Ticketmaster's Hail Mary Pass

Amid IAC's breakup drama, the ticketing giant wants to be the NFL's official reseller
Randy Moss (#81) of the New England Patriots celebrates with Matt Light (#72) after catching a touchdown against the Baltimore Ravens on Dec. 3, 2007 Getty Images

Ticketmaster is close to securing a multiyear deal that would make it the official ticket reseller for the National Football League, according to a person familiar with the negotiations. Both parties have agreed on the major terms, though the deal could still fall apart. Another bidder, the online ticket reseller StubHub, is said to be considering a last-minute counteroffer.

In exchange for the exclusive right to sell pro football tickets in the secondary market, Ticketmaster would have to pay an annual fee, likely to be in the range of $15 million to $20 million a year. The NFL asked for terms similar to a deal that Major League Baseball signed this past August with ticketer StubHub to become its official ticket reseller. The NFL and Ticketmaster declined to comment.

Ticketmaster Bulking Up?

The deal underscores the growing importance of the secondary ticketing market as it emerges from the shadowy world of scalpers and enters the mainstream through Internet marketplaces. Increasingly, season ticket owners and other ticket holders are using various Internet exchanges to unload their tickets on a game-by-game basis. It also reflects the rising pressure on Ticketmaster to beef up its business, as the company preps for the possibility that corporate parent IAC/Interactive (IACI) may put it up for sale. Ticketmaster also stands to lose its huge contract with concert-promoting giant Live Nation (LYVAL) at the end of 2008.

The NFL auction attracted several companies, including StubHub, TicketsNow, and London-based reseller Viagogo. But Ticketmaster was the only company willing to bid at or close to the asking price of the NFL, say several sources close to the deal. StubHub President Chris Tsakalakis said in a prepared statement: "The company is naturally interested in aligning with one of the most recognizable entities in sports, but we're also extremely confident in the competitive position we currently possess acting as an independently run marketplace for fans."

The NFL's terms are similar to a deal that Major League Baseball signed this past August with StubHub to become its official ticket reseller. That deal, says a source familiar with the terms, required StubHub to pay Major League Baseball $10 million each year for the rights to resell tickets, along with a $5 million annual payment that goes toward marketing for baseball teams. As part of the deal, StubHub and MLB also share the fees generated from ticket sales. Baseball tickets are the top-selling category on StubHub.

But the NFL deal may be a lot less lucrative, partly because of the fragmented nature of the league's ticketing agreements. Unlike Major League Baseball, which set up a subsidiary to manage the Internet and ticketing operations of all 30 of its ball clubs, the NFL has not centralized its ticket resale business under a single roof. Individual football teams have been free to license their ticket reselling rights, and many have struck multiyear deals already with various players to do so.

StubHub, which is owned by eBay (EBAY), controls ticket reselling for eight NFL teams, including the Indianapolis Colts, San Diego Chargers, and Chicago Bears. Those deals typically last for three to five years. And Viagogo recently signed an exclusive multiyear deal with the Cleveland Browns to resell tickets.

Bigger Game

Those existing deals mean the NFL cannot immediately deliver the ticket reselling rights for all 32 of its teams. In fact, Ticketmaster already controls secondary ticketing for 17 NFL teams, including the New York Giants, the Dallas Cowboys, and the Pittsburgh Steelers. A new deal could potentially give Ticketmaster control over ticketing for the other 15 teams over the next five years.

To help solve this problem, the NFL has promised Ticketmaster that it will lobby team owners, who call the shots in the league. Already, the NFL has approached team owners and gotten them to agree in principle to support a mandate requiring all teams to shift their business to the auction winner after their existing ticket contracts expire over the next few years, sources say. But it remains to be seen if the NFL passes that resolution, or if teams buy in.

Restrictions that the NFL has imposed on ticket reselling also depress the economic value of the deal. Under the terms of the agreement, each NFL team will be allowed to maintain its own ticketing policies as part of any secondary ticketing deal. The problem is some teams, including the New England Patriots and Denver Broncos, forbid fans from reselling tickets for above face value. In December, 2006, the Patriots sued StubHub for allegedly inciting fans to resell their tickets for above face value, and the team has revoked the season tickets held by a number of fans caught reselling their seats. "Ticketmaster is so desperate they are willing to live within those constraints," says one source close to the deal. "It will buy them time to gloss this thing up."

Ticketmaster's huddle with the NFL is part of a bigger game. On Nov. 5, Barry Diller, the chief executive of IAC/Interactive, which owns Ticketmaster, announced he was breaking up the struggling conglomerate. To complete the breakup, Diller may be forced to sell one of its chief assets to Liberty Media (LCAPA), which owns a controlling stake of IAC.

More Action in Sports Ticketing

Initially, Liberty Media Chairman John Malone expressed interest in snapping up IAC's Home Shopping Network. But after Diller set a high price for the retailer, Liberty Media CEO Greg Maffei said on Dec. 3 that the company may also be interested in Ticketmaster (BusinessWeek.com, 12/4/07). Striking a deal with the NFL could increase the value of Ticketmaster, no matter who ends up buying it, though the value of such a deal is unclear.

While Ticketmaster has signed up hundreds of entertainment venues to use its secondary ticketing platform, called Ticket Exchange, it has had less success convincing sports ticket owners and consumers to use its ticketing market. A search of the Denver Broncos section on Ticketmaster's Web site showed zero tickets for sale for the Dec. 30 game against the Minnesota Vikings and only 131 tickets for sale for the Dec. 9 game against the Kansas City Chiefs. By contrast, StubHub listed 237 tickets for sale for the Chiefs' game and 500 tickets for sale for the Vikings game.

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