Ticketmaster Business Information, Profile, and History

Company Perspectives:

Our mission: for clients--to provide the best systems, services, and tools for the optimal sale of tickets to the widest possible audience ; for consumers--to provide convenient, secure, and fair access to th e best possible ticket offered by our clients.

History of Ticketmaster

Ticketmaster is the world's largest ticket distribution company in th e United States, completely dominating its market niche. The company distributes tickets for more than 10,000 clients whose events range f rom professional wrestling matches and rock concerts to Broadway show s and operas. Tickets are sold at roughly 3,300 outlets worldwide, as well as through 19 telephone call centers and through the ticketmast er.com web site. The company's ReserveAmerica subsidiary manages camp site reservations across North America. Ticketmaster also owns severa l regional ticketing service companies and TicketWeb, a provider of t icketing software and services. Ticketmaster is itself a subsidiary o f IAC/InterActive Corporation, the media vehicle of entrepreneur Barr y Diller.

Early Years

Ticketmaster was started by two Arizona State University students who were looking for a solution to a problem they encountered when buyin g concert tickets. At the time, the buyer of a ticket was forced to s elect from the seats that had been allotted to the particular vendor from whom he or she was purchasing the ticket. If the vendor was near ly sold out, the buyer might be forced to buy bad seats even though b etter seats were available through other ticket sellers. Melees occas ionally erupted when ticket buyers, after standing in line for hours at one place, found that the vendor was sold out or that better seats were available elsewhere. The system also was inefficient for promot ers and owners of venues, who often had difficulty selling all of the ir tickets, despite unmet demand.

In 1978, the two budding entrepreneurs developed a solution to the pr oblem. They created an innovative computer program that networked sev eral computers in such a way that a person buying an event ticket at a box office could quickly select from the total reserve of seats ava ilable. Thus efficient computerized ticket vending was born, and Tick etmaster--the company that sprouted from student innovation--became o ne of several small vendors in the late 1970s and early 1980s that pi oneered the industry. When it was starting out, in fact, Ticketmaster was just one of many small ticket-vending companies competing for a small share of the industry; the business had come to be dominated by ticket distribution giant Ticketron. Nevertheless, Ticketmaster, wit h its unique computer-based vending system, managed to increase its t icket sales to about $1 million annually by 1981. That amount was still less than 1 percent of the business controlled by Ticketron, h owever.

Ticketmaster's fate was changed in 1982, when Chicago investor Jay Pr itzker purchased it. Pritzker, the wealthy owner of the Hyatt Hotel c hain, paid $4 million for the entire company. He immediately brou ght in Fred Rosen as chief executive to manage the operation. Rosen, an attorney and former stand-up comic, brought energy and vision to t he enterprise. He believed that the future of the ticket industry was in concert sales, rather than sporting events, in part because sport ing event-goers often were able to circumvent service fees charged by ticket sellers by purchasing season tickets. But his feeling also ar ose from his observations about the dynamics of the concert industry. Indeed, if concert fans wanted to see a show badly enough, they woul d buy on impulse and would be willing to pay higher prices for ticket s. Furthermore, the long lines that formed at box offices for rock co ncerts indicated a great need for Ticketmaster's computerized service .

Aside from new computer and information technologies, other forces we re at work in the ticket industry in the early 1980s that boded well for an innovator like Ticketmaster. In fact, the rock concert industr y, among other entertainment businesses, was becoming much more compl icated. Prior to the 1970s, bands were paid a lump sum--usually in ca sh just a few minutes before they went on stage--by the promoter of t he concert. The promoter would agree beforehand to pay the band, say, $20,000, and any money left over would be used to pay the promot er's expenses and profit.

In the 1970s, however, bands started demanding more. They started cha rging minimum appearance fees, for example, and wanted a cut of the m oney generated from concessions and parking. The demands, in part, we re the result of a feeling by top bands that promoters were taking ad vantage of them. But the increased cost of traveling and putting on a show also contributed to the bands' desire for better compensation; fans came to expect much more in the way of expensive sound systems a nd special effects, for example.

