Annual report pursuant to Section 13 and 15(d)

LONG-LIVED ASSETS

v3.6.0.2
LONG-LIVED ASSETS
 12 Months Ended
Dec. 31, 2016
LONG-LIVED ASSETS [Abstract]  
LONG-LIVED ASSETS
LONG-LIVED ASSETS
Property, Plant and Equipment
In 2012, an amphitheater in New York that is operated by the Company sustained substantial damage during Hurricane Sandy. During 2014, the Company received the final insurance recovery and recorded a gain of $3.8 million as a component of loss (gain) on disposal of operating assets in the Concerts segment representing the proceeds received in excess of the carrying value of the assets.






Definite-lived Intangible Assets
The following table presents the changes in the gross carrying amount and accumulated amortization of definite-lived intangible assets for the years ended December 31, 2016 and 2015:
 
Revenue-
generating
contracts
 
Client /
vendor
relationships
 
Trademarks
and
naming
rights
 
Non-compete
agreements
 
Technology
 
Venue
management
and
leaseholds
 
Other
 
Total
 
(in thousands)
Balance as of December 31, 2014:
 
 
 
 
 
 
 
 
 
 
 
 
Gross carrying amount
$
635,127

 
$
355,992

 
$
24,266

 
$
123,552

 
$
15,330

 
$
83,322

 
$
3,581

 
$
1,241,170

Accumulated amortization
(272,071
)
 
(123,195
)
 
(8,701
)
 
(98,512
)
 
(4,246
)
 
(50,490
)
 
(1,242
)
 
(558,457
)
Net
363,056

 
232,797

 
15,565

 
25,040

 
11,084

 
32,832

 
2,339

 
682,713

Gross carrying amount:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions—current year
119,482

 
39,113

 
62,953

 
5,110

 
16,230

 
10,574

 
17

 
253,479

Acquisitions—prior year
(8,366
)
 
(4,694
)
 
—

 
49,851

 
11

 
—

 
—

 
36,802

Foreign exchange
(15,332
)
 
(8,474
)
 
(664
)
 
(2,159
)
 
(1,306
)
 
(3,784
)
 
—

 
(31,719
)
Other (1)
(30,116
)
 
(2,655
)
 
1

 
—

 
—

 
(24,061
)
 
—

 
(56,831
)
Net change
65,668

 
23,290

 
62,290

 
52,802

 
14,935

 
(17,271
)
 
17

 
201,731

Accumulated amortization:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization
(78,281
)
 
(51,116
)
 
(6,218
)
 
(22,869
)
 
(4,402
)
 
(10,684
)
 
(389
)
 
(173,959
)
Foreign exchange
6,494

 
2,036

 
340

 
62

 
46

 
1,468

 
—

 
10,446

Other (1)
30,115

 
2,655

 
1

 
—

 
—

 
24,061

 
—

 
56,832

Net change
(41,672
)
 
(46,425
)
 
(5,877
)
 
(22,807
)
 
(4,356
)
 
14,845

 
(389
)
 
(106,681
)
Balance as of December 31, 2015:
 
 
 
 
 
 
 
 
 
 
 
 
Gross carrying amount
700,795

 
379,282

 
86,556

 
176,354

 
30,265

 
66,051

 
3,598

 
1,442,901

Accumulated amortization
(313,743
)
 
(169,620
)
 
(14,578
)
 
(121,319
)
 
(8,602
)
 
(35,645
)
 
(1,631
)
 
(665,138
)
Net
387,052

 
209,662

 
71,978

 
55,035

 
21,663

 
30,406

 
1,967

 
777,763

Gross carrying amount:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions—current year
136,029

 
42,861

 
5,100

 
9,550

 
24,804

 
1,449

 
412

 
220,205

Acquisitions—prior year
11,404

 
782

 
3,618

 
1,500

 
—

 
1,174

 
—

 
18,478

Dispositions
—

 
(2,299
)
 
—

 
—

 
—

 
(1,225
)
 
—

 
(3,524
)
Foreign exchange
(25,360
)
 
(4,528
)
 
(930
)
 
(4,260
)
 
