Breaking news:Ticketmaster Halts Live Nation Talks

Ticketmaster Halts Live Nation Talks
By JESSICA E. VASCELLARO and ETHAN SMITH
August 23, 2007

A long-simmering feud over one of the music industry's last remaining reliable revenue sources boiled over yesterday, as Ticketmaster, the nation's dominant ticket seller, halted talks to reach a new long-term agreement with the biggest concert promoter, Live Nation Inc.

The situation threatens to create an acrimonious war over who will sell tickets for a big portion of the U.S. live-entertainment industry. A memo circulated within IAC/InterActiveCorp's Ticketmaster, which controls the ticket inventory to nearly all major concert and sporting events in the U.S., said the ticketing company no longer expects to renew its agreements to sell seats for events at buildings owned by Live Nation, its largest client. Events at venues owned by Live Nation and its House of Blues subsidiary generated 17% of Ticketmaster's roughly $1 billion revenue last year.

Talks between the two sides have grown acrimonious during the past year and a half, according to people close to the situation. Live Nation Chief Executive Michael Rapino has threatened to start his own ticketing operation rather than renew with Ticketmaster. The concert-promotion business has notoriously thin margins; Live Nation reported net income of $9.9 million for the quarter that ended June 30, on revenue of $1.04 billion; it lost money in 2005 and 2006. Having its own ticketing could be seen as a way to increase profitability. Live Nation didn't respond to a request for comment.

Ticketmaster's current agreement calls for it to sell Live Nation's tickets through 2008; it is committed to sell them for House of Blues, now owned by Live Nation, through 2009. Ticketmaster expects to fulfill its contractual obligations, but isn't pursuing a renewal.

Live Nation had been pushing for an arrangement whereby consumers would purchase tickets primarily through its Web site, with Ticketmaster playing a background role. That proposal was problematic for Ticketmaster, West Hollywood, Calif., which prefers to remain a centralized destination for all ticket sales. North American concert-ticket sales were $3.6 billion in 2006, up 16% from 2005's $3.1 billion total, according to Pollstar, which tracks concert-industry data. Concerts promoted by Live Nation accounted for 42% of concert tickets sold last year.

Beyond the financial stakes, though, is another crucial asset: Control of the relationship with fans. One of the most valuable assets Ticketmaster has long controlled is detailed data on music fans' spending habits, along with direct-email access to buyers. Live Nation, Beverly Hills, Calif., has sought to position itself as its own hub for such contact. Under the current agreement, Live Nation is allowed to use its own Web site to sell as much as 10% of the tickets for its own events; it has grown aggressive about taking advantage of that provision.

Ticketmaster's decision signals growing frustration. In an email sent to employees, the company said it was "doubtful we will extend our agreement when it expires at the end of 2008."

"We are now conducting our business with the clear understanding that our partnership with Live Nation is more than likely coming to an end," Chief Executive Sean Moriarty and Chairman Terry Barnes wrote in the email, which was sent to employees late yesterday afternoon.

Ticketmaster's announcement represents an about-face from earlier this year, when it was still courting its critical client. "We hope and expect they'll stay," IAC Chief Financial Officer Tom McInerney said at an Internet conference in New York in March.

Ticketmaster has been a strong revenue driver for IAC, a New York media conglomerate run by media mogul Barry Diller. Its performance stalled last quarter due to weak domestic ticket sales. Investors and analysts have warned that the breakup between Ticketmaster and Live Nation could be worrisome for IAC, amid stagnant growth at its retailing division, dominated by television shopping channel HSN, and losses at its online mortgage-and-loan unit LendingTree. In the note to employees, Ticketmaster says it plans to focus on growth in new international markets such as Spain, Germany and China.