Annual report pursuant to Section 13 and 15(d)

SEGMENTS AND REVENUE RECOGNITION

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SEGMENTS AND REVENUE RECOGNITION
12 Months Ended
Dec. 31, 2022
Segment Reporting [Abstract]  
SEGMENT DATA SEGMENTS AND REVENUE RECOGNITION
Our reportable segments are Concerts, Ticketing and Sponsorship & Advertising. We use AOI to evaluate the performance of our operating segments and define AOI as operating income (loss) before certain stock-based compensation expense, loss (gain) on disposal of operating assets, depreciation and amortization (including goodwill impairment), amortization of non-recoupable ticketing contract advances and acquisition expenses (including transaction costs, changes in the fair value of accrued acquisition-related contingent consideration obligations, and acquisition-related severance and compensation). AOI assists investors by allowing them to evaluate changes in the operating results of our portfolio of businesses separate from non-operational factors that affect net income (loss), thus providing insights into both operations and the other factors that affect reported results.
Revenue and expenses earned and charged between segments are eliminated in consolidation. Our capital expenditures below include accruals for amounts incurred but not yet paid for, but are not reduced by reimbursements received from outside parties such as landlords and noncontrolling interest partners or replacements funded by insurance proceeds.
We manage our working capital on a consolidated basis. Accordingly, segment assets are not reported to, or used by, our management to allocate resources to or assess performance of our segments, and therefore, total segment assets and related depreciation and amortization have not been presented.
There were no customers that individually accounted for more than 10% of our consolidated revenue in any year.
Concerts
Our Concerts segment involves the promotion of live music events globally in our owned or operated venues and in rented third-party venues, the production of music festivals, the operation and management of music venues, the creation or streaming of associated content and the provision of management and other services to artists. This segment generates revenue from the promotion or production of live music events and festivals in our owned or operated venues and in rented third-party venues, artist management commissions and the sale of merchandise for music artists at events. As a promoter and venue operator, we earn revenue primarily from the sale of tickets, concessions, merchandise, parking, ticket rebates or service charges on tickets sold by Ticketmaster or third-party ticketing platforms, and rental of our owned or operated venues. As an artist manager, we earn commissions on the earnings of the artists and other clients we represent, primarily derived from clients’ earnings for concert tours. Over 96% of Concerts’ revenue, whether related to promotion, venue operations, artist management or artist event merchandising, is recognized on the day of the related event. The majority of consideration for our Concerts segment is collected in advance of or on the day of the event. Consideration received in advance of the event is recorded as deferred revenue or in long-term liabilities if the event is more than twelve months from the balance sheet date. Any consideration not collected by the day of the event is typically received within three months after the event date.
Ticketing
Our Ticketing segment involves the management of our global ticketing operations, including providing ticketing software and services to clients, and consumers with a marketplace, both online and mobile, for tickets and event information, and is responsible for our primary ticketing website, www.ticketmaster.com. Ticket fee revenue is generated from convenience and order processing fees, or service charges, charged at the time a ticket for an event is sold in either the primary or secondary markets. A significant portion of our service charges are payable to the venue and credit card vendors. The Ticketing segment is primarily an agency business that sells tickets for events on behalf of its clients, which include venues, concert promoters, professional sports franchises and leagues, college sports teams, theater producers and museums. This segment records revenue arising from convenience and order processing fees, regardless of whether these fees are related to tickets sold in the primary or secondary market, and regardless of whether these fees are associated with our concert events or third-party clients’ concert events. We do not record the face value of the tickets as revenue. Ticket fee revenue is recognized when the ticket is sold for third-party clients and secondary market sales, as we have no further obligation to our client’s customers following the sale of the ticket. For our concert events where our concert promoters control ticketing, ticket fee revenue is recognized when the event occurs because we also have the obligation to deliver the event to the fan. The delivery of the ticket to the fan is not considered a distinct performance obligation for our concert events because the fan cannot receive the benefits of the ticket unless we also fulfill our obligation to deliver the event. The majority of ticket fee revenue is collected within the month of the ticket sale. Revenue received from the sale of tickets in advance of our concert events is recorded as deferred revenue or in other long-term liabilities if the date of the event is more than twelve months from the balance sheet date. Reported revenue is net of any refunds made or committed to and also the impact of any cancellations of events that occurred during the period and up to the time of filing these consolidated financial statements.
Ticketing contract advances, which can be either recoupable or non-recoupable, represent amounts paid in advance to our clients pursuant to ticketing agreements and are reflected in prepaid expenses or in long-term advances if the amount is expected to be recouped or recognized over a period of more than twelve months. Recoupable ticketing contract advances are generally recoupable against future royalties earned by the client, based on the contract terms, over the life of the contract. Royalties are typically earned by the client when tickets are sold. Royalties paid to clients are recorded as a reduction to revenue when the tickets are sold and the corresponding service charge revenue is recognized. Non-recoupable ticketing contract advances, excluding those amounts paid to support clients’ advertising costs, are fixed additional incentives occasionally paid by us to certain clients to secure the contract and are typically amortized over the life of the contract on a straight-line basis as a reduction to revenue. At December 31, 2022 and 2021, we had ticketing contract advances of $106.5 million and $90.5 million, respectively, in prepaid expenses and $105.0 million and $86.5 million, respectively, in long-term advances. We amortized $79.0 million, $74.4 million and $48.0 million for the years ended December 31, 2022, 2021 and 2020 respectively, related to non-recoupable ticketing contract advances.
