Ticketmaster’s Tough CEO Ready for the Next Act

When Fredric Rosen took control of Ticketmaster Inc. in 1982, the company had 25 employees and a negative net worth. Few investors were interested, because the prospect of competing with then-dominant Ticketron seemed ludicrous.

Today Ticketmaster is the biggest ticketing company in the world, selling nearly 70 million tickets this year. The company has about 1,400 full-time employees, another 3,500 part-time, and a value of about three-quarters of a billion dollars.

Rosen, who is chief executive, built the company, in part, by capitalizing on Ticketmaster’s proprietary technology, but even more by developing a strong economic model for the ticketing business. His customers are the facilities--the arenas, theaters and stadiums where live events are staged--and he pays them for extended, exclusive contracts.

He also did it by being one of the toughest--some would use rougher language--competitors around, often obliterating his business opponents, including Ticketron, which Ticketmaster bought in 1991.

The popular rock group Pearl Jam, unable to mount a national tour without using Ticketmaster, triggered an antitrust investigation by the Justice Department, but the government found no grounds for taking action.

Recently the company made waves in the online world by suing Microsoft Corp. for “electronic piracy” for linking from its Internet site directly into Ticketmaster’s transactional pages on the Web, bypassing advertising and other features of its home page. Meanwhile, the company is working with Intel Corp. to develop technology so ticket buyers will have a virtual view of a field or stage when buying a ticket.

Ticketmaster went public last year to mixed reviews, but the stock has nearly doubled on strong performance. Most of the company’s revenue is from ticket surcharges, but Ticketmaster increasingly is seeking revenue through marketing ventures with companies that want to reach the people who buy tickets. It also is expanding rapidly throughout the world through joint ventures.

Earlier this year, Rosen began reporting to Barry Diller, another entertainment mogul with a reputation for toughness, who bought control of Ticketmaster with shares of HSN Inc., parent company of Home Shopping Network. Diller now proposes to buy

the rest of the company.

Rosen was interviewed in his seventh-floor office at the new Ticketmaster building on Sunset.

Q: How important a part of your business is live music?

A: We realized three or four years ago that the makeup of the touring business was going to change, and so we essentially expanded our business to all live events, from trade shows to museums to family events to theater. The last quarter of financial results was very strong, but that’s a result of finally seeing some popular music that people wanted to go to all happening in the same quarter.

Q: What happened to the concert business?

A: That’s [something] a lot of people in the industry smarter than I am have tried to solve. It became less compelling for people to go to. If you look and see what happened in the last quarter, you see the Rolling Stones come in. You see Fleetwood Mac come in. Garth Brooks remains a phenomenon. That kind of star power in current acts is missing. The older acts clearly are drawing.

Q: Why?

A: When we grew up, music was the soundtrack to our lives. If you go back to the ‘60s and ‘70s, there was nothing you could do that didn’t have this music surrounding it. MTV didn’t exist. You have these great videos that are made by motion picture directors, and the problem is that in live performance, it’s hard to create the same fantasy. When we grew up, it was top 40 radio, and you could listen to new songs, from Barbra Streisand to the Doors to Janis Joplin to the Mamas and Papas, from the Beatles to the Rolling Stones to Ray Charles, all on the same radio station. Today you have gypsy music on one station, gypsy with cymbals on another station. We don’t have a common experience.

Q: Do you foresee the live concert business coming back?

A: I think ’98 will be a better year for concerts. Lots of groups will go out and tour in 1999 as their last tour before the next century. In the year 2000, people will want to tour in the first year of the new century.

We sit in a unique position, because I think the demand to leave your home and go to live events is fundamentally insatiable. Live events are the last tribal gatherings in America. Where else do strangers share things? If you go to a sporting event, you share things with the people next to you whether you know them or not. If you go to a concert, there’s this interaction of people dancing or holding hands or swaying. You’re going to a safe environment, where people feel comfortable, where people have interaction with strangers. Live events are one of the last places where the word “community” exists in America today.

Q: You said recently that you had a “tingling” feeling about this business that you haven’t had for a long time. Why?

