COLUMN ONE : The Ticket King’s Path to Power : As Pearl Jam just learned, Ticketmaster’s Fred Rosen gets what he wants. His tactics have earned him some foes, but even critics admit he has transformed the industry. Now he’s eyeing new realms.
For Fredric Rosen, this was a week to savor.
America’s most popular rock group had admitted defeat. Pearl Jam acknowledged that it would be unable to set up a nationwide concert tour without the help of Ticketmaster, the company Rosen transformed from a fledgling software firm into the world’s biggest ticket operation.
Rosen had won what he once branded Pearl Jam’s “holy war” over the way tickets are sold--a 14-month standoff during which the Seattle band tried to bring down the controversial system Rosen had invented.
Forging one of the remarkable business success stories of the last decade, the pugnacious 51-year-old ticket king has built an empire by relentlessly attacking enemies and handsomely rewarding friends. The list of the vanquished includes formerly dominant Ticketron, which Rosen first beat in the marketplace before his company bought what was left.
Among concert promoters and venue owners, Rosen is revered as a genius who took ticketing--once a costly irritant for arenas--and, like an alchemist, turned it into a huge source of cash. The Los Angeles-based company he heads owns the bulk of the nation’s $1.6-billion live entertainment ticketing business. For rock concerts, the most coveted part of the industry, Ticketmaster rules.
But his aggressive tactics and higher service charges have also earned him many foes among fans, artists, competitors and some lawmakers.
“If the only tool you have is a hammer, then anything that stands in your way just looks like a nail,” said Tim Collins, manager for rock superstars Aerosmith. “Fred is a brilliant businessman who has single-handedly made ticket distribution 100 times better than it was before he arrived on the scene. But in the process he has turned from a driven businessman into an arrogant bully who has forgotten who his true customer is: the fan.”
Having conquered the concert ticket business, Rosen is poised to take Ticketmaster into wide new realms where it is less clear whether his hard-nosed business practices and abrasive qualities will continue to serve him as well.
With the backing of Ticketmaster’s new owner, billionaire and Microsoft co-founder Paul Allen, Rosen wants to expand into on-line computer and cable ticket distribution as well as movie and airline ticket sales.
Consumers meanwhile are seeking legislation to curb service charges that in some cases boost the price of a ticket more than a third. And Ticketmaster’s exclusive agreements with arenas remain under scrutiny by the U.S. Justice Department for possible antitrust violations after a memorandum filed last year by Pearl Jam, which is still angry with the ticketing giant.
Rosen once boasted that he learned his approach to business from the Chinese classic “The Art of War” by Sun Tzu. And yet he is unusually sensitive to public perceptions of him.
It is his success, Rosen says, that has made him a target of criticism, his only sin being that he is a good capitalist.
“The quality we love in athletes we hate in our business leaders,” he said in an interview early this year. “There is intense jealousy when you succeed.”
He declined to be interviewed for this article because of what he believes has been unfair coverage of the dispute between Ticketmaster and Pearl Jam. Attorneys for Rosen contend that The Times has taken the side of the rock band and of ticket buyers and has not presented Ticketmaster’s side.
Notoriously volatile, friends say, Rosen sometimes displays a self-deprecating sense of humor. As a businessman, he is foremost a pragmatist: “When I want vision, I go to the optometrist,” he said recently.
His success in the ticketing business has made him a rich man, though how rich cannot be determined because Ticketmaster is a private company. Those who know him say he is generous and takes pride in donating to charities such as the City of Hope, Pediatric AIDS Foundation and the Neil Bogart Labs. He is devoted to his wife and two children.
In his cluttered office on Wilshire Boulevard, an autographed ticket from an early Beatles concert and a framed letter from Mark Twain hang on the walls. Rosen has Foosball and a pinball machine to amuse promoters and other clients while they wait in his office as their concerts sell out. Colleagues say he loves oldies rock and has mused about setting up his own record label.
Rosen was raised in New York City, where his father was an advertising executive. He worked his way through Clark University in Worcester, Mass., busing tables and selling jewelry. Then he went to Brooklyn Law School.
