Alexandra Glazer October 18, 2011ASM 3300|Professor Gertz Take Home Midterm
Glazer |2Mr. Irving AzoffCEO, TicketmasterTicketmaster HeadquartersRE: Strategic Analysis, Ticketmaster Acquiring Live NationDear Mr. Azoff, Thank you for choosing Beaver Solutions to assist you in your decision to acquireLive Nation as an additional asset toTicketmaster. My name is Alex and I will be yourstrategic consultant throughout this process. First I would like to address what your company is currently doing well.I haveidentified specific factors to the success of Ticketmaster in response to the areas thecompany feels they do well. In correlation to primary ticketing, because ofTicketmaster’slarge share in the market, then naturally becomes the face of the industry, (or “go-to” formost ticket purchasing consumers). Holding this position while maintaining the highquality of service and meeting consumer preferences is no easy feat for a company with avery specific niche. Additionally, your company has mastered the technology needed tooperate a nearly flawless commerce website, providing easy ticket distribution, a tradesecret that takes time and experience to develop. Both of these competencies contribute tothe 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 toregion. Although the presence of Ticketmaster is strong in the states, there is potential forlarge global expansion. In order to expand, company revenue must continue to increaseannually. Annual revenue is being largely affected by the complex value chain, directlyinfluencing the pricing strategy of tickets.In addition, Ticketmaster’s competition continuesto increase due to the continued launch of websites offering a similar service. I have identified 3 core issues that Ticketmaster is facing: need for moreinternational exposure and vendor relationships, growing revenue base, and the rising rivalryin the specific industry. Due to the areas Ticketmaster needs to improve on, BeaverSolutions believes that acquiring Live Nation would only benefit your company. Uponbuying the company, Live Nation would satisfy the following primary company goals: 1. Global Expansion – Live Nation’s large vendor base & reputation 2. Increasing Profitability –simplified value network& additional revenue 3. Competitive Advantage–Exclusive rights, shared fan base, sponsors In the following pages you will find a detailed analysis explaining the developmentof this decision with supporting evidence. Please let me know if you have any concerns. Iam at your disposal for the remainder of this process. Enjoy your report!Sincerely,Alexandra GlazerBeaver Solutions
Glazer |3Industry Analysis Ticketmaster is the leader of the ticket-service provider industry dominating a largeportion of the market sharewith $1.399 million (Cohan 26) of revenue, by selling bothprimary ticketing and ticket resale services (Cohan 12). This industry is very competitive asthey compete on dominance in market, access to the most popular venues, and highestfinancial stability allowing them a larger pool of funding (Cohan 6). When TicketmasteracquiredFront Line, an artist management companyor booking agent, steps were beingmade toward dominating the entire value chain for this industry, something mostcompanies would want to eventually obtain. The challenges in the value chain will beanalyzed in the following section. Frontline was a valuable decision for Ticketmaster,guaranteeing cohesiveness to that segment of the chain. It is important to remember whenlooking at Ticketmaster’s industry, that the company operates in 20 global markets, withdistribution through 3 sources, the online site, 6,700 retail outlets and 19 worldwide callcenters (Cohan 11).Know this kind of information can alter a company strategy. Forexample here, Ticketmaster is well known with a good reputation, and therefore thebusiness model can includecharging steep prices knowing there is still a demand fortickets. Currently the main approaches being executed are high pricing as well as cateringto a wide audience to achieve success. This industry has been affected over the recent years due to the recession and thenature that tickets are purchased for leisure activities, which consumers typically cut backon first. Although many people cut down on frivolous purchases, all of the concerts with themain stream popular artists continued to sell out. Consumer preference is a driver of howsuccessful this service can be, hence why it is crucial that their needs always be satisfied.
Glazer |4Ticketmaster competes with other substitutes such as the cinema, a sports event, play, ornow with the recession, home entertainment has become increasingly more popular(Cohan 8). The barriers to entry for this industry are relatively high considering the vendorrelationships that must be established and trust that comes with the service. One of thepopular competitors at the time who emerged later in the game was AnschutzEntertainment Group. In 2008, Ticketmaster began to feel threatened when Live Nationdecided to team up with another competitor, SMG, to create an ecommerce feature forbuying tickets. Thankfully the deal did not go through as Ticketmaster would have nearlylost 24% of their sales to Live Nation when they launched this new arrangement (Cohan22). This was a large concern for Ticketmaster because of Live Nation’s 46% market sharein their own industry, proving they could be very successful, and started encroaching in toTicketmaster’s area of specialization. Although Live Nation seemed to be successful, thedevelopment of effective ticketing software was extremely costly and not easy. Looking attheir financial information, I discovered that ticket sales only accounted for .5% of theirtotal revenue (Cohan 20). With little to no profit being returned on this operation, it wasnot 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 keycompetitor information, I have pinpointed three areas the company should focus on toachieve desired success. My evaluation suggests that Ticketmaster needs to:
Glazer |51. Expandboth 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. Condensethe 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. Developnew 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
Glazer |6 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 strategicmanagement skill set, Ticketmaster should pursue the Live Nation merger. Evidencedemonstrates that Live Nation and Ticketmaster have needs where the other company cansupport them in bettering their business plan. As CEO of this multimillion dollar company itis time to make a choice. Mr. Azoff, please consider the following operations as solutions tohelp achieve the previous goals mentioned. The first step is for Ticketmaster to acquire Live Nation to begin the rejuvenationprocess. After the merger and Live Nation becomes the parent company, the following canbe 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 putstogether the most concerts in the entire world, totaling around 22,000 concerts on 57countries (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 externalpromoter as Live Nation is able to promote itself! This means that Ticketmaster will nolonger have to include promoters in the operating expenses, as all of that money will beunder the same roof. Lastly, if Live Nation and Ticketmaster were to become one, bothcompanies can take advantage of a new network; all of Live Nation’s 57 million fans willnow support Ticketmaster and vice versa. In addition, Ticketmaster would have access toLive Nation’s sponsors, another resource that can be utilized. If the Live Nation-
Glazer |7Ticketmaster gets approved, exclusive ticketing opportunities would be granted toTicketmaster as its sister company, that other providers would not receive.On the otherhand, Ticketmaster can also offer Live Nation the benefit of getting closer to theircustomers 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 foryou and the supporting evidence that backs my decision process. If Ticketmaster were topurchase Live Nation, you would be enhancing your vertical integration, as well asincreased control in the supply chain, which is very high considering Front Line is also acompany of yours. Although Live Nation would become the parent company toTicketmaster, the later will still have a higher share in the company with 50.1% as opposedto Live Nation with 49.1%. Any concerns you may have regarding legal issues can bediscussed via email or office phone; Ticketmaster will remain a separate entity to avoidclassifying as a monopoly. By merging both companies, you will be improving brandawareness and financials, while also eliminating unnecessary measures that werepreviously in place.It has been a pleasure working with you.Sincerely,Alexandra GlazerAlexandra GlazerStrategic ConsultantBeaver Solutions
Glazer |8 Works CitedCohan, Peter, and Sam Hariharan."Chokehold on Live Entertainment (A)." (2010): 1-30. Web.