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Ticketmaster & Echomusic

Last week Ticketmaster announced the purchase of a majority stake in Nashville based music marketing/fan-club/fan-ticketing company Echomusic.   The terms of the purchase were not disclosed.

Echomusic, which  provides musician fan-websites, marketing, sponsorship services and direct-to-fan ticketing, will help with Ticketmaster’s (a division of Interactive Corp.) efforts to move into broader promotion, and non-traditional ticket sales (resale, dynamic pricing, direct-to-fan).   It will also give Ticketmaster more tools for building relationships with bands and promotions and  that may increase revenue opportunities from channels beyond the ticket-fee charges that account for the bulk of their revenue.   (Ticketmaster earned $279.1 in revenue for Q4 2006, up 10% over ’05). 

Despite the benefits of the deal, the deal is, arguably, as much defensive  for Ticketmaster as offensive.  Later this year Ticketmaster’s contract with concert promoter Live Nation is scheduled to expire.    Live Nation produces more than thirty thousand events a year and is a major contributor to Ticketmaster’s bottom line (Ticketmaster’s Operating Income for Q4 ’06 was $59.1m, and the primary contributor of revenue to IAC’s services division). 

While a Live Nation deal will likely be renewed, it’s unclear under what terms and both sides are angling to increase their leverage.   Over the past year, Live Nation has strengthened its bargaining position and decreased its dependence on Ticketmaster’s ticket sale services. Notably, it bought the leader of Direct to Fan ticketing, MusicToday, last year.  Live Nation has also invested in its own internal ticketing service Next Ticketing.

In buying a majority stake in Echomusic, Ticketmaster has reasserted itself and minimized any influence the Music Today transaction might have on renegotiating with Live Nation.  By helping make Ticketmaster a one-stop shop for music fan’s ticketing needs the deal also provides added leverage for discussions.

Speaking of the deal, Ticketmaster CEO Sean Moriaty said:
"The industry is pushing toward one-stop shopping…. To me that means we’ve got to be the best damn one stop shop that we can be.   When you look at Ticketmaster’s business and our role as a service provider, to the extent that [The Echo] platform can do all of those things that our clients would like to have done between the artist and the fan – fan club interactions, ticket sales, merchandise sales, custom marketing campaigns… – we felt that Echo had build something truly unique."

As an added bonus, the direct-to-fan sales may further help the bottom line for Ticketmaster over the coming years.  The standard in the ticket industry has been to limit 10% of the house for direct sale (and the actual amount sold is often much less than that), but that rule is neither steadfast nor fixed.  With Echomusic ticket master could offer more than 10% of sales directly through fan clubs, other presale, or subscription revenue enhanced promotions (e.g. Pay for Acces to Presale). All of these methods provide revenue potential beyond just ticket-handling surcharges.

Presently, Echo’s client list shows the influence of its Nashville headquarters.  Top billed clients are largely drawn from the country music world including stars like Keith Urban and Rascal Flatts. Echo is not, however, an exclusively Country music club.  The company also counts  Kelly Clarkson and other non-country bands among its clients.  The relationship with Ticketmaster will expand Echo’s credibility, distribution and scale.   This will likely open doors for the company with other artists across different music genres – a benefit for both Ticketmaster and Echomusic.

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