Working as an attorney assessing companies for acquisition, he came across Ticketmaster in the early 1980s. He decided the business, which had just over $1 million in annual sales, had potential and arranged a meeting with Jay Pritzker, a member of the billionaire Chicago family that owned it, Hyatt Hotels and other properties.
“It was a small business and it didn’t make a lot of sense,” recalled Pritzker. “But he was brash and bold and he convinced me he could do something with it.”
Rosen was designated chief executive officer and moved the business from Arizona to Los Angeles in 1982 to develop closer ties to the rock music industry. “There’s an excitement in California, a feeling you can try anything there,” Rosen said at the time.
Ticketron, which was formed in 1968, was then the dominant ticketing company nationwide. With the rock concert business booming by the early 1980s, the ticket market shifted away from box-office sales to computer-generated transactions at outlet locations, of which Ticketron operated more than 700. At the time, promoters and facilities paid Ticketron for its service, which was frequently criticized as mediocre.
In a crucial early victory, the Forum in Inglewood dropped Ticketron to sign an exclusive contract with Ticketmaster because it offered a more efficient computer system and better financial terms. Soon, Rosen had sewn up deals with the Hollywood Bowl, Irvine Meadows, Avalon Attractions and other arenas across the country.
All were lured by Rosen’s crucial innovation: He raised prices. Not on all tickets, but on those with the highest demand, like those offered for popular rock concerts. He then cut building owners and promoters in on a significant share of the profits in return for exclusive deals.
The tactic was welcomed by owners of facilities that had seen their rental income beaten down by bands insisting on a larger share of the concert take.
“Ticket companies are service companies and our client is you, not necessarily the public,” Rosen told a group of arena managers in 1990.
In addition to the exclusive contracts with venues, Rosen developed a corps of highly loyal concert promoters. Some built their own amphitheaters during the late 1980s with the help of money advanced by Rosen.
Rock groups also were offered the opportunity to benefit from Rosen’s system.
Collins of Aerosmith testified during congressional hearings last fall that Rosen offered to pay him $1 per ticket if Aerosmith would include Ticketmaster’s service fees in the face value of tickets so it would not become the target of public ire. Aerosmith declined. A Ticketmaster spokesman denied that Rosen offered Collins the money.
Rosen combined the pricing and contracting innovations with a ferocious business style that included buying, merging with or threatening other ticketing companies. In New York, Minnesota, Kansas, Georgia, Tennessee, Florida and Texas, Ticketmaster pushed into new markets by buying competitors.
Rosen also built strategic alliances with key players. In Atlanta, Ticketmaster’s operations are partly owned by MCA Inc. and Ted Turner, owner of the Atlanta Braves and the city’s top concert hall. In the Midwest, Rosen allied himself with the Simon brothers of Indianapolis, the nation’s biggest mall owners. The Pritzkers also owned a large share of Spectacor Management Group, the nation’s largest hall and stadium management company.
Rosen’s crowning coup came in 1991, when Ticketmaster bought what remained of Ticketron, its only significant rival. The company had been acquired by Abe Pollin, manager of the Washington Bullets basketball team, with the backing of the Carlyle Group, an investment company.
Pritzker recalls telling friends in the Carlyle Group that their effort to revive Ticketron could only end in failure. “I told them: ‘If you don’t have a Fred Rosen, I don’t think you can make it work,’ ” Pritzker said.
Sure enough, Ticketron found itself outfoxed in market after market. When the Carlyle Group finally chose to sell to Rosen, there were concerns among consumer advocates that Ticketmaster would become a monopoly, but the deal sailed through an antitrust review by the Justice Department, then under a Republican Administration.
With that, Ticketmaster became the dominant ticketing company in the United States. The consequences were noticed by consumer groups, which reported that service charges jumped immediately nationwide.
“It used to be that the two companies would bid against each other and we could get the lowest fee for our fans,” said Paul McGuinness, who manages the Irish rock band U2. “But now when a big act like U2 wants to put on a national tour, we have no choice: Ticketmaster is the only game in town.”
While Rosen has been widely criticized for pushing up service charges, some say he has unfairly become the lightning rod for criticism.
“The bands aren’t clean, promoters aren’t clean, buildings aren’t clean and ticketing companies aren’t clean. We are all taking a piece of this,” said Jim Weyermann, deputy director of the Seattle Center, an arts complex in downtown Seattle that may soon sign an exclusive deal with Ticketmaster.