One result of the new demands was that, after a concert, the band's m anager and the promoter typically negotiated, or argued, about exactl y how much the promoter and other involved parties would be paid. The new system increased the bargaining power of the bands, eventually b oosting their take to 75 percent or more of the gross receipts. Meanw hile, the promotion industry was pinched. Many promoters saw their pr ofit margins deteriorate to as little as 1 percent, despite the fact that they were still bearing much of the risk of a failed concert. To get the big name bands, however, promoters had to be willing to acce pt that risk and honor many of the group's requirements.

A New Strategy in the Late 1970s and 1980s

That was the environment still evolving when Rosen took the helm at t he fledgling Ticketmaster. Realizing the folly of trying to compete w ith the mammoth Ticketron using conventional industry tactics, he dev ised a strategy that exploited the frustrations of the promoters. He effectively offered to limit inside charges--the money taken from pro moters and facility owners--thus reducing the promoter's risk. He wou ld accomplish this by raising service charges on individual ticket sa les and giving promoters a percentage of the proceeds. In return, the promoters agreed to give Ticketmaster the exclusive rights to ticket ing for their shows. To boost service fees, Rosen implemented new sal es techniques, particularly telephone sales service, which gave custo mers an alternative to standing in line. For the convenience, Ticketm aster was able to charge as much as a 30 percent premium, or higher i n some instances.

Many promoters gave exclusive rights to Ticketmaster. Indeed, aside f rom guaranteed fees, the promoters benefited from Ticketmaster's stat e-of-the-art ticketing system. The company's computers could sell 25, 000 tickets in just a few minutes, if necessary, which substantially reduced the promoter's advertising and related costs and improved cus tomer satisfaction with the overall event. The arrangement worked so well that Ticketmaster eventually was able to secure long-term contra cts with several major promoters for handling ticketing for all of th eir events. Promoters also viewed Ticketmaster as a preferable altern ative to the giant Ticketron, which many promoters believed had becom e arrogant and sloppy.

Despite steady gains, Ticketmaster lost money in the late 1970s and e arly 1980s as it scrambled to implement its expensive strategy. By th e mid-1980s, though, the company was posting profits. To boost sales and market share, Ticketmaster began buying out smaller competitors i n an effort to broaden its reach into major cities. It acquired Datat ix/Select-A-Seat in Denver, for example, and SEATS in Atlanta. As it bought up more companies and drove others out of business, the number of competitors in the industry declined. At the same time, Ticketron 's supremacy was rapidly waning. Aside from complacency, part of Tick etron's problem was that it lacked the investment capital afforded by Ticketmaster's deep-pocketed owner. Its ticketing systems soon becam e obsolete in comparison with those in use at Ticketmaster.

By the late 1980s, Ticketmaster had become a top player in the ticket ing business and Ticketron was scurrying to duplicate Rosen's success ful revenue-sharing strategy. But it was too late; Ticketmaster had m astered the recipe and was rapidly increasing the number and size of its contracts. In fact, Ticketmaster's relationship with, and control over, its promoters had evolved to the point where Ticketmaster was deeply entwined in the promotion business. That involvement was evide nced by a relationship in Seattle that finally ended in a lawsuit. In 1989, Ticketmaster made a loan and credit line guarantee valued at & #36;500,000 to two of the area's top promoters. The promoters used th e money to start a new operation promoting concerts in The George, a facility in central Washington. In that same year, one of the promote rs launched another venture, PowerStation, to sell tickets in competi tion with Ticketmaster. Enraged Ticketmaster executives responded by withholding cash from the promoter's ticket sales through Ticketmaste r. The promoter sued and finally settled with Ticketmaster out of cou rt, but the PowerStation was shuttered and both promoters left the co ncert business.

