Ticketmaster Loses Its No. 2 Customer to Competitor Live Nation

Live Nation (LYV) is taking on Ticketmaster (TKTM) is the music ticketing market, and it is off to a rousing start.

This morning, Live Nation announced an exclusive deal to sell tickets for music event company SMG, a subsidiary of the publicly-traded investment fund American Capital (ACAS). According to the announcement from the two companies, SMG is “the world’s leading venue management company.”

The company will launch its Live Nation Ticketing service in January 2009; Live Nation said the SMG deal will ramp up to an estimated 5 million tickets a year by 2011. Live Nation expects to sell more than 10 million tickets a year from the new ticketing service just from its own venues. Live Nation says the SMG deal increases its total ticket inventory by about 25% over the next seven years. SMG operates 216 facilities, including 75 arenas, 9 stadiums, 66 convention centers, 52 performing arts centers and 14 other recreational facilities.

Stifel Nicolaus analyst Scott Devitt notes this morning that SMG is Ticketmaster’s second-largest customer, accounting for about 6% of revenues, or about $74.4 million, in 2007. “Live Nation’s business model is disintermediating Ticketmaster’s competitive advantage,” Devitt writes. “By signing big name artists, Live Nation is able to attract venues to the company’s ticketing platform with a compelling value proposition. If venues wish to book the most prominent artists, who are under contract with Live Nation, then the venue will have to work with Live Nation’s ticketing platform.”

Ticketmaster, newly independent after its recent spinout from IAC/Interactive (IACI), this morning is down $3.81, or 20.30%, to $14.96.

Comments

[FSquare:]

this is from TKTM's SEC filing - Not sure why the market was taken by surprise by the announcement.....

"Securing the right to sell tickets depends, in substantial part, on the ability of our businesses to enter into, maintain and renew client contracts on favorable terms. Revenue attributable to our largest client, Live Nation (including its subsidiary, House of Blues), represented approximately 17% of our total revenue in 2007. This client relationship consists of four agreements, two with Live Nation (a worldwide agreement (other than England, Scotland and Wales) that expires on December 31, 2008, and an agreement covering England, Scotland and Wales that expires on December 31, 2009) and two with House of Blues (a U.S. agreement that expires on December 31, 2009, and a Canadian agreement that expires on March 1, 2010). Revenue attributable to the worldwide agreement and the agreement covering England, Scotland and Wales represented approximately 11% and 3%, respectively, of our total revenues in 2007. Each party has the right to terminate the agreement covering England, Scotland and Wales as of December 31, 2008, in which case Live Nation would be obligated to pay us a termination fee in an amount equal to 1.25 times the average of our annual net profits under the agreement for 2007 and 2008. We anticipate that none of these agreements will be renewed. In addition, Live Nation has publicly announced that it will launch its own ticketing business in 2009 and that it intends to ticket Live Nation events and compete with Ticketmaster for third party clients. "

2008 Sep 11 01:30 PM