thanks very much.

Operator

[Operator Instructions] I will go next to Jason Bazinet with Citi.

Jason Bazinet -- Citigroup -- Analyst

Hi, I just had a question on capex. I know you guys have always talked about 2% capex to rev rec. It seems like with the second move up in capex, we're burking sort of 3%. Do you see enough sort of good revenue opportunities that we should be thinking sort of 3% of growth, so sort of a more reasonable number in the interim in next few years as opposed to 2%, or is 2019 sort of an aberration? Thank you.

Kathy Willard -- Chief Financial Officer

So part of -- just to restate, those 2% were back before rev rec changes. So it made a little bit of an increase in it, but I think around 2.5% is probably the right role and kind of [Technical Issues] to rev up assets and just, yes, there are a lot of what we think are good investment opportunities in hospitality, in our technology that we think are the right way to continue to invest in the business.

Jason Bazinet -- Citigroup -- Analyst

Perfect, thank you.

Operator

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

Douglas Arthur -- Huber Research Partners -- Analyst

Yeah hi, its Doug Arthur. Joe. I'm wondering if you could delve into the mix in the concert business a little bit more in the third quarter. I'm not obviously -- you'd say some timing issues going into the quarter in euro debt number of events in North America was up 15%. It looks like attendance for that was down close to 20%. So that's a pretty unusual mix for the third quarter, does that reflect the lack of stadium shows basically or is there something else going on?

Joe Berchtold -- President

You have it exactly right, it's a mix shift. So if you look at the start, if you will, Q2 and Q3 together because we told you we were going to have more weight Q2 this year but those two quarters together is the core Concert segment. The Concerts business is up about 4% on a constant currency. So first volume, we use a few points on the revenue side, just because of the currency fluctuation, but really what's going on, as we told you over the past nine months, we have fewer stadium shows about 30 fewer stadium shows this year than last year. And we've had tremendous growth in our theater shows in particular, both in North America and internationally for those stadium shows that we don't have or the highest volume shows been also the highest average ticket price you're theater shows, they're going to be a much lower average attendance and also a lower ticket price.

So all you seeing is some mix shift going on there still is across all of the venue type very strong sell-through demand, we talked about platinum tickets. We talked about all of the components. So the performance is very strong across the board. And then as we look at next year, we see a big uptick again in our stadium volume, which is what you get the first read on in the business. So we're feeling very good. There is absolutely nothing, you should read into this other than timing.

Douglas Arthur -- Huber Research Partners -- Analyst

Great,, thank you.

Operator

At this time, I would like to hand the call back over to our speakers for any additional or closing remarks.

Michael Rapino -- President and Chief Executive Officer

Thank you everybody.

Operator

[Operator Closing Remarks]

Duration: 41 minutes

Call participants:

Michael Rapino -- President and Chief Executive Officer

Joe Berchtold -- President

Kathy Willard -- Chief Financial Officer

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

Benjamin Swinburne -- Morgan Stanley -- Analyst

David Joyce -- Evercore ISI -- Analyst

Brandon Ross -- LightShed -- Analyst

Khoa Ngo -- Jefferies LLC -- Analyst

Jason Bazinet -- Citigroup -- Analyst

Douglas Arthur -- Huber Research Partners -- Analyst

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