AEG GETS IN BED WITH FRED ROSEN IN TICKETING VENTURE

AEG said it is joining forces with start-up technology company Outbox Enterprises to sell tickets to events at its 105 arenas and theaters, in what could become a broader battle with Ticketmaster, the Wall Street Journal’s Ethan Smith reports. The kicker in the deal is that Outbox’s CEO is none other than onetime Ticketmaster chief Fred Rosen, who piloted that company to dominance in the 1980s and ’90s.

AEG had been expected to distance itself from Ticketmaster since early last year, when the DOJ approved the TM-Live Nation merger, making AEG's only bigger rival in concert promotion that much bigger. In approving the merger, the feds required that AEG be allowed to compete with TM for ticket sales, allowing AEG to license TM’s ticketing software. But instead, AEG this week entered the joint venture with Rosen’s Outbox.

"The deal not only let the fox into the henhouse," Rosen said of the TM-LN merger. "It let the fox own the henhouse. Now the hens are starting to move out."

AEG expects to start selling its tickets through Outbox in the next six to 12 months, and to have nearly all its venues throughout the world on the new system within two years. The venture also plans to compete for the business of current Ticketmaster clients, as their agreements with Ticketmaster expire.

Outbox currently runs ticketing operations for Cirque du Soleil and Montreal's Bell Centre. Its technology and business model are significantly different from TM's. Instead of selling tickets on a centralized website, Outbox offers venue operators what is called a "white label" system, in which consumers buy tickets through the venue's site. In other words, the company operates as a mostly invisible, behind-the-scenes player, in contrast to Ticketmaster—it appears that Rosen has learned a lesson from his own past.

"This isn't about trying to go out there and build a whole new brand around the name Outbox," said AEG CEO Tim Leiweke, in an interview with Smith. "This is about service."

Some in the concert industry have been concerned that the Live Nation-Ticketmaster merger created an entity with power over too many facets of the multibillion-dollar concert business.

Rosen and his partners hope the AEG-Outpox venture will be the most significant challenge TM has faced since 1991, when it bought Ticketron, its only major competitor at the time.

Currently, AEG is among Ticketmaster's biggest clients by ticket volume. Events at venues owned or managed by AEG reportedly account for as many as 10 million of the 140 million tickets that go through TM's system annually, accopunting for an estimated $400 million in face value and associated fees last year. In previous years, those tickets generated an estimated $55 million in service charges for TM. But the DOJ put a damper on the value of that relationship last year with the conditions it attached to the LN-TM merger, Smith points out.

Ticketmaster agreed last summer to adopt an arrangement in which it keeps just $1 per ticket of the fees it collects on events at most AEG venues, people familiar with the matter told the reporter. Before the merger, AEG was responsible for an estimated 9-10% of TM's sales.

The Outbox deal goes down as AEG makes headlines by unveiling plans to build a 64k-seat football stadium adjacent to its Staples Center and L.A. Live, as the company further increases its vice grip on downtown L.A .