Ticketmaster debuts as independent company
Ticketmaster is set today to become a stand-alone publicly traded company, just as the dominant seller of tickets to concerts and sporting events is about to lose its biggest customer.
For five years, the West Hollywood-based company has been part of IAC/InterActiveCorp, owner of an assortment of Internet-based businesses. Under that umbrella, the subsidiary, which last year sold 141 million tickets valued at $8.3 billion, has done well.
Over the last three years, Ticketmaster’s revenue has grown at an annualized rate of 18% to $1.24 billion in 2007, with profit increasing at a 34% rate to $169 million.
But under a plan unveiled last year by IAC Chief Executive Barry Diller, the New York-based parent is spinning off Ticketmaster and three other units today by distributing shares in the units to IAC stockholders.
As Ticketmaster gains independence, it has no serious national competition in its core business. But that is about to change, forcing the company to look abroad and elsewhere for growth.
In January, the company’s biggest client, concert promoter Live Nation Inc., plans to sell tickets to its own events as well as to events organized by others. Live Nation accounted for 17% of Ticketmaster’s 2007 revenue.
“It’s a significant chunk of revenue to lose,” said Joseph Bonner, an analyst with Argus Research Co. “Ticketmaster has got a little bit of a tough hill to climb.”
To help make up for the loss, Ticketmaster is counting on continued growth in its international operations, which generated $426 million in revenue last year. That was up 41% from 2006 and accounted for about a third of the company’s total revenue.
Ticketmaster also intends to reduce annual operating expenses by $35 million by more fully integrating some recently acquired companies and by taking steps such as consolidating call centers.
In addition, Ticketmaster is looking to boost its share of the ticket resale market, in which it competes against rivals such as EBay Inc.'s StubHub. Ticketmaster launched TicketExchange in 2002, two years after the founding of StubHub, a pioneer in letting people buy and sell tickets to each other online. This year Ticketmaster acquired two other firms in the resale niche, TicketsNow and the British-based Get Me In.
“They’ve really spent inordinately in order to shut us out,” StubHub President Chris Tsakalakis said. “That’s basically how they operate as a business.”
Brushing off such criticism, Ticketmaster CEO Sean Moriarty said acquisitions would remain part of the company’s strategy.
“Like any business that’s been long successful in its field, you have your share of fans, and you have your share of critics,” Moriarty said. “We’re comfortable with our strategy but not complacent.”
Ticketmaster shares are expected to start trading today on Nasdaq under the symbol TKTM. In trading Wednesday on a “when issued” basis, the shares closed at $21.64, giving the company a stock market value of about $1.2 billion.
The other IAC units being spun off are shopping-network firm HSN Inc., LendingTree.com operator Tree.com Inc. and time-share specialist Interval Leisure Group Inc.
IAC will retain search engine Ask.com, dating site Match.com and Citysearch, a provider of online city guides.
Separating from a family of diverse businesses could help Ticketmaster, said Tom Taulli, author of “The Complete M&A; Handbook” and “Investing in IPOs.”
“Even if your division is doing very well and the rest of the company is not, you might lose key people, or your employees might not be as motivated,” Taulli said.
Moriarty said as well that Ticketmaster employees would see the fruits of their labor more clearly, and acknowledged that the company seeks to do more for fans, too.
Ticketmaster has already invested in social music site iLike, and may consider revamping how it presents fees and charges, if not reduce the actual costs, which vary from ticket to ticket but can amount to nearly half of face value.
“The fee structure is too complex,” Moriarty said. “We’re hopeful that over the next couple of years we’ll make it much more fan-friendly.”