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EX-31.2 - EXHIBIT 31.2 - TICKETMASTER ENTERTAINMENT, INC.a2196840zex-31_2.htm
EX-32.2 - EXHIBIT 32.2 - TICKETMASTER ENTERTAINMENT, INC.a2196840zex-32_2.htm
EX-99.1 - EXHIBIT 99.1 - TICKETMASTER ENTERTAINMENT, INC.a2196840zex-99_1.htm
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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 10-K




ý

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2009

or

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                  to                                 

Commission File No. 001-34064



TICKETMASTER ENTERTAINMENT LLC
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  27-1730243
(I.R.S. Employer
Identification No.)

9348 Civic Center Drive, Beverly Hills, California 90210
(Address of Registrant's principal executive offices)

(310) 867-7000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class   Name of exchange on which registered
Common Stock, par value $0.01   NASDAQ Global Select Market

(Note: The Company's common stock was de-listed from NASDAQ effective February 5, 2010,
and its de-registration under Section 12(b) will be effective April 26, 2010)

Securities registered pursuant to Section 12(g) of the Act: None



         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes    ý No

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes    ý No

         Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes     o No

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ý

         Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o   Accelerated filer ý   Non-accelerated filer o
(Do not check if a
smaller reporting company)
  Smaller reporting company o

         Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

         As of June 30, 2009, the aggregate market value of the voting and non-voting common equity held by non-affiliates was approximately $243.7 million. (For purposes hereof, directors, executive officers and 10% or greater stockholders have been deemed affiliates.) As of January 25, 2010, the Company was converted to a limited liability company with a single member and thus has no publicly-traded equity securities.

         The number of shares of common stock outstanding: Not Applicable.

         The Company meets the conditions set forth in General Instructions (I)(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K with a reduced disclosure format.

         Documents Incorporated by Reference:  Part 1A incorporates portions of Live Nation Entertainment, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2009, filed February 25, 2010.


Table of Contents


TICKETMASTER ENTERTAINMENT LLC
FORM 10-K
For the Year Ended December 31, 2009
TABLE OF CONTENTS

 
   
  Page
Number

PART I

       
 

Item 1.

 

Business

  1
 

Item 1A.

 

Risk Factors

  6
 

Item 1B.

 

Unresolved Staff Comments

  20
 

Item 2.

 

Properties

  20
 

Item 3.

 

Legal Proceedings

  20
 

Item 4.

 

Submission of Matters to a Vote of Security Holders

  23

PART II

       
 

Item 5.

 

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities

  24
 

Item 6.

 

Selected Financial Data

  24
 

Item 7.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

  25
 

Item 7A.

 

Quantitative and Qualitative Disclosures About Market Risk

  47
 

Item 8.

 

Consolidated Financial Statements and Supplementary Data

  49
 

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

  49
 

Item 9A.

 

Controls and Procedures

  49
 

Item 9B.

 

Other Information

  51

PART III

       
 

Item 10.

 

Directors, Executive Officers and Corporate Governance

  51
 

Item 11.

 

Executive Compensation

  51
 

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

  51
 

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

  51
 

Item 14.

 

Principal Accountant Fees and Services

  51

PART IV

       
 

Item 15.

 

Exhibits and Financial Statement Schedules

  52

Signatures

  56

Table of Contents

PART I

Item 1.    Business

Overview

        As the world's leading live entertainment ticketing and marketing company based on the number of tickets sold, Ticketmaster Entertainment LLC ("Ticketmaster Entertainment," "we," "our," "us" or the "Company") connects the world to live entertainment. The Company currently operates in approximately 19 countries worldwide, providing ticket sales, ticket resale services, marketing and distribution through www.ticketmaster.com, one of the largest e-commerce sites on the internet, and related proprietary internet and mobile channels, approximately 6,700 independent sales outlets and 17 call centers worldwide. Established in 1976, the Company sold tickets on behalf of more than 10,000 clients worldwide during 2009, including venues, promoters, sports leagues and teams, and museum and cultural institutions, among other clients, across multiple live event categories, providing exclusive ticketing services for leading arenas, stadiums, amphitheaters, music clubs, concert promoters, professional sports franchises and leagues, college sports teams, performing arts venues, museums and theaters. The Company's distribution channels and client base provide it with significant scale—for example, in 2009, the Company's brands and businesses sold more than 130 million tickets valued at $8.0 billion.

        The Company's business also includes the operations of Front Line Management Group, Inc. ("Front Line"), one of the world's leading artist management companies. Front Line manages musical artists and acts primarily in rock, classic rock, pop and country music. As of December 31, 2009, Front Line had over 200 artists on its rosters and approximately 75 managers performing services to artists.

        From its spin-off from IAC/InterActiveCorp ("IAC") in August 2008 until January 2010, the Company operated as a stand-alone, publicly-traded company with its common stock trading on The Nasdaq Stock Market. On January 25, 2010, the Company merged into an indirect, wholly-owned subsidiary of Live Nation, Inc. and thus became an indirect, wholly-owned subsidiary of Live Nation, Inc. Following the merger, Live Nation, Inc. changed its name to Live Nation Entertainment, Inc. ("Live Nation"; SEC File No. 001-32601). Live Nation's common stock is listed on the New York Stock Exchange under the symbol "LYV."

Business Segments

        The Company operates in two reportable segments—ticketing and artist services. In addition, the Company also has corporate and other expenses, which are managed on a total company basis. See Item 15. Exhibits and Financial Statement Schedules—Note 7—Segment Information to the Consolidated Financial Statements for financial information regarding segment reporting.

    Ticketing

        The ticketing segment is primarily an agency business that sells tickets for events on behalf of our clients and retains a convenience charge and order processing fee for our services. We sell tickets through a combination of websites, telephone services and ticket outlets. The Company's ticketing sales are impacted by fluctuations in the availability of events for sale to the public, which may vary depending upon scheduling by its clients. Generally, the second and third quarters of the year experience the highest domestic ticketing revenue, earned primarily in the Concerts and Sports categories. Generally, international revenues are the highest in the fourth quarter of the year, earned primarily in the Concerts category.

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    Primary (Initial Sale) Ticketing Services

        Overview.    "Primary" sales of tickets refers to the original sale of tickets to an event by or on behalf of an event presenter. For the year ended December 31, 2009, the substantial majority of the Company's revenues were attributable to primary ticket sale services. The Company provides primary ticket sale services to the following types of clients:

    Venues—including arenas, stadiums, theaters, universities, colleges, clubs and festivals in the United States and abroad, ranging in size from 100,000+ seat stadiums to small clubs, including Madison Square Garden (New York City), Cowboys Stadium (Arlington, Texas), Staples Center (Los Angeles), Manchester Evening News Arena (Manchester, UK), the University of Michigan and the University of California, Los Angeles;

    Promoters—promoters of live events, from worldwide concert tours to single, local events, including AEG Live, Another Planet Entertainment, Jam Productions and MCD Productions;

    Sports Leagues, Teams and Events—professional sports teams, leagues, franchises and clubs and special sporting events, including Major League Baseball Advanced Media and many Major League Baseball, National Football League, National Basketball Association, National Hockey League, Rugby Football Union and Premier League teams; and

    Museums, Cultural Institutions and Historic Sites—including the Guggenheim Museum (New York City) and the Getty Museum and Getty Villa (Los Angeles).

        When providing primary ticket sale services to clients in the U.S. and abroad (other than in the United Kingdom and certain other European markets), the Company generally serves as the exclusive ticket sales agent for individual tickets sold to the general public outside of facility box offices. In the United Kingdom, the Company is typically a non-exclusive ticket sales agent for its clients and instead is guaranteed a certain minimum allocation of the tickets for each event. For any particular event, the Company works with clients to identify those tickets that will be made available for sale through the Company's various distribution channels (see "Distribution" below) as well as facility box offices. To enable most or all tickets for a given event to be offered for sale simultaneously and sold through these channels, the Company licenses the Ticketmaster System, our proprietary system, and related equipment to clients and installs this system at their facility box offices. The provision of primary ticket sale services to clients is generally governed by individual, multi-year agreements between the Company and its clients.

        Consumers who purchase tickets through the Company pay an amount equal to the ticket face price, plus a per ticket convenience charge, a per order "order processing" fee and, if applicable, a premium delivery charge. The Company remits the entire face value of the ticket to the client. In addition, in most cases, the Company remits royalties as specified in the written agreement between the Company and the client.

        Client Relationships.    The Company generally enters into written agreements with individual clients to provide primary ticket sale services for specified multi-year periods, typically ranging from 3 to 5 years. Pursuant to these agreements, clients generally determine what tickets will be available for sale, when such tickets will go on sale to the public and what the ticket face price will be. Agreements with venue clients generally grant the Company the right to sell tickets for all events presented at the relevant venue for which tickets are made available to the general public. Agreements with promoter clients generally grant the Company the right to sell tickets for all events presented by a given promoter at any venue, unless that venue is already covered by an existing exclusive agreement with the Company or another ticketing service provider. Under the Company's exclusive contracts, clients may not utilize, authorize or promote the services of third party ticketing companies or technologies while under contract with the Company. While the Company generally has the right to sell a substantial portion of its clients' tickets, venue and promoter clients often sell and distribute group sales and

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season tickets in-house. In addition, under many written agreements between promoters and the Company's clients, the Company's clients often allocate certain tickets for artist, promoter, agent and venue use and do not make those tickets available for sale by us. The Company also generally allows clients to make a certain limited number of tickets available for sale through fan or other similar clubs, from which the Company generally derives no revenues unless selected by the club to facilitate the sales. As a result, the Company does not sell all of its clients' tickets and the amount of tickets that it sells varies from client to client and from event to event, and varies as to any single client from year to year.

        Pursuant to its agreements with certain clients, sales of premium primary tickets, often under high demand, are offered for sale through the Company's TicketExchange service, which is accessible to consumers through www.ticketmaster.com. Such tickets are referred to as "Platinum" tickets and are frequently priced by the Company's clients at prices that are meant to reflect their market value.

        Convenience charges, which are heavily negotiated, mutually agreed upon and set forth in written agreements between the Company and its clients, vary based upon numerous factors, including: the scope and nature of the services to be rendered, the amount and cost of equipment to be installed at the client's venue location, the amount of advertising and/or promotional allowances to be provided, the type of event and the distribution channel in which the ticket is to be sold and the face price of the ticket. Client agreements also provide how and when, and by how much and with what frequency, changes may be made to per ticket convenience charges and per order "order processing" fees during the term. During the year ended December 31, 2009, average revenue per ticket (which primarily includes per ticket convenience charges and per order "order processing" fees, as well as certain other revenue sources directly related to the sale of tickets) was $7.82.

        Most written agreements provide for the payment of royalties to clients, which are heavily negotiated, in an amount equal to a mutually agreed upon portion of related per ticket convenience charges on all tickets sold through all the Company distribution channels and per order "order processing" fees on all tickets sold online or by telephone. In many cases, written agreements also require the Company to advance royalties to clients, which advances are usually recoupable by the Company out of the future client royalty payments. In limited instances, clients have the right to receive an upfront, non-recoupable payment from the Company as an incentive to enter into the ticketing service agreement. Written agreements also specify the additional ticketing systems, if any, that may be used and purchased by clients during their relationship with the Company.

        The Company generally does not buy tickets from its clients for sale or resale to the public and typically assumes no financial risk for unsold tickets, other than indirect risk associated with its ability to recoup advances made to clients. If an event is canceled, the Company refunds the per ticket convenience charges to customers (but not the per order "order processing" fees, except in certain European jurisdictions where the Company is required by law to do so). Refunds of ticket prices for canceled events are funded by clients, which have historically fulfilled these obligations on a timely basis with few exceptions.

        Clients routinely agree by contract to include the Company's name, logos and the applicable Ticketmaster Entertainment website address and charge-by-phone number in advertisements in all forms of media promoting the availability of their tickets. Ticketmaster Entertainment brand names and logos are also prominently displayed on printed tickets, ticket envelopes and e-mail alerts about upcoming events that the Company sends to its customers. The Company also provides primary ticketing solutions for clients who wish to perform ticketing functions in-house on a private label or other basis through its Paciolan and Ticketmaster VISTA brands and businesses, which license the requisite software or other rights to clients for license and per transaction fees in the case of Paciolan and for per ticket fees in the case of Ticketmaster VISTA. The Company also currently licenses its name and technology exclusively to a third party that provides primary ticketing services to clients in

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the Washington, D.C./Baltimore area, as well as to third parties and joint ventures in certain jurisdictions abroad.

    Ticket Resale Services

        The "resale" of tickets refers to the sale of tickets by a holder who originally purchased the tickets from a venue, promoter or other entity, or a ticketing services provider selling on behalf of a venue, promoter or other entity. The Company currently offers ticket resale services through TicketsNow, which the Company acquired in February 2008, its TicketExchange service, which the Company launched in January 2002, and GET ME IN!, which the Company acquired in February 2008.

        TicketsNow is a leading consumer marketplace for the resale of event tickets in the United States and Canada. TicketsNow enters into listing agreements with licensed ticket resellers to post ticket inventory for sale through TicketsNow at a purchase price equal to a ticket resale price determined by the relevant ticket resellers, plus an amount equal to a percentage of the ticket resale price and a pre-determined service fee. TicketsNow remits the reseller-determined ticket resale price to the ticket resellers and retains the remainder of the purchase price. TicketsNow also licenses point-of-sale business management software to ticket resellers for a fee, which allows the resellers to manage their ticket inventory and operate their businesses. While TicketsNow does not generally acquire tickets for sale on its own behalf, it may do so from time to time on a limited basis. TicketsNow also operates a wholesale ticket brokerage business that sells its own inventory of tickets through www.TicketsNow.com and other retail resellers nationwide.

        In addition to enabling Platinum primary ticket sales, the TicketExchange service allows consumers to resell and purchase tickets online for certain events that were initially sold for the Company's clients in the United States, Europe and Canada who elect to participate in the TicketExchange service. Sellers and buyers each pay the Company a fee that has been negotiated with the relevant client, a portion of which is shared with the client. Consumers in the United Kingdom, Germany and the Netherlands may buy and sell tickets to live entertainment events through GET ME IN!, which charges sellers a commission and buyers a processing fee.

    Marketing, Promotional and Related Services

        The Company is a leading marketer of live entertainment to fans in the markets in which it operates. For example, the Company informs fans about upcoming live events for which tickets will be available through the Company in their area through its TicketAlert email service. Fans can customize TicketAlerts to inform them about upcoming events for particular performers, teams or venues, as well as events in specified categories (Concerts, Sports, Arts and Family). The Company sent approximately 1.8 billion TicketAlert e-mails in 2009, reaching an average of approximately 34 million consumers per week. The Company also provides rich content on its various websites to promote events that it tickets, including artist pages that feature video content and biographical material.

        The Company continues to develop and introduce new initiatives, as well as enter into new relationships, in an effort to help its clients sell more tickets in more markets. The Company also offers a suite of dynamic pricing tools, such as online auctions, pursuant to which consumers bid on tickets being sold by the Company and purchase them at a price equal to the highest winning bid. For auction sales, in addition to per order "order processing" fees, the Company typically receives fees based on a percentage of the prices at which tickets are ultimately sold.

        The Company provides promotional and other related services to artists, such as the sale of tickets to members of artist fan clubs and the sale of artist fan club memberships, through its Echo business. The Company is also seeking to secure and strengthen its relationships with promoters.

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    Distribution

        The Company sells tickets online, through independent sales outlets, and via call centers. During the year ended December 31, 2009, 77%, 13%, and 10% of primary ticket sales were transacted through these channels, respectively.

        Online.    The Company owns and operates various branded websites, both in the United States and abroad, which are customized to reflect services offered in each jurisdiction. The Company's primary online ticketing website, www.ticketmaster.com, together with its other branded ticketing websites, are designed to promote ticket sales for live events and disseminate event and related merchandise information online. Consumers can access www.ticketmaster.com directly, from affiliated websites and through numerous direct links from banners and event profiles hosted by approved third party websites.

        Independent Sales Outlets.    As of December 31, 2009, the Company had approximately 6,700 "Ticket Center" independent sales outlets worldwide, approximately 1,800 of which were in the United States and approximately 4,900 of which were in various jurisdictions abroad. The majority of these independent sales outlets are located in major department, grocery and music stores, malls and, in Europe, post offices. While the Company installs and maintains the hardware and software necessary for these independent sales outlets to sell tickets, it is not generally responsible for staffing, daily operations and related costs. The Company pays independent sales outlets a commission, which averaged approximately 17% of the Company's convenience charge in 2009.

        Call Centers.    As of December 31, 2009, the Company operated 17 call centers worldwide, through which consumers can generally purchase tickets by speaking to an operator or by way of an interactive voice response system, seven days a week, for at least 22 hours per day. The Company's domestic telephone system can channel all or a portion of incoming calls from any city to a selected call center in another city or region to accommodate the commencement of sales activity for a major event in a given region, as well as provide back-up capabilities in the event a call center experiences operating difficulties.

    Artist Services

        The artist services segment primarily provides management services to music recording artists in exchange for a commission on the earnings of these artists. Artist services also sells merchandise associated with musical artists at live musical performances, to retailers and directly to consumers via the internet. The artist services segment is entirely comprised of the business of Front Line. The artist services segment is highly seasonal, with profitability related to the timing of tours and merchandise sales. Peak seasons are typically in the summer and, increasingly, in the fall leading up to the holiday season.

        The fundamental strategy, both at the inception of Front Line and currently, is to build a substantial presence in the music management and allied music services businesses through acquisition and organic growth. Through our brand "I Love All Access" we operate a successful "VIP" ticketing fan experience program. The program covers both Front Line and third party clients, and provides fans with a range of added value to the concert ticket, including possible meet and greet or photo opportunities with the artist, attending sound checks, back stage passes, meals and refreshments, merchandise items and venue parking.

        We also operate a merchandise business selling t-shirts and other apparel at concerts and through retail outlets. Other activities produce income from services provided for various marketing and sponsorship activities for artists.

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International Operations

        The Company provides primary ticket sale services in Australia, Canada, Ireland, New Zealand and the United Kingdom, primarily under the Ticketmaster brand name, and through other brand names in various other jurisdictions abroad, including Denmark (BILLETNet), Finland (Lippupalvelu), Germany (Kartenhaus), the Netherlands (Ticket Service), Norway (billettservice.no), Spain (Tic Tack Ticket), Sweden (Ticnet) and Turkey (Biletix). The Company also provides resale ticket services in Canada through TicketsNow and in the United Kingdom, Germany and the Netherlands through GET ME IN!. As of December 31, 2009, the Company has begun to exit the China market, where the Company previously operated under the Emma Entertainment brand name.

        The Company also is a party to joint ventures with third parties that provide ticket distribution services in Mexico and supplied ticketing services for the 2008 Beijing Olympic Games. The Company also licenses its technology in Brazil, Argentina and Chile.

        The number of tickets sold and revenues attributable to international operations represented approximately 42% and 27%, respectively, of total ticket sales and revenues in 2009.

Additional Information

        Company Website and Public Filings.    The Company's parent, Live Nation, maintains a website at www.livenation.com. Neither the information on the Company's website, nor the information on the website of any Ticketmaster Entertainment business, is incorporated by reference in this report, or in any other filings with, or in any information furnished or submitted to, the SEC.

        The Company makes available, free of charge through Live Nation's website, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K (including related amendments) as soon as reasonably practicable after they have been electronically filed with, or furnished to, the SEC.

Item 1A.    Risk Factors

        This Annual Report on Form 10-K contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The use of words such as "anticipates," "estimates," "expects," "projects," "intends," "plans" and "believes," among others, generally identify forward-looking statements. These forward-looking statements include, among others, statements relating to: the Company's anticipated financial performance, business prospects and, anticipated trends and prospects in the various industries in which Ticketmaster Entertainment businesses operate, new products, services and related strategies and other similar matters. These forward-looking statements are based on management's current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.

        Actual results could differ materially from those contained in the forward-looking statements included in this report for a variety of reasons, including, among others, the risk factors set forth below. Other unknown or unpredictable factors that could also adversely affect the Company's business, financial condition and results of operations may arise from time to time. In light of these risks and uncertainties, the forward-looking statements discussed in this report may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of our management as of the date of this report. The Company does not undertake to update these forward-looking statements.

        On January 25, 2010, the Company merged into a subsidiary of Live Nation, and thereby became an indirect, wholly-owned subsidiary of Live Nation. For a description of risks related to the merger and Live Nation, please see the section entitled "Risk Factors" in Live Nation's Annual Report on Form 10-K for the year ended December 31, 2009, which is incorporated by reference herein. We describe our business risk factors below.

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RISKS RELATING TO OUR BUSINESS

Live Entertainment Industry and General Economic Trends—The Company's success depends, in significant part, on entertainment, sporting and leisure events and factors adversely affecting such events could have a material adverse effect on our business, financial condition and results of operations.

        Through its ticketing segment, the Company sells tickets to live entertainment, sporting and leisure events at arenas, stadiums, theaters and other facilities. Through its artist services segment, the Company provides artist management services to over 200 clients, and derives significant revenues from touring and live concerts by these clients. Accordingly, the Company's business, financial condition and results of operations are directly affected by the popularity, frequency and location of such events. Ticket sales are sensitive to fluctuations in the number and pricing of entertainment, sporting and leisure events and activities offered by promoters, teams and facilities, and adverse trends in the entertainment; sporting and leisure event industries could adversely affect the Company's business, financial condition and results of operations. The ticketing segment relies on third parties to create and perform live entertainment, sporting and leisure events and to price tickets to such events. Accordingly, the Company's success depends, in part, upon the ability of these third parties to correctly anticipate public demand for particular events and the prices that the public is willing to pay to attend such events, as well as the availability of popular artists, entertainers and teams. Similarly, the artist services segment could be adversely affected if the artists it represents do not tour or perform as frequently as anticipated, or if such tours or performances are not as widely attended by fans as anticipated due to changing tastes, general economic conditions or otherwise.

        In addition, general economic conditions, consumer trends, work stoppages, natural disasters and terrorism could have a material adverse effect on the Company's business, financial condition and results of operations. Entertainment-related expenditures are particularly sensitive to business and personal discretionary spending levels, which tend to decline during general economic downturns. Recent market conditions have been extremely volatile and unemployment rates have risen in recent months. A protracted global recession could have a significant negative impact on the Company's business, financial condition and results of operations. Similarly, public heath issues or a health epidemic could result in the cancellation of live entertainment events or in lower attendance and ticket sales if fans choose to not attend events they would otherwise attend out of heath concerns. Recently, human cases of swine flu virus infection have been identified in the United States and internationally. If public health issues such as the swine flu were to result in the cancellation of live entertainment events or diminished ticket sales, the Company's business, financial condition and results of operations could be negatively impacted.

Third Party Relationships—The Company depends on relationships with clients and any adverse changes in these relationships could adversely affect its business, financial condition and results of operations.

        The Company's success is dependent, in significant part, on the ability of the Company's businesses to maintain and renew relationships with existing clients and to establish new client relationships. The Company anticipates that for the foreseeable future, the substantial majority of its revenues from the ticketing segment will be derived from online and offline sales of tickets. The Company also expects that revenues from primary ticketing services, which consist primarily of per ticket convenience charges and per order "order processing" fees, will continue to comprise the substantial majority of its consolidated revenues for the ticketing segment.

        In addition, as is typical of the artist management industry, certain of the Company's arrangements with clients of the artist services segment are terminable at will by either party. The loss of key artists could negatively impact the Company's business.

        While fees from management services represent slightly less than half the revenue of the Company's artist services segment, and no individual client represents more than 10% of revenue from

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management services, the loss of a number of key artists could negatively impact the Company's business. In addition, as the relationship between a manager and artist is highly personalized, the loss of a manager may also result in a loss in the artist represented by the manager, which could negatively impact the Company's business.

        The Company cannot provide assurances that its businesses will be able to maintain other existing client contracts, or enter into or maintain new client contracts, on acceptable terms, if at all, and the failure to do so could have a material adverse effect on its business, financial condition and results of operations. As explained above and in the below risk factor, the ticketing business is highly competitive. A number of competing national, regional, and local ticketing service providers are aggressively seeking to secure ticketing contracts from existing and potential clients of the Company. In addition, facilities, promoters and other potential clients are increasingly electing to self-ticket and/or distribute a growing number of tickets through client direct or other new channels, which could adversely impact the ability of the Company's businesses to secure renewals and new client contracts. The non-renewal or termination of an agreement with a major client or multiple agreements with a combination of smaller clients could have a material adverse effect on the Company's business, financial condition and results of operations.

        Another important component of the Company's success is the ability of the Company's businesses to maintain existing and build new relationships with third party distribution channels and service providers, including providers of credit card processing and delivery services, as well as advertisers, among other parties. Any adverse changes in these relationships, including the inability of these parties to fulfill their obligations to the Company's businesses for any reason, could adversely affect the Company's business, financial condition and results of operations.

Competition—The ticketing and artist services industries are highly competitive and competitors may win business away from the Company, which could adversely affect the Company's financial performance.

        The ticketing industry is highly competitive. The Company faces significant competition from other national, regional and local primary ticketing service providers to secure new and retain existing clients on a continuous basis. Additionally, the Company faces significant and increasing challenges from companies that sell self-ticketing systems and from clients who are increasingly choosing to self-ticket, through the integration of self-ticketing systems into their existing operations or the acquisition of primary ticket services providers and by increasing sales through facility box offices and season, subscription or group sales. The Company also faces competition in the resale of tickets from online auction websites and resale marketplaces and from other ticket resellers with online distribution capabilities. The intense competition that the Company faces in the ticketing industry could cause the volume of its ticketing services business to decline. The Company and Live Nation have entered into an agreement with the Anschutz Entertainment Group, Inc. ("AEG") which provides that AEG has an option to license the Company's Ticketmaster Host technology in order to ticket its owned and operated venues and ticket third party clients using such technology and the Company and Live Nation have agreed with the United States Department of Justice ("DOJ") to divest the Company's Paciolan, Inc. ticketing business, both of which will further increase the competition that the Company faces.

        In the secondary ticket sales market, the Company has restrictions on its business that are not faced by its competitors, which restrictions are both self-imposed and imposed as a result of agreements entered into by the Company with the Federal Trade Commission ("FTC") and the Attorneys General of several individual states. These restrictions primarily relate to the Company's TicketsNow business, and include a restriction on linking from the Company's page on the www.ticketmaster.com website that informs consumers that no tickets were found in response to their ticket request to its TicketsNow re-sale website without first obtaining approval from the State of New Jersey as to the exact disclosure language, architecture and functionality of such link; a prohibition on the sale of tickets to non-sporting

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events (for which tickets are being sold on Ticketmaster's website) through the TicketsNow website until the initial on-sale time at the Ticketmaster primary ticketing website; a prohibition on paid internet search advertising that would lead consumers searching for "Ticketmaster" on internet search engines to the TicketsNow website; a restriction on using or allowing its affiliates to use domain names that, among other things, contain the unique names of venues, sports teams or performers, or contain names that are substantially similar to or are misspelled versions of same; a requirement to clearly and conspicuously disclose on the TicketsNow website (or any other resale website owned by the Company, or on any primary ticketing website where a link or redirect to such a resale website is posted) that it is a resale website and ticket prices often exceed the ticket's original price; and a requirement to make certain clear and conspicuous disclosure when a ticket being offered for re-sale is not "in-hand" as well as a requirement to monitor and enforce the compliance of third parties offering tickets on the Company's websites with such disclosure requirements. The Company's competitors in the secondary ticket sales market are not, to the Company's knowledge, bound by similar restrictions. As a result, the Company's ability to effectively compete in the secondary ticket sales market, through its TicketsNow business or otherwise, may be adversely affected, which could in turn adversely affect the Company's results of operations and financial condition.

