Live Nation's entry into ticketing could shake up the hierarchy of the live entertainment business and alter how fans buy tickets for shows at locations ranging from small clubs to giant arenas. The shift comes as an array of music industry rivals have been jockeying to take a cut of ticket sales as other revenue sources, particularly CD sales, plunge.
Under the pact, Live Nation said it would license software from CTS Eventim, a German ticketing service and concert promoter, to build a ticket unit in North America. Eventim would act as Live Nation's outside ticket service--in a role similar to that of Ticketmaster now--in markets across Europe. Terms of the agreement were not disclosed.
The clock is running for Live Nation to adapt Eventim's ticketing system for the United States, where its technology is largely untested. Live Nation's multiyear contract with Ticketmaster expires at the end of 2008. Talks to extend the deal collapsed in August, setting off a scramble by both companies.
Live Nation said that, in addition to using the new service to sell its own tickets, the company would market the system as an "alternative" service for other concert site owners. A spokesman for Ticketmaster, Joe Freeman, said, "We welcome their entrance to the ticketing business."
The financial stakes are huge. Live Nation accounted for more than 15 percent of Ticketmaster's roughly $1 billion in revenue last year, said a person briefed on the company's finances.
Live Nation, like other concert promoters, receives a part of the service charges added to tickets sold through Ticketmaster: that money added roughly $90 million to Live Nation's books in the last year. In the Eventim deal, Live Nation would have the right to set--and keep--virtually all fees added to tickets in the United States, a person briefed on the deal said. The two companies would operate under a more traditional revenue-sharing deal in certain international markets.
Live Nation has long pushed to take a bigger role in ticket sales, and recently told investors that such a move could bolster profit. The company's concert promotion business has thin margins. Live Nation could add $25 million by taking the ticketing process in-house, according to an investor note last month from John Blackledge, a JPMorgan analyst.
Live Nation's chief executive, Michael Rapino, has also sought tighter control over the relationship with fans. In particular, Rapino has pressed for Live Nation to control customer data from ticket buyers as part of a strategy to sell fans additional merchandise.
Rapino has pushed for livenation.com--and not Ticketmaster's Web site--to be the main outlet for its tickets. Under the new arrangement, the Live Nation site is to be the retail storefront for the company's events in America and Europe.
But it is not clear how much Live Nation will need to spend to build the infrastructure behind a ticketing operation. Another question is whether Eventim's technology will be able to handle the sheer scale of commerce it will inherit from Ticketmaster.
Live Nation said in an analyst presentation that it sold roughly 20 million tickets last year in concert sites it controls; Eventim said it processed more than 30 million inquiries in the first hour tickets went on sale for the 2006 World Cup tournament.
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