Live Nation believes taking its ticketing operation in-house in partnership with CTS Eventim can add some $25 million annually to its operating income, according to LN CEO Michael Rapino during an investor conference call this morning.
“For the first time ever Live Nation will control our most important asset, the concert ticket,” says Rapino. “Through livenation.com we expect to sell more than 20 million tickets annually directly to music fans throughout the world. Through this activity we expect to strengthen the relationship we have with our customers, develop brand new revenue streams, maximize attendance at our events, and build new alliances with corporate partners that have never been before possible.”
Rapino also makes it clear the company intends to compete with other ticketing companies for business beyond events that LN produces. “The launch of our ticketing business has opened a whole new revenue stream for us, as we can provide current venue partners with a double-value proposition with content and a superior ticketing platform,” he says.
LN’s contract with Ticketmaster expires at the end of 2008, and a new 10-year deal with CTS Eventim begins. The deal “will have a profound effect on the global live music business and our bottom line,” Rapino says. With the launch of the new ticketing system next year, LN will have accomplished Rapino’s vision of “a vertically integrated music company. We have now taken an artist relationship that provided us only four or five revenue streams in ticket slaes and venue ancillaries and expanded that relationship to more revenue streams, including tickets, sponsorships, fan clubs, DVDs, etc.”
In-house ticketing makes Live Nation a more efficient concert marketer and gives them much more to offer sponsors, Rapino says. He adds, that the company can improve its concert profit margins. “As we have now eliminated the ticket distributor middleman we can recapture their profit margin, which will make our core concert business healthier and more competitive,” he says.
Live Nation Ticketing president Nathan Hubbard says that approximately half the tickets the company sells in North America are in third party buildings where LN does not participate in the service charge.
“We are now free to be as creative as we want to be around the fees the customer pays without having a ticketing partner solely invested in the current service fee model,” Hubbard adds. “In addition the structure provides us with 100% control over the entire ticketing business, the user experience, all the distribution, the customer data, etc. All the conflicts we have in our existing business are now gone.”
In addition to hiring IT, business development and customer service personnel, LN says it will spend about $20 million on hardware such as servers, computers and printers for box offices. “In 2008, we currently expect ticketing to be a drag of about $15 million on our adjusted OBIDAN as we ramp to benefit us by approximately $15 million in 2009, as the bulk of our North America tickets come online,” says Hubbard. The latter figure improves to $25 million in 2010 as the rest of LN’s North American and European ticketing operations come online.
For more analysis of Live Nation ticketing check out this week’s Billboard.