        There can be no assurance that the Company will be able to compete successfully in the future with existing or potential competitors or that competition will not have an adverse effect on its business and financial condition. Moreover, as the Company expands into new lines of businesses (including as a result of the merger with Live Nation), the Company may face direct competition, in the live music industry, with its prospective or current primary ticketing clients, who primarily include live event content providers (such as owners or operators of live event venues, promoters of concerts and sports teams, among others). This direct competition with the Company's prospective or current primary ticketing clients could result in a decline in the number of clients the Company has and a decline in the volume of its ticketing services business, which could adversely affect its business and financial condition.

        The artist services industry is also a highly competitive industry. There are numerous other music management companies and individual managers in the United States alone. The Company competes with these companies and individuals to discover new and emerging artists and to represent established acts. In addition, certain of the Company's arrangements with clients of the Company's artist services business are terminable at will by either party, leading to competition to retain those artists as clients. Competition is intense and may contribute to a decline in the volume of the Company's artist services business, which could adversely affect the Company's business and financial condition.

Covenants in the Company's debt agreements restrict the Company's business in many ways and if the Company does not effectively manage its business to comply with these covenants, its financial condition and results of operations could be adversely affected.

        The Company's senior secured credit facilities and/or the indenture governing the Ticketmaster Entertainment 10.75% Senior Notes due 2016 contain various covenants that limit the Company's ability and/or the Company's restricted subsidiaries' ability to, among other things:

    incur or assume liens or additional debt or provide guarantees in respect of obligations of other persons;

    issue redeemable stock and preferred stock;

    pay dividends or distributions or redeem or repurchase capital stock;

    prepay, redeem or repurchase debt;

    make loans and investments;

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    enter into agreements that restrict distributions from the Company's subsidiaries;

    sell assets and capital stock of the Company's subsidiaries;

    enter into certain transactions with affiliates; and

    consolidate or merge with or into, or sell substantially all of the Company's assets to, another person.

        In addition, the Company's senior secured credit facilities require it to maintain specified financial ratios. The Company's ability to meet those financial ratios can be affected by events beyond the Company's control, and the Company may be unable to meet those tests. Among other things, certain adjustments required in connection with the merger with Live Nation as a result of the Company's status as the deemed accounting acquired company may make it more difficult for the Company to comply with these financial ratios. In addition, a failure on the Company's part to maintain effective internal controls to measure compliance with these covenants could affect its ability to take corrective actions on a timely basis, and could result in its being in breach. A breach of any of these covenants could result in a default under the Company's senior secured credit facilities and/or the Company's other indebtedness. Upon the occurrence of an event of default under the Company's senior secured credit facilities, the lenders could elect to declare all amounts outstanding under the senior secured credit facilities to be immediately due and payable. If the Company were unable to repay those amounts, the lenders could proceed against the collateral granted to them to secure that indebtedness, which constitutes a significant portion of the Company's assets. If the lenders under the Company's senior secured credit facilities accelerate the repayment of borrowings, the Company may not have sufficient assets to repay its senior secured credit facilities and its other indebtedness.

        The Company's borrowings under its senior secured credit facilities are, and are expected to continue to be, at variable rates of interest and expose it to interest rate risk. If interest rates increase, the Company's debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and the Company's net income would decrease.

International Presence and Expansion—The Company's businesses operate in international markets in which the Company has limited experience. The Company's businesses may not be able to successfully expand into new, or further into existing, international markets.

        The Company provides services in various jurisdictions abroad through a number of brands and businesses that it owns and operates, as well as through joint ventures, and expects to continue to expand its international presence. The Company faces, and expects to continue to face, additional risks in the case of its existing and future international operations, including:

    political instability and unfavorable economic conditions in the markets in which the Company currently has international operations or into which its brands and businesses may expand;

    more restrictive or otherwise unfavorable government regulation of the live entertainment and ticketing industries, including the regulation of the provision of primary ticketing and ticket resale services, as well as promotional, marketing and other related services, which could result in increased compliance costs and/or otherwise restrict the manner in which the Company's businesses provide services and the amount of related fees charged for such services;

    limitations on the enforcement of intellectual property rights, which would preclude the Company from building the brand recognition upon which it has come to rely in many jurisdictions;

    limitations on the ability of foreign subsidiaries to repatriate profits or otherwise remit earnings to the Company;

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    adverse tax consequences;

    limitations on technology infrastructure, which could limit the Company's ability to migrate international operations to the Ticketmaster System, which would result in increased costs;

    lower levels of Internet usage, credit card usage and consumer spending in comparison to those in the United States; and

    difficulties in managing operations and adapting to consumer desires due to distance, language and cultural differences, including issues associated with (i) business practices and customs that are common in certain foreign countries but might be prohibited by United States law and the Company's internal policies and procedures, and (ii) management and operational systems and infrastructures, including internal financial control and reporting systems and functions, staffing and managing foreign operations, which the Company might not be able to do effectively, or if so, on a cost-effective basis.

        The Company's ability to expand its international operations into new jurisdictions, or further into existing jurisdictions will depend, in significant part, on its ability to identify potential acquisition candidates, joint venture or other partners, and enter into arrangements with these parties on favorable terms, as well as the Company's ability to make continued investments to maintain and grow existing international operations. If the revenues generated by international operations are insufficient to offset expenses incurred in connection with the maintenance and growth of these operations, the Company's business, financial condition and results of operations could be materially and adversely affected. In addition, in an effort to make international operations in one or more given jurisdictions profitable over the long term, significant additional investments that are not profitable over the short term could be required over a prolonged period.

        In addition, the ticketing industry in many jurisdictions abroad is more fragmented and local than it is in the United States. The Company's success in these markets will depend on the ability of the Company's businesses to create economies of scale by consolidating within each market geographically, which would most likely occur over a prolonged period, during which significant investments in technology and infrastructure would be required. In the case of expansion through organic growth, the Company could face substantial barriers to entry in new markets, and barriers impeding expansion within existing markets, due primarily to the risks and concerns discussed above, among others.

Foreign Currency Risks—The Company faces risks and uncertainties related to foreign currency exchange rate fluctuations.

        To the extent that costs and prices for services are established in local currencies and adjusted to U.S. dollars based on then-current exchange rates, the Company will be exposed to foreign exchange rate fluctuations. After accounting for such fluctuations, the Company may be required to record significant gains or losses, the amount of which will vary based on then-current exchange rates, which could cause its results to differ materially from expectations. As the Company continues to expand its international presence, its exposure to exchange rate fluctuations will increase, which may have a negative impact on its financial results.

Changing Customer Requirements and Industry Standards—The Company's businesses may not be able to adapt quickly enough to changing customer requirements and industry standards.

        The e-commerce industry is characterized by evolving industry standards, frequent new service and product introductions and enhancements and changing customer demands. The Company's businesses may not be able to adapt quickly enough and/or in a cost-effective manner to changes in industry standards and customer requirements and preferences, and their failure to do so could adversely affect the Company's business, financial condition and results of operations. In addition, the continued

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widespread adoption of new Internet or telecommunications technologies and devices or other technological changes could require the Company's businesses to modify or adapt their respective services or infrastructures. The failure of the Company's businesses to modify or adapt their respective services or infrastructures in response to these trends could render their existing websites, services and proprietary technologies obsolete, which could adversely affect the Company's business, financial condition and results of operations.

        In addition, the Company is currently in the process of migrating its international brands and businesses to the Ticketmaster System in an attempt to provide consistent and state-of-the-art services across its businesses and to reduce the cost and expense of maintaining multiple systems, which the Company may not be able to complete in a timely or cost-effective manner. Delays or difficulties in implementing the Ticketmaster System, as well as any new or enhanced systems, may limit the Company's ability to achieve the desired results in a timely manner. Also, the Company may be unable to devote financial resources to new technologies and systems in the future, which could adversely affect its business, financial condition and results of operations.

Compliance with Laws, Rules and Regulations—The Company's failure to comply with existing laws, rules and regulations as well as changing laws, rules and regulations and other legal uncertainties, could adversely affect the Company's business, financial condition and results of operations.

        Since the Company's businesses sell tickets and provide related services to consumers through a number of different online and offline channels, they are subject to a wide variety of statutes, rules, regulations, policies and procedures in various jurisdictions in the United States and abroad, which are subject to change at any time. For example, the Company's businesses conduct marketing activities via the telephone and/or through online marketing channels, which activities are governed by numerous federal and state regulations, such as the Telemarketing Sales Rule, state telemarketing laws and the CAN-SPAM Act, among others. The Company's businesses are also subject to laws, rules and regulations applicable to providers of primary ticketing and ticket resale services, which in some cases regulate the amount of transaction and other fees that they may be charged in connection with primary ticketing sales and/or the ticket prices that may be charged in the case of ticket resale services. New legislation of this nature is introduced from time to time in various (and is pending in certain) jurisdictions in which the Company's businesses sell tickets and provide services. For example, several U.S. states and cities, Canadian provinces, the United Kingdom and certain European countries prohibit the resale of tickets at prices greater than the original face price (in the case of certain jurisdictions, without the consent of the venue) and/or prohibit the resale of tickets to certain types of events. The Company's various businesses have recently been named as defendants in several purported class action lawsuits and other actions and investigations alleging violations of these types of laws. The failure of the Company's businesses to comply with these laws and regulations could result in fines and/or proceedings against the Company by governmental agencies and/or consumers, which if material, could adversely affect its business, financial condition and results of operations. In addition, the promulgation of new laws, rules and regulations that restrict or otherwise unfavorably impact the ability or manner in which the Company's businesses provide primary ticketing and ticket resale services would require the Company's businesses to change certain aspects of their business, operations and client relationships to ensure compliance, which could decrease demand for services, reduce revenues, increase costs and/or subject the Company to additional liabilities.

        In addition, the application of various domestic and international sales, use, value-added and other tax laws, rules and regulations to the Company's historical and new products and services is subject to interpretation by applicable taxing authorities. While the Company believes that it is compliant with current tax provisions, taxing authorities may take a contrary position and such positions may adversely affect its business, financial condition and results of operations.

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        From time to time, federal, state and local authorities and/or consumers commence investigations, inquiries or litigation with respect to compliance by the Company and its businesses with applicable consumer protection, advertising, unfair business practice, antitrust (and similar or related laws) and other laws. The Company's businesses have historically cooperated with authorities in connection with these investigations and have satisfactorily resolved each such material investigation, inquiry or litigation. The Company and its TicketsNow business are currently subject to agreements with the States of New Jersey and Illinois and the United States Federal Trade Commission which govern, and in certain cases place limitations on, the Company's ticketing resale practices. The Company's competitors in the secondary ticket sales market are not, to the Company's knowledge, bound by such limitations and as a result, the Company may be at a competitive disadvantage. Other states and Canadian provinces have commenced investigations or inquiries regarding the relationship between the Company and TicketsNow. The Company has incurred significant legal expenses in connection with the defense of governmental investigations and litigation in the past and will be required to incur additional expenses in the future regarding such investigations and litigation. In the case of antitrust (and similar or related) matters, any adverse outcome could limit or prevent the Company's businesses from engaging in the ticketing business generally (or in a particular market thereof) or subject them to potential damage assessments, all of which could have a material adverse effect on the Company's business, financial condition and results of operations. See Part I, Item 3 "Legal Proceedings" of this report for a description of certain current legal proceedings involving the Company.

Maintenance of Systems and Infrastructure—The Company's success depends, in part, on the integrity of the Company's systems and infrastructures. System interruption and the lack of integration and redundancy in these systems and infrastructures may have an adverse impact on the Company's business, financial conditions and results of operations.

        The Company's success depends, in part, on the Company's ability to maintain the integrity of the Company's systems and infrastructure, including websites, information and related systems, call centers and distribution and fulfillment facilities. System interruption and the lack of integration and redundancy in the Company's information systems and infrastructures may adversely affect the Company's ability to operate websites, process and fulfill transactions, respond to customer inquiries and generally maintain cost-efficient operations. The Company may experience occasional system interruptions that make some or all systems or data unavailable or prevent its businesses from efficiently providing services or fulfilling orders. The Company lacks documentation regarding certain components of its key ticketing software and systems operations and relies on certain key technology personnel to maintain such software and systems; the loss of some or all of such personnel could require the Company to expend additional resources to continue to maintain such software and systems and could subject the Company to frequent systems interruptions. The Company also relies on affiliate and third-party computer systems, broadband and other communications systems and service providers in connection with the provision of services generally, as well as to facilitate, process and fulfill transactions. Any interruptions, outages or delays in its systems and infrastructures, its businesses, its affiliates and/or third parties, or deterioration in the performance of these systems and infrastructures, could impair the ability of the Company's businesses to provide services, fulfill orders and/or process transactions. Fire, flood, power loss, telecommunications failure, hurricanes, tornadoes, earthquakes, acts of war or terrorism, acts of God and similar events or disruptions may damage or interrupt computer, broadband or other communications systems and infrastructures at any time. Any of these events could cause system interruption, delays and loss of critical data, and could prevent the Company's businesses from providing services, fulfilling orders and/or processing transactions. While the Company's businesses have backup systems for certain aspects of their operations, disaster recovery planning by its nature cannot be sufficient for all eventualities. In addition, the Company may not have adequate insurance coverage to compensate for losses from a major interruption. If any of these

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adverse events were to occur, it could adversely affect the Company's business, financial conditions and results of operations.

        In addition, any penetration of network security or other misappropriation or misuse of personal consumer information could cause interruptions in the operations of the Company's businesses and subject the Company to increased costs, litigation and other liabilities. Network security issues could lead to claims against the Company for other misuse of personal information, such as for unauthorized purposes or identity theft, which could result in litigation and financial liabilities, as well as administrative action from governmental authorities. Security breaches could also significantly damage the Company's reputation with consumers and third parties with whom the Company does business. It is possible that advances in computer capabilities, new discoveries, undetected fraud, inadvertent violations of company policies or procedures or other developments could result in a compromise of information or a breach of the technology and security processes that are used to protect consumer transaction data. As a result, current security measures may not prevent any or all security breaches. The Company may be required to expend significant capital and other resources to protect against and remedy any potential or existing security breaches and their consequences. The Company also faces risks associated with security breaches affecting third parties with which it is affiliated or otherwise conducts business online. Consumers are generally concerned with security and privacy of the Internet, and any publicized security problems affecting the Company's businesses and/or those of third parties may discourage consumers from doing business with the Company, which could have an adverse effect on the Company's business, financial condition and results of operations.

Privacy—The processing, storage, use and disclosure of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights.

        In the processing of consumer transactions, the Company's businesses receive, transmit and store a large volume of personally identifiable information and other user data. The sharing, use, disclosure and protection of this information are governed by the privacy and data security policies maintained by the Company and its businesses. Moreover, there are federal, state and international laws regarding privacy and the storing, sharing, use, disclosure and protection of personally identifiable information and user data. Specifically, personally identifiable information is increasingly subject to legislation and regulations in numerous jurisdictions around the world, the intent of which is to protect the privacy of personal information that is collected, processed and transmitted in or from the governing jurisdiction. The Company could be adversely affected if legislation or regulations are expanded to require changes in business practices or privacy policies, or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect its business, financial condition and results of operations.

        The Company's businesses may also become exposed to potential liabilities as a result of differing views on the privacy of consumer and other user data collected by these businesses. The Company's failure, and/or the failure by the various third party vendors and service providers with which the Company does business, to comply with applicable privacy policies or federal, state or similar international laws and regulations or any compromise of security that results in the unauthorized release of personally identifiable information or other user data could damage the reputation of these businesses, discourage potential users from trying the Company's products and services and/or result in fines and/or proceedings by governmental agencies and/or consumers, one or all of which could adversely affect the Company's business, financial condition and results of operations.

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Intellectual Property—The Company may fail to adequately protect its intellectual property rights or may be accused of infringing intellectual property rights of third parties.

        The Company may fail to adequately protect its intellectual property rights or may be accused of infringing intellectual property rights of third parties. The Company regards its intellectual property rights, including patents, service marks, trademarks and domain names, copyrights, trade secrets and similar intellectual property (as applicable) as critical to its success. The Company's businesses also rely heavily upon software codes, informational databases and other components that make up their products and services.

        The Company relies on a combination of laws and contractual restrictions with employees, customers, suppliers, affiliates and others to establish and protect these proprietary rights. Despite these precautions, it may be possible for a third party to copy or otherwise obtain and use trade secret or copyrighted intellectual property without authorization which, if discovered, might require legal action to correct. In addition, third parties may independently and lawfully develop substantially similar intellectual properties.

        The Company has generally registered and continues to apply to register, or secure by contract when appropriate, its trademarks and service marks as they are developed and used, and reserves and registers domain names as it deems appropriate. The Company generally considers the protection of its trademarks to be important for purposes of brand maintenance and reputation. While the Company vigorously protects its trademarks, service marks and domain names, effective trademark protection may not be available or may not be sought in every country in which products and services are made available, and contractual disputes may affect the use of marks governed by private contract. Similarly, not every variation of a domain name may be available or be registered, even if available. The failure of the Company to protect its intellectual property rights in a meaningful manner or challenges to related contractual rights could result in erosion of brand names and limit its ability to control marketing on or through the Internet using its various domain names or otherwise, which could adversely affect its business, financial condition and results of operations.

        Some of the Company's businesses have been granted patents and/or have patent applications pending with the United States Patent and Trademark Office and/or various foreign patent authorities for various proprietary technologies and other inventions. The Company considers applying for patents or for other appropriate statutory protection when it develops valuable new or improved proprietary technologies or identifies inventions, and will continue to consider the appropriateness of filing for patents to protect future proprietary technologies and inventions as circumstances may warrant. The status of any patent involves complex legal and factual questions, and the breadth of claims allowed is uncertain. Accordingly, any patent application filed may not result in a patent being issued or existing or future patents may not be adjudicated valid by a court or be afforded adequate protection against competitors with similar technology. In addition, third parties may create new products or methods that achieve similar results without infringing upon patents that the Company owns. Likewise, the issuance of a patent to the Company does not mean that its processes or inventions will not be found to infringe upon patents or other rights previously issued to third parties.

        From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of the trademarks, copyrights, patents and other intellectual property rights of third parties. In addition, litigation may be necessary in the future to enforce the Company's intellectual property rights, protect trade secrets or determine the validity and scope of proprietary rights claimed by others. Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of management and technical resources, any of which could adversely affect the Company's business, financial condition and results of operations. Patent litigation tends to be particularly protracted and expensive.

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Key Employees—Failure to attract and retain key employees could adversely impact the Company's business.

        In order to be successful, the Company must attract and retain talented executives and other key employees, including those in managerial, technical, sales, marketing and support positions. The Company's businesses require individuals with relevant experience and diverse skill sets, and the market for these personnel is highly competitive. The failure to attract employees with the requisite skills and abilities to the Company, or the loss of key employees could adversely impact the Company's ability to meet key objectives, such as the timely and effective development and delivery of products and services, and could otherwise have a significant impact on the Company's operations.

Brand Recognition—Failure to maintain brand recognition and attract and retain customers in a cost-effective manner could adversely affect the Company's business, financial condition and results of operations.

        Maintaining and promoting the Ticketmaster and www.ticketmaster.com (and related international) brand names and, to a lesser extent, the www.ticketsnow.com, www.ticketweb.com, www.museumtix.com and www.tmvista.com (and related international) brand names, is critical to the ability of the Company's businesses to attract consumers and business customers to their respective websites and other distribution channels. The Company believes that the importance of brand recognition will increase, given the growing number of online ticketing services due to relatively low barriers to entry to providing online content and services. Accordingly, the Company has spent, and expects to continue to spend, increasing amounts of money on, and devote greater resources to, branding and other marketing initiatives, including search engine optimization techniques and paid search engine marketing, neither of which may be successful or cost-effective. The failure of the Company's businesses to maintain the recognition of their respective brands and to attract and retain consumers in a cost-effective manner could adversely affect the Company's business, financial condition and results of operations.

Acquisitions—The Company may experience operational and financial risks in connection with acquisitions. In addition, some of the businesses acquired by the Company may incur significant losses from operations or experience impairment of carrying value.

        The Company's growth may depend upon future acquisitions and depends, in part, on the Company's ability to successfully integrate historical acquisitions. The Company may experience operational and financial risks in connection with acquisitions. To the extent that the Company continues to grow through acquisitions, it will need to:

    successfully integrate the operations, as well as the accounting, financial controls, management information, technology, human resources and other administrative systems, of acquired businesses with existing operations and systems;

    retain the clients of the acquired businesses;

    retain and integrate key personnel at acquired businesses; and

    successfully manage acquisition-related resource demands on its management, operations and financial resources and/or those of acquired businesses.

        The Company may not be successful in addressing these challenges or any others encountered in connection with recent and future acquisitions and the failure to do so could adversely affect its business, financial condition and results of operations. The anticipated benefits of one or more acquisitions may not be realized and future acquisitions could result in potentially dilutive issuances of equity securities and/or contingent liabilities. Also, the value of goodwill and other intangible assets acquired could be impacted by one or more unfavorable events or trends, which could result in impairment charges. The occurrence of any of these events could adversely affect the Company's business, financial condition and results of operations. In addition, the Company may choose to substantially reduce or discontinue the operations of any of its acquired businesses if it is unsuccessful

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in meeting these challenges. Any such shut-down could expose the Company to expenses associated with exiting from existing contracts and terminating employees, and could expose the Company to certain unknown liabilities that arise following the shut-down.

        Through certain acquisitions, such as the acquisitions of TicketsNow, Emma Entertainment, Echo, GET ME IN! and Front Line, the Company entered into aspects, and through future acquisitions may enter into aspects, of the ticketing and/or entertainment industries in which it had not previously participated directly. Acquisitions of this nature could adversely affect relationships with new and potential clients to the extent that clients view the interests of acquired businesses, or those of the Company overall following the completion of any such acquisitions, as competing with or diverging from their own, which could adversely impact the Company's relationships with its clients and its ability to attract new clients. This would adversely affect the Company's business, financial condition and results of operations.

Future Capital Needs—The Company may have future capital needs and may not be able to obtain additional financing on acceptable terms.

        In connection with the Company's spin-off from IAC, the Company incurred indebtedness of approximately $765.0 million. The Company has since paid down $23.0 million of its indebtedness, while also drawing down an additional $70.0 million from its revolving credit facility. The Company's future capital needs may include funds necessary to develop new services or to enhance its existing services, to complete acquisitions or to otherwise take advantage of business opportunities or respond to competitive pressures.

        These arrangements and current market conditions may limit the Company's ability to secure additional financing in the future on favorable terms or at all. The Company's ability to secure additional financing and satisfy the Company's financial obligations under indebtedness outstanding from time to time will depend upon the Company's future operating performance, which is subject to then prevailing general economic and credit market conditions, including interest rate levels and the availability of credit generally, and financial, business and other factors, many of which are beyond the Company's control. The prolonged continuation or worsening of current credit market conditions would have a material adverse effect on the Company's ability to secure financing on favorable terms, if at all.

        The Company may be unable to secure additional financing or financing on favorable terms or its operating cash flow may be insufficient to satisfy its financial obligations under indebtedness outstanding from time to time (if any). Furthermore, if financing is not available when needed, or is available on unfavorable terms, the Company may be unable to develop new services or enhance its existing services, complete acquisitions or otherwise take advantage of business opportunities or respond to competitive pressures, any of which could have a material adverse effect on its business, financial condition and results of operations. If additional funds are raised through the issuance of equity securities, the Company's stockholders may experience significant dilution.

Goodwill Impairment—Impairment of the Company's goodwill could negatively affect the Company's financial results and financial condition.

        In accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), the Company tests goodwill and indefinite-lived intangible assets for impairment annually, or more frequently if events or changes in circumstances indicate that the assets might be impaired. If the carrying amount of the Company's goodwill exceeds its implied fair value, an impairment loss equal to the excess is recorded. During the year ended December 31, 2008, the Company recognized a total non-cash charge of $1.1 billion related to the impairment of goodwill of its ticketing reporting unit. As of December 31, 2009, the Company had goodwill of approximately $482.3 million, which constituted approximately 27% of its total assets at that date. Due to the volatile stock market, the current economic uncertainty and

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other factors, the Company cannot provide assurance that remaining goodwill will not be further impaired in future periods. Impairment may result from, among other things, a significant decline in its expected cash flows, an adverse change in the business climate and slower growth rates in its industry. If the Company is required to record an impairment charge for its goodwill in the future, this would adversely impact its financial condition and financial results.


RISKS RELATING TO OUR SPIN-OFF FROM IAC

If our spin-off from IAC, or one or more of the spin-offs of three other IAC subsidiaries from IAC that occurred on the same date, were to fail to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, the Company may be subject to significant tax liabilities.

        In connection with IAC's spin-off of each of the Company and certain other former businesses of IAC, each of which is referred to as a Spinco, IAC received a private letter ruling from the IRS regarding the qualification of these spin-offs as transactions that are generally tax-free for U.S. federal income tax purposes. IAC's spin-off of each of the Spincos is referred to collectively as the IAC spin-offs. IAC also received an opinion of counsel regarding certain aspects of the transaction that were not covered by the private letter ruling. Notwithstanding the IRS private letter ruling and opinion of counsel, the IRS could determine that one or more of the IAC spin-offs should be treated as a taxable distribution if it determines that any of the representations, statements or assumptions or undertakings that were included in the request for the IRS private letter ruling are false or have been violated or if it disagrees with the conclusions in the opinion of counsel that are not covered by the IRS ruling. In addition, if any of the representations, statements or assumptions upon which the opinion of counsel was based were or become inaccurate, the opinion may be invalid.

        If any of the IAC spin-offs were to fail to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, then IAC would incur material income tax liabilities for which the Company could be liable. Under applicable federal income tax rules, the Company is severally liable for any federal income taxes imposed on IAC with respect to taxable periods during which the Company was a member of IAC's consolidated federal income tax return group, including the period in which the IAC spin-offs were consummated. Under the Tax Sharing Agreement that the Company entered into with IAC and the other Spincos, the Company generally is required to indemnify IAC and the other Spincos for any taxes resulting from the Company's spin-off to the extent such amounts resulted from (i) any act or failure to act by the Company described in the covenants in the Tax Sharing Agreement, (ii) any acquisition of equity securities or assets of the Company or (iii) any breach by the Company of any representation or covenant contained in the separation documents or in the documents relating to the IRS private letter ruling and/or tax opinions. Corresponding indemnification provisions also apply to the other Spincos. The Company is entitled to indemnification from IAC, among other things, if, the Company is liable for, or otherwise required to make a payment in respect of, a the Company spin-off tax liability for which the Company is not responsible under the Tax Sharing Agreement and, if applicable, is unable to collect from the Spinco responsible for such liability under the Tax Sharing Agreement. The Company's ability to collect under these indemnity provisions would depend on the financial position of the indemnifying party.

