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Live Nation's attempt to snatch business away from Ticketmaster, which was spun off from parent company IAC InterActive in August, will be a test of two dueling business models.
LIVE NATION GOES ON OFFENSE IN THE TICKET WARS
Four Months Before Launching Its Own Ticketing Service, LN Steals Away Ticketmaster’s Second-Biggest Client
The war for dominance in ticket sales between Live Nation and Ticketmaster has been further ramped up, as the Michael Rapino-led LN snags a five-year deal for an undisclosed amount to sell tickets for Ticketmaster's second-largest client, reports the Wall Street Journal’s Ethan Smith. That company is Philadelphia-based SMG, which manages more than 200 major venues, including the Los Angeles Forum and Chicago's Soldier Field. Tickets for events at SMG's venues represent about 6% of Ticketmaster's revenue, people familiar with the matter told the reporter.

According to the terms of the deal, which kicks off late in 2009, Live Nation will sell the vast majority of tickets to events at SMG venues—at least 25 million of about 30 million tickets. Those sales represent an estimated $50 million to $60 million in ticketing fees. A statement from SMG President Wes Wesley said the new deal "will enhance our ability to drive content to our venues."

But SMG lacks authority to make a deal on behalf of the municipally owned venues it runs, Ticketmaster CEO Sean Moriarty told Smith, because it is generally required to award services based on competitive bids. "We will continue to compete on an individual basis for all venues seeking ticketing services," said Moriarty. SMG counters that only a small fraction of its agreements require competitive bidding.

Ticketmaster’s largest client is, of course, Live Nation, generating 17% of its revenue, which totaled $1.24 billion in 2007. But that will change big-time in January, when the deal expires and LN starts its own ticketing service and immediately grabs a big slice of the market, because its own events attract about 20 million ticket buyers a year. Jason Garner, CEO of Live Nation's North American music operation, said his company plans to seek more avenues to get into the ticketing business.

In order to lure SMG, Live Nation pressed an advantage it has over Ticketmaster, people close to the situation told Smith. As the largest purveyor of concerts at major venues, it is in a position to offer more events to venues that sign up for its new ticketing service—and potentially to steer big shows away from venues that don't cooperate.

Live Nation's attempt to snatch business away from Ticketmaster, which was spun off from parent company IAC InterActive in August, will be a test of two dueling business models, Smith points out. TM has long-term contracts with venues, giving it exclusive rights to sell tickets, making its money on service charges and other fees. It has been able to maintain its dominant position by paying its client venues a portion of the fees it collects, and by installing proprietary technology.

But LN's growing dominance of the concert-promotion business has put it in a unique position to compete. Its headline-grabbing exclusive deals with Madonna, Jay-Z, Nickelback, U2 and Shakira enable LN to deliver concerts by some of the world's biggest draws.

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