CORPORATE FOCUS—Ticketmaster Gets Renewed Vigor Away From Internet

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Summary


Business:

Event ticketing/Web sites


Headquarters:

Los Angeles


CEO:

John Pleasants


Market Cap:

$2 billion Dividend Yield: N/A


Total Liabilities:

$ 251 million P/E Ratio: N/A


Long-Term Debt:

$ 6.8 million

As shares of Los Angeles-based Ticketmaster Inc. climbed in recent weeks on news of strong revenue growth, the company was lauded by the press as one of the few strong Internet plays.

That may be true, but its strength has more to do with a revenue stream that is hardly Internet related.

While it operates an array of online properties like eVite.com and countless CitySearch sites, Ticketmaster derived 88 percent of its $187 million in second quarter revenues from event ticketing. Of its overall ticketing revenues in the second quarter, only 37 percent, or $60 million, came from online ticket sales.

Revenue from its money-losing CitySearch unit, which runs a network of Web sites that provide news and lifestyle information for major cities worldwide, fell 3 percent from the like year-earlier quarter, to $12.4 million.

Ticketmaster is an event ticketing company first, a Web site operator second. That may be part of the reason why Wall Street is enthused.

“I don’t think people are fully aware of the cash flow the business generates since it was combined with overall Ticketmaster,” said Standard & Poor’s analyst Mark Basham. “Many people think it’s still a dot-com. It’s not.”

The company formed earlier this year when Ticketmaster Online-CitySearch bought former parent company Ticketmaster Corp. Before that, Ticketmaster Online-CitySearch was operating lifestyle and event ticketing Web sites, while Ticketmaster offered retail ticketing services.

The stock was trading at around $15 last Wednesday, up 49 percent year-to-date. It rose 12 percent to $15.05 after the July 24 earnings announcement.

The company, a unit of Barry Diller’s USA Networks Inc., reported a net loss of $29.5 million (21 cents per diluted share) for the second quarter ended June 30, compared with a loss of $46 million (33 cents) in the like year-earlier quarter. Second quarter revenues were $187 million, up from $166 million in the second quarter of 2000.

Investors weren’t excited about Diller’s Ticketmaster Online-City Search Internet plays last year. In an attempt to cash in on the boom, Diller tried to spin off Ticketmaster Online-City Search in December 1998. By November 2000, it sank below its initial offering price of $11.62. The spin-off was folded back into Ticketmaster last January.

It’s not that Ticketmaster’s Internet plays are doomed. Online ticketing is showing signs of growth. Revenue for the second quarter was up 45 percent from a year ago, primarily because of the success of presales for big-time concerts. Online ticket sales grew to 33 percent of all tickets, up 38 percent from the like year-earlier quarter.

Also, Ticketmaster’s most dramatic revenue gains came from online personal ads, which rose 43 percent from the like year earlier quarter to $10.7 million. Ticketmaster’s dating Web site, Match.com, is marketed through AOL Time Warner’s AOL and Microsoft Corp.’s MSN.

Ticketmaster Chief Executive John Pleasants is upbeat about money losing CitySearch. “Against the backdrop of significant double digit revenue declines reported by advertising-based Internet companies, we are pleased with CitySearch’s ability to sustain its core revenue base and reduce EBITDA losses,” he said in a statement.

Stung by ad-supported online companies, some analysts don’t share that optimism. “The one problem with Ticketmaster is that CitySearch is still gushing red ink,” said Morningstar analyst David Kathman.

Because of exclusive deals with hundreds of arenas and performing arts venues worldwide, there often is grumbling from bands and concert-goers about a Ticketmaster monopoly.

“If it’s not a monopoly, it’s very close to it,” said Kathman. “People can’t do much about it unless the government steps in, which I don’t think it’s going to do.”

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