Certain transactions in IAC, the Company, or other Spinco equity securities could cause one or more of the IAC spin-offs to be taxable to IAC and may give rise to indemnification obligations of the Company under the Tax Sharing Agreement.

        Current U.S. federal income tax law creates a presumption that any of the IAC spin-offs would be taxable to IAC if it is part of a "plan or series of related transactions" pursuant to which one or more persons acquire directly or indirectly stock representing a 50% or greater interest (by vote or value) in IAC or a Spinco (including the Company). Acquisitions that occur during the four-year period that begins two years before the date of a spin-off are presumed to occur pursuant to a plan or series of

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related transactions, unless it is established that the acquisition is not pursuant to a plan or series of transactions that includes the spin-off.

        These rules limit the Company's ability during the two-year period following the Company's spin-off to enter into certain transactions that might be advantageous to the Company and its stockholders, particularly issuing equity securities to satisfy financing needs, repurchasing equity securities, and, under certain circumstances, acquiring businesses or assets with equity securities or agreeing to be acquired. Under the Tax Sharing Agreement, there are restrictions on the Company's ability to take such actions for a period of 25 months from the day after the date of the Company's spin-off. Entering into the merger agreement with Live Nation did not violate these restrictions because, prior to entering into the agreement, the Company provided IAC with an unqualified opinion of tax counsel contemplated by the Tax Sharing Agreement and IAC confirmed that the opinion was satisfactory to IAC.

        In addition to actions of IAC and the Spincos (including the Company), certain transactions that are outside their control and therefore not subject to the restrictive covenants contained in the Tax Sharing Agreement, such as a sale or disposition of the stock of IAC or the stock of a Spinco by certain persons that own five percent or more of any class of stock of IAC or a Spinco could have a similar effect on the tax-free status of a spin-off as transactions to which IAC or a Spinco is a party. As of the date of the Company's spin-off, Liberty Media and certain of its affiliates, in the aggregate, owned IAC stock representing approximately 61.6% by vote and 29.9% by value and, immediately subsequent to the Company's spin-off, owned stock of each Spinco representing approximately 29.9% by vote and value. Accordingly, in evaluating the Company's ability to engage in certain transactions involving its equity securities, the Company will need to take into account the activities of Liberty Media and its affiliates.

        As a result of these rules, even if each IAC spin-off otherwise qualifies as a transaction that is generally tax-free for U.S. federal income tax purposes, transactions involving Spinco or IAC equity securities (including transactions by certain significant stockholders) could cause IAC to recognize taxable gain with respect to the stock of the Spinco as described above. Although the restrictive covenants and indemnification provisions contained in the Tax Sharing Agreement are intended to minimize the likelihood that such an event will occur, one or more of the IAC spin-offs may become taxable to IAC as a result of transactions in IAC or Spinco equity securities. As discussed previously, the Company could be liable for such taxes under the Tax Sharing Agreement or under applicable federal income tax rules.

        In connection with the merger with Live Nation, the Company received (i) two unqualified opinions of tax counsel (one dated as of the date of execution of the definitive merger agreement and one dated as of the closing date of the merger) that the transaction as contemplated in the definitive merger agreement will not have an adverse tax effect on the Company's spin-off, and (ii) IAC's written acknowledgement that the closing date opinion was in form and substance satisfactory to IAC. However, the IRS may disagree with the conclusions in these opinions of counsel and determine that the merger caused the Company's spin-off to be taxable to IAC. Were this to occur and that position were sustained, the Company would be required to make material indemnification payments to IAC.

The spin-off agreements were not the result of arm's length negotiations.

        The agreements that the Company entered into with IAC and the other Spincos in connection with the spin-offs, including the Separation and Distribution Agreement, Tax Sharing Agreement, Employee Matters Agreement and Transition Services Agreement, were established by IAC, in consultation with the Spincos, with the intention of maximizing the value to current IAC's shareholders. Accordingly, the terms for the Company may not be as favorable as would have resulted from negotiations among unrelated third parties.

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Item 1B.    Unresolved Staff Comments

    None.

Item 2.    Properties

        The Company's principal executive offices are those of its parent, Live Nation, located at 9348 Civic Center Drive, Beverly Hills, California; its corporate operating offices are located at 8800 W. Sunset Blvd., West Hollywood, California, where the Company currently leases approximately 82,000 square feet from IAC. The Company also leases office space in various cities throughout the United States and in the various jurisdictions abroad in which it has operations pursuant to short- and long-term leases of adequate duration. In addition, the Company owns a small plot of land outside of Albuquerque, New Mexico. The Company believes that its facilities are adequate in the locations where it currently does business.

        The following table shows the location, approximate square footage, use and related business segment of each of the material principal properties used by the Company. All such properties are leased.

Location
  State (U.S.) or Country   Approximate Square Footage   Use   Segment

West Hollywood

  California     81,547   Office building   Corporate

Los Angeles

  California     54,532   Office building   Artist Services

Pharr

  Texas     41,736   Office building, call center   Ticketing

Los Angeles

  California     37,055   Office building   Ticketing

Crystal Lake

  Illinois     35,496   Office building   Ticketing

Scottsdale

  Arizona     32,000   Office building, data center   Ticketing

Irvine

  California     31,720   Office building   Ticketing

London

  United Kingdom     31,700   Office building   Ticketing

Item 3.    Legal Proceedings

        In the ordinary course of business, the Company is a party to various legal proceedings, including those noted in this section. The Company establishes reserves for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Management has also identified certain other legal matters where it believes an unfavorable outcome is not probable and, therefore, no reserve is established. Although management currently believes that an unfavorable resolution of claims against the Company, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on the liquidity, results of operations or financial condition of the Company, these matters are subject to inherent uncertainties and management's view of these matters may change in the future. It is possible that an unfavorable outcome of one or more of these lawsuits could have a material impact on the liquidity, results of operations, or financial condition of the Company. The Company also evaluates other contingent matters, including tax contingencies, to assess the probability and estimated extent of potential loss. See Item 15. Exhibits and Financial Statement Schedules—Note 8—Income Taxes to the Consolidated Financial Statements for discussion related to income tax contingencies. Except as expressly noted herein, the Company intends to vigorously defend or prosecute all pending legal matters.

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    UPS Consumer Class Action Litigation

        On October 21, 2003, a purported representative action was filed in California state court, challenging Ticketmaster Entertainment's charges to online customers for UPS ticket delivery. The complaint alleged in essence that it is unlawful for Ticketmaster Entertainment not to disclose on its website that the fee it charges to online customers to have their tickets delivered by UPS contains a profit component. The complaint asserted a claim for violation of California's Unfair Competition Law ("UCL"), codified at California Business and Professions Code section 17200 et seq., and sought restitution or disgorgement of the difference between (i) the total UPS delivery fees charged by Ticketmaster Entertainment in connection with online ticket sales during the applicable statute of limitations period, and (ii) the amount Ticketmaster Entertainment paid to UPS for that service.

        On July 20, 2004, Ticketmaster Entertainment filed a motion for summary judgment. The Court heard the motion on December 20, 2004, and denied Ticketmaster Entertainment's motion, in part, based on Plaintiffs' arguments that they were not challenging Ticketmaster Entertainment's rights to make a profit, but instead were only challenging Ticketmaster Entertainment's UPS delivery charges based on Plaintiffs' "misleading pass-through" theory of liability.

        On December 7, 2004, Ticketmaster Entertainment filed its first motion for judgment on the pleadings based on the passage of Proposition 64, which became effective in November 2004. Plaintiffs opposed the motion. The Court heard the motion on April 1, 2005, and explained that Plaintiffs could not proceed with a representative action without amending the complaint to comply with class action procedures.

        On August 31, 2005, the plaintiffs filed their first amended complaint, for the first time pleading this case as a putative class action. The first amended complaint alleged (i) as before, that Ticketmaster Entertainment's website disclosures in respect of its charges for UPS ticket delivery violate the UCL, and (ii) for the first time, that Ticketmaster Entertainment's website disclosures in respect of its ticket order-processing fees constitute false advertising in violation of California's False Advertising Law ("FAL"), codified at California Business and Professions Code sections 17500 et seq. On this latter claim, the amended complaint seeks restitution or disgorgement of the entire amount of order-processing fees charged by Ticketmaster Entertainment during the applicable statute of limitations period.

        On September 25, 2006, Ticketmaster Entertainment filed their second motion for judgment on the pleadings, which the plaintiffs opposed. On November 21, 2006, Ticketmaster Entertainment requested that the court stay the case pending the California Supreme Court's decisions in two cases (In re Tobacco II Cases, 142 Cal. App. 4th 891 (2006), and Pfizer Inc. v. Superior Court (Galfano), 141 Cal. App. 4th 290 (2006)) that present issues concerning the interpretation of Proposition 64 that are directly pertinent to both of the pending motions. The plaintiffs opposed Ticketmaster Entertainment's request. On November 29, 2006, the court ordered that the case be stayed pending the California Supreme Court's ruling on the two cases referenced above.

        On September 20, 2007, the Court heard Plaintiffs' motion for class certification. On December 19, 2007, the Court issued an Order denying the motion without prejudice and continuing the stay of the case pending resolution of In re Tobacco II (the lead case before the Supreme Court on the relevant issues).

        On May 18, 2009, the California Supreme Court decided the Tobacco II case. On April 1, 2009, the Court granted plaintiff's motion for leave to file a Second Amended Complaint that purports to clarify plaintiff's existing claims under the UCL and FAL and adds new claims that (a) Ticketmaster Entertainment's order processing fees are unconscionable under the UCL and (b) Ticketmaster Entertainment's alleged business practices violate the "unlawful" prong of the UCL because they also allegedly constitute an underlying violation of California's Consumer Legal Remedies Act (codified at

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California Civil Code sections 1750 et seq.). Ticketmaster Entertainment filed a demurrer to the Second Amended Complaint on May 8, 2009. Plaintiffs filed a Third Amended Complaint to attempt to cure deficiencies in the Second Amended Complaint and to seek to address the California Supreme Court's holding in Tobacco II. Ticketmaster Entertainment filed a demurrer to the Third Amended Complaint on July 3. The court overruled Ticketmaster Entertainment's demurrers on October 20, 2009. Plaintiffs filed their second class certification motion on August 31, 2009, which Ticketmaster Entertainment opposed on September 21, 2009. On February 5, 2010, the court granted certification of a class as to the first two causes of action (which allege that Ticketmaster Entertainment misrepresents/omits the fact that there is a profit component in its UPS and Order Processing Fees). The class will consist of California consumers who purchased tickets through Ticketmaster Entertainment's website from 1999 to the present. The court denied certification of a class on the third and fourth causes of action, which allege that Ticketmaster Entertainment's UPS and Order Processing fees are unconscionably high. The parties are awaiting a formal order from the court.

    Canadian Consumer Class Action Litigation Relating to TicketsNow

        In February of 2009, five putative consumer class action complaints were filed in Canada against TNow Entertainment Group, Inc. ("TicketsNow"), Ticketmaster Entertainment, Ticketmaster Canada Ltd. ("Ticketmaster Canada") and Premium Inventory, Inc. All of the cases allege essentially the same set of facts and causes of action: each plaintiff purports to represent a class consisting of all persons who purchased a ticket from Ticketmaster Entertainment, Ticketmaster Canada or TicketsNow from early February of 2007 to the present. Each proposed class purports to extend to United States as well as Canadian consumers. The complaints allege in essence that Ticketmaster Entertainment and Ticketmaster Canada conspired to divert a large number of tickets for resale through the TicketsNow website at prices higher than face value in violation of Ontario's Ticket Speculation Act, the Amusement Act of Manitoba, the Amusement Act of Alberta, and the Quebec Consumer Protection Act, respectively. The Ontario case contains the additional allegation that Ticketmaster Entertainment and TicketsNow's service fees run afoul of anti-scalping laws. Each lawsuit seeks compensatory and punitive damages on behalf of the class.

    United States Consumer Class Action Litigation Relating to TicketsNow

        From February through June of 2009, eleven purported class action lawsuits asserting causes of action under various state consumer protection laws were filed against Ticketmaster Entertainment and TicketsNow in District Courts in California, New Jersey, Minnesota, Pennsylvania and North Carolina. The lawsuits allege that Ticketmaster Entertainment and TicketsNow unlawfully deceived consumers by, among other things, selling large quantities of tickets to TicketsNow's ticket brokers, either prior to or at the time that tickets for an event go on sale, thereby forcing consumers to purchase tickets at significantly marked-up prices on TicketsNow.com instead of Ticketmaster.com. Plaintiffs further claim that Ticketmaster Entertainment violated various state consumer protection laws by allegedly "redirecting" consumers from Ticketmaster.com to Ticketsnow.com, thereby engaging in false advertising and an unfair business practice by deceiving consumers into inadvertently purchasing tickets from TicketsNow for amounts greater than face value. Plaintiffs claim that Ticketmaster Entertainment has been unjustly enriched by this conduct and seek compensatory damages, a refund to every class member of the difference between face value and the amount paid to TicketsNow, an injunction preventing Ticketmaster Entertainment from engaging in further unfair business practices with TicketsNow, and attorney fees and costs. On July 20, 2009, all of the cases were consolidated and transferred to the Central District of California. Plaintiffs filed their consolidated class action complaint on September 25, 2009. Ticketmaster Entertainment filed its answer on October 26, 2009.

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    Litigation Relating to the Merger with Live Nation

        Ticketmaster Entertainment and each of its directors have been named as defendants in two lawsuits filed in the Superior Court of California, Los Angeles County (the "Court"), challenging the merger: McBride v. Ticketmaster Entertainment, Inc., No. BC407677, and Police and Fire Retirement System of the City of Detroit v. Ticketmaster Entertainment, Inc., No. BC408228. These actions were consolidated under the caption In re Ticketmaster Entertainment Shareholder Litigation, Lead Case No. BC407677, by a court order dated March 30, 2009. The plaintiffs filed an amended complaint in the consolidated action on July 2, 2009, a second amended complaint on September 10, 2009, and a third amended complaint on November 19, 2009, which superseded the earlier complaints. The third amended consolidated complaint generally alleges that Ticketmaster Entertainment and its directors breached their fiduciary duties by entering into the Merger Agreement without regard to the fairness of its terms to the Ticketmaster Entertainment stockholders and in return for illicit payments of "surplus" Live Nation stock. The third amended consolidated complaint also alleges that the joint proxy statement/prospectus of Live Nation and Ticketmaster Entertainment, which is a part of the final Form S-4 Registration Statement of Live Nation that was filed with the SEC on November 6, 2009, contains material omissions and misstatements. Plaintiffs moved for a preliminary injunction barring the completion of the merger on December 4, 2009. The Court denied this motion in a hearing on December 22, 2009. The Ticketmaster Entertainment and Live Nation shareholders, respectively, approved the merger in shareholder meetings held on January 8, 2010. Plaintiffs continue to prosecute the case, now seeking compensatory damages, attorneys' fees and expenses. The Ticketmaster Entertainment Defendants answered the third amended consolidated complaint on January 21, 2010, denying its allegations and asserting defenses.

    Federal Trade Commission Investigation

        Ticketmaster Entertainment and TicketsNow have entered into a settlement agreement with the Federal Trade Commission ("FTC") to resolve the FTC's investigation of methods by which Ticketmaster Entertainment and TicketsNow previously advertised and sold tickets to consumers on the TicketsNow resale marketplace. Pursuant to a Stipulated Final Judgment dated February 18, 2010, Ticketmaster Entertainment and TicketsNow will make restitutionary payments to certain consumers claiming to be unsatisfied with ticket purchases made from the TicketsNow online resale marketplace, as well as additional disclosures (1) when linking between primary and resale ticket sites and (2) pertaining to the issue of speculative ticket postings and anticipated ticket delivery dates.

Item 4.    Submission of Matters to a Vote of Security Holders

        Omitted pursuant to General Instruction I(2)(c) to Form 10-K.

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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities

        The common stock of Ticketmaster Entertainment, Inc., our predecessor corporation, was listed on the Nasdaq Stock Market, Inc. ("NASDAQ") under the ticker symbol "TKTM" from August 12, 2008 until January 25, 2010. The following table sets forth the intra-day high and low prices per share for our common stock during the periods indicated:

Quarter Ended
  High   Low  

September 30, 2008 (beginning August 12)

  $ 27.00   $ 9.52  

December 31, 2008

  $ 13.33   $ 3.33  

March 31, 2009

  $ 7.22   $ 3.42  

June 30, 2009

  $ 8.23   $ 3.60  

September 30, 2009

  $ 12.90   $ 5.49  

December 31, 2009

  $ 13.00   $ 9.26  

        As of January 25, 2010, Live Nation is the indirect owner of all the common equity in the Company, and there is no public market for the common equity of the Company.

        Any distributions in respect of the ownership interests of the Company (the limited liability company equivalent of a dividend in respect of the common stock of a corporation) will depend on our earnings, capital requirements, financial condition and other factors considered relevant by Live Nation as our sole owner (subject to restrictions in the documents governing our indebtedness). There are restrictions on our ability to pay dividends under our senior secured credit facility.

        During the quarter ended December 31, 2009, the Company did not issue or sell any shares of its common stock or other equity securities pursuant to unregistered transactions. The Company did not purchase any shares of its common stock during the quarter ended December 31, 2009.

Item 6.    Selected Financial Data

        Omitted pursuant to General Instruction I(2)(a) to Form 10-K.

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

GENERAL

Forward-Looking Statements

        Forward-looking statements in this Annual Report on Form 10-K are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or other public statements. Forward-looking statements include the information regarding future financial performance, business prospects and strategy, as well as anticipated financial position, liquidity and capital needs and other similar matters, in each case relating to the Company.

        Statements preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "intends," "projects," "estimates," "plans," "may increase," "may fluctuate," and similar expressions or future or conditional verbs such as "will," "should," "would," "may" and "could" are generally forward-looking in nature and not historical facts. You should understand that the following important factors could affect future results and could cause actual results to differ materially from those expressed in such forward-looking statements:

    our recently-completed merger with Live Nation;

    adverse changes in economic conditions generally, including the current worldwide economic downturn, or in any of the markets or industries in which the businesses of the Company operate;

    changes in senior management at the Company;

    adverse changes to, or interruptions in, relationships with third parties;

    changes affecting the ability of the Company to efficiently maintain and grow the market share of its various brands, as well as to extend the reach of these brands through a variety of distribution channels and to attract new (and retain existing) customers;

    consumer acceptance of new products and services offered by the Company;

    the rates of growth of the Internet and the e-commerce industry;

    changes adversely affecting the ability of the Company to adequately expand the reach of its businesses into various international markets, as well as to successfully manage risks specific to international operations and acquisitions, including the successful integration of acquired businesses;

    regulatory legislative and legal actions and conditions affecting the Company, including:

    the promulgation of new, and/or the amendment of existing laws, rules and regulations applicable to the Company and its businesses;

    changes in the application or interpretation of existing laws, rules and regulations in the case of the businesses of the Company. In each case, laws, rules and regulations include, among others, those relating to sales, use, value-added and other taxes, software programs, consumer protection and privacy, intellectual property, the Internet and e-commerce; and

    the outcome of pending and future legal proceedings to which the Company is a party;

    competition from other companies;

    changes adversely affecting the ability of the Company and its businesses to adequately protect intellectual property rights, as well as to obtain licenses or other rights with respect to

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      intellectual property in the future, which may or may not be available on favorable terms (if at all);

    the substantial indebtedness of the Company and the possibility that the Company may incur additional indebtedness;

    third-party claims alleging infringement of intellectual property rights by the Company or its businesses, which could result in the expenditure of significant financial and managerial resources, injunctions or the imposition of damages, as well as the need to enter into formal licensing or other similar arrangements with such third parties, which may or may not be available on favorable terms (if at all);

    the Company's ability to successfully implement expense reduction measures; and

    natural disasters, acts of terrorism, war or political instability.

        Certain of these factors and other factors, risks and uncertainties are discussed in Part I, Item 1A of this Annual Report on Form 10-K. Other unknown or unpredictable factors may also cause actual results to differ materially from those projected by the forward-looking statements. Most of these factors are difficult to anticipate and are generally beyond the control of the Company.

        You should consider the areas of risk described above, as well as those set forth in Part I, Item 1A of this Annual Report on Form 10-K, in connection with considering any forward-looking statements that may be made by the Company generally. Except for the ongoing obligations of the Company to disclose material information under the federal securities laws, the Company does not undertake any obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless required to do so by law.

Spin-off from IAC/InterActive Corp

        On July 1, 2008, the Board of Directors of IAC/InterActiveCorp ("IAC") approved a plan to separate IAC into five separate, publicly traded companies via the distribution of all of the outstanding shares of the common stock of four wholly-owned subsidiaries (the "Spincos"), including the Company.

        On August 20, 2008, IAC distributed to its stockholders all of the outstanding shares of common stock, par value $0.01 per share, of Ticketmaster Entertainment (the "Spin-off"). The Company's businesses include the businesses that formerly comprised IAC's Ticketmaster segment, which included IAC's domestic and international ticketing and ticketing related businesses, subsidiaries and investments, excluding the Company's ReserveAmerica subsidiary and its investment in Active.com. At the time of the Spin-off, the Company included IAC's minority investment in Front Line. On October 29, 2008, the Company acquired an additional equity interest in Front Line, giving the Company a controlling interest in Front Line. As a result, the Company consolidated the results of Front Line from the acquisition date.

        Upon completion of the Spin-off (and for a short period prior to that, on a "when issued" basis), the Company's shares began trading on The Nasdaq Global Select Market ("NASDAQ") under the symbol "TKTM." In conjunction with the Spin-off, the Company completed the following transactions: (1) extinguished all intercompany receivable balances due from IAC and its subsidiaries, which totaled $604.4 million, by recording a non-cash distribution to IAC, (2) recapitalized the invested equity balance with common stock, whereby holders of IAC stock received one fifth of a share of Ticketmaster Entertainment common stock for each share of common and class B common stock of IAC held, as described in our Post Effective Amendment No. 1 to Form S-1 (Commission File Number 333-152702) filed with the Securities and Exchange Commission ("SEC") on August 20, 2008, and (3) distributed $752.9 million in cash to IAC in connection with the Company's separation from IAC, which included the net proceeds of $723.6 million from a combination of privately issued debt

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securities and bank borrowings. Refer to Item 15. Exhibits and Financial Statement Schedules—Note 9—Long-Term Debt.

Merger with Live Nation

        On February 10, 2009, the Company entered into a definitive agreement to merge with Live Nation, Inc. The merger with Live Nation was completed on January 25, 2010 (the "Merger"). As part of the Merger, among other things, (i) Ticketmaster Entertainment, which up to that time was a Delaware corporation named Ticketmaster Entertainment, Inc. ("Old Ticketmaster"), merged into an indirect, wholly-owned subsidiary of Live Nation ("Merger Sub"), (ii) Merger Sub continued as the surviving entity and Old Ticketmaster ceased to exist, (iii) Merger Sub was renamed Ticketmaster Entertainment LLC, a single member limited liability company with an indirect, wholly-owned subsidiary of Live Nation as its sole member, (iv) each issued and outstanding share of common stock of Old Ticketmaster was converted into 1.4743728 shares of common stock of Live Nation plus cash in lieu of any fractional shares, and (v) Live Nation changed its name to Live Nation Entertainment, Inc. As a result, Ticketmaster Entertainment is now an indirect, wholly-owned subsidiary of Live Nation, and Live Nation remains a publicly-traded company with its shares listed on the New York Stock Exchange under the symbol "LYV." See Item 15. Exhibits and Financial Statement Schedules—Note 3—Merger with Live Nation to the Consolidated Financial Statements for a more detailed discussion related to the Merger.

Basis of Presentation

        These consolidated financial statements present our results of operations, financial position, temporary equity and equity, comprehensive income and cash flows on a consolidated basis. The consolidated financial statements include the Company's investment in Front Line, which was consolidated beginning on October 29, 2008, when the Company increased its ownership interest from 39.4% to 82.3% (approximately 75% on a diluted basis). Prior to October 29, 2008, the investment in Front Line was accounted for using the equity method of accounting.

        We prepared the consolidated financial statements from the historical results of operations and historical basis of the assets and liabilities of the Company with the exception of income taxes. We computed income taxes using our stand-alone tax rate. Our income tax payable as well as deferred tax assets and liabilities represent the estimated impact of filing a consolidated income tax return with IAC through the Spin-off, and filing a standalone consolidated income tax return thereafter. We eliminated all significant intercompany transactions and accounts for periods prior to the Spin-off.

        Until the Spin-off, we recorded expense allocations from IAC, which consisted of certain IAC general corporate overhead expenses, based on the ratio of our revenue as a percentage of IAC's total revenue. The general corporate overhead allocations primarily included expenses relating to accounting, treasury, legal, tax, corporate support, human resource functions and internal audit. Since the Spin-off, we have been performing these functions using our own resources or purchased services, including services purchased from IAC pursuant to the transitional services agreement among IAC and the Spincos.

        The historical financial statements are based on certain assumptions about the Company as a stand-alone company. Our management believes the assumptions underlying the historical consolidated financial statements of the Company are reasonable. However, this financial information does not necessarily reflect what the historical financial position, results of operations and cash flows of the Company would have been if the Company had been a stand-alone company during the entire period presented.

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Management Overview

        The Company is the world's leading live entertainment ticketing and marketing company based on the number of tickets sold, providing ticket sales, ticket resale services, marketing and distribution through www.ticketmaster.com, one of the largest e-commerce sites on the Internet, approximately 6,700 independent sales outlets and 17 call centers worldwide. The Company serves leading arenas, stadiums, professional sports franchises and leagues, college sports teams, performing arts venues, museums and theaters in the United States and abroad, including Australia, Canada, China, Denmark, Finland, Germany, Ireland, the Netherlands, New Zealand, Norway, Spain, Sweden, Turkey and the United Kingdom. The Company is also a party to joint ventures with third parties to provide ticket distribution services in Mexico and supplied ticketing services for the 2008 Beijing Olympic Games. The Company licenses its technology in Mexico, Argentina, Brazil, Chile and China.

Sources of Revenue

Ticketing

        The Company earns a majority of its revenue from primary ticketing on behalf of its clients. Ticketing operations revenue primarily consists of convenience and order processing fees generated primarily through ticket sales. The sale of tickets for an event often commences several months prior to the event performance date. The Company recognizes revenue from the sale of a ticket when the ticket is sold. Fluctuations in ticket operations revenue occur largely as a result of changes in the number of tickets sold and the average revenue per ticket. The number of tickets sold varies as a result of (i) additions or losses of clients serviced by the Company; (ii) fluctuations in the scheduling of events, particularly for popular performers; (iii) overall consumer demand for live entertainment events; and (iv) the percentage of tickets for events which are sold directly by clients. The average revenue per ticket varies as a result of the amount of convenience charges earned on each ticket. The amount of convenience charges typically varies based upon numerous factors, including the face price of the ticket, the type of event, whether the ticket is purchased at an independent sales outlet, through call centers or via our websites, as well as the services to be rendered to the client.

Artist Services

        Front Line secures work for the clients it represents, for which it receives a commission. Generally, commissions are payable by clients upon their receipt of payments for performance of services or upon the delivery or use of materials that they created. Revenue is recognized in the month of the artist event. Contingent commissions, such as those based on profits or gross receipts, are recorded upon determination of the amounts. Revenue is not recognized before persuasive evidence of an arrangement exists, services have been rendered, the amount to be received is fixed or determinable, and collectability is reasonably assured.

