Alexandra Glazer

October 18, 2011

ASM 3300|Professor Gertz

Take Home Midterm

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Mr. Irving AzoffCEO, TicketmasterTicketmaster HeadquartersRE: Strategic Analysis, Ticketmaster Acquiring Live Nation

Dear Mr. Azoff,

Thank you for choosing Beaver Solutions to assist you in your decision to acquire Live Nation as an additional asset to Ticketmaster. My name is Alex and I will be your strategic consultant throughout this process.

First I would like to address what your company is currently doing well. I have identified specific factors to the success of Ticketmaster in response to the areas the company feels they do well. In correlation to primary ticketing, because of Ticketmaster’s large share in the market, then naturally becomes the face of the industry, (or “go-to” for most ticket purchasing consumers). Holding this position while maintaining the high quality of service and meeting consumer preferences is no easy feat for a company with a very specific niche. Additionally, your company has mastered the technology needed to operate a nearly flawless commerce website, providing easy ticket distribution, a trade secret that takes time and experience to develop. Both of these competencies contribute to the large success of Ticketmaster.

However, Ticketmaster needs improvement in some areas that limit profitability. The company has an inconsistent relationship with valuable vendors, largely related to region. Although the presence of Ticketmaster is strong in the states, there is potential for large global expansion. In order to expand, company revenue must continue to increase annually. Annual revenue is being largely affected by the complex value chain, directly influencing the pricing strategy of tickets. In addition, Ticketmaster’s competition continues to increase due to the continued launch of websites offering a similar service.

I have identified 3 core issues that Ticketmaster is facing: need for more international exposure and vendor relationships, growing revenue base, and the rising rivalry in the specific industry. Due to the areas Ticketmaster needs to improve on, Beaver Solutions believes that acquiring Live Nation would only benefit your company. Upon buying the company, Live Nation would satisfy the following primary company goals:

1. Global Expansion – Live Nation’s large vendor base & reputation2. Increasing Profitability – simplified value network & additional revenue3. Competitive Advantage – Exclusive rights, shared fan base, sponsors

In the following pages you will find a detailed analysis explaining the development of this decision with supporting evidence. Please let me know if you have any concerns. I am at your disposal for the remainder of this process. Enjoy your report!

Sincerely,Alexandra GlazerBeaver Solutions

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Industry Analysis

Ticketmaster is the leader of the ticket-service provider industry dominating a large

portion of the market share with $1.399 million (Cohan 26) of revenue, by selling both

primary ticketing and ticket resale services (Cohan 12). This industry is very competitive as

they compete on dominance in market, access to the most popular venues, and highest

financial stability allowing them a larger pool of funding (Cohan 6). When Ticketmaster

acquired Front Line, an artist management company or booking agent, steps were being

made toward dominating the entire value chain for this industry, something most

companies would want to eventually obtain. The challenges in the value chain will be

analyzed in the following section. Frontline was a valuable decision for Ticketmaster,

guaranteeing cohesiveness to that segment of the chain. It is important to remember when

looking at Ticketmaster’s industry, that the company operates in 20 global markets, with

distribution through 3 sources, the online site, 6,700 retail outlets and 19 worldwide call

centers (Cohan 11). Know this kind of information can alter a company strategy. For

example here, Ticketmaster is well known with a good reputation, and therefore the

business model can include charging steep prices knowing there is still a demand for

tickets. Currently the main approaches being executed are high pricing as well as catering

to a wide audience to achieve success.

This industry has been affected over the recent years due to the recession and the

nature that tickets are purchased for leisure activities, which consumers typically cut back

on first. Although many people cut down on frivolous purchases, all of the concerts with the

main stream popular artists continued to sell out. Consumer preference is a driver of how

successful this service can be, hence why it is crucial that their needs always be satisfied.

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Ticketmaster competes with other substitutes such as the cinema, a sports event, play, or

now with the recession, home entertainment has become increasingly more popular

(Cohan 8).

The barriers to entry for this industry are relatively high considering the vendor

relationships that must be established and trust that comes with the service. One of the

popular competitors at the time who emerged later in the game was Anschutz

Entertainment Group. In 2008, Ticketmaster began to feel threatened when Live Nation

decided to team up with another competitor, SMG, to create an ecommerce feature for

buying tickets. Thankfully the deal did not go through as Ticketmaster would have nearly

lost 24% of their sales to Live Nation when they launched this new arrangement (Cohan

22). This was a large concern for Ticketmaster because of Live Nation’s 46% market share

in their own industry, proving they could be very successful, and started encroaching in to

Ticketmaster’s area of specialization. Although Live Nation seemed to be successful, the

development of effective ticketing software was extremely costly and not easy. Looking at

their financial information, I discovered that ticket sales only accounted for .5% of their

total revenue (Cohan 20). With little to no profit being returned on this operation, it was

not worth it for Live Nation to continue internally and try to enter the crowded industry,

especially when selling tickets, is not a core competency of the company.