“I don’t always agree with his methods,” Weyermann said, “but he is not the Antichrist. That depiction is unfair.”
Yet Rosen could be merciless to those who challenged him. David Leiken, an Oregon promoter, tried to start his own ticketing business by contracting with a Philadelphia company to install a system. The deal soured and Leiken blamed Ticketmaster. He sued in federal court alleging contractual interference and received a settlement. A Ticketmaster spokesman said the company did nothing wrong.
Leiken ultimately purchased a different system and is trying to win business from Ticketmaster.
Even critics concede that Rosen has transformed the industry and created a powerful franchise that enjoys huge scale advantages. With more than 2,000 people answering phones and 2,700 outlets across the country, the company can sell out nationwide rock concerts in 30 minutes, now a selling point for popular bands.
Even as the Justice Department investigates the ticket industry, Rosen is aggressively bidding for every piece of new business becoming available.
Within a few weeks, Ticketmaster will have its own site on the Internet’s World Wide Web where fans can read a listing of major events taking place around the world and, eventually, buy tickets.
The company is close to launching an events magazine and is considering whether to create a sort of MTV meets Home Shopping Network venture that would show live performances and sell tickets and merchandise for the events.
In addition, the company has received a travel agent’s license and is aggressively studying ways to use its phone system to sell airline tickets.
“This is the year [Rosen] is transforming the company,” said a Ticketmaster executive.
It was the decision to expand, Rosen said in an interview a couple months ago, that persuaded him he needed a new backer.
“I saw the future of Ticketmaster in a different universe and . . . [that I didn’t have] the skill set to be comfortable in choosing which routes to follow,” Rosen said. He got what he wanted when billionaire Allen paid $300 million for 80% of the company two years ago.
Among the challenges facing the company is a ticketing system based on an older technology that experts say is expensive to maintain and does not allow the kind of targeted marketing that a growing number of arts organizations would like.
The Kennedy Center in Washington, D.C., recently decided not to go with a Ticketmaster licensee because it could not offer such a database. A Ticketmaster licensee also lost the bid to offer ticketing for the 1996 Olympics in Atlanta to ProTix Inc. of Madison, Wis., in part because its system lacked this capability.
Across the country, small ticketing companies are springing up that are trying to exploit the backlash against Ticketmaster with new, more advanced and cheaper technology to take on the ticketing giant.
In spite of challenges to his empire, in the key area of rock concerts Ticketmaster’s franchise appears unassailable. Although Pearl Jam’s defeat has not ended the Justice Department inquiry, the band’s public humiliation certainly will discourage similar defections. Rosen also recently negotiated cheaper service fees with popular bands such as Offspring and Green Day.
Some argue that the emergence of small companies competing in the ticket business is evidence that Ticketmaster is not a monopoly and does not deserve federal antitrust scrutiny.
Pearl Jam says its experience shows otherwise.
The Seattle band went to war with Ticketmaster after Rosen refused to negotiate a lower service fee for a national tour the group was planning in 1994. In a memorandum filed 13 months ago with the Justice Department, Pearl Jam accused Ticketmaster of retaliating by pressuring promoters to boycott the band’s effort to plan a low-cost summer concert tour this year.
Ticketmaster denies that it has done anything improper in its dealings with Pearl Jam.
The Justice Department is expected to announce its findings within a month, and the outcome is far from clear. Rosen has engaged a powerful battery of lawyers and lobbyists to argue his case against antitrust intervention.
In recent months, Rosen has privately told several promoters and managers that what disturbs him most about his battle with Pearl Jam is the impact it has had on his family.
Rosen’s eyes “welled up with tears,” one associate says, as he recounted an episode during a meal at a Beverly Hills restaurant about his daughter getting harassed at school by students who blamed her father for trying to “ruin” Pearl Jam’s tour.
Business associates say the image of Rosen as a ruthless businessman is not the full picture.
“Not many people get to know the inner Fred,” said Claire L. Rothman, former president of the Forum who recently joined Ticketmaster as a vice president, “but behind all his tough jargon and smart one-liners, there beats a very kind and gentle heart.”