        Other revenues consist of revenues from the sales of entertainment packages to consumers in connection with live performances. Entertainment packages are sold and cash is received from consumers in advance of the event. Revenue and related expenses incurred are deferred until the event occurs. In addition, Front Line sells entertainment related merchandise at live musical performances, to retailers, and directly to consumers via a website. For retail and Internet sales, revenue is recognized upon shipment of the merchandise. Touring revenue, including the sale of merchandise, is recognized in the month of the event.

Operating Costs

        The Company records ticket operations costs specifically associated with the distribution of tickets sold through its system. The largest components of these operating costs are royalties paid to clients as a share of convenience and order processing fees, credit card fees, payroll, telecommunication and data

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communication costs associated with the Company's call centers, commissions paid on tickets distributed through independent sales outlets away from the box office, and other expenses including ticket stock and postage. These costs are primarily variable in nature. Direct payroll costs relate to our call centers. Outlet commissions are paid to music chains, department stores and other independent retail locations in exchange for their providing space and personnel to service ticket purchases. The participation, if any, by clients in the Company's revenue from convenience and order processing fees is set forth in our contracts with its clients.

Channels of Distribution; Marketing Costs

        The Company sells tickets online, through independent sales outlets, call centers and via mobile devices. During the year ended December 31, 2009, 77%, 13%, 10% and less than 1% of primary tickets were sold through these channels, respectively.

        The Company owns and operates various branded websites, both in the U.S. and abroad, which are customized to reflect services offered in each jurisdiction and designed to promote ticket sales for live events and disseminate event, performer and related merchandise information online. Consumers can access www.ticketmaster.com directly from affiliated websites and through numerous direct links from banners and event profiles hosted by approved third party websites.

        As of December 31, 2009, the Company had approximately 6,700 independent sales outlets worldwide, including approximately 1,800 in the United States and approximately 4,900 in various jurisdictions abroad. The Company pays independent sales outlets a commission, which averaged approximately 17% of our convenience charge in 2009.

        As of December 31, 2009, the Company operated 17 call centers worldwide through which consumers can generally purchase tickets by telephone, or by way of an interactive voice response system, seven days a week, for at least 22 hours per day.

        The Company markets and offers services directly to customers through www.ticketmaster.com and its other branded websites allowing customers to transact directly with us in a convenient manner. The Company also pays fees to market and distribute services on third party distribution channels, such as Internet portals and search engines. In addition, some of the Company's businesses manage affiliate programs, pursuant to which they pay commissions and fees to third parties based on revenue earned. The Company has made, and expects to continue to make, investments in online and offline advertising to build its brands and drive traffic to its businesses.

        Clients routinely agree by contract to include the Company's name, logos, and applicable website address and charge-by-phone number in advertisements in all forms of media promoting the availability of their tickets. The Company's brand name and logo are also prominently displayed on printed tickets, ticket envelopes and email alerts about upcoming events that we sends to its customers.

Access to Supply

        The Company's primary ticketing services, and to a lesser extent, its ticketing resale services, depend significantly upon our ability to secure ticketing inventory through existing clients and new clients. The Company believes that the ability of its ticketing clients to reach a large qualified audience through its brands and businesses, including through its multiple distribution channels, is a significant benefit. The Company seeks to maintain and renew client contracts, and enter into new client contracts, on a favorable basis.

Economic and Other Trends and Events; Industry Specific Factors

        The ticketing services industry has experienced significant changes over the past decade due to the advent of online commerce. The increase in the number of online ticket sales as a percentage of all

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ticket sales has resulted in a general decrease in ticketing costs, making it easier for clients to manage ticket sales in-house, either using proprietary technology or stand-alone, automated ticketing systems licensed from a third party. The growth of online commerce has also contributed to the growth of resale ticketing services and the consolidation of those services, which historically has been very fragmented, consisting of a significant number of local brokers with limited inventory selling through traditional storefronts. In addition, entertainment-related expenditures such as ticket sales are sensitive to business and personal discretionary spending levels, which might tend to decline during general economic downturns.

        The Company has taken steps to increase revenue from new markets and opportunities. These include a number of discrete investments including new acquisitions, efforts to gain scale in the market for ticket resale services and adding resources into growth efforts internationally, which come with up-front costs.

        In 2008, the Company began a comprehensive review of its worldwide cost structure in the light of significant investments that have been made through increased operating and capital expenditures, acquisitions in recent periods, and in advance of the termination of the Live Nation ticketing agreement in 2009. As a result of this review, the Company began to effect a series of actions to reduce annual operating expenses from reductions in personnel, consolidation of customer contact centers, and reductions in other operating and discretionary costs. The cost-reduction efforts were completed in the first quarter of 2009, resulting in estimated reductions in operating expenses of approximately $54.2 million in fiscal 2009.

Live Nation Merger Concessions

        On January 25, 2010, the Merger Agreement was approved by the DOJ after the Company and Live Nation agreed to concessions required by the DOJ. The DOJ required, among other concessions, that the Company divest its Paciolan primary ticketing business to Comcast-Spectacor, L.P., or another acceptable buyer, and that the Company license its proprietary Ticketmaster Host Platform to AEG. For the year ended December 31, 2009, Paciolan contributed revenue, operating income and net income to the Company of $40.9 million, $8.6 million and $6.1 million, respectively. The Company recognized approximately $126.8 million of revenue under its ticketing contracts with AEG in 2009. The Company expects that 2010 results will be negatively impacted by the aforementioned Merger concessions.

International Operations

        The Company's future growth depends in part on its ability to expand its brands and businesses abroad, including in Europe and Asia, given the large consumer marketplace for the services that our brands and businesses offer. The Company's ability to expand its international operations into jurisdictions where we do not currently operate depends in part on its ability to identify potential acquisition candidates, acquire them on favorable terms and successfully integrate their operations. In addition, in many countries abroad, access to ticketing inventory is fragmented and may require significant additional investment to achieve profitability levels consistent with the Company's established businesses. As a percentage of total revenue, international operations represented approximately 27% in 2009, 31% in 2008 and 34% in 2007.

Emma Entertainment

        The Company provides primary ticket sales and promotions in China under the Emma Entertainment brand name. For the year ended December 31, 2009, the Company recorded total revenues of $8.7 million, an operating loss of $24.0 million, and a net loss of $19.7 million relating to Emma Entertainment. In the fourth quarter of 2009, the Company decided to exit the Emma Entertainment business in China due to the poor results realized in 2009 and ongoing concerns surrounding the strategic outlook in the Chinese market. The Company expects to wind down and substantially exit the business in the first quarter of 2010.

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Results of Operations for the Years Ended December 31, 2009, 2008 and 2007

Ticketmaster Entertainment Consolidated Results of Operations

Revenue

 
   
   
   
  % Change  
 
  Years Ended December 31,  
 
  2009 vs. 2008   2008 vs. 2007  
 
  2009   2008   2007  
 
  (Dollars in thousands)
   
   
 

Revenue:

                               
 

Ticketing

  $ 1,294,381   $ 1,408,820   $ 1,240,477     -8 %   14 %
 

Artist services

    191,786     45,705         NM     NM  
                           
   

Total Revenue

  $ 1,486,167   $ 1,454,525   $ 1,240,477     2 %   17 %
                           

NM: Not meaningful

Consolidated

        Revenue in 2009 increased $31.6 million, or 2%, from 2008 primarily due to contributions from Front Line, in which the Company acquired a majority interest in October 2008, partially offset by lower ticketing revenue attributable to the Company's largest client through 2008, Live Nation (including its subsidiary, House of Blues) following the expiration on December 31, 2008 of the principal agreement for primary ticketing services to Live Nation.

        Revenue in 2008 increased $214.0 million, or 17%, from 2007 primarily due to contributions from acquisitions completed in the year ended December 31, 2008. Excluding the impact of the acquisitions, ticketing revenue grew due to higher revenue per ticket, partially offset by a decline in the number of tickets.

Ticketing

        Revenue for the ticketing segment decreased $114.4 million, or 8%, from 2008 primarily due to the above mentioned lower ticketing revenue attributable to Live Nation. On a world-wide basis, there was an 8% decrease in the number of primary tickets sold, while average revenue per ticket decreased by less than 1%. Excluding the impact of Live Nation, there was a 2% decrease in the number of primary tickets sold and a 3% increase in the average revenue per ticket. Domestic revenue for ticketing decreased $61.8 million, or 6%, from 2008 primarily due to an 8% decrease in the number of primary tickets sold, partially offset by an increase in the average revenue per ticket of less than 1%. The decrease in domestic ticketing volumes was primarily attributable to a decline in the Concerts category due to the expiration of the principal agreement for primary ticketing with Live Nation. Excluding the impact of Live Nation, there was a 5% increase in the number of primary tickets sold domestically. In addition, revenue from resale ticketing declined $11.1 million, or 9%, from 2008 primarily due to a decline in the TicketsNow business. The decrease in revenue from TicketsNow was partially offset by additional resale ticketing revenue attributable to the Company's NFL Ticket Exchange business. International ticketing revenue decreased $52.6 million, or 12%, from 2009 primarily due to a 9% decrease in the number of primary tickets sold along with a 2% decrease in average revenue per ticket in the Company's international operations. The decrease in the number of tickets sold was driven primarily by declines in the Concerts and Sports categories. The decrease in the average revenue per ticket is due largely to the volatility of foreign exchange rates. Excluding the $38.5 million negative impact of foreign exchange rates, international revenue decreased by 3% compared to the prior year, primarily due to sales declines in the Netherlands, China, Australia and Canada, partially offset by higher revenue in the United Kingdom, Spain, Sweden and Ireland.

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        Revenue for the ticketing segment in 2008 increased $168.3 million, or 14%, from 2007 primarily due to contributions from TicketsNow and Paciolan, acquired in February and January 2008, respectively, and a 3% higher average revenue per primary ticket worldwide. These increases were partially offset by a 2% decline in the number of primary tickets sold worldwide. Domestic revenue for ticketing grew by 17% due primarily to the TicketsNow and Paciolan acquisitions mentioned above. Excluding acquisitions, domestic revenue increased slightly primarily due to a 4% increase in average revenue per ticket. The increase in the average revenue per ticket was partially offset by a 3% decline in the number of primary tickets, with the largest declines in the Concerts and Family categories. International revenue grew by 6%, or approximately 8% excluding the $5.2 million negative impact of foreign exchange, primarily due to a 2% increase in average revenue per ticket. The increases in the average revenue per ticket primarily resulted from increased revenue from China (Emma Entertainment acquired in August 2007), Canada and Spain. Acquisitions contributed approximately $138.1 million to worldwide revenue growth in the ticketing segment in 2008.

        The Company's largest client through 2008, Live Nation (including its subsidiary House of Blues), represented approximately 5%, 13% and 17% of its consolidated revenue for the years ended December 31, 2009, 2008 and 2007, respectively.

Artist Services

        On October 29, 2008, the Company acquired additional equity interests in Front Line, giving the Company a controlling interest in the business. Prior to the acquisition, the Company did not have a presence in the artist services businesses. Subsequent to the acquisition, the Company consolidated the results of Front Line and began reporting a separate artist services segment. Artist services focuses on artist management, merchandising, VIP ticketing and related artist marketing services activities.

        Revenue for the artist services segment increased $146.1 million from 2008 as a result of a full year of consolidated operations in 2009. The core artist management group contributed $90.9 million primarily from touring performances by artists under Front Line's management. Revenue from merchandising, VIP ticketing and other marketing services contributed $100.9 million of revenue in 2009.

        Revenue for the artist services segment in 2008 totaled $45.7 million from the acquisition date, driven by strong touring revenue from its core artist management roster. Strong retail sales by the merchandise business also contributed to revenue for the period. As the Company did not acquire a controlling interest in Front Line until October 29, 2008, artist services did not exist as a separate segment for 2007.

Cost of Sales

 
   
   
   
  % Change  
 
  Years Ended December 31,  
 
  2009 vs. 2008   2008 vs. 2007  
 
  2009   2008   2007  
 
  (Dollars in thousands)
   
   
 

Cost of sales:

                               
 

Ticketing

  $ 812,962   $ 907,583   $ 766,538     -10 %   18 %
 

Artist Services

    83,190     20,306         NM     NM  
                           
   

Total Cost of sales

  $ 896,152   $ 927,889   $ 766,538     -3 %   21 %
                           

As a percentage of total revenue

    60 %   64 %   62 %   (349 )bp   200 bp

Gross margins

    40 %   36 %   38 %   349 bp   (200 )bp

NM: Not meaningful

bp: Basis point

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Consolidated

        Cost of sales consists primarily of ticketing royalties, as well as compensation and other employee-related costs (including stock-based compensation) for personnel engaged in call center functions and credit card processing fees. Ticketing royalties relate to the Company's client's share of convenience and order processing charges. In the artist services segment, merchandise inventory, related shipping costs and costs associated with VIP ticket packages are recorded as cost of sales.

        Cost of sales in 2009 decreased $31.7 million, or 3%, from 2008, primarily due to a decrease in compensation and other employee-related costs, a decrease in ticketing royalties and credit card processing fees, a decline in ticketing and shipping variable costs, and a decrease in call center operation costs. Partially offsetting these decreases in cost of sales, artist services had higher costs as a result of a full year of operations in 2009.

        Cost of sales in 2008 increased $161.4 million, or 21%, from 2007, primarily due to an increase in compensation and other employee-related costs, increases in ticketing royalties and higher credit card processing fees. Included in these increases was the impact of acquisitions of $93.3 million not in the prior year, which impacted ticketing royalties, compensation and other employee-related costs, credit card processing fees and other variable costs. Other variable costs include merchandise costs and express delivery and shipping costs. Excluding the impact of acquisitions not in the prior year period, cost of sales increased $68.1 million, or 9%, from 2007.

Ticketing

        Ticketing cost of sales in 2009 decreased $94.6 million, or 10%, from 2008, primarily due to a decrease of $22.5 million in compensation and other employee-related costs, a decrease of $17.5 million in ticketing royalties, an $11.5 million decrease in costs related to call center operations, a decline of $8.4 million in ticketing and shipping variable costs and a decrease of $6.2 million in credit card processing fees. The decrease in compensation and employee-related costs was due in part to a reduction in headcount. The decrease in ticketing royalties and credit card processing fees was primarily due to the lower convenience and processing revenues. The cost savings from call center operations was due to lower volume and customer calls handled by call centers, as well as the Company's focus on increased efficiencies and reducing overall expenses. The decrease in ticketing and shipping variable costs was due to the decline in ticketing sales volume.

        Ticketing cost of sales in 2008 increased $141.0 million, or 18%, from 2007, primarily due to an increase of $39.2 million in compensation and other employee-related expenses, an increase of $18.3 million in ticketing royalties, and an increase of $5.7 million in credit card processing fees. The increase in compensation and employee-related costs was primarily due to an increase in headcount, which was partially the result of acquisitions in the current year. The higher ticketing royalties expense was primarily due to higher convenience and processing revenue and higher royalty rates. The increase in credit card processing fees was due to the increased volume of ticketing sales. Included in these increases was the impact of acquisitions not in the prior year period, which contributed $25.0 million, $7.5 million, $3.0 million and $37.4 million to compensation and other employee-related costs, credit card processing fees, ticketing royalties, and other variable costs, respectively. Excluding the impact of acquisitions not in the prior year period, cost of sales increased $47.8 million, or 6%, from 2007.

Artist Services

        Cost of sales for the artist services segment increased $62.9 million from 2008 as a result of a full year of consolidated operations in 2009. Merchandise inventory costs and related shipping costs represented $66.2 million of the total cost of sales. The remaining $17.0 million of costs are related to royalties and fulfillment costs for VIP ticket packages.

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        Cost of sales in 2008 for Front Line equaled $20.3 million due primarily to $14.3 million in sales of merchandise inventory and related shipping costs. The remaining $6.0 million of costs are related to royalties and fulfillment costs for VIP ticket packages. As the Company did not acquire a controlling interest in Front Line until October 29, 2008, artist services did not exist as a separate segment for 2007.

Selling and marketing expense

 
   
   
   
  % Change  
 
  Years Ended December 31,  
 
  2009 vs. 2008   2008 vs. 2007  
 
  2009   2008   2007  
 
  (Dollars in thousands)
   
   
 

Selling and marketing expense:

                               
 

Ticketing

  $ 94,657   $ 102,631   $ 43,487     -8 %   NM  
 

Artist Services

                NM     NM  
                           
   

Total selling and marketing

                               
     

expense

  $ 94,657   $ 102,631   $ 43,487     -8 %   NM  
                           

As a percentage of total revenue

    6 %   7 %   4 %   (69 )bp   355 bp

NM: Not meaningful

bp: Basis point

        Selling and marketing expense consists primarily of advertising and promotional expenditures and compensation and other employee-related costs (including stock-based compensation) for personnel engaged in customer service and sales functions. Advertising and promotional expenditures primarily include online marketing, including fees paid to search engines and distribution partners, as well as offline marketing, including sports sponsorship marketing and radio spending. Selling and marketing expenses are incurred only for the ticketing segment and do not impact the artist services segment.

        Selling and marketing expense in 2009 decreased $8.0 million, or 8%, from 2008, primarily due to a decrease of $4.1 million in advertising and promotional expenditures and a decrease of $1.5 million in compensation and other employee-related costs. The decrease in advertising and promotional expenditures was due, in part, to a decrease in sports sponsorship marketing expense and fees paid to search engine partners for online marketing. The decrease in compensation and employee-related costs was due in part to a reduction in headcount.

        Selling and marketing expense in 2008 increased $59.1 million from 2007, primarily due to increased advertising and promotional expenditures of $47.8 million and increased compensation and other employee-related costs of $8.6 million as the Company continued to build out its worldwide infrastructure. These increases included the impact of acquisitions in 2008, which contributed $25.9 million and $6.4 million to advertising and promotional expenditures and compensation and other employee-related costs, respectively. The increase in advertising and promotional expenditures was due, in part, to an increase in sports sponsorship agreements intended to promote the Company's ticket resale services and fees paid to search engine partners for online marketing. Excluding the impact of acquisitions not in the prior year period, selling and marketing expense increased $25.3 million, or 58%.

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General and administrative expense

 
   
   
   
  % Change  
 
  Years Ended December 31,  
 
  2009 vs. 2008   2008 vs. 2007  
 
  2009   2008   2007  
 
  (Dollars in thousands)
   
   
 

General and administrative expense:

                               
 

Ticketing

  $ 100,056   $ 93,505   $ 78,448     7 %   19 %
 

Artist Services

    66,629     10,567         NM     NM  
 

Corporate and unallocated

    104,652     85,982     71,030     22 %   21 %
                           
   

Total General and administrative

                               
     

expense

  $ 271,337   $ 190,054   $ 149,478     43 %   27 %
                           

As a percentage of total revenue

    18 %   13 %   12 %   519 bp   102 bp

NM: Not meaningful

bp: Basis point

Consolidated

        General and administrative expense consists primarily of compensation and other employee-related costs (including stock-based compensation) for personnel engaged in finance, legal, tax, human resources and executive management functions, facilities costs and fees for professional services.

        General and administrative expense in 2009 increased $81.3 million, or 43%, from 2008, primarily due to increases of $30.8 million in compensation and other employee-related costs and $29.6 million in professional fees. The increase in compensation and other employee-related costs was primarily due to $42.9 million of additional Front Line compensation, partially offset by cost savings from the Company's restructuring plan. The additional Front Line compensation is a result of the Company including Front Line for the full 2009 year compared to the partial period in 2008. General and administrative expense includes non-cash and stock-based compensation expense of $23.7 million in 2009 compared to $21.2 million in 2008. The increase in non-cash compensation was primarily due to the continued expensing of awards granted in prior years and new awards granted to employees in the current year, partially offset by charges in the prior year for modifications of existing stock-based compensation awards in connection with the Spin-off from IAC. The increase in professional fees was primarily due to $32.2 million of legal and professional fees incurred in connection with the Merger, partially offset by lower costs for other professional services. Excluding the impacts of Front Line, stock-based compensation costs and Merger related professional fees, general and administrative expense decreased $9.5 million, or 5%.

        General and administrative expense in 2008 increased $40.6 million, or 27%, from 2007, primarily due to increases of $27.4 million in compensation and other employee-related costs, $4.3 million in facilities costs and $3.2 million in professional fees. The increase in compensation and other employee-related costs was primarily due to an increase of $16.2 million associated with acquisitions not in the prior year period. Of the $16.2 million attributable to acquisitions, $10.9 million is related to acquisitions in the ticketing segment and $5.3 million is related to the acquisition of Front Line. Excluding the impact of acquisitions not in the prior-year period, general and administrative expense increased $10.4 million, or 7%. This increase was driven by higher severance costs incurred in connection with the previously announced cost reduction plan, public company costs incurred subsequent to the Spin-off and increased non-cash compensation expense. General and administrative expense includes non-cash compensation expense of $21.2 million in 2008 compared with $10.9 million in 2007. The increase in non-cash compensation was primarily due the modification of existing

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stock-based compensation awards, new awards granted in connection with the Company's Spin-off and the grants of awards in connection with 2008 acquisitions.

Goodwill impairment

        In 2008, the Company recognized a non-cash, pre-tax charge of $1.1 billion related to the impairment of goodwill in its ticketing segment. The impairment, which was indicated by the Company's 2008 annual impairment testing of goodwill, reflected the decline in the Company's share price since the Spin-off from IAC and recent uncertain economic conditions. No impairment charge was recorded for the years ended December 31, 2009 and 2007.

Adjusted EBITDA

        Adjusted EBITDA is a supplemental measure to GAAP and is defined in "—Ticketmaster Entertainment's Principles of Financial Reporting," below.

 
   
   
   
  % Change  
 
  Years Ended December 31,  
 
  2009 vs. 2008   2008 vs. 2007  
 
  2009   2008   2007  
 
  (Dollars in thousands)
   
   
 

Adjusted EBITDA:

                               
 

Ticketing

  $ 288,076   $ 312,949   $ 356,125     -8 %   -12 %
 

Artist services

    55,999     16,985         NM     NM  
 

Corporate and unallocated

    (96,238 )   (72,252 )   (62,579 )   33 %   15 %
                           
   

Total Adjusted EBITDA

  $ 247,837   $ 257,682   $ 293,546     -4 %   -12 %
                           

NM: Not meaningful

        Adjusted EBITDA in 2009 decreased $9.8 million, or 4%, from 2008, primarily due to lower sales volumes, increases in Merger related professional fees and a $8.7 million negative impact of foreign currency exchange rates, partially offset by contributions from Front Line, lower cost of sales and selling and marketing expense, discussed above. Excluding the impact of the Merger related professional fees, Adjusted EBITDA increased $22.4 million, or 9%.

        Adjusted EBITDA in 2008 decreased $35.9 million, or 12%, from 2007, primarily due to increases in cost of sales, selling and marketing expense and general and administrative expense. The increase in these expenses was driven by acquisitions and increased losses associated with strategic investments, particularly in Germany and Asia, and higher overall royalty rates. Excluding the impact of acquisitions in the ticketing segment not in the prior-year period, Adjusted EBITDA decreased $84.9 million, or 29%.

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Other (expense) income, net

 
   
   
   
  % Change  
 
  Years Ended December 31,  
 
  2009 vs. 2008   2008 vs. 2007  
 
  2009   2008   2007  
 
  (Dollars in thousands)
   
   
 

Other (expense) income:

                               
 

Interest income

  $ 2,392   $ 13,926   $ 33,065     -83 %   -58 %
 

Interest expense

    (63,518 )   (39,216 )   (1,003 )   62 %   NM  
 

Equity in income of unconsolidated affiliates

    3,872     2,659     6,301     46 %   -58 %
 

Impairment of long-term investments

    (9,914 )   (12,334 )       -20 %   NM  
 

Other income

    9,172     4,914     1,120     87 %   NM  
                           
   

Total Other (expense) income

  $ (57,996 ) $ (30,051 ) $ 39,483     93 %   NM  
                           

NM: Not meaningful

Interest income

        Interest income in 2009 decreased $11.5 million, or 83%, from 2008 primarily due to the extinguishment of interest-bearing intercompany receivables from IAC upon consummation of the Company's Spin-off and lower average interest rates.

        Interest income in 2008 decreased $19.1 million, or 58%, from 2007, primarily due to lower intercompany receivable balances due from IAC and subsidiaries and the extinguishment of intercompany receivables from IAC upon consummation of the Spin-off along with lower average interest rates.

Interest expense

        Interest expense in 2009 increased $24.3 million, or 62%, from 2008, primarily due to incremental interest expense and amortization of debt issuance costs of $33.3 million related to the Company's Notes and senior secured credit facilities, partially offset by an $8.3 million cumulative interest charge from IAC in 2008 and lower interest related to capital leases.

        Interest expense in 2008 increased $38.2 million from 2007, primarily due to interest expense and amortization of debt issuance costs of $28.1 million related to the previously mentioned Notes and senior secured credit facilities, and the previously mentioned $8.3 million cumulative interest charge from IAC.

Equity in income of unconsolidated affiliates

        Equity in income of unconsolidated affiliates in 2009 increased $1.2 million, or 46%, from 2008 primarily due to the negative performance of the Company's joint venture in China (the "China Investment") which impacted the prior year, partially offset by the absence of equity in the income of Front Line in the current year as the Company acquired a majority interest in Front Line in October 2008.

        Equity in income of unconsolidated affiliates in 2008 decreased $3.6 million, or 58%, from 2007 due to lower income earned from the Company's investments in Front Line and Ticketmaster Mexico as well as negative performance of the China Investment. Income related to the investment in Front Line was recorded on an equity method of accounting prior to October 29, 2008.

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Impairment of long-term investments

        In 2009, the Company recorded total charges of $9.9 million related to two of its investments in unconsolidated affiliates. A charge of $3.8 million was recorded for its cost investment in Broadway China Ventures ("BCV") to write down the investment to its estimated fair value. In addition, a charge of $6.1 million was recorded for its equity investment in the China Investment to write down the investment to its fair value. See Item 15. Exhibits and Financial Statement Schedules—Note 13—Investments in Unconsolidated Affiliates to the Consolidated Financial Statements for a more detailed discussion of the impairment charges.

        In 2008, the Company recorded $12.3 million of charges related to the China Investment and its iLike.com investment. The $6.5 million charge for the China Investment included a settlement of disputed items with the Company's joint venture partners. The $5.8 million charge for the iLike.com investment wrote down the investment to its estimated fair value. No such charges were recorded for the year ended December 31, 2007.

Other income

        Other income in 2009 increased $4.3 million, or 87%, from 2008 primarily due to a gain of $2.9 million from the sale of its equity investment in iLike.com and a gain of $0.9 million on the extinguishment of a portion of its outstanding debt in the current year, as well as incremental gains of $0.5 million on foreign currency exchange.

        Other income in 2008 increased $3.8 million from 2007 due to gains on foreign currency exchange primarily related to the Company's operating activities in Canada and the United Kingdom due to the strengthening of the U.S. dollar compared to the Canadian Dollar and the British Pound Sterling.

