Full Circle.....

Are you ready? It's coming.





For the last year or so, I've been doing some research to get a better understanding of how the online ticket industry has evolved. I stumbled upon an old article describing Ticketmaster's entrance into the industry. They were a puny David with $1M in annual sales up against the colossal Ticketron, which did $100M in annual sales.

Ticketmaster, founded by two Arizona State University computer students in 1978, got its first big break in 1981, when it was a struggling $1 million-per-year upstart trying to take on $100-million-per-year giant Ticketron. Ticketmaster needed a major client to give it credibility, and to prove that the company could handle a large account and a complicated set of ticketing problems efficiently. They also wanted a client with a national profile. It settled on a major-league baseball franchise whose new owner was appalled to find that his team did not have computerized ticketing. At the beginning of each baseball season, tickets to every seat for every game were printed, stored somewhere in its stadium, then delivered to box offices and ticket outlets as game dates approached. The system was horribly inefficient, and wasteful as well, as most of the tickets printed up were never sold.

-Fred Moody Seattle Weekly 11/2/94

Wow! Talk about coming full circle. Back in the day, Ticketmaster found a way to make the process of buying tickets more efficient and more enjoyable to the customer. Fred goes on to point out three keys to Ticketmaster's success:

• 1-Ticketron stopped innovating

  It is also forgotten that Ticketmaster rose to dominance at the expense of an established, competing company -- Ticketron -- that operated a virtual monopoly in the early 1980s, and that was notorious both for insensitivity to customer complaints and for its refusal to innovate or create efficiency. Ticketron was so bad that many venues opted for noncomputerized ticketing rather than Ticketron's computerized service. Even Curtis says Ticketmaster succeeded because "they are good, smart businessmen. They were way better than everyone else -- Ticketron just wasn't as good."

• 2-Ticketmaster built a portfolio of exclusive venue contracts
  

  These exclusive contracts contain two interesting provisions -- one of which helps explain the variety and high levels of Ticketmaster service charges. Arenas or promoters who sign them are prohibited from allowing anyone else to sell their tickets; and Ticketmaster "rebates" or, in the words of its critics, "kicks back" some of the service charges to its contractors. Venues that have entered into such agreements with Ticketmaster are reported to have taken in as much as $500,000 per year from the ticketer as a result -- payment, essentially, for freezing competitors out of the market.

• 3-Ticketmaster established "promoter incentive programs"
  
  In addition to locking up those venues, Ticketmaster also signs contracts directly with promoters. So even a venue that refuses to contract with Ticketmaster finds it impossible to stage a non-Ticketmaster concert, as any viable promoter in a given market will also have an exclusive contract with Ticketmaster.

A better product, some nice barriers to entry, and the legal muscle to enforce the binding contracts helped shape the environment for a super monopoly. So much so, that it was almost impossible for artists to go on tour without using Ticketmaster. The exclusive contracts with suppliers and more efficient distribution channels (phones and thousands of kiosks) helped catapult Ticketmaster over Ticketron.

Because of Ticketmaster's avowed determination to enforce its contracts by suing promoters who cooperated with Pearl Jam, says Kelly Curtis, "We realized that we couldn't put together a safe, efficient tour without using existing venues. In order to do that, we would have to use non-Ticketmaster venues, which means open fields where we install fences, security, amenities... It was a logistics thing. It's possible to do a tour without Ticketmaster, but it's an incredible pain in the ass."

In the early 80's, 2 computer scientists from Arizona State (Albert Leffler?, Jerry Nelson?) built a better mouse trap. Their technology made it possible to service a larger number of consumers in a smaller period of time. Ticketmaster's ability to sell out a show in less than 10 minutes was revolutionary. In addition to speed of transactions, one often overlooked asset is the information Ticketmaster produced through the market.

While the convenience factor Ticketmaster affords cannot be overemphasized, neither can the value of the information it provides. One of the prime justifications for the company's high service charges is the fact that only one out of eight callers actually buys a ticket; the rest call for information, and pay nothing. The company is an information source for nearly every live event in the region. "Seventy to eighty percent of our calls," says Ticketmaster Northwest general manager Brian Kabatznick, "are for information only, and generate no revenue."

Fast forward to 2001 and Stubhub steps on the scene. Doesn't Stubhub's story sound strikingly similar? In the later 90's Ticketmaster's fees were getting a bit too annoying. Marquee events would sellout too fast (I guess there is a such thing as too much efficiency) leaving customers highly upset. Additionally, customers not only wanted to buy tickets, but also SELL their tickets. Ticketmaster had fumbled the ball. How did Stubhub scoop and score?

