Ticketmaster Interview – All Your Questions Answered
Hi, my name’s Fredrick Rosen, and I created and built Ticketmaster, and today I’m running another company that’s in a different business.
Ticketmaster really started as an inventory control system. Basically if you go back to the early 80s, which is when I got involved, I think I became the CEO of a very little ticket company in 1982. It primarily provided (which is hard to believe in terms of 2006 sensibilities), season ticketing and single ticketing, which meant box office and outlets all on one integrated system. That did not happen in those days, and phones where just beginning to happen outside New York, and the Internet was nonexistent. So in those days what Ticketmaster could do was, basically provide a box office inventory system essentially for arenas, stadiums, and for teams.
How did people by tickets? In those days people use to camp out and buy tickets at outlets, or they’d camp out at the box office. What people forget is, in the late 70s / early 80s, 60-70 percent of all tickets that were sold, were sold at the box office. One of the earlier companies that was involved, that was the biggest name, was called Ticketron, a company I ultimately bought. But what they did was, they were among the pioneers and they would take allocations. So you never quite knew that they would sometimes do the whole box office, or do the entire inventory – and sometimes they would get allocations. So people never knew if they would get best available seat because you’d sometimes go to an event and you’d see empty sections; then you’d see a section with people in it, and you’d go, that’s the Ticketron section.
When we started, what we told people was, that it was necessary for us to have the whole house, because the whole premise in the early 80s was to sell best available seat. Today that’s obvious, but it was not so obvious in the early 80s. And that way when people came to your outlets, even the designation – we called our outlets, ticket centers, as opposed to remote outlets. And we came up with the theory that a remote outlet meant a remote seat, and you know, it’s all marketing.all fun.
An allocation would be if there’s a – take a stadium that would hold 45,000 baseball tickets. You’d get an allocation of 5000 tickets, maybe in 3 sections. We didn’t do that, so we didn’t face that, but that was the condition of the industry at the time we came in. Basically what we were was a processing center. I remember we went to one building in the Midwest and I said,
- How do people buy tickets here?”
- And he said, “Well they buy tickets at the box office and at the outlets.”
- And I said, “Does anybody use the phones here?”
- And he said, “No. Nobody uses the phones.”
- And he said, “We have very little phone business.”
- And I said, “Well how many lines do you have?”
- And he said, “Well just one, it comes in the box office.”
So you sit there and you maintain a straight face. And then when you wind up computerizing the building and put all your equipment in, and then the public can walk into – you know, and have access to a 50 person phone room, sales calls go from non-existent, to 20-30 percent over night – because ultimately, it’s about accessibility.
I was practicing law in New York at that time, and this was a little company [Ticketron] that had basically run out of money. But it struck me, there were three clients in Chicago: the Chicago White sox; Jam (which is a major concert promoter); *** and Jerry; and the Chicago Cubs, who basically told us three conditions for them to become clients with Ticketmaster: one was, that we would have a system up and running in Chicago by October 1; two was, we would tell ’em who our outlets would be by the summer; and three was, we’d get the company financed. And I thought that was pretty interesting that people were willing to sign a letter of intent, and who would trust you to get the company financed (which told you the state of the industry). Because when you sat and talked to these people, obviously as a lawyer, I thought I knew a lot more than I really did, so the dynamic was, that I was shocked – or surprised that people would take that kind of a leap. And the reason they did was, they felt they weren’t taking that big of risk. They thought they were stepping off a curb.
In those days, the business was driven by very low service charges and very low service, so nobody saw the ticket business as a real business. The Ticketron mentality was,we’re a utility. We don’t anything; we don’t do any marketing; we don’t help you sell tickets; we don’t help you do anything except put your tickets on sale; and if they sell, good for you – and if they don’t, great.
In terms of understanding the players in computerized ticketing, let me see if we can define it: The venue is defined as the facility that basically has the seats. That can be a stadium, that can be an arena, that can be a theater, that can be a club. So the venue is the host. A promoter is somebody who sometimes owns the facility and sometimes doesn’t. They basically promote the act; whether it’s rock n roll, whether it’s country music, whether it’s R&B, it doesn’t really make any difference, that’s the promoter’s function.
The way the ticketing business worked in terms of who had ultimate authority; it was always the big battle of whose ticket is this? It was one of the great – it was not a controversy, but it was a lot of discussion around whose ticket was it? It’s the promoter’s ticket, or the building’s ticket in the end. You had a building contract that determined whether you had an exclusive on the building. So if you signed an exclusive contract with the building, you had an exclusive contract with the building whether or not you had a contract with the promoter. That’s the way it worked before I got in the business. And there was logic to that because ultimately everything in that venue is exclusive (something people get confused with). There’s one food service; there’s one person that cleans it; there’s one security company. Everything in a building is driven by exclusives, and there was one exclusive ticketing company; so that’s sort of the generic basis of the business.
What was interesting was, at the time you went into business, everybody complained. There are moments in history when there are books written – they’re called tipping points or sea change. At the time that we went into business, almost everybody complained about the service they got from Ticketron. I remember when I negotiated some of those agreements and they’d say, “Well, you know, I don’t have.” – they’d take me and they’d show me old machines, or they showed me they couldn’t get software, or they showed me they get paid once a month instead of once a week. There’s a litany of things that, if I repeated them all, they’re almost boring. This is what the venues would tell you. They had equipment that was old; they had equipment that wouldn’t work; they couldn’t get it serviced properly; they couldn’t get software changes; you could go down a list of things. And what was interesting was, when I sat down and negotiated these deals, I think I was a lot tougher in the beginning. As you get bigger, you find the bigger you become, the less tough you can be in terms of how you set things up. We were very tough at the beginning, which basically said – it had to be exclusive. And if you wanted us to do a good job, we couldn’t do this on a dollar a ticket.
One of the things we did was – and this is sort of where the business evolved to was, the venues paid a lot of money on the insides. Those were inside charges. So if you were paying a $10 ticket and there was a four or five percent inside charge, the building would net $9.50, ok? 40 or 50-cents would come to the ticket company, and $1 would be charged to the public on the outside, ok? And the building didn’t share in that revenue. And I said you know, that doesn’t make any sense to me. People want convenience. People really do want convenience. So if you create an outlet system that’s open store hours; if you create outlet systems that can generate a significant amount of tickets; if you can develop a system that will be reliable – that can do – well when we started, if we could sell 20,000 tickets in two hours, we were doing great. By the time I left, you could do 20,000 tickets in 10 minutes. The dynamics changed because of the thru-put of what we were able to develop, but in the old days it would take a full day to sell out a concert like that. So if you sold it out in 1 hour or 2 hours that was great, and if you had 75 or 80 outlets that people could go to, it was really good.
The bet in the business was that you could make people not come to the box office and go to the outlets. Now when you think about it – when you think about movies, movies are every 10 minutes from you. Who lives near a box office? I mean how many people live around the Forum? How many people live around Madison Square Garden? How many people live around the United Center, or the Rosemont Horizon?