Income tax provision

        In 2009, the Company recorded an income tax provision of $19.1 million which represents an effective tax rate of 50%. The 2009 tax rate is higher than the statutory rate of 35% principally due to losses in certain foreign jurisdictions for which no tax benefit can be recognized, state and local income taxes, losses on investments of unconsolidated subsidiaries, partnership flow-through losses attributable to noncontrolling interests, and non-cash compensation expense, partially offset by foreign income taxed at lower rates, including the effects of our international restructuring and net adjustments related to the reconciliation of provision accruals to tax returns. In 2008, the Company recorded an income tax provision of $25.6 million which represents an effective tax rate of -3%. The 2008 tax rate is different from the statutory rate of 35% principally due to the impairment of goodwill that is not deductible for tax. Excluding the impairment charges recorded in 2008, the Company's effective tax rate would have been 42%. This rate is higher than the statutory rate of 35% principally due to the losses not benefited in foreign jurisdictions and state taxes, partially offset by foreign income taxed at lower rates and foreign tax credits.

        As of December 31, 2009 and 2008, the Company had unrecognized tax benefits of approximately $5.6 million and $1.7 million, respectively, which included accrued interest of $0.2 million and $0.4 million, respectively.

        By virtue of previously filed tax returns, including consolidated filings with IAC, the Company is routinely under audit by federal, state, local and foreign authorities in the area of income tax. These audits include questioning the timing and the amount of deductions and the allocation of income among various tax jurisdictions. Income taxes payable include amounts considered sufficient to pay assessments that may result from examination of prior year returns; however, the amount paid upon resolution of issues raised may differ from the amount provided. Differences between the unrecognized tax benefits and the amounts owed by the Company are recorded in the period in which they become known.

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        The IRS is currently examining the IAC consolidated tax returns for the years ended December 31, 2001 through 2006, which include the operations of the Company from January 17, 2003, the date the Company joined the IAC consolidated tax return. The statute of limitations for these years has been extended to December 31, 2010. Various IAC consolidated state and local jurisdictions are currently under examination, the most significant of which are California, New York and New York City, for various tax years beginning with December 31, 2002. These examinations are expected to be completed in 2011. Various stand-alone state and local jurisdictions of the Company are currently under examination. These examinations are expected to be completed in 2010. All tax years prior to 2003 for federal and 2002 for significant state jurisdictions are closed. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by approximately $1.0 million within twelve months of the current reporting date due to settlements and expirations of applicable statutes of limitation related to various state tax filings. An estimate of other changes in unrecognized tax benefits cannot be made, but are not expected to be significant.


LIQUIDITY AND CAPITAL RESOURCES

        As of December 31, 2009, the Company had $554.5 million of cash and cash equivalents including $301.9 million in funds representing amounts equal to the face value of tickets sold on behalf of clients ("client funds"). The Company's $554.5 million of cash and cash equivalents included $339.7 million held in foreign jurisdictions which was maintained principally in Australia, the United Kingdom and Canada; of this balance, $212.6 million were client funds. The Company does not utilize client funds for its own financing or investing activities as the amounts are payable to clients.

        Net cash provided by operating activities was $181.8 million and $195.2 million for the years ended December 31, 2009 and 2008, respectively. The decrease of $13.4 million in net cash provided by operating activities reflected the decline in operating results and higher interest payments in 2009 compared to 2008, as well as unfavorable changes in working capital. The decrease in net cash provided by operating activities was partially offset by higher contributions from client funds of $44.4 million, driven by the timing of settlements with clients.

        Net cash used in investing activities in the year ended December 31, 2009 was $65.2 million and primarily resulted from cash paid for capital expenditures of $46.3 million and $33.6 million for acquisitions in the artist services segment, partially offset by proceeds received from the sales of the Company's investment in iLike and its office building in Vancouver, British Columbia. Net cash used in investing activities in 2008 of $1.5 billion primarily resulted from cash transfers to IAC of $910.1 million and acquisitions, net of cash acquired, of $506.6 million.

        Net cash used in financing activities for the year ended December 31, 2009 of $63.6 million was primarily due to the repayment of $40.0 million of the outstanding balance under the Company's senior secured credit facilities, the repurchase of $13.0 million face value of the outstanding 10.75% senior notes (the "Notes") for $11.5 million in cash, $9.9 million of distributions to noncontrolling interest holders and $1.8 million of payments on capital leases. Net cash provided by financing activities in 2008 of $1.2 billion was primarily due to $300.0 million of proceeds received from the issuance of the Notes and $565.0 million of proceeds received from borrowings under the senior secured credit facilities. In addition, the Company received $405.5 million in capital contributions from IAC during 2008.

        As of December 31, 2008, the Company had $466.1 million of cash and cash equivalents and marketable securities, including $254.0 million in client funds. The Company's cash and cash equivalents and marketable securities held in foreign jurisdictions were approximately $302.8 million at December 31, 2008, including $169.7 million in client funds, which was maintained principally in Canada, the United Kingdom and Australia.

        Net cash provided by operating activities was $195.2 million and $212.0 million for the years ended December 31, 2008 and 2007, respectively. The decrease of $16.8 million in net cash provided by

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operating activities reflected lower contributions from client funds of $95.3 million which was driven by the timing of settlements with clients, partially offset by lower advance payments under ticketing contracts and sponsorship deals with resale partners, including significant advances made in 2007 which were not repeated in 2008.

        Net cash used in investing activities in 2008 of $1.5 billion primarily resulted from cash transfers to IAC of $910.1 million and acquisitions, net of cash acquired, of $506.6 million. The cash transfers to IAC were comprised of total net proceeds from the Notes and the senior secured credit facilities, and were distributed to IAC in connection with the Spin-off, as well as other proceeds paid to IAC as part of their centrally managed U.S. treasury function. Acquisitions, net of cash acquired, primarily related to the acquisitions of TicketsNow, Paciolan, GET ME IN! and Front Line. Net cash used in investing activities in 2007 of $13.0 million primarily resulted from $47.5 million of capital expenditures and $29.4 million of acquisitions, net of cash acquired, partially offset by cash transfers from IAC of $64.5 million.

        Net cash provided by financing activities in 2008 of $1.2 billion was primarily due to $300.0 million of proceeds received from the issuance of the Notes and $565.0 million of proceeds received from borrowings under the senior secured credit facilities. The Company incurred $27.2 million of costs for these debt financings which were initiated in connection with the Spin-off. In addition, we received $405.5 million in capital contributions from IAC during 2008. Net cash provided by financing activities in 2007 of $30.3 million was primarily due to capital contributions from IAC.

        The Company anticipates that it will need to make capital and other expenditures in connection with the development and expansion of its operations. The Company's ability to fund its cash and capital needs will be affected by its ongoing ability to generate cash from operations and the overall capacity and terms of its financing arrangements as discussed above. The Company believes that its cash on hand along with its anticipated operating cash flow in 2010 and its access to financing arrangements are sufficient to fund its operating needs, capital, investing and other commitments and contingencies for the foreseeable future.

        Under the senior secured credit facilities and the indenture governing the Company's Notes, the Company is required to comply with certain financial covenants. The Notes contain two incurrence-based financial covenants, requiring that the Company meet a minimum fixed charge coverage ratio, as defined therein, of 2.0 to 1.0 and a maximum secured leverage ratio, as defined therein, of 2.25 to 1.0 in order to incur additional indebtedness other than permitted debt. The senior secured credit facilities have two maintenance-based quarterly financial covenants, requiring a maximum total leverage ratio of 3.5 to 1.0 and a minimum interest coverage ratio of 3.0 to 1.0. The total leverage ratio for the senior secured credit facilities, calculated as total debt, as defined therein, divided by total EBITDA, as defined therein, for the trailing twelve-month period is the most sensitive to change, as debt levels increase and/or earnings decline. As of December 31, 2009, the Company was in compliance with these financial covenants.

        The Company believes it has adequate cash and cash equivalents and it will generate sufficient cash from operations to pay down a portion of its debt, if required, in order to maintain compliance with all financial covenants through December 31, 2010. The Company may, from time to time, engage in open market purchases of the Notes.

        As a result of the Merger being consummated, the Company's cost of capital related to its bank financing will increase as a result of obtaining the necessary amendment to its senior secured credit facilities required for the Merger.

        On May 12, 2009, the Company entered into an amendment to the senior secured credit facilities, which became effective on January 25, 2010 upon completion of the merger and the payment to each lender that consented to the amendment of a consent fee equal to 0.50% of the sum of the principal

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amount of the term loans outstanding to such lender as of May 12, 2009 and the full amount of such lender's revolving commitment as of May 12, 2009. The amendment permits the senior secured credit facilities to remain outstanding following the merger, increases the interest spreads under each of the Term Loan A, Term Loan B and revolving credit facility by 1.25%, institutes a LIBOR floor of 2.50% for the senior secured credit facilities, conditions each borrowing under the revolving credit facility and certain other debt incurrences on the Company having a pro forma consolidated total leverage ratio of no more than 3.50 to 1.00, creates restrictions on the Company and its subsidiaries transferring assets to Live Nation or Live Nation's other subsidiaries in certain circumstances and effects certain other changes to facilitate the integration of the Company and its subsidiaries with Live Nation and its subsidiaries following consummation of the merger.


CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

 
  Payments Due by Period  
Contractual Obligations
  Total   Less Than
1 Year
  1 - 3 Years   3 - 5 Years   More Than
5 Years
 
 
  (In thousands)
 

Long-term debt obligations(1)

  $ 1,095,198   $ 50,098   $ 131,270   $ 577,575   $ 336,255  

Capital lease obligations

    890     821     69          

Purchase obligations(2)

    148,470     51,128     83,382     2,535     11,425  

Estimated earn-out payments related to acquisitions(3)

    25,972     11,248     5,392     9,332      

Operating leases

    99,005     26,568     34,237     18,551     19,649  
                       

Total contractual cash obligations(4)

  $ 1,369,535   $ 139,863   $ 254,350   $ 607,993   $ 367,329  
                       

(1)
Long-term debt obligations represent future principal and interest payments related to the Notes through maturity in 2016 and borrowings under the senior secured credit facility through maturity in 2014. The future interest payments related to our existing debt obligations are based on fixed and variable interest rates specified in the associated debt agreements.

(2)
The purchase obligations primarily arise from sports sponsorship agreements intended to promote the Company's ticket resale services.

(3)
The Company has certain contingent obligations related to acquisitions of various artist management companies. Of the $26.0 million total estimated earn-out payments at December 31, 2009, $7.1 million represents commitments arising from acquisitions completed prior to the effective date of the current guidance for business combinations, which now requires contingent considerations to be accrued at the time of acquisition. These amounts have not been accrued for in the accompanying Consolidated Balance Sheets, but remain subject to payout following the achievement of future performance targets. Such contingent payouts may be payable in 2010. As the remaining $18.9 million balance of estimated earn-out payments relates to acquisitions completed subsequent to the adoption of the current guidance for business combinations, the Company has accrued $4.0 million and $10.1 million in "Other accrued expenses and current liabilities" and "Other long-term liabilities," respectively, in the accompanying Consolidated Balance Sheet for the year ended December 31, 2009, representing the fair value of the estimated earn-out arrangements.

(4)
Amounts exclude potential redemption amounts due to noncontrolling interests of $1.2 million that are currently redeemable, $39.2 million in the year ended December 31, 2011, $7.1 million in the year ended December 31, 2012, $30.3 million in the year ended December 31, 2013, and $13.7 million contingent upon the occurrence of other events. See Item 15. Exhibits and Financial Statement Schedules—Note 11—Temporary Equity and Equity—Redeemable Noncontrolling

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    Interests to the Consolidated Financial Statements for a more detailed discussion of redeemable noncontrolling interests.

        At December 31, 2009, the Company had gross unrecognized tax benefits of approximately $5.6 million. The Company is unable to reasonably predict the timing of tax settlements, as tax audits can involve complex issues and the resolution of those issues may span multiple years. See Item 15. Exhibits and Financial Statement Schedules—Note 8—Income Taxes to the Consolidated Financial Statements for a more detailed discussion of the Company's unrecognized tax benefits.

        The Company also has funding commitments that could potentially require its performance in the event of demands by third parties or contingent events, such as under letters of credit or guarantees of debt, as follows (in thousands):

 
  Amount of Commitment Expiration Per Period  
Other Commercial Commitments
  Total
Amounts
Committed
  Less Than
1 Year
  1 - 3 Years   3 - 5 Years   More Than
5 Years
 

Guarantees, surety bonds and letters of credit

  $ 4,667   $ 1,217   $ 3,250   $ 200   $  
                       

Off-Balance Sheet Arrangements

        Other than the contractual obligations and other commercial commitments described above, the Company does not have any off-balance sheet arrangements as of December 31, 2009.

Seasonality

        The Company's ticketing sales are impacted by fluctuations in the availability of events for sale to the public, which may vary depending upon scheduling by its clients. Generally, the second and third quarters of the year experience the highest domestic ticketing revenue, earned primarily in the Concerts and Sports categories. Generally, international revenues are highest in the fourth quarter of the year, earned primarily in the Concerts category.

Critical Accounting Policies and Estimates

        Certain of the Company's significant accounting policies are summarized below. Also see Item 15. Exhibits and Financial Statement Schedules—Note 2—Summary of Significant Accounting Policies to the Consolidated Financial Statements for further discussion of the Company's accounting policies.

        The Company's management is required to make certain estimates and assumptions during the preparation of its consolidated financial statements in accordance with GAAP. These estimates and assumptions impact the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amount of net earnings during any period. Actual results could differ from those estimates.

        Significant estimates underlying the accompanying consolidated financial statements include: the recoverability of contract advances; the recoverability of long-lived assets; the recovery of goodwill and intangible assets; the determination of income taxes payable and deferred income taxes, including related valuation allowances; and assumptions related to the determination of stock-based compensation.

Revenue Recognition

        The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured.

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Determining whether some or all of these criteria have been met involves assumptions and judgments, including the evaluation of multiple element arrangements that can have an effect on the timing and amount of revenue the Company reports.

    Gross versus Net Revenue Recognition

        The Company reports revenue on a gross or net basis based on management's assessment of whether it acts as a principal or agent in the transaction. To the extent the Company acts as the principal in a transaction, revenues are reported on a gross basis. The determination of whether the Company acts as a principal or an agent in a transaction is based on an evaluation of whether it has the substantial risks and rewards of ownership under the terms of an arrangement.

    Ticketing Revenue

        Revenue, which primarily consists of convenience and order processing fees from ticketing operations, is recognized as tickets are sold, and is recorded on a net basis (net of the face value of the ticket) as the Company acts as an agent in these transactions. Interest income is earned on funds that are collected from ticket purchasers and invested until remittance to the applicable clients. As the process of collecting, holding and remitting these funds is a critical component of providing service to these clients, the interest earned on these funds is included in revenue. For the years ended December 31, 2009, 2008 and 2007, $3.2 million, $16.2 million and $18.7 million, respectively, of interest income is included in revenue. Revenue is presented net of sales tax.

    Artist Services Revenue

        Front Line secures work for the clients it represents, for which it receives a commission. Generally, commissions are payable by clients upon their receipt of payments for performance of services or upon the delivery or use of materials which they created. Revenue is generally recognized in the month of the artist event. Contingent commissions, such as those based on profits or gross receipts, are recorded upon determination of the amounts. Revenue is not recognized before persuasive evidence of an arrangement exists, services have been rendered, the amount to be received is fixed or determinable, and collectability is reasonably assured.

        Front Line also earns revenue from the sales of entertainment packages to consumers in connection with live performances. Entertainment packages are sold and cash is received from consumers in advance of the event. Revenue and related expenses incurred are deferred until the event occurs. In addition, Front Line sells merchandise associated with musical artists at live musical performances, to retailers and directly to consumers via a website. For retail and Internet sales, revenue is recognized upon shipment of the merchandise. Touring revenue, including the sale of merchandise, is recognized in the month of the event.

Goodwill and Indefinite-Lived Intangible Assets

        Goodwill represents the excess purchase price of an acquired entity over the fair value of the net tangible and intangible assets acquired. Indefinite-lived intangible assets acquired in a business combination are initially recorded at management's estimate of their fair values. For the year ended December 31, 2009, the Company identified one reporting unit in the ticketing segment and three in the artist services segment (artist management, VIP ticketing and merchandising). For the year ended December 31, 2008, the Company had identified two reporting units in the ticketing segment (ticketing and Echo Music) and three reporting units in the artist services segment (artist management, VIP ticketing and merchandising). The reduction in the number of reporting units identified within the ticketing segment is a result of a change in the Company's reporting structure, with the Echo Music

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reporting unit being merged into the ticketing reporting unit. As of December 31, 2008, the Echo Music reporting unit had no goodwill.

        Testing of goodwill for impairment consists of a two-step process. The first step involves a comparison of the estimated fair value of a reporting unit to its carrying amount, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is not required. If the carrying amount of a reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed in which the implied fair value of the reporting unit's goodwill is compared to its goodwill carrying amount to measure the amount of impairment loss, if any. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The Company determines the fair value of the reporting units based on the present value of the cash flows the reporting units can be expected to generate in the future.

        We also test our indefinite-lived intangible assets for impairment annually on the first day of our fiscal fourth quarter, or whenever events or changes in circumstances indicate the carrying value may not be recoverable. The impairment test for indefinite-lived intangible assets involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. In our case, the Ticketmaster trade name is the only intangible asset not subject to amortization. The fair value of the Ticketmaster trade name is estimated using a multi-period royalty savings method, which reflects the savings realized by owning the trade name, and thus not having to pay a royalty fee to a third party.

        The Company performed its annual testing of goodwill on October 1, 2009. As a result of testing, the Company determined that there were no indications of goodwill impairment for any of the reporting units for the year ended December 31, 2009.

        As a result of our annual goodwill impairment test in 2008, the Company concluded that goodwill in the Company's ticketing and Echo Music reporting units was likely impaired. The factors indicating a likely impairment included the decline in the global economy, which resulted in downward adjustments in forecasted future operating income and cash flows, and a significant decline in the Company's stock price. In determining the impairment charge, the Company used certain DCF analyses. The analyses included seven years of projected cash flows with forecasted sales growth rates ranging from -5.7% to 12.5% with a terminal growth rate of 3%. The discount rates used in the DCF analyses for the step one tests were 12% with a 9% rate for the terminal value. The Company also considered the market approach which evaluates market transactions involving similarly situated companies, however it was not considered meaningful in the final evaluation because of the lack of comparability between the reporting units and guideline public companies. In addition, the Company assessed the reasonableness of its determined fair values by reference to the Company's market capitalization and determined that the implied control premium was reasonable. To quantify the impairment, the Company allocated the fair value of the reporting units to the reporting units' individual assets and liabilities utilizing the purchase price allocation guidance. The resulting implied value of the ticketing and Echo Music reporting units' goodwill was $1.1 billion less than the current carrying value of the goodwill. The difference was recorded as a non-cash impairment charge to reduce the goodwill in the ticketing and Echo Music reporting units to $261.6 million and zero, respectively. There was no impairment recorded for the years ended December 31, 2009 and 2007.

        The Company's impairment test for the indefinite-lived trademark indicated no impairment for the years ended December 31, 2009, 2008 and 2007.

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Long-Lived Assets and Intangible Assets with Definite Lives

        Long-lived assets, including property and equipment and intangible assets with definite lives, are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Events or circumstances that may indicate that an asset is impaired include, but are not limited to, significant decreases in the market value of an asset, significant underperformance relative to expected historical or projected future operating results, a change in the extent or manner in which an asset is used, shifts in technology, loss of key personnel, significant negative industry or economic trends, changes in the Company's operating model or strategy, and competitive forces. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying amount is deemed to not be recoverable, an impairment loss is recorded as the amount by which the carrying amount of the long-lived asset exceeds its fair value. Amortization of definite lived intangible assets is recorded either on a straight-line basis or a basis more representative of the time pattern over which the benefit is derived.

        In connection with its annual assessment in 2008, the Company identified and recorded an impairment charge of $0.6 million for the write-off of a covenant not to compete related to the Company's operations in Germany. The intangible asset impairment charge was included in the amortization of intangible assets in the accompanying Consolidated Statements of Operations for the year ended December 31, 2008. There was no definite-lived intangible asset impairment recorded for the years ended December 31, 2009 and 2007.

Long-Term Investments

        The Company owns certain investments in common stock of entities which do not have readily determinable fair values. Investments in which the Company has the ability to exercise significant influence over the operating and financial matters of the investee are accounted for using the equity method. Investments in which the Company does not have the ability to exercise significant influence over the operating and financial matters of the investee are accounted for using the cost method. The Company evaluates each equity and cost method investment for impairment on a quarterly basis and recognizes an impairment loss if a decline in value is determined to be other-than-temporary. If the Company has not identified events or changes in circumstances that may have a significant adverse effect on the fair value of a cost investment, then the fair value of such cost method investment is not estimated, as it is impracticable to do so.

Contract Advances

        Contract advances, which can be either recoupable or non-recoupable, represent amounts paid in advance to the Company's clients pursuant to ticketing agreements. . Recoupable contract advances provide for the client's participation in the convenience charges and/or order processing fees and are generally recoupable against future royalties earned by the clients based on the contract terms over the life of the contract (generally 3 to 7 years). Non-recoupable contract advances are fixed additional incentives sometimes paid by the Company to secure exclusive ticketing rights with certain clients and are normally amortized over the life of the contract on a straight-line basis (generally 3 to 7 years). Recoupment of contract advances and amortization of non-recoupable contract advances are included in cost of sales in the accompanying Consolidated Statements of Operations.

Deferred Revenue

        Deferred revenue primarily consists of unredeemed gift cards issued by the Company. Upon the purchase of a gift card, deferred revenue is established for the cash value of the gift card. Deferred revenue is relieved and net revenue is recorded upon redemption by the customer or the expiration of

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the gift card, if applicable. Over time, some portion of the gift cards issued without expiration dates are not redeemed. This amount is recorded as revenue when it can be determined that the likelihood of the gift card being redeemed is remote and there is no legal obligation to remit the unredeemed gift cards to relevant jurisdictions. We determine the probability of the gift cards being redeemed based on historical gift card redemption patterns. Income from gift card revenue, net of any amounts subject to escheat laws, is included in revenue in the accompanying Consolidated Statements of Operations.

Redeemable Noncontrolling Interests

        In connection with the acquisition of certain subsidiaries, the Company is party to fair value put arrangements with respect to the common securities that represent the remaining noncontrolling interests of the acquired company. These put arrangements are exercisable at fair value by the counter-party outside the control of the Company and are classified as temporary equity. Adjustments to the carrying amount of redeemable noncontrolling interests issued in the form of a common security to reflect a fair value redemption feature do not impact the Company's earnings per share. Accordingly, to the extent that the fair value of these redeemable noncontrolling interests exceeds the value determined by normal noncontrolling interest accounting, the value of such interests is adjusted to fair value with a corresponding adjustment to additional paid-in capital. Redeemable noncontrolling interests for which the put arrangements are not currently redeemable are accounted for by normal noncontrolling interest accounting, and changes in the redemption fair value are accreted over the period from the date of issuance to the earliest redemption date of the security using the interest method. For the noncontrolling interests that are not currently redeemable, the total redemption fair value being accreted to is $76.6 million.

Recent Accounting Pronouncements

        See Item 15. Exhibits and Financial Statement Schedules—Note 2—Summary of Significant Accounting Policies to the Consolidated Financial Statements for a description of recent accounting pronouncements.


TICKETMASTER ENTERTAINMENT'S PRINCIPLES OF FINANCIAL REPORTING

        The Company reports Adjusted EBITDA as a supplemental measure to GAAP. This measure is one of the primary metrics by which the Company evaluates the performance of its segments and businesses, on which its internal budgets are based and by which management is compensated. The Company believes that investors should have access to the same set of tools that it uses in analyzing its results. This supplemental measure should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. The Company provides and encourages investors to examine the reconciling adjustments between the GAAP and supplemental measure, which are discussed below.

Definition of Ticketmaster Entertainment's Supplemental Measure

        Adjusted EBITDA, is defined as operating income excluding, if applicable: (1) depreciation expense, (2) non-cash and stock-based compensation expense, (3) amortization and impairment of intangibles, (4) goodwill and other impairments, (5) pro forma adjustments for significant acquisitions, fair value adjustments to contingent consideration and executive compensation expense associated with significant transactions or the Merger with Live Nation, and (6) one-time items. The Company believes this measure is useful to investors because it represents the operating results from the Company's businesses excluding the effects of non-cash expenses. The Adjusted EBITDA metric was named Adjusted Operating Income in the Company's Annual Report on Form 10-K, as amended, for the year ended December 31, 2008. Adjusted EBITDA has certain limitations in that it does not take into account the impact to the Company's Consolidated Statement of Operations of certain expenses,

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including acquisition-related accounting. The Company endeavors to compensate for the limitations of the supplemental measure presented by also providing the comparable GAAP measure with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the supplemental measure.

Pro Forma Results

        The Company will only present Adjusted EBITDA on a pro forma basis if a particular transaction is significant within the meaning of Rule 11-01 of Regulation S-X or if it views a transaction as so significant in nature that disclosure of pro forma financial information would be material to investors. For the periods presented in this report, there are no transactions that the Company has included on a pro forma basis.

One-Time Items

        Adjusted EBITDA is presented before one-time items, if applicable. These items are truly one-time in nature and nonrecurring, infrequent or unusual, and have not occurred in the past two years or are not expected to recur in the next two years, in accordance with SEC rules. For the periods presented in this report, there are no one-time items.

Non-Cash Expenses That Are Excluded From Ticketmaster Entertainment's Supplemental Measure

        Non-cash and stock-based compensation expense consists principally of expense associated with the grants, including unvested grants assumed in acquisitions, of restricted stock, restricted stock units and stock options. These expenses are not paid in cash, and the Company will include the related shares in its future calculations of fully diluted shares outstanding. For the majority of the awards, upon vesting of restricted stock and restricted stock units and the exercise of certain stock options, the awards will be settled, at the Company's discretion, on a net basis, with the Company remitting the required tax withholding amount from its current funds. For certain stock-based awards which are classified as liabilities, upon vesting of the awards, the awards will be redeemed in cash at the then fair value of the stock awards.

        Amortization of intangibles is a non-cash expense relating primarily to acquisitions. At the time of an acquisition, the intangible assets of the acquired company, such as purchase and distribution agreements, are valued and amortized over their estimated lives. While it is likely that the Company will have significant intangible amortization expense as it continues to acquire companies, the Company believes that since intangibles represent value created by the acquired company prior to acquisition, they are part of transaction costs.


RECONCILIATION OF ADJUSTED EBITDA

        For a reconciliation of Adjusted EBITDA to Net income (loss) attributable to Ticketmaster Entertainment LLC for the years ended December 31, 2009, 2008 and 2007, see Item 15. Exhibits and Financial Statement Schedules—Note 7—Segment Information to the Consolidated Financial Statements.

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

        Our market risk is affected by changes in interest rates that may impact our outstanding borrowings. The Company had $812.0 million of total debt outstanding as of December 31, 2009. Of the total amount, the Company has $287.0 million of fixed-rate debt and $525.0 million of variable-rate debt.

