Eventbrite's Yearly Eight-Figure Losses Offer Window Into Ticketing Business
The company lost $78 million in two years because of rising client acquisition costs and a hyper-competitive landscape.
The ticketing world got a rare glimpse into the books of one of live entertainment's most competitive ticketing companies last week, following Eventbrite's announcement it planned to go public and sell $200 million worth of shares on the New York Stock Exchange.
According to Eventbrite’s S-1 disclosures filed with the Securities and Exchange Commission ahead of its planned IPO, the ticketing company created in 2006 by co-founders Julia and Kevin Hartz posted losses of $40.4 million in 2016 and $38.5 million for 2017. So far the company has lost $15.6 million in 2018, taking a $6.6 million hit for a hacking attack earlier this summer. At this pace, Eventbrite is well on its way to posting more than a $100 million in combined losses over the last three years.
While many ticketing startups operate at a loss for years as they rely on outside investment to grow, the annual eight-figure losses have set a new benchmark for what it takes to compete in the hyper-competitive landscape once dominated by Ticketmaster and now flooded with outside cash. Several independent ticketing companies interviewed by Billboard say the size of losses came as a surprise.
“It’s a staggering amount of money they spend for the business they land,” said Iain Bluett with Atlanta ticketing companies Ticket Alternative and Freshtix. While only a portion of that loss comes from advances and signing bonuses the company pays to “creators” to incentivize them sign up for the platform, the big upfront payments make it difficult for independent ticketing companies to compete for customers.
“It’s similar to competing against Ticketmaster in the 2000s,” Bluett says of competition against Eventbrite, who purchased another of Freshtix’s major competitors, Ticketfly, last year in a deal estimated to be worth $200 million.
While Ticketmaster continues to dominate large swaths of the music and sports industry, ticketing’s middle market -- the clubs, venues and festivals operated by non-Live Nation or AEG promoters -- has been an important growth area for ticketing companies, often fueled by outside money. Since its founding, Eventbrite has raised more than $320 million in nine rounds of funding, according to Crunchbase. Competitors like SeatGeek have raised $160 million from investors, while both companies face other well-capitalized competitors like eTix and ShowClix. (eTix has raised millions from Parthenon Capital Partners, helping to fund a $16.5 million buyout of ExtremeTix earlier this year, while ShowClix -- led by Brian Arnone, a former SVP at Ticketfly -- accepted an investment from Providence Strategic Growth last year.)
It's unclear how Eventbrite spends the millions it raised, abstaining from details of how it spent $81 million to generate $201 million in 2017, other than to say a portion of the money came from some "stockbased compensation expenses." Meanwhile, the company does offer some level of detail on how it spends millions in signing bonuses to recruit and retain clients.
According to Eventbrite’s IPO, the company gives out two type of signing bonuses to the “creators” it signs on its platform: signing bonuses, which are handed out to promoters and amortized by Eventbrite; and recoupable fees, which are given out to event producers with the understanding the money will be paid back over the term of the contract. As of June 30, Eventbrite has $13.3 million in signing fees on its books for 2018 and $21.6 million in recoupable fees for 2018 it’s waiting to be repaid from clients.
Per to Eventbrite's IPO, about 13 percent of creators on its platform received an advanced payout in 2017. (Keep in mind many creators on the platform are too small to receive payouts, while others are on multi-year deals that weren’t up for renewal last year.) While it’s hard to estimate what percentage of the company’s advances are the subject of default, Eventbrite estimates that the "total write-off from all lost advance payouts and other chargebacks" was $3.6 million in 2017 and $2.7 million for the first half of 2018.
Those payouts have helped Eventbrite post impressive top-line growth, with revenue jumping from $133 million in 2016 to $201 million in 2017, meaning the company was able to increase revenue 51 percent year-over-year, while its losses shrunk by 4.7 percent year-over-year.
With the forthcoming IPO, the Hartzes are on track to retain a 17.4 percent stake in the company. Tiger Global and Sequoia Capital are listed as the company's largest shareholders.
Those big names shareholders are considered attractive to investors, who will have to evaluate whether the company can maintain its growth when making decisions that might affect stock price. And several ticketing professionals say they’ve already started to see the company slow down, hobbled by a May 31 hacking attack on Ticketfly that took their system offline for several days and caused widespread outages among clients.
Eventbrite and Ticketfly have "not been in contention for the last few deals we’ve done, even tapping out early, which is highly uncommon,” said one professional from a competitive ticketing service who wished to remain anonymous.
As for Bluett, he says he stays competitive by convincing clients that they’ll enjoy a higher level of service by staying with a small independent service like Ticket Alternative and Freshtix.
“It’s about customer service and support,” he tells Billboard. “A lot of my clients simply aren’t comfortable being a small cog in a very large wheel."
Billboard reached out to a representative for Eventbrite for this story and was told company officials had no comment for this article.