• 1-Built a better platform for sellers
• Stubhub attracted sellers which in turn attracted more buyers. An introductory systems dynamics course will help you see the positive reinforcing feedback loop.
  
  
• 2-Established "secondary market" contracts
• Once Stubhub got a foot in the door, it would be easier to become the primary ticket supplier of a venue, artist, or team. (Stubhub recently inked the MLB deal.)
  
  
• 3-Developed ticket broker relationships
• Stubhub aggregated inventory from the fragmented ticket broker community across the United States. "Fans" could [buy/sell] tickets [from/to] other "fans" or ticket brokers.

By getting supply from venues as well as "regular fans" Stubhub was able to build great brand awareness at the end customer level (they "owned" the customer) as well as offer a wider variety of tickets at competitive, market driven prices.

2 Stanford MBA students (Eric Baker, Jeff Fluhr) established a $310M company in 6 years. Their technology was not rocket science, but as enterprising economists, the founders built a more relevant, efficient way to both buy and sell tickets.

Here's the kicker. Fred Moody actually predicted the fate of Ticketmaster in 1994. Almost 13 years before eBay bought Stubhub. At that time Ticketmaster had unimaginable power. Here's Fred's warning:

Ticketmaster, like IBM before it, is more likely to falter or decline because of changing market conditions than because of federal intervention. Knowledgeable sources claim that the availability and ease of use of current computing technology has so lowered the barriers of entry into the ticketing market that competitors inevitably will find a way to break Ticketmaster's stranglehold. And if Pearl Jam pulls off its concert tour next year, a template of sorts will be in place for other acts to follow. The history of monopoly in this country, after all, is more a history of disgruntled competitors and customers finding an alternative to the services of a monopolist than it is a history of the government regulating monopolies out of existence.

Ultimately, the question of whether a monopoly can survive its own abuses of power boils down to how much consumers will tolerate. Companies that are morally monopolistic -- even if not monopolists in the tangled and technical legal sense of the word -- grow so cynical in the process of accumulating and keeping market power that they lose touch with reality, become incapable of decent public relations, and overstep some boundary in the consumer's mind. Monopoly, in this sense, is like pornography -- consumers can't define it, but they know it when they see it. And ultimately they turn away from the monopolist in disgust.

It's now 2007 and according to Moore's law, things are coming full circle once again.

2 (I guess two is the magic number) engineers from Princeton who graduated from Sloan (me, Gos) have combined technology and creativity with the most efficient market clearing mechanism known to man, not an online store, not a message board, not an auction...............................but a continuous, electronic exchange. I wonder what Fred would say about trading tickets and ticket derivatives. Innovative? Efficient? Fun? Transparent?


It's about to get really interesting. WGTCT

MIT Career Fair 2007

To be the best and beat the best; you have to compete head to head.
It was great going back to campus. (Life was so much easier then.)
















Booth #294
Thanks everyone who stopped by our booth!


Here's the Who's Who list of the career fair:

Microsoft

eBay

Susquehanna

Oracle

Adobe

Google

Yahoo: (sorry....i couldn't find their booth.)

South of Philly

I guess there are some places worse than the South.
(Parental advisory recommended. Graphic torture in Logan County, West Virginia.)


What's the first word that comes to mind when you see this picture?
(Please place your comment below.)

Happy Birthday Kyle

Good luck today. We're all watching.

GO BOISE!

The video that made it all possible

You asked for it. Here you go.

This is why I live in the Northeast

First, I would like to thank everyone for reading my blog. The readership is growing every month and I welcome all feedback as well as comments (I hide from no one.) Now I usually don't post on political issues, but the recent events have left me no choice.

As crazy as the story of the Jena 6 sounds, many still have no idea. To be honest, I only heard about the story sometime last month. (I know, I know....I should be ashamed of myself.) But seriously, why is there no US media coverage of the case? Not CNN, ABC, NBC....I won't even mention Fox. Why do I have to read articles from publications overseas discussing racism in the US? Before you hear me go off, watch this quick video.



See, this is why I can't live in the South. I was born, raised, and schooled in NJ, but my mom's side of the family is from Mississippi. Every summer my brothers and I would go visit my family in MS. Every summer I would get scolded by my cousins, aunts, uncles, and family friends. Why might you ask? Because I didn't know my role.