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        The $525.0 million of variable-rate debt is comprised of a $100.0 million Term Loan A, $340.0 million Term Loan B and $85.0 million outstanding under the Revolver. In aggregate, these balances are referred to as our senior secured credit facilities. Under the borrowing terms in effect as of December 31, 2009, the interest rate per annum applicable to loans under the senior secured credit facilities are, at the Company's option, equal to either a base rate or a LIBOR rate plus an applicable margin, which in the case of the Term Loan A and the Revolver will vary with the total leverage ratio of the Company. For the year ended December 31, 2009, the applicable margin for the Term Loan B was 3.25% per annum for LIBOR loans and 2.25% per annum for base rate loans. The base rate means the greater of (i) the prime rate as quoted from time to time by JPMorgan Chase Bank, N.A. or (ii) the Federal Funds rate plus 0.5%.

        On May 12, 2009, the Company entered into an amendment to the senior secured credit facilities which became effective upon consummation of the Merger and payment by the Company of certain consent fees to each lender that consented to the amendment. Among other changes to the existing terms, the amendment increases the interest spreads under each of the Term Loan A, Term Loan B and revolving credit facility by 1.25%, and institutes a LIBOR floor of 2.50% for the senior secured credit facilities. Based on the LIBOR rate as of December 31, 2009, the LIBOR floor of 2.50% would be applied when determining the interest payable to the borrowers.

        For the period from January 1, 2010 through January 25, 2010, a 100 basis point change in the interest rate under our senior secured credit facilities would impact the interest expense by approximately $0.4 million. Based on the three-month LIBOR rate as of December 31, 2009, a 100 basis point increase would result in a rate of 1.25%. As this is below the stipulated LIBOR floor of 2.50%, there would be no impact on the interest expense calculation for the period beginning January 25, 2010 through the end of the year.

Foreign Currency Exchange Risk

        The Company conducts business in certain foreign markets, primarily in the United Kingdom, the European Union and Canada. The Company's primary exposure to foreign currency risk relates to investments in foreign subsidiaries that transact business in a functional currency other than the U.S. Dollar, primarily the Euro, British Pound Sterling and Canadian Dollar. However, the exposure is mitigated as the Company has generally reinvested profits from its international operations in order to fund the growth of its international operations including through acquisitions. The Company is also exposed to foreign currency risk related to its assets and liabilities denominated in a currency other than the functional currency.

        As currency exchange rates change, translation of the income statements of the Company's international businesses into U.S. dollars affects year-over-year comparability of operating results. Historically, the Company has not hedged translation risks because cash flows from international operations generally have been reinvested locally. However, the Company periodically reviews its strategy for hedging transaction risks. The Company's objective in managing its foreign exchange risk is to minimize its potential exposure to the changes that exchange rates might have on the Company's earnings, cash flows and financial position. However, the Company estimates that a 10% change in overall foreign currency exchange rates over an entire year would impact reported revenue by approximately $40.8 million and reported earnings before income taxes and noncontrolling interests by approximately $0.4 million.

        In certain limited instances, the Company enters into foreign currency forward exchange contracts to mitigate the risk of changes in foreign currency exchange rates on short-term intercompany loans payable to certain international subsidiaries. As of December 31, 2009 and 2008, the Company had foreign currency forward exchange contracts outstanding with nominal amounts of CAD 3.2 million and AUD 16.5 million, respectively. Gains and losses on these foreign currency exchange contracts are

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recognized in "Other income" in the Consolidated Statement of Operations as the contracts were not designated as hedging instruments, substantially offsetting currency transaction gains and losses on the short-term intercompany loans. The gains or losses are carried on the Consolidated Balance Sheets on a gross basis in "Prepaid expenses and other current assets" and "Other accrued expenses and current liabilities," respectively. The change in fair value of these instruments from date of purchase through December 31, 2009 and 2008 was a loss of $0.1 million and a loss of $0.5 million, respectively.

        Foreign exchange net gains for the years ended December 31, 2009, 2008 and 2007 were $5.4 million, $4.9 million and $1.1 million, respectively.

        As the Company increases its operations in international markets it becomes increasingly exposed to potentially volatile movements in currency exchange rates. The economic impact of currency exchange rate movements on the Company is often linked to variability in real growth, inflation, interest rates, governmental actions and other factors. These changes, if material, could cause the Company to adjust its financing, operating and hedging strategies.

Item 8.    Consolidated Financial Statements and Supplementary Data

        Our consolidated financial statements and supplementary data are included at the end of this report, beginning on page F-1.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

        None.

Item 9A.    Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

        Our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of December 31, 2009. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2009, the disclosure controls and procedures are effective in ensuring that material information required to be disclosed in the Company's reports filed or submitted under the Exchange Act has been made known to them in a timely fashion.

        There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a—15(f) and 15d—15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2009, that have materially affected, or are reasonable likely to materially affect, the Company's internal control over financial reporting.

Management's Report on Internal Control Over Financial Reporting

        Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2009.

        The effectiveness of our internal control over financial reporting as of December 31, 2009 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.

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Report of Independent Registered Public Accounting Firm

The Board of Managers and Member of Ticketmaster Entertainment LLC

        We have audited Ticketmaster Entertainment, Inc.'s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Ticketmaster Entertainment, Inc.'s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        In our opinion, Ticketmaster Entertainment, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the COSO criteria.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets as of December 31, 2009 and 2008 and the related consolidated statements of operations, temporary equity and equity, and cash flows for each of the three years in the period ended December 31, 2009 of Ticketmaster Entertainment, Inc. and our report dated February 25, 2010 expressed an unqualified opinion thereon.

    /s/ ERNST & YOUNG LLP

Los Angeles, California
February 25, 2010

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Item 9B.    Other Information

        None.

PART III

Item 10.    Directors, Executive Officers and Corporate Governance

        Omitted pursuant to General Instruction I(2)(c) to Form 10-K.

Item 11.    Executive Compensation

        Omitted pursuant to General Instruction I(2)(c) to Form 10-K.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

        Omitted pursuant to General Instruction I(2)(c) to Form 10-K.

Item 13.    Certain Relationships and Related Transactions, and Director Independence

        Omitted pursuant to General Instruction I(2)(c) to Form 10-K.

Item 14.    Principal Accountant Fees and Services

        The following table sets forth fees for all professional services rendered by Ernst & Young LLP to Ticketmaster Entertainment for each of the years ended December 31, 2009 and 2008.

Description
  2009   2008  

Audit Fees(1)

  $ 2,442,839   $ 1,816,694  

Audit-Related Fees(2)

    140,537     652,280  

Tax Fees

         

Other Fees

         
           

Total Fees

  $ 2,583,376   $ 2,468,974  
           

(1)
Audit Fees include fees associated with the annual audit of the Company's consolidated financial statements; accounting consultations and expenses associated with the audit; and statutory audits. Statutory audits include audits performed for certain Ticketmaster Entertainment businesses in various jurisdictions abroad, which audits are required by local law.

(2)
Audit-Related Fees include SAS 70 fees, due diligence fees and accounting consultations in connection with acquisitions.

Audit Committee Policy Regarding Pre-Approval of Audit and Permissible Non-Audit Services of our Independent Auditors

        The Audit Committee of Ticketmaster Entertainment approved all of the audit and permissible non-audit services performed by Ernst & Young LLP during the 2009 fiscal year. From and after the Merger on January 25, 2010, the Audit Committee of the Company's parent, Live Nation, performs the audit committee function for the Company. The Audit Committee has established procedures for the approval of all audit and non-audit services provided by our independent registered public accounting firm. Pursuant to this policy, the Audit Committee approves all audit and non-audit services provided by the independent registered public accounting firm, including the fees and other terms of the engagements. Before the independent registered public accounting firm is engaged to perform any non-audit services, the Audit Committee must review and pre-approve such services. The Audit Committee may delegate its approval authority to its Chairperson, provided that any services approved by the Chairperson are reported to the Audit Committee at its next regularly scheduled meeting.

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PART IV

Item 15.    Exhibits and Financial Statement Schedules

        (a)(1)  Consolidated Financial Statements

        The financial statements listed in the Index to Consolidated Financial Statements on page F-1 are filed as part of this Form 10-K.

        (a)(2)  Financial Statement Schedule

        Schedule II—Valuation and Qualifying Accounts on page F-59

        All other financial statement schedules are either included in the Notes to Consolidated Financial Statements or are omitted because they are not applicable.

        (a)(3)  Exhibits

Exhibit   Description
  2.1   Agreement and Plan of Merger, dated as of February 10, 2009, by and among Ticketmaster Entertainment Inc., Live Nation, Inc. and, from and after its accession to the Agreement, Merger Sub (incorporated by reference to Ticketmaster Entertainment's Form 8-K, filed February 13, 2009)

 

3.1

 

Certificate of Formation of LN-TM Merger Sub, LLC (incorporated by reference to Exhibit 3.1 of Ticketmaster Entertainment's Form 8-K, filed February 5, 2010)

 

3.2

 

Limited Liability Company Agreement of LN-TM Merger Sub, LLC, dated January 22, 2010 (incorporated by reference to Exhibit 3.2 of Ticketmaster Entertainment's Form 8-K, filed February 5, 2010)

 

10.1

 

Separation and Distribution Agreement, dated as of August 20, 2008, by and among IAC/InterActiveCorp, HSN, Inc., Interval Leisure Group, Inc., Ticketmaster and Tree.com, Inc. (incorporated by reference to Ticketmaster Entertainment's Form 8-K, filed August 25, 2008)

 

10.2

 

Tax Sharing Agreement, dated as of August 20, 2008, by and among IAC/InterActiveCorp, HSN, Inc., Interval Leisure Group, Inc., Ticketmaster and Tree.com, Inc. (incorporated by reference to Ticketmaster Entertainment's Form 8-K, filed August 25, 2008)

 

10.3

 

Transition Services Agreement, dated as of August 20, 2008, by and among IAC/InterActiveCorp, HSN, Inc., Interval Leisure Group, Inc., Ticketmaster and Tree.com, Inc. (incorporated by reference to Ticketmaster Entertainment's Form 8-K, filed August 25, 2008)

 

10.4

 

Employee Matters Agreement, dated as of August 20, 2008, by and among IAC/InterActiveCorp, HSN, Inc., Interval Leisure Group, Inc., Ticketmaster and Tree.com, Inc. (incorporated by reference to Ticketmaster Entertainment's Form 8-K, filed August 25, 2008)

 

10.5

 

Credit Agreement among Ticketmaster Entertainment, Inc., the Guarantors party thereto, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, dated as of July 25, 2008 (incorporated by reference to Ticketmaster Entertainment's Registration Statement on Form 10-12B/A, filed June 26, 2008)

 

10.6

 

Amendment No. 1 to Credit Agreement among Ticketmaster Entertainment, Inc., the Guarantors party thereto, the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative and Collateral Agent, dated as of July 25, 2008 (incorporated by reference to Exhibit 10.1 to Ticketmaster Entertainment's Form 10-Q for the quarter ended September 30, 2009)

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Exhibit   Description
  10.7   Indenture, dated as of July 28, 2008, among Ticketmaster, as Issuer, the Guarantors identified therein, and The Bank of New York Mellon, as Trustee (incorporated by reference to Ticketmaster Entertainment's Registration Statement on Form 10-12B/A, filed June 26, 2008)

 

10.8

 

First Supplemental Indenture, dated as of August 20, 2008, to the Indenture, dated as of July 28, 2008, among Ticketmaster, as Issuer, the Guarantors identified therein and The Bank of New York Mellon as Trustee (incorporated by reference to Ticketmaster Entertainment's Form 8-K, filed August 25, 2008)

 

10.9

 

Second Supplemental Indenture, dated as of April 30, 2009, to the Indenture, dated as of July 28, 2008, among Ticketmaster, as Issuer, the Guarantors identified therein and The Bank of New York Mellon, as Trustee (incorporated by reference to Exhibit 10.2 to Ticketmaster Entertainment's Form 10-Q for the quarter ended June 30, 2009)

 

10.10

 

Third Supplemental Indenture, dated as of July 23, 2009, to the Indenture, dated as of July 28, 2008, among Ticketmaster, as Issuer, the Guarantors identified therein and The Bank of New York Mellon, as Trustee (incorporated by reference to Exhibit 10.3 to Ticketmaster Entertainment's Form 10-Q for the quarter ended June 30, 2009)

 

10.11

 

Fourth Supplemental Indenture, dated January 25, 2010, by and among Ticketmaster Entertainment, LLC, Ticketmaster Noteco, Inc., the Guarantors party thereto and The Bank of New York Mellon, as Trustee, to the Indenture dated July 28, 2008, among Ticketmaster Entertainment, Inc., as Issuer, the Guarantors named therein and The Bank of New York Mellon, as Trustee (incorporated by reference to Live Nation Entertainment, Inc.'s Form 8-K dated January 25, 2010)

 

10.12

 

Letter Agreement between Ticketmaster Corporation and Ticketmaster Group Limited Partnership, dated as of July 31, 2006 (incorporated by reference to Ticketmaster Entertainment's Registration Statement on Form 10-12B/A, filed June 26, 2008)

 

10.13

 

Letter Agreement between Ticketmaster Corporation and Ticketmaster Group Limited Partnership, dated as of February 6, 2006 (incorporated by reference to Ticketmaster Entertainment's Registration Statement on Form 10-12B/A, filed June 26, 2008)

 

10.14

 

Letter Agreement between Ticketmaster L.L.C. and Ticketmaster Group Limited Partnership, dated as of October 17, 2005 (incorporated by reference to Ticketmaster Entertainment's Registration Statement on Form 10-12B/A, filed June 26, 2008)

 

10.15

 

Letter Agreement between Ticketmaster L.L.C. and Ticketmaster Group Limited Partnership, dated as of March 21, 2002 (incorporated by reference to Ticketmaster Entertainment's Registration Statement on Form 10-12B/A, filed June 26, 2008)

 

10.16

 

Letter Agreement between Ticketmaster Corporation and Ticketmaster Group Limited Partnership, dated as of February 7, 2001 (incorporated by reference to Ticketmaster Entertainment's Registration Statement on Form 10-12B/A, filed June 26, 2008)

 

10.17

 

Amendment to License Agreement between Ticketmaster Corporation and Ticketmaster Group Limited Partnership, dated as of August 31, 1999 (incorporated by reference to Ticketmaster Entertainment's Registration Statement on Form 10-12B/A, filed June 26, 2008)

 

10.18

 

Letter Agreement between Ticketmaster Corporation and Ticketmaster Group Limited Partnership, dated as of July 28, 1997 (incorporated by reference to Ticketmaster Entertainment's Registration Statement on Form 10-12B/A, filed June 26, 2008)

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Exhibit   Description
  10.19   Consent and Agreement between Ticketmaster Corporation and Ticketmaster Group Limited Partnership, dated as of January 5, 1996 (incorporated by reference to Ticketmaster Entertainment's Registration Statement on Form 10-12B/A, filed June 26, 2008)

 

10.20

 

License Agreement between Ticketmaster Corporation and Ticketmaster Group Limited Partnership, dated as of May 23, 1991 (incorporated by reference to Ticketmaster Entertainment's Registration Statement on Form 10-12B/A, filed June 26, 2008)

 

10.21

 

Amended and Restated Ticketmaster Entertainment, Inc. 2008 Stock and Annual Incentive Plan (incorporated by reference to Annex K to Ticketmaster Entertainment's Definitive Proxy Statement on Schedule 14A, filed November 6, 2009)†

 

10.22

 

Agreement and Plan of Merger among Ticketmaster, V.I.P. Merger Sub Inc., The V.I.P. Tour Company, TNSH, LLC, and certain stockholders of The V.I.P. Tour Company, dated January 11, 2008 (incorporated by reference to Ticketmaster Entertainment's Registration Statement on Form S-1, filed August 1, 2008)

 

10.23

 

Stockholder Agreement, dated as of February 10, 2009, by and among Live Nation, Inc., Liberty Media Corporation, Liberty USA Holdings, LLC and Ticketmaster Entertainment, Inc. (incorporated by reference to Ticketmaster' Entertainment's Form 8-K, filed February 13, 2009)

 

10.24

 

Stock Purchase Agreement, dated as of October 22, 2008, by and among FLMG Holdings Corp., MM Investment Inc. and WMG Church Street Limited (incorporated by reference to Ticketmaster Entertainment's Form 8-K filed October 28, 2008)

 

10.25

 

Employment Agreement, dated as of October 22, 2008, by and among Irving Azoff, Ticketmaster Entertainment Inc., and for certain purposes, the Azoff Family Trust of 1997 (incorporated by reference to Ticketmaster Entertainment's Form 8-K, filed November 4, 2008)†

 

10.26

 

Employment Agreement, dated October 21, 2009, by and among Irving Azoff, Ticketmaster Entertainment, Inc. and the Azoff Family Trust of 1997, dated May 27, 1997 (incorporated by reference to Ticketmaster Entertainment's Form 8-K, filed October 21, 2009)†

 

10.27

 

Amended and Restated Employment Agreement, dated as of October 21, 2009, by and between Front Line Management Group, Inc. and Irving Azoff (incorporated by reference to Ticketmaster Entertainment's Form 8-K, filed October 21, 2009)†

 

10.28

 

Restricted Stock Award Agreement, dated as of June 8, 2007, by and between Front Line Management Group, Inc. and Irving Azoff (incorporated by reference to Ticketmaster Entertainment's Form 8-K, filed November 4, 2008)†

 

10.29

 

Amended and Restated Stockholders' Agreement of Front Line Management Group, Inc., dated as of June 9, 2008, by and among Front Line Management Group, Inc., FLMG Holdings Corp., for certain purposes IAC/ InterActiveCorp, The Azoff Family Trust of 1997, MM Investment Inc., WMG Church Street Limited, Madison Square Garden, L.P. and the other parties named therein (incorporated by reference to Ticketmaster Entertainment's Form 8-K, filed November 4, 2008)†

 

10.30

 

Note, dated January 24, 2010, by and among Ticketmaster Entertainment, Inc., Azoff Family Trust of 1997 and Irving Azoff (incorporated by reference to Live Nation Entertainment, Inc.'s Form 8-K dated January 25, 2010)†

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Exhibit   Description
  10.31   Employment Agreement between Brian Regan and Ticketmaster L.L.C., dated as of May 19, 2008 (incorporated by reference to Ticketmaster Entertainment's Registration Statement on Form 10-12B/A, filed June 26, 2008)†

 

10.32

 

Amendment No. 1 to Employment Agreement dated as of May 19, 2008, between Brian Regan and Ticketmaster L.L.C. (incorporated by reference to Exhibit 10.3 to Ticketmaster Entertainment's Form 8-K, filed July 31, 2009)†

 

10.33

 

Amendment No. 2 to Employment Agreement dated as of May 19, 2008, between Brian Regan and Ticketmaster L.L.C. (incorporated by reference to Exhibit 10.2 to Ticketmaster Entertainment's Form 8-K, filed July 31, 2009)†

 

10.34

 

Employment Agreement by and between Eric Korman and Ticketmaster Entertainment, Inc., dated as of July 27, 2009 (incorporated by reference to Exhibit 10.1 to Ticketmaster Entertainment's Form 8-K, filed July 31, 2009)†

 

10.35

 

Employment Agreement dated as of December 9, 2004, between Ticketmaster L.L.C. and Chris Riley (incorporated by reference to Ticketmaster Entertainment's Form 10-Q for the Quarterly Period ended September 30, 2008)†

 

10.36

 

Amendment No. 1 dated as of January 4, 2008, to Employment Agreement between Ticketmaster L.L.C. and Chris Riley (incorporated by reference to Ticketmaster Entertainment's Form 10-Q for the Quarterly Period ended September 30, 2008)†

 

10.37

 

Amendment No. 2 to Employment Agreement dated as of November 4, 2004, between Chris Riley and Ticketmaster L.L.C. (incorporated by reference to Exhibit 10.1 to Ticketmaster Entertainment's Form 8-K filed August 21, 2009)†

 

14.1

 

Code of Business Conduct and Ethics

 

31.1

 

Certification of Chief Executive Officer

 

31.2

 

Certification of Chief Financial Officer

 

32.1

 

Section 1350 Certification of Chief Executive Officer

 

32.2

 

Section 1350 Certification of Chief Financial Officer

 

99.1

 

"Risk Factors" as set forth in Live Nation Entertainment, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2009

Reflects management contracts and management and director compensatory plans

        Unless otherwise noted, exhibits are filed herewith.

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SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

    TICKETMASTER ENTERTAINMENT LLC
                              (Registrant)
Date: February 25, 2010        

 

 

By:

 

/s/ MICHAEL RAPINO

Michael Rapino
Chief Executive Officer,
Live Nation Entertainment, Inc.*

        Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant on February 25, 2010 in the capacities indicated.

Signature
 
Title

 

 

 
/s/ MICHAEL RAPINO

Michael Rapino
  Chief Executive Officer, Live Nation Entertainment, Inc. & Manager
(Principal Executive Officer)

/s/ BRIAN REGAN

Brian Regan

 

Executive Vice President, Chief Financial Officer,
Ticketmaster Entertainment LLC & Manager
(Principal Financial & Accounting Officer)

/s/ MICHAEL ROWLES

Michael Rowles

 

Manager

*
Mr. Rapino, as Chief Executive Officer of the Company's parent, Live Nation Entertainment, Inc., performs the function of Chief Executive Officer of the Company.

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TICKETMASTER ENTERTAINMENT, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Explanatory Note

        The accompanying audited consolidated financial statements are labeled as those of Ticketmaster Entertainment, Inc., whereas this Annual Report on Form 10-K for the year ended December 31, 2009 is being filed by Ticketmaster Entertainment LLC. As of December 31, 2009, Ticketmaster Entertainment, Inc. was a stand alone public entity. On January 25, 2010, Ticketmaster Entertainment, Inc. merged with and into an indirect, wholly-owned subsidiary of Live Nation, creating Ticketmaster Entertainment LLC. The separate corporate existence of Ticketmaster Entertainment, Inc. ceased at such time, and Ticketmaster Entertainment LLC succeeded to the assets, liabilities, rights, obligations and duties of Ticketmaster Entertainment, Inc. These financial statements reflect the previous name, Ticketmaster Entertainment, Inc., because that was the name and structure of the entity as of December 31, 2009.

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Report of Independent Registered Public Accounting Firm

The Board of Managers and Member of Ticketmaster Entertainment LLC

        We have audited the accompanying consolidated balance sheets of Ticketmaster Entertainment, Inc. (the "Company," as described in Note 1) as of December 31, 2009 and 2008, and the related consolidated statements of operations, temporary equity and equity, and cash flows for each of the three years in the period ended December 31, 2009. Our audits also included the financial statement schedule on page F-59. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ticketmaster Entertainment, Inc. at December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.

        As discussed in Note 2 to the consolidated financial statements, on January 1, 2009, the Company adopted Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Financial Statements—an amendment of Accounting Research Bulletin No. 51, (codified in FASB Accounting Standards Codification 810, Consolidation) and retroactively applied its presentation and disclosure requirements.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Ticketmaster Entertainment, Inc.'s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2010 expressed an unqualified opinion thereon.

    /s/ ERNST & YOUNG LLP  

Los Angeles, California
February 25, 2010

 

 

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TICKETMASTER ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 
  Years Ended December 31,  
 
  2009   2008   2007  
 
  (In thousands, except per share data)
 

Revenue

  $ 1,482,997   $ 1,438,282   $ 1,221,798  

Interest on funds held for clients

    3,170     16,243     18,679  
               
 

Total revenue

    1,486,167     1,454,525     1,240,477  

Cost of sales (exclusive of depreciation shown separately below)

    896,152     927,889     766,538  
               

Gross profit

    590,015     526,636     473,939  

Selling and marketing expense

    94,657     102,631     43,487  

General and administrative expense

    271,337     190,054     149,478  

Amortization of intangibles

    71,608     44,109     26,200  

Depreciation

    56,293     49,894     38,458  

Goodwill impairment

        1,094,091      
               
 

Operating income (loss)

    96,120     (954,143 )   216,316  

Other (expense) income, net:

                   
 

Interest income

    2,392     13,926     33,065  
 

Interest expense

    (63,518 )   (39,216 )   (1,003 )
 

Equity in income of unconsolidated affiliates

    3,872     2,659     6,301  
 

Impairment of long-term investments

    (9,914 )   (12,334 )    
 

Other income

    9,172     4,914     1,120  
               

Total other (expense) income, net

    (57,996 )   (30,051 )   39,483  
               

Earnings (loss) before income taxes and noncontrolling interests

    38,124     (984,194 )   255,799  

Income tax provision

    (19,096 )   (25,627 )   (89,007 )
               

Net income (loss)

    19,028     (1,009,821 )   166,792  

Loss attributable to noncontrolling interests, net

    11,226     4,322     2,559  
               

Net income (loss) attributable to Ticketmaster Entertainment, Inc

  $ 30,254   $ (1,005,499 ) $ 169,351  
               

Net earnings (loss) per share available to common stockholders:

                   

Basic

  $ 0.53   $ (17.84 ) $ 3.01  

Diluted

  $ 0.50   $ (17.84 ) $ 3.01  

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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TICKETMASTER ENTERTAINMENT, INC.

