Staff Reporter

Having reported record revenues for fiscal 1998 last week, Ticketmaster Group Inc. seems even less likely to accept Barry Diller's unsolicited bid to purchase the part of the company he doesn't already own.

Fred Rosen, CEO of the West Hollywood-based ticketing company, called Diller's bid insufficient when it was placed on the table in October.

New York-based USA Networks Inc., of which Diller is chairman and chief executive, already owns 47.5 percent of Ticketmaster, a stake he purchased from Microsoft Corp. co-founder Paul Allen last May in exchange for $210 million worth of Home Shopping Network Inc. stock. (Home Shopping Network was renamed USA Networks as of last week.)

Diller proposed a similar stock swap to Rosen, who said the bid valued at about $340 million was too low and didn't account for Ticketmaster's rapid growth.

Rosen was unavailable for comment last week, and Ticketmaster officials declined to comment.

But in an interview with the Wall Street Journal last month, Rosen said, "As time has passed, it becomes clear that the offer on the table is not sufficient."

Now that the company's growth has been quantified through the fourth quarter and 1998 fiscal year ended Jan. 31, Rosen is expected to consider Diller's deal even less palatable.

"Rosen is not taking a low-ball bid," said Richard Read, an analyst at New York-based Arnhold & S. Bleichroeder. "It is difficult to guess at what point Rosen would feel a bid was properly valued, but it is clear that Rosen feels that he can continue to grow his company even though it already dominates its market."

Ticketmaster is already the unrivaled leader in managing ticket sales for events that range from sporting events to concerts. The company generates revenues primarily through fees it charges customers who buy tickets over the phone or from sales outlets. The average service fee is about 14 percent of the ticket's face value.

Calling the fee a type of price gouging, the rock music group Pearl Jam boycotted Ticketmaster for years, refusing to sell tickets to their concerts through the computerized service. (The band finally relented just this month in order to sell more tickets.)

Ticketmaster's ticket-selling power is indeed awesome. It sold 70.2 million tickets in fiscal 1998, up from 60.0 million in fiscal 1997. That, combined with aggressive strategic expansions into related ventures, has fueled significant revenue growth.

Its fiscal 1998 revenues of $341.0 million were a 48 percent improvement from its year-earlier revenues of $231.0 million. Net income jumped to $8.1 million in 1998 from $1.8 million a year earlier.

In a statement, Rosen attributed the growth to consolidating ticketing joint ventures, adding online ticketing capability and expanding operations internationally.

Regarding consolidation, Ticketmaster has formed alliances with other sales agencies. On Feb. 12, Parsippany, N.J.-based Cendant Corp. purchased the right to sell its products and services to Ticketmaster customers. Among other properties, Cendant owns and operates car rental services and hotel franchises. Customers calling Ticketmaster for tickets will be asked at the end of their transaction if they would like travel, dining or shopping discounts. If so, they will then be transferred to a Cendant salesperson.

Under the multi-year agreement, Cendant will pay Ticketmaster $7.5 million up front and a percentage of the revenue it makes from sales to Ticketmaster callers.

Both parties have refused to specify details about the deal.

"Ticketmaster wants to leverage its well-developed infrastructure that delivers an 18- to-49-year-old demographic with an implied disposable income," Read said. "There is no reason why it can't duplicate similar deals to continue to grow revenue from its existing client base."

The February announcement prompted Ticketmaster's stock to spike by more than $2 a share, continuing the stock's upward trend. The price has more than doubled over the last 10 months, trading last week at about $26 a share after hitting a low of around $11 in mid-May.

Analysts expect the stock to continue rising, largely due to the company's growing online sales activities.

Ticketmaster reported selling almost 400,000 tickets online in the fourth quarter, representing more than $16.7 million, or 2.5 percent, of total sales. While the percentage might seem negligible, the rate at which the online business has taken off is not. Online sales in the fourth quarter were more than 50 percent higher than in the third quarter.

"The online business is growing very rapidly," Read said. "It may only constitute 2.5 percent of revenue for now, but with such a high growth rate, online ticket sales will generate a significant percentage of revenue for the company in about five or six years."

A third prong of the company's strategy is to increase its international presence. On Feb. 25, the company announced that it has agreed to buy a 66 percent stake in MC France-Ticket Plus, the ticket sales unit of French media company Canal Plus. Terms of the deal were not disclosed.

Ticketmaster also has sales outlets throughout Canada, Mexico, Australia, South America and Europe.

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