They were absolutely right. I didn't know my role (and still don't.) I don't care where you are from or who you are or how much money you make, there are some things that I will not tolerate. #1, please do not try to speak to me in a condescending manner. That's only going to bring out the beast. #2, my name is Gerry, not boy, not kid, not (I won't even type it.)

So, you can imagine what happens when you mix a literate, intelligent, slick talking, young man from NJ with some of that down south nonsense you've just witnessed in the video. It's not a good look. Needless to say, I'm banned from Mississippi or anywhere south of Philly for that matter.

Now this brings me to Jena, Louisiana, population 2,971. What the f*ck is going on down there? Can someone please help me answer these questions:

• Why would some child have to ask if they could sit under a tree on school grounds? At a public school! (I don't know if this is true, but if it is, I'd have to pack my bags and leave Jena, LA asap.)

• If a grown man pulls a shotgun out on you and you "wrestle" the gun away from him, how could you be charged with theft of a firearm? (I don't know if this is true, but if this happened to me, I'd have to pack my bags and leave Jena, LA asap.)

• Since when did hanging nooses with school colors become a popular, juvenile prank? (I don't know if this is true, but if it is, I'd take it as a warning, pack my bags and leave Jena, LA asap.)

• I've heard of out-of-school suspension for fighting, but when did getting into a school yard fight become a crime punishable by 22 years in prison. (I don't know if this is true, but if it is, I'd pack my bags and leave Jena, LA asap.)

Without getting into all of the he said, she said politics, I still find this case quite troubling. With all of this controversy, why is there minimal media coverage on the Jena 6? No one wants to touch this case except the obvious Rev. and Rev. All I want are the facts. Just the facts.

Since I don't have the facts and I can only get second hand facts from across the Atlantic Ocean, my only real advice to the people of Jena, LA is to follow that North Star.

One last Boise post for the week

For those who missed the Fiesta Bowl, here's the best catchup in less than 10 minutes.

Out of the Blue

How could you not love Boise? When Vince and I put together Kyle's highlight film, all we knew at the time was that Boise was in the Top 25. We knew Kyle could play anywhere, but it was late in the recruiting season and most schools had already made their offers. With little options and time ticking away, I made a highlight tape over Thanksgiving break and fedex'd 25 copies to the top 25 programs in the country. Boise was the first to respond and the rest was history. Little did I know, our little video would have such a profound effect on the Boise community.

For those of you who watched the Fiesta Bowl on TV, all I can say was the live game was the most exciting game I've ever witnessed. Not only was the whole family there, but our seats were in the corner of the endzone where all of the magic took place. We couldn't have asked for a better view.

Now I'll be the first to admit. After the interception I thought it was over. I recall an Oklahoma fan who had never said a word during the entire game, came over to our seats after the pick and say, "Win or lose, this was a hell of a game." I sat there thinking to myself, if you don't get your sorry, chicken-$hit ass out of my face I'm going to throw you down the stairs. A real sportsman would not have waited until his team was on the verge of winning to start gloating. Anyway, instead of leaving the stadium, my girlfriend reminded us the game was not over and we just needed faith. And after all was said and done, she was absolutely right (as usual).

How could you not love Boise? Boise State is much more than a football team. Much more than Blue Turf. Much more than a some university in the middle of Idaho. Boise is all about faith.

Faith; if you're a great prospect and no one has found you yet, Boise State will. Faith; if you're an underdog and nobody believes you can do it, Boise State will show you how. At some point in life, we all need a little faith in whatever we do in order to make things happen. Like I said, Boise State is much more than a football team.

I'm so proud of the school. So proud of the team. So proud of the coaches. So proud that I had a small role in history.

Now.....I'm not in the movie, nor am I receiving any royalties.....but I would like to invite all of my readers to check out Out of the Blue. You can't see it in the theaters unless you live in Boise. Everyone else, we'll have to get the DVD. Why am I recommending this movie without ever seeing it? Because I feel like I lived it. I've followed the school ever since the day we sent the highlight tape and I want to share my experience with everyone I know.

I know it will be difficult, if not impossible to top last season. But if I had to think of one team that could find a way to make it happen, it would be Boise State.

B-O-I-S-E!! S-T-A-T-E!!

I get money!

Thanks to my new little toy (thanks gos), I am now making my foray into cinema. Watch out Guy.

Please let the video load before playing.