Market Dominance in the Early 1990s

By the end of the 1980s, Ticketmaster was selling more than $500, 000 worth of tickets annually. Ticketron was still considered an indu stry power, but its status was diminished and its long-term prospects were dismal. The only other competition consisted of a smattering of local and regional companies struggling to combat Ticketmaster. Tick etmaster finally delivered the crowning blow to Ticketron in 1991, wh en it purchased some of the company's assets and effectively rendered the company no more than a lesson in corporate history. Questions we re raised about whether or not the buyout would give Ticketmaster a m onopoly on the industry, but the U.S. Department of Justice approved the deal. With Ticketron out of its way, Ticketmaster was virtually d ominant and its sales began rising rapidly toward the $1 billion mark.

Because it had so much control in the ticket industry, Ticketmaster c ame under fire from numerous critics following the demise of Ticketro n. Some fans complained that Ticketmaster was raising its fees, refle cting a monopoly on the industry. Similarly, some promoters argued th at Ticketmaster wielded too much power and that it was willing to abu se that power to get its way. Finally, some rock bands complained tha t Ticketmaster was gouging their profits with excessive fees, knowing that the bands had nowhere else to turn. Ticketmaster countered, cit ing rising operating costs and relatively modest overall company prof its. Still, criticism continued.

Band discontent with Ticketmaster's tactics culminated in one of the most visible disputes with Ticketmaster on record: a complaint filed with the Justice Department by the popular rock band Pearl Jam allege d that Ticketmaster engaged in monopolistic practices. Pearl Jam want ed Ticketmaster to drop its service fees to $1.80 per ticket, but the company refused to drop below $2.50. Pearl Jam rejected the offer and threatened to work without Ticketmaster. The band planned t o find venues, such as fairgrounds and racetracks, that were not subj ect to Ticketmaster's exclusive contracts. Their efforts eventually f ailed and their concert tour fell apart. It was then that the band fi led the complaint, and the Justice Department launched an investigati on.

Ticketmaster argued that from about $1 billion worth of tickets s old in 1993, it generated revenues of $191 million in 1993, only $7 million of which was earned as net profit. That amounted to le ss than ten cents in profit per ticket. Critics complained that Ticke tmaster was simply concealing the profitability of the business, but Rosen and his fellow executives were adamant that the industry was st ill competitive. "Fifteen years ago, there was another company everyb ody said had a monopoly--Ticketron," said Larry Solters, Ticketmaster spokesperson, in the July 31, 1994, News & Observer. He a dded, "Ticketmaster did ticketing better. And I wouldn't be surprised if somebody else comes up with a better system someday. There are a million ideas out there. ... It's not that tough."

After posting record sales and profits in 1993, Ticketmaster's fate w as changed again when Paul Allen beat out several big media players i n a bid to purchase controlling interest in the company. The 40-year- old Allen, who had gained fame as the cofounder of Microsoft, paid an estimated $300 million for his stake. Following his departure fr om the software giant, he had assembled an interesting portfolio of i nvestments, many of which were related to the emerging information hi ghway. He also owned the Portland Trailblazers basketball team and a charitable foundation, among other interests. Allen retained Rosen as CEO, but he had new plans for the company. In fact, he wanted to inc rease its sales threefold to fivefold within five years and expand in to different distribution avenues.

Ticketmaster sold a whopping 52 million tickets to entertainment and sporting events in 1994 and captured about $200 million in revenu es. Having nearly cornered the ticket market, it was setting its sigh ts on several other media-related ventures. The company already was d istributing a regional monthly events guide to about 600,000 customer s, and it planned to use that as a base for creation of a new enterta inment magazine. Ticketmaster also was working on a new online servic e, hoping to position itself as a one-stop shopping center for entert ainment and event needs.

The company launched its new magazine, Live!, in February 1996 . Critics saw the publication as a thinly veiled attempt to brighten Ticketmaster's tarnished image. The magazine field was definitely a d ifficult one to break into, and Live! lost money from the star t, costing its owners $11 million in the first two years. Other v entures introduced during 1996 included a hotel and airline reservati on service, Ticketmaster Travel and Ticketmaster Online. The latter w as an instant success, topping $3 million a month in revenues wit hin a short time.