CONSOLIDATED BALANCE SHEETS

 
  December 31,
2009
  December 31,
2008
 
 
  (In thousands, except per share data)
 

ASSETS

             

Cash and cash equivalents

  $ 554,482   $ 464,618  

Marketable securities

        1,495  

Accounts receivable, client accounts

    62,964     70,121  

Accounts receivable, net of allowance of $6,799 and $3,662 at December 31, 2009 and 2008, respectively

    43,150     46,459  

Deferred income taxes

    26,661     14,038  

Contract advances

    47,923     44,927  

Prepaid expenses and other current assets

    34,197     37,758  
           
 

Total current assets

    769,377     679,416  

Property and equipment, net

    101,048     111,291  

Goodwill

    482,341     455,751  

Intangible assets, net

    300,305     330,061  

Long-term investments

    8,809     17,487  

Other non-current assets

    127,878     112,561  
           

TOTAL ASSETS

  $ 1,789,758   $ 1,706,567  
           

LIABILITIES, TEMPORARY EQUITY AND EQUITY

             

LIABILITIES:

             

Accounts payable, client accounts

  $ 364,893   $ 324,164  

Accounts payable

    25,697     29,251  

Accrued compensation and benefits

    46,384     39,683  

Deferred revenue

    32,483     33,244  

Income taxes payable

    11,196     7,522  

Other accrued expenses and current liabilities

    100,275     82,435  
           
 

Total current liabilities

    580,928     516,299  

Long-term debt

    811,980     865,000  

Income taxes payable

    4,448     1,680  

Other long-term liabilities

    28,016     10,286  

Deferred income taxes

    60,337     67,300  

Commitments and contingencies

             

TEMPORARY EQUITY:

             

Series A convertible redeemable preferred stock, $0.01 par value, 25,000 shares authorized, 1,750 non-vested shares issued and outstanding at December 31, 2009 and December 31, 2008

    16,130     9,888  

Redeemable noncontrolling interests

    57,086     42,483  

EQUITY:

             

Ticketmaster Entertainment, Inc. stockholders' equity:

             

Common stock, $0.01 par value, 300,000 shares authorized; 57,383 shares issued and outstanding at December 31, 2009 and 57,213 shares issued and outstanding at December 31, 2008

    574     572  

Additional paid-in capital

    1,219,822     1,235,019  

Accumulated deficit

    (1,028,504 )   (1,058,758 )

Accumulated other comprehensive income (loss)

    7,001     (11,374 )
           
 

Total Ticketmaster Entertainment, Inc. stockholders' equity

    198,893     165,459  
           

Noncontrolling interests

    31,940     28,172  
           

Total equity

    230,833     193,631  
           

TOTAL LIABILITIES, TEMPORARY EQUITY AND EQUITY

  $ 1,789,758   $ 1,706,567  
           

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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TICKETMASTER ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF TEMPORARY EQUITY AND EQUITY

(In thousands)

 
  Temporary Equity   Ticketmaster Entertainment, Inc. Stockholders' Equity    
   
 
 
  Redeemable Preferred Stock $0.01 Par Value    
  Common Stock $0.01 Par Value    
   
   
   
   
   
   
 
 
  Redeemable
Non-
controlling
Interests
   
   
   
   
  Accumulated
Other
Comprehensive
Income (Loss)
   
   
 
 
  Invested
Capital
  Additional
Paid-in
Capital
  Accumulated
Deficit
  Receivables
from IAC and
Subsidiaries
  Non-
controlling
Interests
   
 
 
  Amount   Shares   Amount   Shares   Total  

Balance as of December 31, 2006

  $       $ 669   $       $ 1,874,710   $   $   $ (539,861 ) $ 22,988   $   $ 1,357,837  

Comprehensive income:

                                                                       

Net income (loss) for the year ended December 31, 2007

            (2,560 )           169,351                         169,351  

Foreign currency translation

            72                             17,802         17,802  
                                                                     

Comprehensive income

                (2,488 )                                                 187,153  

Cumulative effect of adoption of ASC Topic 740

                        1,344                         1,344  

Stock-based compensation

            2,445                                      

Net transfers from IAC (principally the transfer of an investment and funding for acquisitions

                        127,092                         127,092  

Net change in receivables from IAC and subsidiaries

                                    65,751             65,751  

Acquisition of controlling interests in subsidiaries

            7,186                                      
                                                   

Balance as of December 31, 2007

  $       $ 7,812   $       $ 2,172,497   $   $   $ (474,110 ) $ 40,790   $   $ 1,739,177  

Comprehensive loss:

                                                                         

Net income prior to the Spin-off

                        53,259                         53,259  

Net loss after the Spin-off

            (5,394 )                   (1,058,758 )           1,072     (1,057,686 )

Foreign currency translation

                                        (52,164 )       (52,164 )
                                                                     

Comprehensive loss

                (5,394 )                                             1,072     (1,056,591 )

Distributions to and contributions from IAC, net of extinguishment of intercompany amounts

                        (1,012,960 )           474,110             (538,850 )

Capitalization as a result of the Spin-off

                        (1,212,796 )   1,212,796                      

Issuance of common stock at the Spin-off

                562     56,210         (562 )                    

Issuance of common stock upon exercise of stock options

                    3         50                     50  

Fair value of RSU liability adjustment

                            826                     826  

Stock awards related to Front Line acquisition

                10     1,000         13,158                     13,168  

Redeemable preferred stock

    8,848     1,750                     (8,848 )                   (8,848 )

Stock-based compensation

    1,040         2,415                 18,265                     18,265  

Acquisition of controlling interests in subsidiaries

            42,840                                 29,074     29,074  

Fair value of redeemable noncontrolling interests adjustments

            666                 (666 )                   (666 )

Distributions to noncontrolling interests

            (5,856 )                               (1,974 )   (1,974 )
                                                   

Balance as of December 31, 2008

  $ 9,888     1,750   $ 42,483   $ 572     57,213   $   $ 1,235,019   $ (1,058,758 ) $   $ (11,374 ) $ 28,172   $ 193,631  

Comprehensive loss:

                                                                         

Net income (loss)

            (4,437 )                   30,254             (6,789 )   23,465  

Minimum pension liability adjustment

                                        (206 )       (206 )

Foreign currency translation

            27                             18,581         18,581  
                                                                     

Comprehensive loss

            (4,410 )                                             (6,789 )   41,840  

Issuance of common stock upon exercise of stock options

                2     170         815                     817  

Fair value of RSU liability adjustment

                            (266 )                   (266 )

Stock-based compensation

    6,242         3,478                 12,603                     12,603  

Repurchase of outstanding options

                            (388 )                   (388 )

Tax adjustment related to the Spin-off

                            (5,188 )                   (5,188 )

Acquisition of controlling interests in subsidiaries

                                            12,625     12,625  

Fair value of redeemable noncontrolling interests adjustments

            23,637                 (22,773 )                   (22,773 )

Exercise of redemption feature of noncontrolling interest. 

            (382 )                                    

Distributions to noncontrolling interests

            (7,878 )                               (2,068 )   (2,068 )

Other

            158                                      
                                                   

Balance as of December 31, 2009

  $ 16,130     1,750   $ 57,086   $ 574     57,383   $   $ 1,219,822   $ (1,028,504 ) $   $ 7,001   $ 31,940   $ 230,833  
                                                   

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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TICKETMASTER ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 
  Years Ended December 31,  
 
  2009   2008   2007  
 
  (In thousands)
 

Cash flows from operating activities:

                   

Net income (loss)

  $ 19,028   $ (1,009,821 ) $ 166,792  

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

                   
 

Amortization of intangibles

    71,608     44,109     26,200  
 

Depreciation

    56,293     49,894     38,458  
 

Goodwill impairment

        1,094,091      
 

Impairment of long-term investments

    9,914     12,334      
 

Amortization of debt issuance costs

    4,536     1,697      
 

Provision for doubtful accounts

    3,362     2,409     464  
 

Stock-based compensation expense

    22,323     23,731     12,572  
 

Deferred income taxes

    (34,044 )   (32,247 )   (11,210 )
 

Gain on disposal of property and equipment

    (2,438 )        
 

Gain on extinguishment of debt

    (902 )        
 

Gain on sale of long-term investments

    (2,902 )        
 

Equity in income of unconsolidated affiliates, net of dividends

    135     953     1,035  
 

Excess tax benefits from stock-based awards

        (55 )   (3,029 )

Changes in assets and liabilities, excluding acquisition effects:

                   
 

Accounts receivable

    9,302     3,694     (10,878 )
 

Prepaid expenses and other current assets

    (1,987 )   3,266     (77,559 )
 

Accounts payable and other current liabilities

    1,573     4,678     (9,645 )
 

Income taxes payable

    6,982     12,199     4,110  
 

Deferred revenue

    (2,182 )   7,209     2,038  
 

Funds collected on behalf of clients, net

    21,224     (23,198 )   72,093  

Other, net

        245     526  
               

Net cash provided by operating activities

    181,825     195,188     211,967  
               

Cash flows from investing activities:

                   
 

Transfers (to) from IAC

        (910,088 )   64,548  
 

Cash paid for acquisitions, net of cash acquired

    (33,636 )   (506,602 )   (29,423 )
 

Purchases of property and equipment

    (46,275 )   (50,838 )   (47,521 )
 

Purchase of marketable securities

        (7,634 )    
 

Proceeds from sales and maturities of marketable securities

    1,497     5,043      
 

Proceeds from sales of property and equipment

    6,400          
 

Proceeds from sales of long-term investments

    7,042          
 

Cash paid for long-term investments

    (226 )   (5,830 )   (630 )
               

Net cash used in investing activities

    (65,198 )   (1,475,949 )   (13,026 )
               

Cash flows from financing activities:

                   
 

Capital contributions from IAC

        405,498     29,423  
 

Proceeds from issuance of long-term debt

        300,000      
 

Proceeds from bank borrowings

        565,000      
 

Principal payments on long-term obligations

    (53,341 )   (2,101 )   (2,175 )
 

Payment of deferred financing costs

        (27,169 )    
 

Purchase of noncontrolling interest

        (764 )    
 

Distributions to noncontrolling interests

    (9,946 )   (7,830 )    
 

Excess tax benefits from equity awards

        55     3,029  
 

Other, net

    (333 )   50      
               

Net cash (used in) provided by financing activities

    (63,620 )   1,232,739     30,277  
               

Effect of exchange rate changes on cash and cash equivalents

    36,857     (55,777 )   21,622  
               

Net increase (decrease) in cash and cash equivalents

    89,864     (103,799 )   250,840  

Cash and cash equivalents at beginning of year

    464,618     568,417     317,577  
               

Cash and cash equivalents at end of year

  $ 554,482   $ 464,618   $ 568,417  
               

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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NOTE 1—ORGANIZATION AND BASIS OF PRESENTATION

Company Overview

        Ticketmaster Entertainment, Inc., a Delaware limited liability company ("Ticketmaster Entertainment," "we," "our," "us" or the "Company"), consists of Ticketmaster and Front Line Management Group, Inc. ("Front Line"). Ticketmaster operates in 19 global markets, providing ticket sales, ticket resale services, marketing and distribution through www.ticketmaster.com, numerous retail outlets and worldwide call centers. Established in 1976, Ticketmaster serves clients worldwide across multiple event categories, providing exclusive ticketing services for leading arenas, stadiums, professional sports franchises and leagues, college sports teams, performing arts venues, museums and theaters. The Company acquired a controlling interest in Front Line in October 2008. Founded by Irving Azoff and Howard Kaufman in 2004, Front Line is an artist management company.

Spin-off from IAC/InterActiveCorp

        On July 1, 2008, the Board of Directors of IAC/InterActiveCorp ("IAC") approved a plan to separate IAC into five separate, publicly-traded companies via the distribution of all of the outstanding shares of common stock of four wholly-owned subsidiaries (the "Spincos"), including Ticketmaster Entertainment.

        On August 20, 2008, IAC distributed to its stockholders all of the outstanding shares of common stock, par value $0.01 per share, of Ticketmaster Entertainment (the "Spin-off"). The Company's businesses include the businesses that formerly comprised IAC's Ticketmaster segment (which, at the time of the Spin-off, included IAC's domestic and international ticketing and ticketing-related businesses, subsidiaries and investments, and excluded the Company's Reserve America subsidiary and its investment in Active.com). At the time of the Spin-off, the Company also included IAC's minority investment in Front Line. On October 29, 2008, the Company acquired additional equity interests in Front Line, giving the Company a controlling interest.

        Upon completion of the Spin-off (and for a short period prior to that, on a "when issued" basis), the Company's shares began trading on The Nasdaq Global Select Market ("NASDAQ") under the symbol "TKTM." In conjunction with the Spin-off, the Company completed the following transactions: (1) extinguished all intercompany receivable balances due from IAC and its subsidiaries, which totaled $604.4 million, by recording a non-cash distribution to IAC, (2) recapitalized the invested equity balance with common stock, whereby holders of IAC stock received one fifth of a share of Ticketmaster Entertainment common stock for each share of common and class B common stock of IAC held, as described in our Post Effective Amendment No. 1 to Form S-1 (Commission File Number 333-152702) filed with the Securities and Exchange Commission ("SEC") on August 20, 2008, and (3) distributed $752.9 million in cash to IAC in connection with the Company's separation from IAC, which included the net proceeds of $723.6 million from a combination of privately-issued debt securities and bank borrowings. Refer to Note 9—Long-Term Debt for further discussion of the Company's outstanding debt balance.

Merger with Live Nation

        On February 10, 2009, the Company entered into a definitive agreement to merge (the "Merger Agreement") with Live Nation, Inc. ("Live Nation"). The merger (the "Merger") was completed on January 25, 2010. As part of the Merger, among other things, (i) Ticketmaster Entertainment, which up to that time was a Delaware corporation named Ticketmaster Entertainment, Inc. ("Old Ticketmaster"), merged into an indirect, wholly-owned subsidiary of Live Nation ("Merger Sub"), (ii) Merger Sub continued as the surviving entity and Old Ticketmaster ceased to exist, (iii) Merger Sub was renamed Ticketmaster Entertainment LLC, a single member limited liability company with an

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Table of Contents

NOTE 1—ORGANIZATION AND BASIS OF PRESENTATION (Continued)


indirect, wholly-owned subsidiary of Live Nation as its sole member, (iv) each issued and outstanding share of common stock of Old Ticketmaster was converted into 1.4743728 shares of common stock of Live Nation plus cash in lieu of any fractional shares, and (v) Live Nation changed its name to Live Nation Entertainment, Inc. As a result, Ticketmaster Entertainment is now an indirect, wholly-owned subsidiary of Live Nation, and Live Nation remains a publicly-traded company with its shares listed on the New York Stock Exchange under the symbol "LYV." Refer to Note 3—Merger with Live Nation for a more detailed discussion of the Merger.

Basis of Presentation

        These consolidated financial statements present our results of operations, financial position, temporary equity and equity, comprehensive income (loss) and cash flows on a consolidated basis. The consolidated financial statements include the Company's investment in Front Line, which was consolidated beginning on October 29, 2008, when the Company increased its ownership interest from 39.4% to 82.3% (approximately 75% on a diluted basis). Prior to October 29, 2008, the investment in Front Line was accounted for using the equity method of accounting.

        We prepared the consolidated financial statements from the historical results of operations and historical basis of the assets and liabilities of the Company with the exception of income taxes. We computed income taxes using our stand-alone tax rate. Our income tax payables as well as deferred tax assets and liabilities represent the estimated impact of filing a consolidated income tax return with IAC through the Spin-off, and filing a stand-alone consolidated income tax return thereafter. We eliminated all significant intercompany transactions and accounts for periods prior to the Spin-off.

        Until the Spin-off, we recorded expense allocations from IAC, which consisted of certain general corporate overhead expenses, based on the ratio of our revenue as a percentage of IAC's total revenue. The general corporate overhead allocations primarily included expenses relating to accounting, treasury, legal, tax, corporate support, human resource functions and internal audit. Since the Spin-off, we have been performing these functions using our own resources or purchased services, including services purchased from IAC pursuant to the transitional services agreement among IAC and the Spincos.

        The historical financial statements prior to the Spin-off are based on certain assumptions about Ticketmaster Entertainment as a stand-alone company. Our management believes the assumptions underlying the historical consolidated financial statements of the Company are reasonable. However, this financial information does not necessarily reflect what the historical financial position, results of operations and cash flows of the Company would have been if the Company had been a stand-alone company during the entire period presented.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

        The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The Company consolidates all entities that we control by ownership of a majority voting interest as well as certain variable interest entities for which the Company is the primary beneficiary.

        We use the equity method to account for our investments for which we have the ability to exercise significant influence over operating and financial policies. Consolidated net income includes the Company's proportionate share of the net income or net loss of these companies.

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NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        We use the cost method to account for our investments in companies that we do not control and for which we do not have the ability to exercise significant influence over operating and financial policies. In accordance with the cost method, these investments are recorded at cost or fair value, as appropriate.

        We eliminate from our financial results all significant intercompany transactions, including the intercompany transactions with variable interest entities and the intercompany portion of transactions with equity method investees.

Revenue Recognition

        The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured. Determining whether some or all of these criteria have been met involves assumptions and judgments, including the evaluation of multiple element arrangements that can have an effect on the timing and amount of revenue the Company reports.

Gross versus Net Revenue Recognition

        The Company reports revenue on a gross or net basis based on management's assessment of whether the Company acts as a principal or agent in the transaction. To the extent the Company acts as the principal in a transaction, revenues are reported on a gross basis. The determination of whether the Company acts as a principal or an agent in a transaction is based on an evaluation of whether the Company has the substantial risks and rewards of ownership under the terms of an arrangement.

Ticketing

        Ticketing revenue, which primarily consists of convenience and order processing fees from ticketing operations, is recognized as tickets are sold, and is recorded on a net basis (net of the face value of the ticket) as the Company acts as an agent in these transactions. Interest income is earned on funds that are collected from ticket purchasers and invested until remittance to the applicable clients. As the process of collecting, holding and remitting these funds is a critical component of providing service to these clients, the interest earned on these funds is included in revenue. Revenue is presented net of sales tax.

Artist Services

        Front Line secures work for the clients it represents, for which it receives a commission. Generally, commissions are payable by clients upon their receipt of payments for performance of services or upon the delivery or use of materials which they created. Revenue is generally recognized in the month of the artist event. Contingent commissions, such as those based on profits or gross receipts, are recorded upon determination of the amounts. Revenue is not recognized before persuasive evidence of an arrangement exists, services have been rendered, the amount to be received is fixed or determinable, and collectability is reasonably assured.

        Front Line also earns revenue from the sales of entertainment packages to consumers in connection with live performances. Entertainment packages are sold and cash is received from consumers in advance of the event. Revenue and related expenses incurred are deferred until the event occurs. In addition, Front Line sells merchandise associated with musical artists at live musical performances, to retailers, and directly to consumers via a website. The Company recognized revenue

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NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


of $76.8 million, $16.9 million and zero related to the sale of merchandise for the years ended December 31, 2009, 2008 and 2007. For retail and internet sales, revenue is recognized upon shipment of the merchandise. Touring revenue, including the sale of merchandise, is recognized in the month of the event.

Cost of Sales (exclusive of depreciation)

        In our ticketing segment, costs associated with processing and delivering ticketing orders to customers are recorded as cost of sales. In our artist services segment, merchandise inventory, related shipping costs and costs associated with VIP ticket packages are recorded as cost of sales. The Company recognized cost of sales of $66.2 million, $14.3 million and zero related to the sale of merchandise for the year ended December 31, 2009, 2008 and 2007.

Cash and Cash Equivalents

        Cash and cash equivalents include cash, money market instruments and time deposits with maturities of less than 91 days. These balances are stated at cost, which approximates fair value. Cash and cash equivalents include $301.9 million and $254.0 million at December 31, 2009 and 2008, respectively, of collected proceeds relating to the face value of the tickets, which are payable to clients and reflected as accounts payable, client accounts. Cash and cash equivalents held in international territories totaled $339.7 million and $301.3 million at December 31, 2009 and 2008, respectively.

Marketable Securities

        At times, the Company invests in marketable securities. The Company only invests in marketable securities with active secondary or resale markets to ensure portfolio liquidity and the ability to readily convert investments into cash to fund current operations, or satisfy other cash requirements as needed. When held by the Company, marketable securities are classified as available-for-sale and reported at fair value based on quoted market prices.

Accounts Receivable

        Accounts receivable, client accounts, are due principally from ticketing outlets and credit card processors and represent the face value of tickets sold plus convenience and order processing fees, generally net of outlet commissions.

        Accounts receivable include amounts relating to artist management, merchandising, advertising, and software licensing sales and are stated at amounts due, net of an allowance for doubtful accounts. Accounts receivable outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time accounts receivable are past due, the Company's previous loss history, the specific customer's current ability to pay its obligation to the Company and the condition of the general economy and the customer's industry. The Company writes off accounts receivable when they become uncollectible.

Inventories

        Inventories are valued at lower of cost or net realizable market value. Cost is determined using the first-in, first-out method. At December 31, 2009 and 2008, respectively, Front Line merchandise inventory of $2.2 million and $1.8 million was included in "Prepaid expenses and other current assets" in the accompanying Consolidated Balance Sheets.

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Property and Equipment

        Property and equipment, including significant improvements, are recorded at cost. Any gains or losses on dispositions are included in operations.

        Depreciation is recorded on a straight-line basis to allocate the cost of depreciable assets to operations over their estimated service lives.

Asset Category
  Depreciation
Period
Computer equipment and capitalized software   1 to 5 years
Furniture and other equipment   5 to 7 years
Buildings and leasehold improvements   3 to 40 years

        Leasehold improvements are amortized using the straight-line method over the shorter of the economic useful life or the remaining lease term. Expenditures for maintenance and repairs are charged to operations as incurred, whereas expenditures for renewal and improvements are capitalized. Assets recorded under capital leases are amortized over the shorter of the economic useful life or the remaining lease term; the amortization is included in depreciation expense.

        The Company capitalizes certain qualified costs incurred in connection with the development of internal use software. Capitalization of internal use software costs begins when the preliminary project stage is completed, management with the relevant authority authorizes and commits to the funding of the software project, and it is probable that the project will be completed and the software will be used to perform the function intended. Capitalized internal use software is depreciated on a straight-line basis over the estimated useful life of the software. Capitalized internal software costs, net of accumulated depreciation, totaled $40.8 million and $33.9 million at December 31, 2009 and 2008, respectively, and are included in "Property and equipment, net" in the accompanying Consolidated Balance Sheets.

Goodwill and Indefinite-Lived Intangible Assets

        Goodwill represents the excess fair value of an acquired entity over the fair value of the identifiable net tangible and intangible assets acquired. Indefinite-lived intangible assets acquired in a business combination are initially recorded at management's estimate of their fair values. We test our goodwill for impairment annually on the first day of our fiscal fourth quarter (October 1, 2009 of fiscal 2009), or whenever events or changes in circumstances indicate the carrying value may not be recoverable. For the year ended December 31, 2009, the Company identified one reporting unit in the ticketing segment and three in the artist services segment (artist management, VIP ticketing and merchandising). For the year ended December 31, 2008, the Company had identified two reporting units in the ticketing segment (ticketing and Echo Music) and three reporting units in the artist services segment (artist management, VIP ticketing and merchandising). The reduction in the number of reporting units identified within the ticketing segment is a result of a change in the Company's reporting structure, with the Echo Music reporting unit being merged into the ticketing reporting unit. As of December 31, 2008, the Echo Music reporting unit had no goodwill.

        The testing of goodwill for impairment consists of a two-step process. The first step involves a comparison of the estimated fair value of a reporting unit to its carrying amount, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is not required. If the carrying amount of a reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed in which the implied fair value of the reporting unit's goodwill is compared to its

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goodwill carrying amount to measure the amount of impairment loss, if any. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The Company determines the fair value of the reporting units based on the present value of the cash flows the reporting units can be expected to generate in the future.

        We also test our indefinite-lived intangible assets for impairment annually on the first day of our fiscal fourth quarter, or whenever events or changes in circumstances indicate the carrying value may not be recoverable. The impairment test for indefinite-lived intangible assets involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. In our case, the Ticketmaster trade name is the only intangible asset not subject to amortization. The fair value of the Ticketmaster trade name is estimated using a multi-period royalty savings method, which reflects the savings realized by owning the trade name, and thus not having to pay a royalty fee to a third party.

Long-Lived Assets and Intangible Assets with Definite Lives

        Long-lived assets, including property and equipment and intangible assets with definite lives, are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying amount is deemed to not be recoverable, an impairment loss is recorded as the amount by which the carrying amount of the long-lived asset exceeds its fair value. Amortization of definite lived intangible assets is recorded either on a straight-line basis or a basis more representative of the time pattern over which the benefit is derived.

Long-Term Investments

        The Company owns certain investments in common stock which do not have readily determinable fair values. Investments in which the Company has the ability to exercise significant influence over the operating and financial matters of the investee are accounted for using the equity method. Other investments in which the Company does not have the ability to exercise significant influence over the operating and financial matters of the investee are accounted for using the cost method. The Company evaluates each equity and cost method investment for impairment on a quarterly basis and recognizes an impairment loss if a decline in value is determined to be other-than-temporary. If the Company has not identified events or changes in circumstances that may have a significant adverse effect on the fair value of a cost investment, then the fair value of such cost method investment is not estimated, as it is impracticable to do so.

Contract Advances

        Contract advances, which can be either recoupable or non-recoupable, represent amounts paid in advance to the Company's clients pursuant to ticketing agreements. Recoupable contract advances provide for the client's participation in the convenience charges and/or order processing fees and are generally recoupable against future royalties earned by the clients based on the contract terms over the life of the contract (generally 3 to 7 years). Non-recoupable contract advances are fixed additional incentives sometimes paid by the Company to secure exclusive ticketing rights with certain clients and are normally amortized over the life of the contract on a straight-line basis (generally 3 to 7 years).

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Recoupment of contract advances and amortization of non-recoupable contract advances are included in "Cost of sales" in the accompanying Consolidated Statements of Operations.

Accounts Payable, Client Accounts

        Accounts payable, client accounts consist of contractual amounts due to clients for tickets sold on behalf of the organizations that sponsor events and receive ticketing royalties, which arise from the clients' share of convenience and order processing charges.

Deferred Revenue

        Deferred revenue primarily consists of unredeemed gift cards issued by the Company. Upon the purchase of a gift card, deferred revenue is established for the cash value of the gift card. Deferred revenue is relieved and net revenue is recorded upon redemption by the customer or the expiration of the gift card, if applicable. Over time, some portion of the gift cards issued without expiration dates are not redeemed. This amount is recorded as revenue when it can be determined that the likelihood of the gift card being redeemed is remote and there is no legal obligation to remit the unredeemed gift cards to relevant jurisdictions. We determine the probability of the gift cards being redeemed based on historical gift card redemption patterns. Income from gift card revenue, net of any amounts subject to escheat laws, is included in revenue in the accompanying Consolidated Statements of Operations.

Redeemable Noncontrolling Interests

        In connection with the acquisition of certain subsidiaries, the Company is party to fair value put arrangements with respect to the common securities that represent the remaining noncontrolling interests of the acquired company. These put arrangements are exercisable at fair value by the counter-party outside the control of the Company and are classified as temporary equity. Adjustments to the carrying amount of redeemable noncontrolling interests issued in the form of a common security to reflect a fair value redemption feature do not impact the Company's earnings per share. Accordingly, to the extent that the fair value of these redeemable noncontrolling interests exceeds the value determined by normal noncontrolling interest accounting, the value of such interests is adjusted to fair value with a corresponding adjustment to additional paid-in capital. Redeemable noncontrolling interests for which the put arrangements are not currently redeemable are accounted for by normal noncontrolling interest accounting, and changes in the redemption fair value are accreted over the period from the date of issuance to the earliest redemption date of the security using the interest method. For the noncontrolling interests that are not currently redeemable, the total redemption fair value being accreted to is $76.6 million.

Advertising

        Advertising costs are charged to expense in the period incurred and represent both offline costs, including sports sponsorships and radio advertising, and online advertising costs, including fees paid to search engines and distribution partners. Advertising expense was $66.1 million, $70.2 million and $21.6 million for the years ended December 31, 2009, 2008 and 2007, respectively.

Research and Development

        Research and development costs, which relate primarily to software development, are charged to operations as incurred. Based on the Company's development process, technological feasibility is established upon completion of a working model. Costs incurred prior to the completion of a working model are expensed as incurred. Costs incurred subsequent to the completion of a working model and

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to the point at which the software is ready for general release are capitalized. Research and development costs were $31.4 million, $34.5 million and $21.4 million for the years ended December 31, 2009, 2008 and 2007, respectively.

Income Taxes

        The Company accounts for income taxes under the liability method, and deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided on deferred tax assets if it is determined that it is more likely than not that the deferred tax asset will not be realized. The Company records interest on potential tax contingencies as a component of income tax expense and records interest net of any applicable related income tax benefit.

        Effective January 1, 2007, the Company adopted authoritative guidance on accounting for uncertainty in income taxes. Under this guidance, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

Foreign Currency Translation and Transaction Gains and Losses

        The financial position and operating results of substantially all foreign operations are consolidated using the local currency as the functional currency. Local currency assets and liabilities are translated at the rates of exchange as of the balance sheet date, and local currency revenue and expenses are translated at average rates of exchange during the period. Resulting translation gains or losses are included as a component of accumulated other comprehensive income, a separate component of equity. The cumulative translation adjustment was a net gain of $7.2 million and a net loss of $11.4 million at December 31, 2009 and 2008, respectively. Transaction gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved are included in the Consolidated Statements of Operations.