A: The Internet is tremendously exciting. And if you said that I was pulled kicking and screaming into [that] universe, you probably wouldn’t be far from wrong, because I felt that it was a medium that had been really hyped. We started doing [online] transactions in a test last summer, and the first person who bought a ticket on the Internet, we called him up and asked him, “You’re the first person to buy a ticket this way; can you tell us why?” And he said, “I don’t like talking to people, and I don’t like talking to you.” As a side note, we’ve had more [single ticket] transactions in this universe than we’ve had since we’ve been in business.

We rolled it out in November, and we sold 5,000 tickets, and it was about $100,000 in ticket sales. And then in February we did a million dollars. I pulled everybody in and I said: “You know what? I wasn’t slightly wrong about this; I was totally wrong. We need to devote more resources to this and make the site bigger, make it more cool.” We still have not spent a nickel marketing this, and in the month of October, we did more than $4 million in transactions and 100,000 tickets. Within three years it can be 3% to 5% of our business.

Our site is now getting about a million and a half people a month to it, which is about 45,000 people a day. And that’s almost a small cable channel in today’s world.

Q: Are you making money yet on the Internet?

A: We’re close. As advertisers start walking into that universe, we are clearly going to have a Web site that they’re going to want to be near, because we know we can deliver.

And I think we’re on the ground floor. Now, that doesn’t mean I can’t be wrong. It’s just that I get a sense of it.

Q: Is that the gut sense when you first got into the ticketing business and built Ticketmaster?

A: Oh, God. No, I think the gut sense I had when I first got into the ticketing business was I didn’t want to be a lawyer anymore. When you succeed, people use all these great adjectives about you, that you had vision or you had this great master plan. I don’t think it was like that. The first thing I’d like to do is make payroll, and then I’d like to make a little money, and then I’d like to expand the business.

Q: Why did you go public?

A: There had been a lot of people who had been with this company for a long time, and I felt it was a way of giving them equity. There were a lot of misconceptions about this company, and I felt that being public would clear up a lot of those misconceptions.

Q: And it would drive up the value of the company.

A: When [Microsoft co-founder] Paul Allen bought his stake, a lot of people made all kinds of not particularly decent comments that he had paid too much [at roughly $14 a share]. And when we went public, the press [wrote] very skeptical and nasty articles. And now it’s a year later, and our earnings picture is pretty good and the company is growing, and Barry Diller, who is a very smart man and certainly well-respected both here and in the Wall Street community, [is offering about $25 a share]. No one is saying he’s overpaying.

Q: Can you be an entrepreneur running a division of Barry Diller’s company?

A: That’s a question that I don’t think I know the answer to. . . . I have 14 months left on a contract. Clearly Barry and I are both going to honor it. We’ve had talks about my staying. But I haven’t reached any resolution. It’s like a daughter. You raise a daughter, she gets to a certain age and she leaves home. So you have to face the fact that when you build companies like these, you don’t always get to keep them or run them.

Q: Is Fred Rosen about running Ticketmaster or is Fred Rosen about building a business?

A: Fred Rosen might even be about taking some time off. I’ve worked since I was 16. I’m going to be 54. I’m very lucky in the sense that I have an identity outside of this company, and I can live running this company and I can live not running this company. The phone will ring. Skills are translatable. Ultimately what will make my decision is where I’m going to have the most fun.

Q: You have the reputation of being merciless to competitors and you’ve made a lot of enemies along the way.

A: Success brings enemies. If you took a poll today, you could find 28% of the people in America are against motherhood. If you do anything, people are against it. Change--people are against it. I wasn’t running for office.

Q: Are you a bully?

A: No, I think I’m strong. Adjectives like that are easy to use. You can use that or you can use “intimidating.” There’s someone who could say I’m a bully, and there’s someone else who says I’m a father. I can give you 20 other adjectives people call me, but at the end of the day, I think my record speaks to who I am.

Q: For most of your years at Ticketmaster you worked for investors and they let you run the company. Has that changed?

A: Not as of yet it hasn’t. Barry has been very respectful. The difference is you can sit with Barry and talk with Barry about an issue.

