Ticketmaster Group, Inc.

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Ticketmaster Group, Inc.

founded: 1978

Contact Information:

headquarters: 8800 sunset blvd.
west hollywood, ca 90069 phone: (310)360-6000 fax: (310)360-0207 url: http://www.ticketmaster.com

OVERVIEW

Ticketmaster is the undisputed leader in the area of ticket sales. The company, which had receipts of $341 million in 1997 on sales of more than 70 million tickets, virtually owns the field. Ticketmaster operates at more than 2,900 retail outlets and 29 nationwide phone call centers. It sells tickets for 85 professional sports teams and hundreds of arenas, stadiums, theaters, and other venues. In 1997, it generated about a fifth of its revenue from its expanding international operation.

COMPANY FINANCES

Ticketmaster's sales have shown strong growth. They were $161 million in 1995, $231 million in 1996, and $341 million in 1997. However, profits have been slow in coming. Earnings per share were $0.07 in 1996 and $0.31 in 1997, after a loss of $0.33 in 1995. In 1997, the company was laboring under $128 million in debt, but was hoping to bring it down to $60 million in 1998. The new businesses, which Ticketmaster was counting on to boost profits, contributed less than 5 percent of revenues in 1997.

ANALYSTS' OPINIONS

Investor and media response to Ticketmaster's initial public offering (I.P.O.) of stock in November 1996 was lukewarm. The New York Times greeted the I.P.O. on November 10 of that year with the headline, "Tickets on Sale! But Is the Show a Dud?" and 10 days later reported that Ticketmaster shares had experienced an immediate price drop on the first day of sales. However, stock values rose $10 per share in 1997, almost doubling in value.

HISTORY

Ticketmaster was the creation of two Arizona State University graduates who, in 1978, became frustrated with the way tickets were sold, and sought to establish a better method. Until 1982, however, the company failed to make much headway against industry leader, Tick-etron. It was during that year that the company was purchased by Jay Pritzker, a Chicago investor who owned Hyatt Hotels. Suddenly Ticketmaster had enormous financial backing and, thanks to Pritzker's appointment of Fred Rosen as CEO, solid leadership.

Over the next decade, Ticketmaster underwent enormous expansion, and by 1991 it had bought out Tick-etron and become the undisputed industry leader. At around that time, the company began to encounter a great deal of criticism as a monopoly, and in 1994 the rock band Pearl Jam filed a complaint against it with the U.S. Department of Justice. In 1993, Microsoft Corp. co-founder Paul Allen acquired 80 percent of the company, and in November 1996, Ticketmaster became a publicly traded corporation.

In May 1997, Home Shopping Network (HSN) purchased Paul Allen's stake, by then down to 47.5 percent, and got up to around 50 percent via stock purchases. A few months later, HSN bid to acquire the remaining stock, offering investors HSN shares. Fred Rosen announced shortly thereafter that he would leave the merged venture.

STRATEGY

Before Ticketmaster, ticket vendors had only a set number of tickets to a given concert or sports event. If a buyer went to a particular vendor, the buyer had to purchase whatever the vendor offered, or go to another one and hope for the best. Thus one vendor might be sold out and unable to sell tickets to buyers, while another vendor had plenty of tickets left over. The concert might end up losing money because not all the seats were filled, while frustrated would-be ticket buyers went away empty-handed.

The founders of Ticketmaster overcame this inefficient situation with computerized ticket sales, which made it possible for any vendor to sell from the full set of tickets to a given event. Thanks to the computerized system, the vendor would know exactly what seats were available at any moment. This change of method proved revolutionary, as did Ticketmaster's strategy with regard to concert promoters.

Concerts do not just happen. It is usually a promoter who puts the concert together by booking the musical act and the venue. The promoter takes a great deal of financial risk. By the late 1970s when Ticketmaster came along, promoters were starting to see their livelihoods threatened by bands that demanded an increasingly larger share of concert proceeds. Ticketmaster catered to promoters, offering them a cut of the service charge added to the price of the ticket.

In the 1980s and 1990s, Ticketmaster built a winning marketing strategy by making it easier for customers to purchase tickets, instituting telephone sales that freed concertgoers from having to wait in line for hours. It also began to use the tickets themselves as marketing tools, encouraging sponsors to purchase space on the ticket backs and envelopes to promote themselves on these "handheld billboards."

INFLUENCES

Ticketmaster started as an underdog, and much of its appeal was based on the fact that it was an upstart company taking on an established giant, Ticketron. By the late 1990s, Ticketmaster had long since cut its old nemesis to pieces, and had itself become a powerful quasi-monopoly derided by the rock group Pearl Jam and many others.