(1,364
)
 
(3,848
)
 
(2
)
 
(40,292
)
Other (1)
(62,470
)
 
(14,089
)
 
(6
)
 
(117,152
)
 
(627
)
 
(9,600
)
 
6

 
(203,938
)
Net change
59,603

 
22,727

 
7,782

 
(110,362
)
 
22,813

 
(12,050
)
 
416

 
(9,071
)
Accumulated amortization:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization
(76,484
)
 
(60,815
)
 
(9,623
)
 
(19,195
)
 
(6,153
)
 
(5,406
)
 
(454
)
 
(178,130
)
Dispositions
—

 
599

 
—

 
—

 
—

 
22

 
—

 
621

Foreign exchange
10,555

 
1,962

 
477

 
1,188

 
491

 
1,765

 
(27
)
 
16,411

Other (1)
62,872

 
14,089

 
—

 
117,227

 
627

 
9,600

 
22

 
204,437

Net change
(3,057
)
 
(44,165
)
 
(9,146
)
 
99,220

 
(5,035
)
 
5,981

 
(459
)
 
43,339

Balance as of December 31, 2016:
 
 
 
 
 
 
 
 
 
 
 
 
Gross carrying amount
760,398

 
402,009

 
94,338

 
65,992

 
53,078

 
54,001

 
4,014

 
1,433,830

Accumulated amortization
(316,800
)
 
(213,785
)
 
(23,724
)
 
(22,099
)
 
(13,637
)
 
(29,664
)
 
(2,090
)
 
(621,799
)
Net
$
443,598

 
$
188,224

 
$
70,614

 
$
43,893

 
$
39,441

 
$
24,337

 
$
1,924

 
$
812,031


______________
(1) 
Other includes netdowns of fully amortized or impaired assets.
Included in the current year acquisitions amount above for 2016 are definitive-lived intangible assets primarily associated with the acquisitions of controlling interests in festival and concert promoters located in the United States, Australia, Sweden and the United Kingdom, a controlling interest in an artist management business with locations in the United States and Canada, a controlling interest in a digital content company located in the United States, and the remaining interest in a ticketing-related technology business that had previously been accounted for as a cost method investment.
Included in the prior year acquisitions amount above for 2016 are definite-lived intangible assets primarily associated with the acquisition of a controlling interest in a festival promoter located in the United States.
Included in the current year acquisitions amount above for 2015 are definite-lived intangible assets primarily associated with the acquisitions of all or a controlling interest in festival promoters, a venue management business, an artist management business, and a ticketing business all located in the United States and the United Kingdom.
Included in the prior year acquisitions amount above for 2015 are definite-lived intangible assets primarily associated with the prospective consolidation of an artist management business located in the United Kingdom.
The 2016 and 2015 additions to definite-lived intangible assets from acquisitions have weighted-average lives as follows:
  
Weighted-
Average
Life (years)
 
2016
 
2015
 
 
 
 
Revenue-generating contracts
8
 
8
Client/vendor relationships
6
 
6
Trademarks and naming rights
10
 
10
Non-compete agreements
5
 
5
Technology
5
 
6
Venue management and leaseholds
5
 
8
All categories
7
 
8

During all years presented, the Company reviewed the carrying value of certain definite-lived intangible assets that management determined would not be renewed or that had an indicator that future operating cash flows may not support its carrying value. It was determined that certain assets were impaired since the estimated undiscounted future cash flows associated with those assets were less than their carrying value. For the year ended December 31, 2014, the Company recorded impairment charges related to definite-lived intangible assets of $11.1 million as a component of depreciation and amortization primarily related to client/vendor relationship intangible assets in the Artist Nation segment and technology intangible assets in the Ticketing segment. See Note 5—Fair Value Measurements for further discussion of the inputs used to determine the fair values. There were no significant impairment charges recorded in 2016 and 2015.
Amortization of definite-lived intangible assets for the years ended December 31, 2016, 2015 and 2014 was $178.1 million, $174.0 million and $154.7 million, respectively.
The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangible assets that exist at December 31, 2016:
 