Strategic Problems

After a careful analysis of Ticketmaster’s financials, operations, future goals and key

competitor information, I have pinpointed three areas the company should focus on to

achieve desired success. My evaluation suggests that Ticketmaster needs to:

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1. Expand both locally and internationally. Ticketmaster expressed interest in

continuing to grow the audience they reach globally. In addition, Ticketmaster

should continue to set up as many well established vendor relationships as

possible, there is never an end to networking.

2. Condense the complicated value network. Currently Ticketmaster is at the end of

a 5 vendor supply chain. The chain goes as follows in chronological order

starting with the original source: Performers, Booking Agents, Promoters, Venue

Operators and Ticketing Companies (Cohan 3). In addition to Ticketmaster,

Ticketmaster Entertainment also owns Front Line, which falls under the second

segment, Booking Agent. Ticketmaster made a savvy business move by acquiring

Front Line and beginning to manipulate the chain of command. If Ticketmaster

were able to eliminate other external vendors by purchasing them in house,

operating costs would be less for each company as all companies would be

working under one parent company together sharing profits. The high price of

Ticketmaster services is due to the fact that there is a long supply chain. On a

ticket price of $66.00, Ticketmaster after paying all of the involved vendors, only

earns about $4.75 (Cohan 15); if some of the fees were removed in conjunction

with the value network, profit could increase dramatically.

3. Develop new defense tactics against emerging competitors. Ticketmaster has

many strategies that create a competitive advantage, the largest in my opinion

being the reputation of the brand name. The other strategy your company

implements called 360 deals, where Ticketmaster and Live Nation are able to

give back large proceeds to the performers from merchandise etc. are very

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unique to these companies but trying to be mimicked. Many ticket reseller sites

have surfaced with lower pricing, StubHub for example, and Ticketmaster needs

to have a game plan prepared to get on defense and keep loyal customers.

Solutions

Based upon the primary goals I have recommended with my advanced strategic

management skill set, Ticketmaster should pursue the Live Nation merger. Evidence

demonstrates that Live Nation and Ticketmaster have needs where the other company can

support them in bettering their business plan. As CEO of this multimillion dollar company it

is time to make a choice. Mr. Azoff, please consider the following operations as solutions to

help achieve the previous goals mentioned.

The first step is for Ticketmaster to acquire Live Nation to begin the rejuvenation

process. After the merger and Live Nation becomes the parent company, the following can

be executed. First, with Live Nation’s vendor relationships, monetary base and reputation,

these contacts can be used to help Ticketmaster make more connections. Live Nation puts

together the most concerts in the entire world, totaling around 22,000 concerts on 57

countries (Cohan 18). The next result of the merger would be to simplify the value network.

When Ticketmaster merges with Live Nation there will no longer be a need for an external

promoter as Live Nation is able to promote itself! This means that Ticketmaster will no

longer have to include promoters in the operating expenses, as all of that money will be

under the same roof. Lastly, if Live Nation and Ticketmaster were to become one, both

companies can take advantage of a new network; all of Live Nation’s 57 million fans will

now support Ticketmaster and vice versa. In addition, Ticketmaster would have access to

Live Nation’s sponsors, another resource that can be utilized. If the Live Nation-

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Ticketmaster gets approved, exclusive ticketing opportunities would be granted to

Ticketmaster as its sister company, that other providers would not receive. On the other

hand, Ticketmaster can also offer Live Nation the benefit of getting closer to their

customers through “live events & ticket platforms” like they had hoped for (Cohan 20).

I hope that you will strongly take in to consideration the analysis I have provided for

you and the supporting evidence that backs my decision process. If Ticketmaster were to

purchase Live Nation, you would be enhancing your vertical integration, as well as

increased control in the supply chain, which is very high considering Front Line is also a

company of yours. Although Live Nation would become the parent company to

Ticketmaster, the later will still have a higher share in the company with 50.1% as opposed

to Live Nation with 49.1%. Any concerns you may have regarding legal issues can be

discussed via email or office phone; Ticketmaster will remain a separate entity to avoid

classifying as a monopoly. By merging both companies, you will be improving brand

awareness and financials, while also eliminating unnecessary measures that were

previously in place.

It has been a pleasure working with you.

Sincerely,

Alexandra GlazerAlexandra GlazerStrategic ConsultantBeaver Solutions

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Works Cited

Cohan, Peter, and Sam Hariharan. "Chokehold on Live Entertainment (A)." (2010): 1-30. Web.