Ticketmaster: Still Stuck on CitySearch
When New York accountant James Galla wants to find a list of half-price opera tickets, he logs on to CitySearch, a Web-based network of local city guides owned by Ticketmaster Inc. (TMCS ). But to read a review of the show or find a restaurant near the theater, he passes up CitySearch and instead flips through his copy of the local weekly magazine Time Out New York. "It's easier," Galla says. The problem: CitySearch just doesn't offer anything special, he adds.
That's a critique executives at Ticketmaster and its parent company, USA Networks Inc. (USAI ), are hearing more and more these days. The Web-based network of city guides listing events, hotels, restaurants, and local shops has become the problem child of the biggest name in ticket sales. CitySearch's perennial money-losing ways are costing Los Angeles-based Ticketmaster profits at a time when a slowdown in consumer and ad spending could already hurt the entire company's bottom line.
Still, Ticketmaster isn't ready to cut CitySearch loose. Ever since USA Networks bought CitySearch in 1998 and merged it with Ticketmaster Online -- creating a separate, public company -- USA Networks Chairman and CEO Barry Diller has seen the combo as a match made in ticketing heaven. Diller's vision: CitySearch wouldn't just link customers directly from a listing to Ticketmaster.com but it would also become a complete event hub: providing coupons for restaurants near the venue, driving instructions, maps to parking areas, and more. But as independently managed units, the online and offline companies just couldn't pull the vision together. Indeed, the average customer can't even tell the two sites are related. So in January, they merged.
A DRAG ON PROFITS.
Execs hope that the new Ticketmaster will get an added boost from a deal announced on Mar. 21 with AOL Time Warner. The online giant chose Ticketmaster to provide its members live-event tickets and online-dating services in an undisclosed revenue-sharing agreement. As part of that deal, CitySearch guides will offer advance movie-ticket sales and listings through AOL's Moviefone. It's Ticketmaster's first foray into movie ticketing. "Undoubtedly movie ticketing will help CitySearch," says Diller. "CitySearch will succeed if it answers the needs of ordinary people who want to access everything happening in their city."
Ticketmaster -- apart from CitySearch -- is already doing a rollicking business. Thanks to its contracts with 5,000 event venues, Ticketmaster controls ticket sales for virtually every major concert and sporting event. The business has transferred seamlessly to the Web. Ticketmaster.com eliminates the long lines and busy signals typical at ticket booths and call-in centers. Online sales jumped from 13.8% of total ticket sales in 1999, to 24.3%, in 2000.
But Ticketmaster's moves to revamp CitySearch come at a tough time: Consumer and ad spending are slowing appreciably. Theater fans willing to shell out for $50 tickets a year ago might hesitate today. What's more, CitySearch depends almost entirely on ads. Like most ad-supported sites on the Web today, it's fighting for survival. Last year was dismal: It lost $47.4 million on $80 million in sales. Since it was founded in 1995 as part of Bill Gross's Internet incubator idealab!, CitySearch has never turned a profit.
"STITCHING THE TWO."
Now CitySearch has become a drag on Ticketmaster's shares. The company's stock price has dropped 28%, to $8.38 per share, since the merger of the online and offline operations was announced late last year. Thomas S. Underwood, an analyst for Legg Mason Inc., estimates Ticketmaster will earn $64 million in operating income on $678 million in sales this year, compared with a pro forma loss of $36.9 million on sales of $606.7 million last year. That might be good news, but consider Ticketmaster's financials without CitySearch: Its profits would nearly double, to $114 million on $580 million in sales, says Underwood.
So why is Ticketmaster so stuck on CitySearch? Diller and other execs still cling to the original vision. "If we can succeed at stitching the two together, that changes the whole game of what we can do on a local basis," says John Pleasants, CEO of Ticketmaster. "When someone buys a ticket, they should be dumped into CitySearch, where they'll find a list of restaurants that have specials the night of the event. That's the integration that needs to happen."
AOL may do wonders for thriving Ticketmaster. But it isn't likely to cure what ails its weak sister. For one thing, AOL offers a competing network of city guides, Digital City, which attracts twice as much traffic as CitySearch, according to Jupiter Media Metrix. For another, Ticketmaster's deal with AOL doesn't include any partnering between CitySearch and Digital City. If AOL's Moviefone isn't enough to drive entertainment-starved consumers to CitySearch, Diller may soon have to consider what has been unthinkable for him so far -- pulling the plug.
By Arlene Weintraub in Los Angeles, with Amy Borrus in Washington
Edited by Edited by Tom Lowry
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