 
(in thousands)
2017
$
177,921

2018
$
155,754

2019
$
131,077

2020
$
111,003

2021
$
77,837



As acquisitions and dispositions occur in the future and the valuations of intangible assets for recent acquisitions are completed, amortization may vary.
Indefinite-lived Intangibles
The Company has indefinite-lived intangible assets which consists of trade names. These indefinite-lived intangible assets had a carrying value of $368.8 million and $369.3 million as of December 31, 2016 and 2015, respectively.
The Company tests for possible impairment of indefinite-lived intangible assets on at least an annual basis. For the year ended December 31, 2014, the Company recorded an impairment charge of $6.0 million as a component of depreciation and amortization in the Ticketing segment. During 2014, the Company made a decision to rebrand certain of its markets that were not using the Ticketmaster trade name. In connection with the rebranding, it was determined that an indefinite-lived intangible asset for a certain market was fully impaired since the transition to the Ticketmaster trade name was substantially completed for that market during the year. See Note 5—Fair Value Measurements for further discussion of the inputs used to determine the fair value. There were no impairment charges of indefinite-lived intangible assets recorded in 2016 and 2015.
Goodwill
The Company currently has seven reporting units with goodwill balances: International Concerts and North America Concerts within the Concerts segment; Sponsorship & Advertising; International Ticketing and North America Ticketing within the Ticketing segment; and Artist Management and Artist Services (non-management) within the Artist Nation segment. The Company reviews goodwill for impairment annually, as of October 1, using a three-step process: a qualitative review, a quantitative analysis, and a measurement of implied goodwill. In 2016, as part of the Company’s annual test for impairment of goodwill, five reporting units were assessed under the initial qualitative evaluation and did not require a quantitative analysis. These reporting units account for approximately 80% of the Company’s goodwill at December 31, 2016. Considerations included the considerable excess of fair values over carrying values in the most recent quantitative analysis performed together with the following comparison of current information to the most recent quantitative analysis: (a) improved discount rates, (b) varying results on market multiples and (c) for two of the reporting units, financial results outperforming prior expectations and for the other reporting units, financial results that did not meet prior expectations.
Finally, for two reporting units that account for approximately 20% of the Company’s goodwill at December 31, 2016, although these reporting units showed improved discount rates and varying results on market multiples, the qualitative analysis was inconclusive due to declines in recent financial performance against prior expectations. As such, quantitative analysis was performed for these reporting units, but did not require the final step to measure potential impairment as it was determined that no impairment was needed.
The Company performed the quantitative analysis using a combination of a discounted cash flows methodology, which uses both market-based and internal assumptions, and a market multiple methodology, which uses primarily market-based assumptions.
Based upon the results of the annual tests performed, there were no impairment charges recorded in 2016 and 2015. In 2014, the Company recorded impairment charges of $117.0 million and $17.9 million related to its International Concerts and Artist Services (non-management) reporting units, respectively.

The following table presents the changes in the carrying amount of goodwill in each of the Company’s reportable segments for the years ended December 31, 2016 and 2015:
 
Concerts
 
Sponsorship
&  Advertising
 
Ticketing
 
Artist
Nation
 
Total
 
(in thousands)
Balance as of December 31, 2014:
 
 
 
 
 
 
 
 
 
Goodwill
$
577,891

 
$
302,865

 
$
657,631

 
$
345,513

 
$
1,883,900

Accumulated impairment losses
(386,915
)
 
—

 
—

 
(17,948
)
 
(404,863
)
                 Net
190,976

 
302,865

 
657,631

 
327,565

 
1,479,037

 
 
 
 
 
 
 
 
 
 
Acquisitions—current year
57,792

 
43,248

 
77,951

 
15,051

 
194,042

Acquisitions—prior year
(28,472
)
 
(3,274
)
 
10,341

 
(17,968
)
 
(39,373
)
Foreign exchange
(4,440
)
 
(10,758
)
 
(12,098
)
 
(2,095
)
 
(29,391
)
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2015:
 
 
 
 
 
 
 
 
 
Goodwill
602,771

 
332,081

 
733,825

 
340,501

 
2,009,178

Accumulated impairment losses
(386,915
)
 