Q: You mean day-to-day management?

A: No. Barry is more interested in the overview. What we’ve talked about is figuring out what electronic commerce means and where these companies can help each other. Some things we agree on and some things we don’t, but the conversations are always interesting.

Q: Are there ways to make Ticketmaster work with Home Shopping?

A: There are certainly platforms we can learn from each other. Are we going to be selling toasters when we sell tickets? No. Are they going to be selling tickets when they’re selling toasters? No. I don’t see it like that.

Q: You’ve talked in the past about Ticketmaster doing movie ticketing. Why hasn’t that worked?

A: Advance movie tickets outside of Los Angeles and New York have no meaning. Kids have an abundance of time. If they go at 5:00 and the show is busy, they’ll go at 8:30. It’s not going to be a business for us.

Q: What about airline tickets?

A: We came very close to buying a couple of travel agencies, and I couldn’t bring myself to pull the trigger. I think we will not be in that business in any significant way. It’s just too competitive, and the airlines are busy killing the travel agents. How many wars do you want to fight in a lifetime?

Q: Live, Ticketmaster’s magazine and guide to events, is losing millions. Will you keep it?

A: We lost about $7.5 million the first year. This year we’ll lose somewhere between $4.5 [million] and $4.8 [million], and next year we’ll get pretty close to break-even. It’s a worthwhile endeavor for us. We’re not trying to compete with Time Warner.

Q: Why do people hate Ticketmaster?

A: You charge a service charge, a convenience charge on every ticket, and people don’t like that. If you sit in the first third of the house, people don’t mind that. If they sit in the second third of the house, OK. But when they sit in the last third of the house, they’re angry. They’re never angry at the performer. They’re never mad at the building. They need someone to be mad at, so they get mad at us. If we could put everybody in the first 10 rows, we wouldn’t have one complaint.

The fact of the matter is, people forgot what this business was about for 20 years: going to the box office. That’s how you bought tickets. We said, let’s have a uniform distribution system so people will know where to go. We built bigger outlet systems, bigger phone rooms. People thought it was great. They didn’t have to drive to the box office.

They didn’t mind paying the money, because they all remembered what it was like to get up at 3:00 in the morning or get there the night before and camp out. For the first five or six or seven years, everyone thought this was a great company. By the end of the ‘80s and the early ‘90s, everybody forgot why we got started. So the next generation of kids grew up with us, and they never realized about standing in line for two days or camping out. And then came, why do I have to pay, especially if I had a bad seat?

Q: What are your service charges?

A: They range from $1 to $7. If it’s a sporting event, it’s one price; if it’s a concert, it’s another; if it’s a play, it’s another. We have contracts with our facilities. All the service charges are spelled out in the facility agreement. We don’t set the price of tickets. We don’t determine when shows go on sale. We don’t determine how many tickets are made available to the public.

Q: Upon reflection, what impact did Pearl Jam have on Ticketmaster?

A: It was not a pleasant time. I’ve never commented about that time and about the impact, and I don’t think I should now, either. I think that the process worked, and we were ultimately vindicated. I’d just as soon leave it at that.

Q: When Pearl Jam tours, would you want to do their ticketing?

A: If they play in our facilities, we’d love to do their ticketing.

Q: What other businesses interest you? The music business?

A: Probably not.

Q: The movie business?

A: The way this town works? Oh, no. It’s too hard. And it takes two to three years to make a movie. I want to do things in a quicker time span. I’ve always been interested in the entertainment business. But you know, I’ve built, ultimately, a service business that touches on the entertainment business, but really isn’t the entertainment business.

Q: Is it possible for a small ticketing company to take on Ticketmaster today?

A: If the question is can we lose a client, certainly. I always assume there’s competition. The public gets confused because they think there should be competition for every event. That would be chaos. Arenas have competition when you bid for the arena, but then that contract is three, four or five years.

Q: Could any business challenge Ticketmaster?

A: No one had any expectations that anyone could beat Ticketron, [but] Ticketron wasn’t watching. We’re watching.

Mark Saylor is Times entertainment business editor.