The company came from humble beginnings; yet its founders had a number of clever notions about how to reinvent the ticket sales business. Three years after its 1978 founding, Ticketmaster had annual sales of only $1 million, just 1 percent of the market share held by Tick-etron. In 1982, Jay Pritzker, owner of Hyatt Hotels, purchased the company for only $4 million and placed Fred Rosen in charge. Rosen had an unusual background, as both an attorney and a standup comic. Under his leadership, Ticketmaster would go from the position of an underdog to a solid first.

By instituting the policy of appealing to music promoters, Rosen began to gain the edge over Ticketron, which many promoters considered to be a giant corporation that no longer cared about them. Within five years, Ticketmaster became profitable, and it soon began buying up smaller ticketing agencies, such as Atlanta's SEATS, in an effort to gain a larger market share. Thanks to Pritzker's deep pockets, the company continued to acquire other firms, and by the end of the 1980s, Ticketron was on the run. Ticketmaster bought what remained of the old giant in 1991. Now it had a virtual monopoly. To some observers, it seemed as if Ticketmaster was making vast sums of money and unfairly controlling the market for ticket sales.

In 1993 the band Pearl Jam, objecting to the large cut Ticketmaster was taking from their concert ticket sales, filed a complaint with the Justice Department citing monopolistic practices, severed their ties with the company, and began trying to book venues in which the ticket sales were not controlled by Ticketmaster. The move disrupted Pearl Jam's concert tour, but it also scored a publicity blow against Ticketmaster. The company argued that another upstart could come along and displace Ticketmaster in the same way as it had once displaced Ticketron. As the 1990s drew to a close, some looked for a company that would do exactly that. In March 1996, Rolling Stone announced a launch by New England promoter Don Law of Next Ticketing, which the magazine suggested might give Ticketmaster some real competition.

FAST FACTS: About Ticketmaster Group, Inc.

Ownership: Ticketmaster is a publicly owned corporation with stock traded on NASDAQ.

Ticker symbol: TKTM

Officers: Barry Diller, Chmn.; Terry Barnes, CEO; Gene Cobuzzi, CFO

Employees: 6,355

Chief Competitors: Ticketmaster has no major individual competitors in nationwide entertainment and sports event ticket sales. Its main competition consists of direct box office sales, local agencies, and regional ticketing systems.

CHRONOLOGY: Key Dates for Ticketmaster Group, Inc.

1978:: Ticketmaster is founded
1980:: Purchased by Jay Pritzker
1991:: Buys out Ticketron, its biggest competitor
1993:: Paul Allen of Microsoft acquires 80 percent of the company
1994:: Pearl Jam files suit against Ticketmaster claiming it was a monopoly
1996:: Ticketmaster goes public
1997:: Home Shopping Network purchases Allen's share of the company

CURRENT TRENDS

In 1996, Ticketmaster launched a magazine, Live! to promote its concert and sports offerings. Its web site, Ticketmaster Online, was updated in 1997 with Intel technology allowing customized information to be delivered to users. It sold 522,926 tickets worth $19.5 million in the first quarter of 1998. A number of strategic Internet marketing programs included linkages of the Ticketmaster site to those of the Excite search engine, Ford Motor Company, Honda, and Internet Travel Network. A similar linkage deal with the Microsoft Network failed when Rosen asked for $6 million. Microsoft declined to pay but linked anyway. A lawsuit resulted. Fred Rosen told Brandweek in 1996 that his company intended to devote more of its efforts to attracting wealthy consumers with larger amounts of disposable income, a strategy well served by an increased Internet presence.

PRODUCTS

Ticketmaster facilitates automated ticket sales throughout the United States and selected other countries for concerts and sports events. It maintains ticket inventory, a distribution network, and some aspects of marketing for these musical and sporting activities. It makes a percentage on each ticket sold. In addition, the company publishes Live! magazine to promote its activities.

CORPORATE CITIZENSHIP

Ticketmaster provides support to causes such as the battle against AIDS and cancer research. Its corporate giving program also includes Tickets for Kids, a collaboration with local governments providing free tickets to family entertainment for community groups. The tickets are distributed as rewards to children who participate in volunteer activities or contribute to their communities in other ways.

GLOBAL PRESENCE

In 1997, perceiving an under-penetrated market, Ticketmaster expanded operations in the United Kingdom, Australia, and Mexico, and entered new markets in Canada, Argentina, and Ireland. The company was also exploring opportunities in Europe, the Pacific Rim, and South America. The international markets represented 20 percent of ticket sales in 1997, up from 6 percent in 1996.

EMPLOYMENT

Approximately two-thirds of Ticketmaster's 6,355 employees are part-time workers who are primarily telephone sales agents. About 15 percent of the sales agents—those in Chicago, Ontario, and Australia—are covered by collective bargaining agreements.