Local Yocal: TicketMaster-CitySearch-CityAuction

When CitySearch canceled its own IPO plans in favor of merging with
Ticketmaster Online last August, we wondered where the fit was between city
guides and event ticketing. Our thinking was the combined entity probably
had to fill in some gaps between the two services to round out its
offering. And so it is.


Somewhere between Yahoo and Joe’s Pizza lies
TicketMaster-CitySearch (NASDAQ:TMCS), hoping to catch the multi-billion
local entertainment and content market through its series of deals with
regional media groups and aggressive Web hosting for businesses. One gap
filler is its new buy: CityAuction. 47,000 registered users, 100,000 page
views a day, 115,000 auctions listed since day 1.


On Jan. 11, TMCS agreed to acquire CityAuction for 800,000 shares ($44.2
millilon based on TMCS close Jan. 21). It offers local personal
auctions.


The move underscores the local Web market opportunity across a
swath of content and commerce, one largely ignored or difficult to address
by the larger portals/hubs as they go for bulk and not targeted info. TMCS
owns seven local guide sites and media partners run nine others with two more
pending.


The buy comes on the heels of TMCS successful IPO Dec. 2
selling 7 million shares at $14. Shares closed Jan. 21 at $55.25 and
have flirted with $80.50 in its brief public life. USA Networks owns 60
percent common and 67 percent voting control of the company.








































 

1998

% total revenue

1997

% total revenue

tickets

$ 5.8

43%

$ 1.9

34%

city guides

$ 5.3

39%

$ 2.5

45%

sponsors/ads

$ 2.5

18%

$ 1.2

21%

TOTAL

$ 13.6

 

$ 5.6

 



TMCS generates revenue from three sources: ticket sales, providing turn-key
Web
sites for local businesses in regions its in, and through
ads/sponsorships.


Fourth-quarter sales were $13.6 million, 43 percent from
tickets. City guide sales were driven by Web sites sold to businesses in
its markets, with the average price per month increased from $100 in
December 1997 to $219 in December 1998. These contracts are 12 months. Ad
banners generate only 5 percent of all revenue.


Translation: this is not another
ad-based revenue model a la the large search guides. That explains why
Wall Street gives TMCS a $4 billion market cap, which our analysis
estimates at 68x 1999 sales, the sort of multiple that an eBay or Yahoo
enjoys. But losses are heavy.


While full-year results/losses won’t be released until next week, for the
nine months ending September TMCS posted a $57 million loss, which we
attribute to the heavy lifting in building local content/commerce enterprises.


The huge capital outlays to be a meaningful local guide has probably kept
the Yahoos of the world from
going truly local–that’s the irony of the opportunity. But a $78 billion
local ad pie with several billion more in events and other ticketing
opportunities appears to be a fairly compelling potential market that
dwarfs the losses posted so far. Let’s see revenue:
























































































TicketMaster/CitySearch

actual IPO

at 1/20/99

Price per share

$ 14.00

$ 55.25

Fully-diluted

$1,033.20

$4,077.45

 

 

 

Revenue multiples

 

 

 
 
 

Fully diluted/1998

26

102

Fully diluted/1999 est. revenue

17

68

 

 

 

Revenue

 

 

1998

$ 40.16

$ 40.16

1997

$ 15.48

$ 15.48

Estimated 1999

$ 60.00

$ 60.00

(Losses)

 

 

Nine mos. To Sept

$ (56.80)

$ (56.80)

Annualized

$ (75.74)
$
(75.74)

1997

$ (80.36)

$ (80.36)
all figures in millions except share price and multiple (c)
1999 internet.com LLC, internet stock report



Note how ticketing jumped from 1997 to 1998 to take the lion’s share of
revenue. This is a trend we expect to continue. Ticketmaster Online
accounted for just 6 percent of the entire Ticketmaster corporation’s sales
but we think that will grow to about 30 percent by the year 2001 as
theater, dining, cinema, sports and music venues become more aware of the
Web as channel
and also as consumers come online more and more for convenience of
ticketing via this channel.


For example, users can already preview “sit”
in a seat and see how it looks to the stage all through a “web’s eye” view
of how your seat relates to the stage or venue. We think that’s very
powerful use of the Web.


What’s next? Glancing at the entrees at the
local restaurant before you make a reservation? We think so. And
more.


The tie-in with Barry Diller’s USA Networks gives TMCS possible
cross-promotion and cross-pllination across broadcast
and cable, feeding the Website(s) for buying and selling further.
Ticketmaster Online receives 50 percent of the net profits on tickets sold
through the Web, or about $1 profit on every average ticket sale.


Helping get TMCS in these markets is its partnering with established
newspapers and media companies shortcuts the expense side and boosts
marketing. Los Angeles, for example, is led by the LA Times (Times
Mirror).


We asked TMCS CEO Charles Conn about how he sees things and the CityAuction
acquisition:


What does CityAuction bring to TMCS?


Conn: For goods that are either heavy, bulky or fragile or very expensive,
national auction sites like eBay don’t provide very good opportunity. Also,
face to face sales are important for trust reasons sometimes. CityAuction
is about 1/20th the size of eBay and growing.


You haven’t announced full fourth-quarter results but have released
revenue. Tell us about revenue numbers.

Analysts expected about $9.6
million revenue and we delivered $13.6 million. All three segments were
above plan.


How many page views does TMCS have each month?


Above 60 million per month. It’s important to remember that’s concentrated
in these cities. For example, in Raleigh-Durham, N.C., we had about
2.3 million page views in an Internet0using population in that city of
300,000. So we have extremely high density of use.


TMCS operates in 16 cities today with two more coming. What’s your
goal?


I’d like to be in 40 cities within 12 to 18 months. We’ve developed a new
model for rolling out cities that we think will be both faster and less
costly than in the past. That’s still untested.


We’d like to also extend
the ticketing metaphor to smaller venues and into orgainazitions and
businesses that don’t do professional ticketing like small music clubs and
venues.


CitySearch builds Web sites for bars and club with 100 seats
and they don’t have professional ticketing right now just box
office.


Local e-commerce, hotel and restaurant ticketing, local auctions,
other classified categories and other merchandising categories.
Essentially, we’d like to be able to help you with any reason you go out
your front door, whether you want information on local mountain biking
trails or want to go to a Rolling Stones concert.





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