A Ticket To Dot Com Heaven?

Ticketmaster's online service offers high hopes

A few minutes after tickets to see singer Fiona Apple in Birmingham, Ala., went on sale Mar. 4, 19-year-old Julie Carnes snagged two fourth-row seats. But she didn't camp out at the box office or spend hours on the phone navigating busy signals. All it took for Carnes was a few clicks at www.ticketmaster.com. The $76.25 price tag included an $8.50 service charge, but the Auburn University business major didn't mind too much. "The seats are great," she says, "and ordering online was quick and easy."

It's about to get easier. Ever since Ticketmaster Online merged with CitySearch Inc. in November, 1998, the Pasadena (Calif.) company has been driving to create a virtual datenight.com. The idea is to turn the oft-resented ticket service into a giant Internet portal where people can get local information about entertainment and then act on it: by making restaurant reservations, lining up a date through the company's online dating service, and finding theater tickets--including, for the first time, downloading the ducats.

That's right, the real McCoys--right off the Net and out your printer. This month, Ticketmaster Online-City Search Inc. (TMCS) will begin offering print-at-home ticketing in an effort to transform Ticketmaster's intractable image into one of convenience. But that's only one part of Chief Executive Charles Conn's push. Through a series of partnerships, TMCS is moving onto wireless devices so customers can see entertainment listings and make deals anywhere, any time. "Our information and tools are exactly what people want," he says.

JUICY MARGINS. Conn hopes to use each side of the company to feed the other. CitySearch draws Netizens by offering local entertainment listings--and ekes revenues out of advertising, auctions, and by hosting Web storefronts. Where the big bucks are made is when CitySearch routes its customers to Ticketmaster Online, which has juicy margins on the tickets it sells. In return, Ticketmaster helps CitySearch by putting up cash to let Conn work through CitySearch's early losses. Thomas Weisel Partners analyst Gordon Hodge says the CitySearch side will break even by 2002 and make $47 million a year in 2003. Meanwhile, Ticketmaster Online will keep churning out its own profits. "We see a lot of incremental profits (from CitySearch) coming in," Hodge says. "What it's going to take is time."

The strategy has won Conn powerful backers: USA Networks Inc. and Microsoft Corp. USA Networks has a 52% stake in TMCS and has invested $200 million so far. Microsoft sold its local-listing service MSN Sidewalk to CitySearch for stock and warrants in 1999 and made TMCS the prime provider of local content and tickets to Microsoft Network. "It has been costly," USA Networks Chairman Barry Diller says. "But I believe the money we put in will erect barriers to entry."

But both concert-goers and shareholders should hold the hosannas: Entertainment heaven is still a ways off. Gripes about high service fees in its offline business still dog Ticketmaster's Web affiliate. Conn won't commit to sharing cost cuts from doing business online with consumers, preserving Ticketmaster's average $6.46 per ticket handling fee. And building up CitySearch means tangling with the bigger AOL Digital City, backed by America Online Inc. Digital City has its own wireless strategy and offers a wider range of services. "Ticketing is one component, but local services is a very large [business]," says Digital City CEO Paul DeBenedictus.

ALLIANCES. Digital City also has a bigger audience. With 4.2 million users, it dwarfs CitySearch's 2.6 million--a key factor in attracting both advertisers and e-commerce partners. Digital City advertisers pay up to $100,000 a year, while most advertisers on CitySearch pay up to $10,000 a year. One result: Ticketmaster Online made $16 million last year, but the combined Ticketmaster Online-CitySearch lost $42.7 million on revenues of $105 million.

Clearly, Conn has to close the gap. He's attempting this through a series of acquisitions and alliances. In addition to Sidewalk, TMCS bought the personal-ad site Match.com Inc., and CityAuction, a local auction service targeting items such as cars and furniture that are tough to ship to buyers. Conn also has partnered with dozens of Web sites ranging from restaurant-reservations site foodline.com Inc. to home-delivery service Kozmo.com Inc. And TMCS is expected to announce a wireless deal with Ericsson Radio Systems to let 45 million owners of Ericsson Web phones dial up event listings and order tickets by punching phone buttons. The announcement followed other wireless deals with Palm, Nokia, and AvantGo.

The wireless deals are part of Conn and Diller's strategy to build the image of convenience and flexibility. By making it easy for customers to book tickets on their Palms or cell phones, TMCS expects to increase ticketing transactions significantly. But the more dramatic change for most users may be the print-at-home tickets. Ticketmaster Online will be up to several months ahead of rival Tickets.com Inc. in providing the service. It relies on bar-code scanning technology to verify that the tickets are genuine. Every venue accepting them will have to invest in scanning equipment to screen out fakes. And the homemade tickets will come with coupons for nearby restaurants and parking lots on the same printed page.

Can the Web really make Ticketmaster convenient and friendly? Some customers say yes. "It's just a nicer way to order tickets," says Bill Rubin, a software engineer for IBM in Yorktown Heights, N.Y., who bought tickets for a Bruce Springsteen concert. "I got a chance to see where my seats were going to be." Another possible boost: Using customer data collected by Ticketmaster, venues will soon shoot e-mails to fans, offering leftover tickets at a discount shortly before a show.

Certainly Web technologies help Ticketmaster serve its constituencies better. The British band Yes promoted its fall U.S. tour through Ticketmaster Online. Using data collected by Ticketmaster, tour promoters e-mailed Yes fans before tickets went on sale, offering them the opportunity to buy first. "In some markets we sold 15% of our total tickets just on this promotion," says Ed Thomas, general manager of Left Bank Management, the company that coordinated Yes's tour.

But so far the Web hasn't fixed all of the gripes about Ticketmaster. While Carnes got Fiona Apple tickets easily, she was sidelined by an overloaded server when new band Blink-182 came to town. "My definition of `convenience' isn't sitting in front of my computer for 30 minutes hitting `refresh' constantly," she says. Hence the question on which Conn's $2.1 billion market cap depends:

Can Ticketmaster's corporate cousin make it in a world where the customer is king?

For E-Business Editor Tim Mullaney's thoughts on Ticketmaster, see our video at www.businessweek.com/mediacenter/