—

 
—

 
(17,948
)
 
(404,863
)
                 Net
215,856

 
332,081

 
733,825

 
322,553

 
1,604,315

 
 
 
 
 
 
 
 
 
 
Acquisitions—current year
98,936

 
45,376

 
8,671

 
25,016

 
177,999

Acquisitions—prior year
(18,906
)
 
18,302

 
(108
)
 
449

 
(263
)
Dispositions
—

 
—

 
—

 
(323
)
 
(323
)
Foreign exchange
(29,143
)
 
67

 
(3,283
)
 
(2,281
)
 
(34,640
)
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2016:
 
 
 
 
 
 
 
 
Goodwill
653,658

 
395,826

 
739,105

 
363,362

 
2,151,951

Accumulated impairment losses
(386,915
)
 
—

 
—

 
(17,948
)
 
(404,863
)
                 Net
$
266,743

 
$
395,826

 
$
739,105

 
$
345,414

 
$
1,747,088


Included in the current year acquisitions amount above for 2016 is goodwill associated with the acquisitions of controlling interests in festival and concert promoters located in the United States, Australia and the United Kingdom, a controlling interest in an artist management business with locations in the United States and Canada, and a digital content company located in the United States.
Included in the prior year acquisitions amount above for 2016 are net reductions in goodwill resulting from the finalization of accounting for the acquisitions of a controlling interest in a festival promoter located in the United States and a venue management business in New Zealand.
Included in the current year acquisitions amount above for 2015 is goodwill primarily associated with the acquisitions of all or a controlling interest in festival promoters and a ticketing business, all located in the United States.
Included in the prior year acquisitions amount above for 2015 is a reduction of goodwill primarily associated with the finalization of accounting for the acquisition of a controlling interest in a festival and concert promoter in the United States and prospective consolidation of an artist management business located in the United Kingdom.
For the goodwill recognized in connection with the 2016 and 2015 acquisitions, $60.2 million and $107.9 million, respectively, is expected to be deductible for tax purposes.
The Company is in various stages of finalizing its acquisition accounting for recent acquisitions, which include the use of external valuation consultants, and the completion of this accounting could result in a change to the associated purchase price allocations, including goodwill and its allocation between segments.
Investments in Nonconsolidated Affiliates
The Company has investments in various affiliates which are not consolidated and are accounted for under the equity method of accounting. The Company records its investments in these entities in the balance sheet as investments in nonconsolidated affiliates reported as part of other long-term assets. The Company’s interests in these operations are recorded in the statements of operations as equity in losses (earnings) of nonconsolidated affiliates. For the year ended December 31, 2016, the Company’s investments in Venta de Boletos por Computadora S.A. de C.V, a 33% owned ticketing distribution services company, and Vice Nation, LLC, a 60% owned digital content company, are considered significant on an individual basis. In September 2016, a decision was made to change the way the Company creates digital content and not to continue to operate the Vice Nation, LLC joint venture. Summarized balance sheet and income statement information for these entities is as follows (at 100%):
 
 
December 31,
 
 
2016
 
2015
 
 
(in thousands)
Current assets
 
$
45,432

 
$
63,455

Noncurrent assets
 
$
2,908

 
$
4,474

Current liabilities
 
$
28,510

 
$
38,319

Noncontrolling interests
 
$
355

 
$
403

 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
 
 
(in thousands)
Revenue
 
$
47,757

 
$
51,629

 
$
43,490

Operating income
 
$
10,750

 
$
18,062

 
$
19,903

Net income
 
$
4,729

 
$
11,100

 
$
14,452

Net income attributable to the common stockholders of the equity investees
 
$
4,747

 
$
11,019

 
$
14,311


The company reviews its nonconsolidated affiliates for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. For the year ended December 31, 2016, the Company recorded impairment charges related to these investments of $16.5 million as equity in losses (earnings) of nonconsolidated affiliates, primarily related to investments in a digital content company and an online merchandise company that are located in the United States. See Note 5—Fair Value Measurements for further discussion of the inputs used to determine the fair values. There were no significant impairments of investments in nonconsolidated affiliates during 2015 and 2014.