1996 Public Offering

The biggest story for Ticketmaster in 1996 was its decision to go pub lic. Paul Allen kept his stake, retaining control of 54 percent of th e company after the initial public offering (IPO). The initial offeri ng price had been considered high by many analysts, and it soon fell off. Within a year it recovered, however, rising to nearly double the original figure.

On April 28, 1997, Ticketmaster filed suit against Microsoft over tha t company's practice of deep linking from its web site to an inner pa ge of Ticketmaster's site, bypassing the company's home page and its logo and advertising content. To some users, it could appear that the Ticketmaster page was generated by Microsoft, rather than Ticketmast er. The suit was later settled out of court, with Microsoft agreeing to link only to Ticketmaster's home page. The year also saw the compa ny's online ticket service merge with CitySearch's entertainment guid e web site, and new investments in Australian and French ticketing co mpanies. A joint venture with Jack Nicklaus's Golden Bear Golf to mar ket golfing reservations was launched as well.

In May 1997 Barry Diller's HSN, Inc. (later to be known as USA Networ ks, Inc.) announced plans to buy out Allen's stake in Ticketmaster. T he following year the company became a subsidiary of USA Networks whe n the remainder of its stock was acquired. After the acquisition, Fre d Rosen stepped down as CEO, allegedly due to clashes with Diller. He was replaced by Terry Barnes. At about this time Diller acquired Cit y Search, Inc., merged it with Ticketmaster's online operation to for m Ticketmaster Online-CitySearch, Inc., and spun it off as a public c ompany, retaining 60 percent ownership. This resulted in two Ticketma sters, the one representing the traditional part of the business and the awkwardly named Ticketmaster Online-CitySearch as its own Interne t-only company. This was at a time when Internet stocks were the high fliers on Wall Street, and many companies split off their online div isions as separate companies. For example, bookseller Barnes and Nobl e made a freestanding unit out of its online seller barnesandnoble.co m. So this seemed a sensible business strategy with many imitators in the late 1990s.

In December 1997 a contract was signed with event promotion giant SFX Entertainment that guaranteed Ticketmaster exclusive ticketing right s for seven years. Diller and SFX Chairman Robert F.X. Sillerman had earlier engaged in a very public battle of words, but were able to bu ry the hatchet when it came time to do business.

A lawsuit over Ticketmaster's alleged monopoly on ticket distribution reached the Supreme Court in 1999. The court let a prior ruling, whi ch was in Ticketmaster's favor, stand. Also during the year, an attem pt to merge Ticketmaster Online-CitySearch with Lycos and USA Network s failed when Lycos shareholders rebelled.

In late 1999 and early 2000, Ticketmaster acquired several more of it s competitors. These included Alabama-based TicketLink, multilingual ticketer Admission Network, Inc. of Canada, and ETM Entertainment Net work, Inc., which had contracts with the Los Angeles Dodgers and New York Mets, among others. The company also sued Tickets.com, in conjun ction with Ticketmaster Online-CitySearch, over alleged deceptive pra ctices involving its web site. The appeal of buying tickets online wa s growing steadily, with 40 percent of some events' seats selling ove r the Internet. As a result, Ticketmaster's telephone operators were taking fewer orders, and the company shut down several of its call ce nters. Tickets purchased online were still mailed to customers, but n ew technology was being tested that would allow them to be printed at home, further streamlining the process.

Reunited Company in the 2000s

When Barry Diller took over Ticketmaster in 1997, he had moved quickl y to capitalize on what looked like the most vital part of the compan y by spinning off the online ticketing business as Ticketmaster Onlin e-Citysearch. The new Internet company's stock had initially gone way up, and shortly after the IPO, Ticketmaster Online-Citysearch was wo rth as much as $3.4 billion. The soaring stock price allowed Dill er to make several acquisitions, trading the stock for small ticket c ompanies such as 2b Technologies, a museum ticketing firm, and a Micr osoft subsidiary called Sidewalk that made city guides. These acquisi tions may have cost the company too dearly. And there were other prob lems as well. Although Ticketmaster was ostensibly a separate operati on from Ticketmaster Online-Citysearch, the companies still overlappe d in many ways. For example, Ticketmaster's telephone call centers we re staffed with Ticketmaster employees, but these employees were at t imes asked to do things that specifically benefited Ticketmaster Onli ne-Citysearch. Communication between the two companies was apparently rocky. John Pleasants, who was CEO of the online company, claimed in an interview with Fortune magazine (March 5, 2001) that "Ther e was an issue every day," meaning conflict between the two firms was ongoing.