        In certain limited instances, the Company enters into foreign currency forward exchange contracts to mitigate the risk of changes in foreign currency exchange rates on short-term intercompany loans payable to certain international subsidiaries. As of December 31, 2009 and 2008, the Company had foreign currency forward exchange contract outstanding with nominal amounts of CAD 3.2 million and AUD 16.5 million, respectively. Gains and losses on these foreign currency exchange contracts are recognized in "Other income" in the Consolidated Statements of Operations immediately as the contracts were not designated as hedging instruments, substantially offsetting currency transaction gains and losses on the short-term intercompany loans. The gains or losses are carried on the Consolidated Balance Sheet on a gross basis in "Prepaid expenses and other current assets" and "Other accrued expenses and current liabilities," respectively. The change in fair value of these instruments from date of purchase through December 31, 2009 and 2008 was a loss of $0.1million and a loss of $0.5 million, respectively.

Debt Issuance Costs

        Debt issuance costs are deferred and amortized to interest expense over the terms of debt. The Company utilizes the effective interest method to amortize debt issuance costs.

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Stock-Based Compensation

        The Company follows the current accounting guidance for stock-based compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options and restricted stock units ("RSUs") based on the grant-date fair values of the awards.

        The Company adopted the current guidance using the modified prospective transition method, and the Company's consolidated financial statements for the years ended December 31, 2009, 2008 and 2007 reflect the impact of the adoption. Stock-based compensation recognized for the years ended December 31, 2009, 2008 and 2007 was $23.8 million, $23.7 million and $12.6 million, respectively, which was primarily related to RSUs and stock options. In accordance with current guidance, the Company has been recognizing expense for all stock-based grants since it became wholly owned by IAC on January 17, 2003.

        Determining the fair value of share-based awards at the measurement date requires judgment, including estimating the expected term that stock options will be outstanding prior to exercise, the associated volatility, and the expected dividends. The Company estimates the fair value of share based payment awards on the grant date using the Black-Scholes option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company's Consolidated Statements of Operations.

        Under current guidance, forfeiture rates must be estimated at the time of grant in order to calculate the amount of share-based payment awards ultimately expected to vest. The forfeiture rate is based on historical rates. Stock-based compensation expense recognized in the Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and 2007 has been reduced for estimated forfeitures as it is based on equity awards ultimately expected to vest.

Net Income (Loss) Per Share

        Basic net income (loss) per share attributable to common stockholders is computed using the weighted-average number of common shares outstanding during the period, net of shares subject to repurchase rights, and excludes any dilutive effects of options or warrants, Restricted Stock, RSUs, and convertible securities, if any. Diluted net income (loss) per share is computed using the weighted-average number of common stock and common stock equivalent shares outstanding (including the effect of restricted stock) during the period. Common stock equivalent shares are excluded from the computation if their effect is antidilutive.

Legal Contingencies

        The Company is currently involved in certain legal proceedings. The Company records liabilities related to pending litigation when an unfavorable outcome is probable and management can reasonably estimate the amount of loss. The Company does not record liabilities for pending litigation when there are uncertainties related to assessing either the amount or the probable outcome of the claims asserted in the litigation. As additional information becomes available, the Company continually assesses the potential liability related to such pending litigation.

Operating Leases

        The Company leases office space, data centers and certain office equipment under operating lease agreements. Certain of the lease agreements contain rent holidays and rent escalation provisions. Rent holidays and rent escalation provisions are considered in determining straight-line rent expense to be

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recorded over the lease term. The lease term begins on the date of initial possession of the leased property for purposes of recognizing lease expense on a straight-line basis over the term of the lease. Lease renewal periods are considered on a lease-by-lease basis and are generally not included in the initial lease term.

Segments

        The Company complies with the segment reporting requirements as outlined in the current accounting guidance. After the October 29, 2008 acquisition of a controlling interest in Front Line, based upon changes in the internal management structure and how the chief operating decision maker viewed the business, the Company began reporting two segments: ticketing and artist services.

Accounting Estimates

        The Company's management is required to make certain estimates and assumptions during the preparation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles. These estimates and assumptions impact the reported amount of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amount of net earnings during any period. Actual results could differ from those estimates.

        Significant estimates underlying the accompanying consolidated financial statements include, but are not limited to: the recoverability of contract advances; the recoverability of long-lived assets; the recovery of goodwill and intangible assets; the determination of income taxes payable and deferred income taxes, including related valuation allowances; and assumptions related to the determination of stock-based compensation.

Certain Risks and Concentrations

        The Company's business is subject to certain risks and concentrations including dependence on third-party technology providers, exposure to risks associated with online commerce security and credit card fraud.

        Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents. Cash and cash equivalents are maintained with quality financial institutions of high credit and cash held in the U.S. is in excess of Federal Deposit Insurance Corporation insurance limits.

        As of December 31, 2009, the Company has no customers that individually comprise more than 10% of total revenue. For the year ended December 31, 2008 and 2007, the Company had one customer, Live Nation, (including its subsidiary House of Blues) that comprised more than 10% of total revenue. Refer to Note 7—Segment Information for information regarding significant customers.

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NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements

FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles

        In June 2009, the Financial Accounting Standards Board ("FASB") issued authoritative guidance that establishes the FASB Accounting Standards Codification ("Codification" or "ASC"), as the single source of authoritative United States accounting and reporting standards applicable for all non-governmental entities, with the exception of guidance promulgated by the SEC and its staff. The Codification, which changes the referencing of financial standards, is effective for interim or annual financial periods ending after September 15, 2009. We adopted the guidance in the third quarter of 2009. Since the guidance did not change GAAP, the Codification did not impact the Company's financial statements.

Determination of the Useful Life of Intangible Assets

        In April 2008, the FASB issued authoritative guidance that revises the factors that should be considered in developing renewal or extension assumptions in determining the useful life of a recognized intangible asset under the guidance. We adopted the guidance in the first quarter of 2009 on a prospective basis, and the standards did not have a material impact on the Company's consolidated financial statements.

Noncontrolling Interests in Consolidated Financial Statements

        In December 2007, the FASB issued authoritative guidance that impacts the accounting and reporting for noncontrolling interests. Noncontrolling interests are to be reported as a component of equity separate from the parent's equity, and purchases or sales of equity interests that do not result in a change in control are to be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest should be included in consolidated net income on the face of the Consolidated Statements of Operations and upon a loss of control, the interest sold, as well as any interest retained, should be recorded at fair value with any gain or loss recognized in earnings. The guidance is applied prospectively, except for the presentation and disclosure requirements, which are applied retrospectively for all periods presented. We adopted the guidance in the first quarter of 2009.

        As a result of the adoption, we have reclassified certain noncontrolling interests from liabilities to a component of equity. Securities that are redeemable at the option of the holder and not solely within the control of the issuer must be classified outside of equity. Since the noncontrolling interests held by third parties in certain consolidated subsidiaries are exercisable outside the control of the Company, these interests are classified as a component of temporary equity in the accompanying Consolidated Balance Sheets.

Business Combinations

        In December 2007, the FASB issued authoritative guidance that establishes revised principles and requirements for the recognition and measurement of assets and liabilities in a business combination. The guidance requires (i) recognition of 100% of the fair values of acquired assets, including goodwill, and assumed liabilities upon obtaining control, (ii) contingent consideration to be accounted for at fair value at the acquisition date, (iii) transaction costs to be expensed as incurred, (iv) pre-acquisition contingencies to be accounted for at the acquisition date at fair value and (v) costs of a plan to exit an activity or terminate or relocate employees to be accounted for as post combination costs. We adopted the guidance in the first quarter of 2009 on a prospective basis. As of December 31, 2008, approximately $0.6 million of transaction costs related to transactions not consummated were

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capitalized and included in prepaid expenses and other current assets. These costs were charged to expense during the first quarter of 2009.

        In April 2009, the FASB issued an amendment to amend and clarify the guidance on business combinations to require that an acquirer recognize at fair value, at the acquisition date, an asset acquired or a liability assumed in a business combination that arises from a contingency if the acquisition-date fair value of that asset or liability can be determined during the measurement period. If the acquisition-date fair value of such an asset acquired or liability assumed cannot be determined, the acquirer should apply the provisions of the guidance on business combinations to determine whether the contingency should be recognized at the acquisition date or after it. We adopted the guidance in the first quarter of 2009, and the standard did not have a material impact on the Company's consolidated financial statements.

Subsequent Events

        In May 2009, the FASB issued authoritative guidance that establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, the guidance sets forth the following: (i) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The guidance is effective for interim or annual financial periods ending after June 15, 2009 on a prospective basis. We adopted the guidance in the second quarter of 2009, and the standard did not have a material impact on the Company's consolidated financial statements and disclosures.

Fair Value Accounting

        In April 2009, the FASB issued guidance that requires disclosures about the fair value of financial instruments for interim reporting periods ending after June 15, 2009. The guidance also requires those disclosures in summarized financial information at interim financial periods. The Company adopted the guidance in the second quarter of 2009, and the standard did not have an impact on the Company's financial statement disclosures.

        In August 2009, the FASB issued guidance related to the fair value measurement of liabilities. The guidance provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, an entity is required to measure fair value utilizing one or more of the following techniques: (1) a valuation technique that uses the quoted market price of an identical liability or similar liabilities when traded as assets; or (2) another valuation technique that is consistent with the principles of fair value measurements, such as a present value technique. We adopted the guidance in the fourth quarter of 2009, and the standards did not have a material impact on the Company's consolidated financial statements.

Variable Interest Entities

        In June 2009, the FASB issued guidance that amends the existing guidance related to variable interest entities. Among other accounting and disclosure requirements, the guidance replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity and the obligation to absorb losses of

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the entity or the right to receive benefits from the entity. The Company will adopt the guidance in its first annual and interim reporting periods beginning after November 15, 2009. The Company is evaluating the impact the guidance will have on the Company's consolidated financial statements.

NOTE 3—MERGER WITH LIVE NATION

        On January 25, 2010, the Company and Live Nation completed their Merger following the receipt of regulatory clearances from the U.S. Department of Justice (the "DOJ") and the Canadian Bureau of Competition (having previously received clearance from all other government authorities required under the Merger Agreement), and the approval of Ticketmaster Entertainment and Live Nation stockholders. As part of the Merger, the Company's stockholders received 1.4743728 shares of Live Nation common stock for each share of Ticketmaster Entertainment common stock they owned. Effective on the date of the Merger, the merged entity changed its name to Live Nation Entertainment, Inc. On January 28, 2010, the Company and Live Nation received notice from the UK Competition Commission that it would re-open its investigation of the Merger in response to an appeal filed by CTS Eventim, and since then the Commission has officially reported that it will complete its work in the re-opened investigation on or before May 11, 2010.

        The combined company is led by Michael Rapino as CEO and President of Live Nation Entertainment and Irving Azoff as Executive Chairman of Live Nation Entertainment and CEO of Front Line. Barry Diller serves as Chairman of the Board of Live Nation Entertainment. The Board consists of 14 directors, seven of whom were designated by each the Company and Live Nation.

        Under the terms of the agreement reached with the DOJ, the Company and Live Nation agreed to divest the Company's ticketing subsidiary, Paciolan, Inc., and to license the Ticketmaster Host technology to Anschutz Entertainment Group, Inc., as well as to other terms intended to protect competitive conditions in ticketing and promotions.

        On May 12, 2009, the Company had entered into an amendment to the senior secured credit facilities, which was contingent on the consummation of the Merger. The amendment effects certain changes to the senior secured credit facilities, which became effective upon the Company notifying the administrative agent under the senior secured credit facilities that the Merger was completed pursuant to the terms of the Merger Agreement and the payment to each lender that has consented to the amendment of a consent fee equal to 0.50% of the sum of the principal amount of the term loans outstanding to such lender as of May 12, 2009 and the full amount of such lender's revolving commitment as of May 12, 2009. The amendment permits the senior secured credit facilities to remain outstanding following the Merger, increases the interest spreads under each of the Term Loan A, Term Loan B and revolving credit facility by 1.25%, institutes a LIBOR floor of 2.50% for the senior secured credit facilities, conditions each borrowing under the revolving credit facility and certain other debt incurrences on the Company having a pro forma consolidated total leverage ratio of no more than 3.50 to 1.00, creates restrictions on the Company and its subsidiaries transferring assets to Live Nation or Live Nation's other subsidiaries in certain circumstances and would effect certain other changes to facilitate the integration of the Company and its subsidiaries with Live Nation and its subsidiaries following consummation of the Merger.

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NOTE 4—GOODWILL AND INDEFINITE-LIVED INTANGIBLE ASSETS

        The balance of goodwill and indefinite-lived intangible assets, net is as follows (in thousands):

 
  December 31,  
 
  2009   2008  

Goodwill

  $ 482,341   $ 455,751  

Indefinite-lived intangible assets, trade name

    62,585     62,585  
           
 

Total goodwill and indefinite-lived intangible assets, net

  $ 544,926   $ 518,336  
           

        The following tables present the balance of goodwill, including the changes in carrying amount of goodwill, for the years ended December 31, 2009 and 2008 (in thousands):

 
  Ticketing   Artist Services   Total  
 
  (In thousands)
 

Balance as of January 1, 2008

                   
 

Goodwill

  $ 1,090,418   $   $ 1,090,418  
 

Accumulated impairment loss

             
               

    1,090,418         1,090,418  
               

Increase in goodwill related to acquisitions

    284,990     194,160     479,150  

Reduction of goodwill related to impairment

    (1,094,091 )       (1,094,091 )

Effect of foreign currency

    (19,726 )       (19,726 )
               

Balance as of December 31, 2008

                   
 

Goodwill

    1,355,682     194,160     1,549,842  
 

Accumulated impairment loss

    (1,094,091 )       (1,094,091 )
               

    261,591     194,160     455,751  
               

Increase in goodwill related to acquisitions

        18,072     18,072  

Effect of foreign currency

    8,518         8,518  
               

Balance as of December 31, 2009

                   
 

Goodwill

    1,364,200     212,232     1,576,432  
 

Accumulated impairment loss

    (1,094,091 )       (1,094,091 )
               

  $ 270,109   $ 212,232   $ 482,341  
               

        For the year ended December 31, 2009, goodwill additions of $15.0 million resulted from acquisitions of four separate artist management companies. These acquisitions were not considered material and the acquired businesses did not have a material impact on the Company's financial position, results of operations or cash flows for the twelve months ended December 31, 2009. Additionally, $3.1 million of goodwill was recognized due to payments arising from contingent earn-outs on acquisitions completed prior to the effective date of the current guidance for business combinations.

        For the year ended December 31, 2008, additions to the ticketing segment principally related to the 2008 acquisitions of TicketsNow, Paciolan, and GET ME IN! The aggregate purchase price for these acquisitions totaled approximately $428.0 million with approximately $151.6 million of intangible assets and $282.1 million of goodwill identified. For the artist services segment, $194.2 million of goodwill was recorded as a result of the acquisition of a controlling interest in Front Line, which included $147.4 million in historical basis and $46.8 million resulting from the excess of the purchase price over fair value of identified assets for the stepped-up portion of the acquisition.

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NOTE 4—GOODWILL AND INDEFINITE-LIVED INTANGIBLE ASSETS (Continued)

Impairment Testing

        The Company performed its annual impairment testing of goodwill on October 1, 2009. As a result of testing, the Company determined that there were no indications of goodwill impairment for any of the reporting units for the year ended December 31, 2009.

        As a result of our annual impairment test in 2008, the Company concluded that goodwill in the Company's ticketing and Echo Music reporting units was likely impaired. The factors indicating a likely impairment included the decline in the global economy, which resulted in downward adjustments in forecasted future operating income and cash flows, and a significant decline in the Company's stock price. In determining the impairment charge, the Company used certain discounted cash flow ("DCF") analyses. The analyses included seven years of projected cash flows with forecasted sales growth rates ranging from -5.7% to 12.5% with a terminal growth rate of 3%. The discount rates used in the DCF analyses for the step one tests were 12% with a 9% rate for the terminal value. The Company also considered the market approach which evaluates market transactions involving similarly situated companies, however it was not considered meaningful in the final evaluation because of the lack of comparability between the reporting units and guideline public companies. In addition, the Company assessed the reasonableness of its determined fair values by reference to the Company's market capitalization and determined that the implied control premium was reasonable. To quantify the impairment, the Company allocated the fair value of the ticketing and Echo Music reporting units to the reporting units' individual assets and liabilities utilizing the purchase price allocation guidance. The resulting implied value of the ticketing and Echo Music reporting units' goodwill was a total of $1.1 billion less than the current carrying value of the goodwill. The difference was recorded as a non-cash impairment charge to reduce the goodwill in the ticketing and Echo Music reporting units to $261.6 million and zero, respectively.

        There was no goodwill impairment recorded for the year ended December 31, 2007. In addition, the Company's impairment test for the indefinite-lived trademark indicated no impairment for the years ended December 31, 2009, 2008 and 2007.

NOTE 5—LONG-LIVED ASSETS AND INTANGIBLE ASSETS WITH DEFINITE LIVES

        Intangible assets with definite lives related to the following (in thousands):

 
  December 31, 2009   December 31, 2008  
 
  Cost   Accumulated
Amortization
  Weighted
Average
Amortization
Period
(Years)
  Cost   Accumulated
Amortization
  Weighted
Average
Amortization
Period
(Years)
 

Artist relationships

  $ 172,588   $ (65,650 )   20.0   $ 138,369   $ (38,720 )   20.0  

Purchase agreements

    157,563     (157,396 )   6.1     157,952     (151,209 )   6.1  

Broker relationships

    64,375     (9,832 )   12.0     64,331     (4,468 )   12.0  

Customer relationships

    53,115     (18,443 )   8.2     53,086     (8,060 )   7.9  

Technology

    31,377     (21,635 )   3.5     31,333     (14,494 )   3.5  

Distribution agreements

    27,805     (27,596 )   6.3     27,333     (23,959 )   6.3  

Non-compete agreements

    27,577     (17,767 )   5.3     23,968     (12,950 )   4.8  

Trademarks and trade names

    24,896     (5,861 )   9.1     24,740     (2,716 )   9.1  

Other

    3,927     (1,323 )   10.9     3,873     (933 )   10.9  
                               
 

Total

  $ 563,223   $ (325,503 )       $ 524,985   $ (257,509 )      
                               

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Table of Contents

NOTE 5—LONG-LIVED ASSETS AND INTANGIBLE ASSETS WITH DEFINITE LIVES (Continued)

        Long-lived assets, including property and equipment and intangible assets with definite lives, are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. There was no definite-lived intangible asset impairment recorded for the year ending December 31, 2009. In 2008, the Company identified and recorded an impairment charge of $0.6 million for the write-off of a covenant not to compete related to the Company's ticketing operations in Germany. The intangible asset impairment charge was included in "Amortization of intangible assets" in the accompanying Consolidated Statements of Operations.

        In the 2009, as a result of consideration of operating results and other events impacting the business, the Company evaluated the remaining useful lives attributed to certain intangible assets. The Company determined that circumstances warranted a revision to the remaining period of amortization for the related intangible assets. The Company determined that certain international ticketing agreement intangible assets did not have a useful life beyond 2009, and as such, the Company accelerated the amortization of these assets to fully amortize the assets as of June 30, 2009. The additional amortization expense related to the ticketing agreement intangible assets equaled $5.1 million. Amortization of intangible assets with definite lives is based on the nature of the applicable intangible asset and expected future cash flows derived from the intangible asset. As of December 31, 2009, the amortization for the next five years and thereafter is estimated to be as follows (in thousands):

Years Ending December 31,
   
 

2010

  $ 53,071  

2011

    36,728  

2012

    31,142  

2013

    27,136  

2014

    22,209  

Thereafter

    67,434  
       

Total

  $ 237,720  
       

        As acquisitions and dispositions occur in the future and the valuation of intangible assets for recent acquisitions is completed, amortization expense may vary.

NOTE 6—PROPERTY AND EQUIPMENT

        Property and equipment, net is as follows (in thousands):

 
  December 31,  
 
  2009   2008  

Computer equipment and capitalized software

  $ 342,995   $ 300,331  

Buildings and leasehold improvements

    18,519     19,374  

Furniture and other equipment

    21,349     21,461  

Projects in progress

    12,862     13,198  

Land

        2,058  
           

    395,725     356,422  

Less: accumulated depreciation

    (294,677 )   (245,131 )
           
 

Total property and equipment, net

  $ 101,048   $ 111,291  
           

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Table of Contents

NOTE 6—PROPERTY AND EQUIPMENT (Continued)

        In October 2009, the Company completed a transaction to sell both the land and existing commercial building located in Vancouver, British Columbia, which had a net book value of $2.8 million at the time of the sale, for a total of $6.4 million, net of commissions. As part of the sales transaction, the Company entered into an operating lease with the buyer covering a period of three years. Under the terms of the lease agreement, the Company retains usage rights to the property that are more than minor but less than substantially all of the property. In accordance with guidance for sale-leaseback transactions, the Company has recognized $2.8 million of the gain in the current year as a reduction of "General & administrative expense" in the Consolidated Statement of Operations for the year ended December 31, 2009. The $0.8 million remaining balance of the gain has been deferred and will be recognized as a reduction of "General & administrative expense" ratably over the remaining term of the lease.

NOTE 7—SEGMENT INFORMATION

        Prior to the October 29, 2008 acquisition of Front Line, the Company had one operating segment in accordance with the internal management structure and based upon how the chief operating decision maker viewed the business, its organizational structure and the type of service provided, which primarily was online and offline ticketing services. Following the acquisition, based upon changes in the internal management structure and how the chief operating decision maker and executive management viewed the business, the Company began reporting two segments: ticketing and artist services.

        The ticketing segment is primarily an agency business that sells tickets for events on behalf of our clients and retains a convenience charge and order processing fee for our services. We sell tickets through a combination of websites, telephone services and ticket outlets.

        The artist services segment primarily provides management services to music recording artists in exchange for a commission on the earnings of these artists. Artist services also sells merchandise associated with musical artists at live musical performances, to retailers, and directly to consumers via a website.

        Revenue and expenses earned and charged between segments are eliminated in consolidation. Corporate expenses, interest income, interest expense, equity in losses (earnings) of nonconsolidated affiliates, loss attributable to noncontrolling interests, other expense (income)—net and income taxes expense are managed on a total company basis. Corporate expenses primarily include compensation and other employee costs (including stock-based compensation), outside services and professional fees.

 
  Years Ended December 31,  
 
  2009   2008   2007  
 
  (In thousands)
 

Revenue:

                   
 

Ticketing

  $ 1,294,381   $ 1,408,820   $ 1,240,477  
 

Artist Services

    191,786     45,705      
               
   

Total revenue

  $ 1,486,167   $ 1,454,525   $ 1,240,477  
               

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Table of Contents

NOTE 7—SEGMENT INFORMATION (Continued)


 
  Years Ended December 31,  
 
  2009   2008   2007  
 
  (In thousands)
 

Operating income (loss):

                   
 

Ticketing

  $ 201,677   $ (872,083 ) $ 290,070  
 

Artist Services

    2,222     7,642      
 

Corporate and unallocated

    (107,779 )   (89,702 )   (73,754 )
               
   

Total operating income (loss)

  $ 96,120   $ (954,143 ) $ 216,316  
               

 

 
  Years Ended December 31,  
 
  2009   2008   2007  
 
  (In thousands)
 

Adjusted EBITDA(a):

                   
 

Ticketing

  $ 288,076   $ 312,949   $ 356,125  
 

Artist Services

    55,999     16,985      
 

Corporate and unallocated

    (96,238 )   (72,252 )   (62,579 )
               
   

Total Adjusted EBITDA

  $ 247,837   $ 257,682   $ 293,546  
               

 

 
  Years Ended December 31,  
 
  2009   2008   2007  
 
  (In thousands)
 

Capital expenditures:

                   
 

Ticketing

  $ 42,586   $ 43,821   $ 41,354  
 

Artist Services

    490     150      
 

Corporate and unallocated

    3,199     6,867     6,167  
               
   

Total capital expenditures

  $ 46,275   $ 50,838   $ 47,521  
               

        The following table reconciles Adjusted EBITDA to Operating income (loss) for the Company's reportable segments to net income (loss) attributable to Ticketmaster Entertainment, Inc.:

 
  Year Ended December 31, 2009  
 
  Adjusted
EBITDA(a)
  Non-cash and
stock-based
compensation
expense
  Amortization
of intangibles
  Depreciation
expense
  Operating
income (loss)
 
 
  (In thousands)
 

Ticketing

  $ 288,076   $ (1,371 ) $ (32,630 ) $ (52,398 ) $ 201,677  

Artist Services

    55,999     (14,031 )   (38,978 )   (768 )   2,222  

Corporate and unallocated

    (96,238 )   (8,414 )       (3,127 )   (107,779 )
                       
 

Total

  $ 247,837   $ (23,816 ) $ (71,608 ) $ (56,293 ) $ 96,120  
                         

Other expense, net

    (57,996 )
                               

Earnings before income taxes and noncontrolling interests

    38,124  

Income tax provision

    (19,096 )
                               

Net income

    19,028  
 

Plus: Loss attributable to noncontrolling interests, net

    11,226  
                               

Net income attributable to Ticketmaster Entertainment, Inc

  $ 30,254  
                               

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Table of Contents

NOTE 7—SEGMENT INFORMATION (Continued)


 
  Year Ended December 31, 2008  
 
  Adjusted
EBITDA(a)
  Non-cash and
stock-based
compensation
expense
  Amortization
of intangibles
  Depreciation
expense
  Goodwill
impairment
  Operating
income (loss)
 
 
  (In thousands)
 

Ticketing

  $ 312,949   $ (7,848 ) $ (37,103 ) $ (45,990 ) $ (1,094,091 ) $ (872,083 )

Artist Services

    16,985     (2,153 )   (7,006 )   (184 )       7,642  

Corporate and unallocated

    (72,252 )   (13,730 )       (3,720 )       (89,702 )
                           
 

Total

  $ 257,682   $ (23,731 ) $ (44,109 ) $ (49,894 ) $ (1,094,091 ) $ (954,143 )
                             

Other expense, net

    (30,051 )
                                     

Earnings before income taxes and noncontrolling interests

    (984,194 )

Income tax provision

    (25,627 )
                                     

Net loss

    (1,009,821 )
 

Plus: Loss attributable to noncontrolling interests, net

    4,322  
                                     

Net loss attributable to Ticketmaster Entertainment, Inc

  $ (1,005,499 )
                                     

 

 
  Year Ended December 31, 2007  
 
  Adjusted
EBITDA(a)
  Non-cash and
stock-based
compensation
expense
  Amortization
of intangibles
  Depreciation
expense
  Operating
income (loss)
 
 
  (In thousands)
 

Ticketing

  $ 356,125   $ (4,121 ) $ (26,200 ) $ (35,734 ) $ 290,070  

Corporate and unallocated

    (62,579 )   (8,451 )       (2,724 )   (73,754 )
                       
 

Total

  $ 293,546   $ (12,572 ) $ (26,200 ) $ (38,458 ) $ 216,316  
                         

Other income, net

    39,483  
                               

Earnings before income taxes and noncontrolling interests

    255,799  

Income tax provision

    (89,007 )