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Ticket company's dominance challenged

January 20, 2008|From the Associated Press

CLEVELAND -- In the 1990s, when Garth Brooks and Michael Jordan filled arenas, the only way to see them live was to go through Ticketmaster, or a scalper.

Today, finding a ticket for a Green Bay Packers playoff game or a Rascal Flatts concert is a click away on StubHub.com or other Internet resale sites.

Ticketmaster, the world's leading ticketing company, no longer controls the gateway to the world of live sports and music events, and more change is coming.

In December, concert promoter Live Nation, Ticketmaster's biggest client, said it would begin selling its own tickets in 2009. Live Nation accounted for about 15 percent of West Hollywood-based Ticketmaster's roughly $1 billion in revenue in 2006.

The announcement came at the end of a year in which Ticketmaster sued one of its own clients, the Cleveland Cavaliers, lost Major League Baseball's ticket resale business and trailed competitors in the secondary ticketing market.

"It's the equivalent in the ticketing industry of the fall of the Roman Empire," said Eric Baker, founder and CEO of Viagogo.com, a European ticket resale website.

Ticketmaster denies such assertions, but like a broker with a handful of tickets five minutes before kickoff, it's working feverishly to maintain its leadership role in the ticketing marketplace.

"We're in a transformation in some sense," said Eric Korman, Ticketmaster's executive vice president. "We're taking a very profitable 30-year-old company that's a leader in ticketing and entertainment marketing and looking to expand that."

Those moves include this week's acquisition of Rolling Meadows, Ill.-based TicketsNow, which works with more than 800 professional ticket resellers, giving Ticketmaster a quality inventory that it believes will help strengthen its resale business.

Ticketmaster also has made deals to become the official resale source for several professional sports leagues and the purchase of Irvine, Calif-based Paciolan Inc., which provides sports and entertainment venues with the software needed for automated ticketing.

Korman acknowledges the company is an underdog in reselling tickets. The ticket resale market was essentially created by Internet upstarts, and Ticketmaster's resale site, TicketExchange, lags behind its younger competitors.

"You have to look at the secondary market as something that is a real threat to Ticketmaster," said Joe Bonner, a securities analyst at Argus Research Corp. who tracks Ticketmaster's parent company, New York-based IAC/InterActiveCorp. "They missed the boat. StubHub has been around a few years now already. They weren't as proactive as they probably should have been."

Ticketmaster lost Major League Baseball's resale business to StubHub last year, but has secondary ticketing deals with the NBA, NHL and NFL. In a deal signed last month, the NFL agreed to help market a new Ticketmaster Web site.

Ticket resale sites allow ticket holders to hold auctions for their tickets. The sites charge the buyer, seller or both a percentage of the sale price.

Many experts argue that the advent of secondary ticketing means more tickets are available to the public, which will drive down prices.

Ticketmaster points to the Police tour as an example, in which an overabundance of tickets in places such as Chicago and Minneapolis caused prices to plummet, in some cases below face value.

Others, like Sucharita Mulpuru, a senior analyst at Forrester Research Inc., believe the opposite, saying secondary markets will inflate prices for popular events such as Hannah Montana concerts.

Bonner believes Ticketmaster still has a lot of catching up to do in the secondary market. He has a "Hold" rating on Internet conglomerate IAC/InterActiveCorp, which announced recently that it will spin off Ticketmaster and four other companies into separate businesses.

"It frees it to make acquisitions," Bonner said. "A riskier bet, but maybe it will make it a more nimble competitor."

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