By the end of 2000, when the high-tech market had crashed, Ticketmast er Online-Citysearch's stock had gone from a high of more than $8 0 to less than $12 a share. The company had lost some $337 mi llion over two years. In November 2000, Barry Diller agreed to buy ba ck a controlling stake in Ticketmaster Online-Citysearch. A few month s later, he announced that the two companies would once again operate as one. Diller became cochairman of the new combined Ticketmaster Co rporation, with Ticketmaster CEO Terry Barnes sharing the post. The n ew company was to have more than 12 million customers and sell some 8 0 million tickets a year.

Barry Diller remained extremely active in the Internet world, buying the Internet travel firm Expedia for $4.6 billion in 2003 and Hot els.com later that year. In June 2003, Diller's USA Networks changed its name to IAC/Interactive Corporation. Ticketmaster was part of a m edia empire that also contained the home shopping channel HSN and the web-based mortgage lending company LendingTree. Ticketmaster was not a fast-growing company, but it did remain profitable after its merge r with its online sister, and it made some acquisitions and changes i n its way of doing business. In 2003, the company experimented with a uctioning off event tickets. Many concert tickets were already auctio ned off electronically in the secondary market, selling on eBay somet imes for much much more than the original price. Ticketmaster, which sold close to 100 million tickets overall in 2002, was looking at so- called "dynamic pricing" as a way to ease problems caused by unscrupu lous "scalpers" (secondary market sellers) and to sell difficult seat s such as ones in the back of an auditorium, that often went empty. T icketmaster also moved into new international markets in the early 20 00s, expanding into Sweden, Norway, Denmark, and Finland. Ticketmaste r also operated in Scotland, Wales, Ireland, England, and The Netherl ands. The company also formed a new unit in 2005 called TicketmasterA rts, dedicated specifically to ticketing and fundraising for arts org anizations. The new division worked with venues like the Kennedy Thea ter and the North Carolina BTI Center for the Performing Arts.

In 2005, Ticketmaster's parent corporation, IAC/Interactive, went thr ough another upheaval, splitting off its travel division Expedia and some other Internet travel companies into a new entity. Ticketmaster remained part of the main company IAC/Interactive, along with HSN, Le ndingTree, and the Internet search engine Ask Jeeves. While the paren t company did not break out financial results for the subsidiaries, T icketmaster was considered a stable and profitable company in IAC's m ix. The parent company had projected 2005 sales of $5.7 billion.

Principal Competitors:Tickets.com; TicketCity.com

Chronology

• Key Dates:
• 1978: Ticketmaster is founded by two Arizona State University students.
• 1982: Jay Pritzker purchases the company, beginning a period o f growth.
• 1991: Main rival Ticketron is acquired, giving the company mar ket dominance.
• 1996: Ticketmaster goes public, launches online, travel, and m agazine ventures.
• 1997: Online service is merged with CitySearch; Barry Diller a cquires 47 percent of the company.
• 1998: Diller's USA Networks acquires the remainder of Ticketma ster; the online operations are spun off.
• 1999: The U.S. Supreme Court refuses to review an antitrust la wsuit appeal in a victory for the company.
• 2000: The company acquires Admission Network and ETM Entertain ment Network.
• 2001: The company buys back a controlling stake in Ticketmaste r Online-Citysearch, and the merged companies begin to operate as Tic ketmaster Corporation.
• 2003: Diller's USA Networks changes its name to IAC/Interactiv e Corporation.
• 2005: The company forms a new unit called TicketmasterArts, de dicated specifically to ticketing and fundraising for arts organizati ons.