Sponsorship & Advertising
Our Sponsorship & Advertising segment manages the development of strategic sponsorship programs in addition to the sale of international, national and local sponsorships and placement of advertising such as signage, promotional programs, rich media offerings, including advertising associated with live streaming and music-related content, and ads across our distribution network of venues, events and websites. This segment generates revenue from sponsorship and marketing programs that provide its sponsors with strategic, international, national and local opportunities to reach customers through our venue, concert and ticketing assets, including advertising on our websites. These programs can also include custom events or programs for the sponsors’ specific brands, which are typically experienced exclusively by the sponsors’ customers. Sponsorship agreements may contain multiple elements, which provide several distinct benefits to the sponsor over the term of the agreement, and can be for a single or multi-year term. We also earn revenue from exclusive access rights provided to sponsors in various categories such as ticket pre-sales, beverage pouring rights, venue naming rights, media campaigns, signage within our venues, and advertising on our websites. Revenue from sponsorship agreements is allocated to the multiple elements based on the relative stand-alone selling price of each separate element, which are determined using vendor-specific evidence, third-party evidence or our best estimate of the fair value. Revenue is recognized over the term of the agreement or operating season as the benefits are provided to the sponsor unless the revenue is associated with a specific event, in which case it is recognized when the event occurs. Revenue is collected in installment payments during the year, typically in advance of providing the benefit or the event. Revenue received in advance of the event or the sponsor receiving the benefit is recorded as deferred revenue or in other long-term liabilities if the date of the event is more than twelve months from the balance sheet date.
At December 31, 2022, we had contracted sponsorship agreements with terms greater than one year that had approximately $1.5 billion of revenue related to future benefits to be provided by us. We expect to recognize, based on current projections, approximately 34%, 25%, 17% and 24% of this revenue in 2023, 2024, 2025 and thereafter, respectively.
The following table presents the results of operations for our reportable segments for the years ending December 31, 2022, 2021 and 2020:
Concerts Ticketing Sponsorship
& Advertising
Other & Eliminations Corporate Consolidated
  (in thousands)
2022
Revenue $ 13,494,100 $ 2,238,618 $ 968,146 $ (19,610) $ —  $ 16,681,254 
% of Consolidated Revenue 80.9% 13.4% 5.8% (0.1)%
Intersegment revenue $ 12,821 $ 8,643 $ $ (21,464) $ —  $ — 
AOI $ 169,740 $ 827,901 $ 591,972 $ (14,549) $ (167,882) $ 1,407,182 
Capital expenditures $ 277,133 $ 70,739 $ 19,383 $ (17) $ 9,680  $ 376,918 
2021
Revenue $ 4,722,190 $ 1,134,268 $ 411,910 $ 79 $ —  $ 6,268,447 
% of Consolidated Revenue 75.3% 18.1% 6.6%
Intersegment revenue $ 2,505 $ 404 $ $ (2,909) $ —  $ — 
AOI $ (221,338) $ 420,545 $ 242,239 $ (6,963) $ (110,620) $ 323,863 
Capital expenditures $ 92,132 $ 49,004 $ 12,299 $ $ 23,036  $ 176,471 
2020
Revenue $ 1,468,433 $ 188,383 $ 203,676 $ 686 $ —  $ 1,861,178 
% of Consolidated Revenue 78.9% 10.1% 10.9% 0.1%
Intersegment revenue $ 712 $ 1,835 $ $ (2,547) $ —  $ — 
AOI $ (638,846) $ (374,563) $ 81,910 $ (13,478) $ (70,915) $ (1,015,892)
Capital expenditures $ 119,730 $ 77,018 $ 5,781 $ $ 6,886  $ 209,415 
The following table sets forth the reconciliation of consolidated AOI to operating income (loss) for the for the years ended December 31, 2022, 2021 and 2020:
2022 2021 2020
(in thousands)
AOI $ 1,407,182  $ 323,863  $ (1,015,892)
Acquisition expenses 68,078  42,912  (13,088)
Amortization of non-recoupable ticketing contract advance 79,043  74,406  47,971 
Depreciation and amortization 449,976  416,277  485,025 
Loss (gain) on sale of operating assets (32,082) (1,211) 503 
Stock-based compensation expense 110,049  209,337  116,889 
Operating income (loss) $ 732,118  $ (417,858) $ (1,653,192)
Deferred Revenue
The majority of our deferred revenue is typically classified as current and is shown as a separate line item on the consolidated balance sheets. Deferred revenue that is not expected to be recognized within the next twelve months is classified as long-term and reflected in other long-term liabilities on the consolidated balance sheets. At December 31, 2022, 2021 and 2020, we had current deferred revenue of $3.1 billion, $2.8 billion and $1.8 billion, respectively.
The table below summarizes the amount of prior year current deferred revenue recognized during the years ended December 31, 2022 and 2021:
December 31,
2022 2021
(in thousands)
Concerts $ 2,327,040  $ 516,035 
Ticketing 134,966  43,508 
Sponsorship & Advertising 133,318  74,266 
$ 2,595,324  $ 633,809