Ticketmaster Prepares to Vault into China

Ticketmaster, the world's largest ticket supplier, has won the exclusive contract to supply tickets for the 2008 Beijing Summer Olympics and plans to use the event as a springboard to enter the Chinese market.

A division of Barry Diller's IAC/InterActiveCorp, Ticketmaster has formed a joint venture with a cultural affiliate of the Beijing municipal government and a national sporting-events promoter, to supply ticketing services to the Beijing Organizing Committee for the Olympic Games and to remain there as a supplier afterward. The joint venture is called Beijing Gehua Ticketmaster Ticketing Co.

Event marketing is in its infancy in China, where less than 5% of the population have credit cards. As such, most ticket sellers tend to be regional or city-based, employing low-cost courier services which use a cash-on-delivery model and charge fees of about up to 15%.

That is expected to change with the 2008 Olympics. The city plans to use 31 venues for the Games, of which 12 stadiums are currently under construction, and aims to host sporting and entertainment events in them after the Games. The cities of Shanghai and Guangzhou each have similar aspirations to host events.

Ticketmaster expects that the Olympics will create the infrastructure to support more live events, from musicals to Broadway imports and National Basketball Association games.

Gehua Ticketmaster submitted its winning bid in November and already has 100 machines capable of emitting 125,000 tickets per hour.

Ticketmaster, which holds a near-monopoly on ticketing major live events in the U.S. and charges fees of as much as 30%, has expanded steadily overseas. Last year, more than $250 million of its total $950 million in sales came from Western Europe, Latin America, Scandinavia, Australia and New Zealand, where it says its fees average 15%. The company has high expectations for China, with a potential middle-class market of 300 million people and is planning to expand to other cities.

"We are committed to a long-term investment in China," said Sean Moriarty, president and chief operating officer of Ticketmaster.

Although Ticketmaster has supplied most major international sporting events including the World Cup, it didn't win an Olympic contract until the 2004 Athens Games. During those Games, the company employed 900 people to staff box offices, outlets, and a call center that handled 177,000 monthly calls at its peak, and processed 3.8 million tickets.

But the company knew it would exit Greece after the Olympics, since the nation wouldn't operate enough of the new venues to sustain a national business. "There wasn't enough inventory for a ticketing company to survive," said Albert Leffler, the Ticketmaster founder, who organized the project. "At the end of the Games, sad as it was, we just turned everything off."

This time, with a mandate to stay from the Beijing Organizing Committee, Mr. Leffler is laying the foundation for a long-term business in China. He is setting up at least 800 outlets to sell tickets throughout the country and expects the call center to handle reservations and sales. He also enlisted the support of Bank of China Ltd., one of the nation's largest banks and a sponsor of the Games, at whose branches customers can pay for reserved tickets and pick them up.

"The timing was such that we weren't ready to go into China until now, and China wasn't ready until now for our model," Mr. Leffler said. "It's going to take from within China to grow that, but we'll be there since we'll be the easiest way for people to get tickets and to take advantage of our marketing."

Ticketmaster's Chinese partner is Beijing CSI Ticketing Development Co., which includes China Sports Industry Group Co., a promoter of professional and amateur sporting events throughout the nation, and the Beijing Gehua Cultural Development Group, which is an affiliate enterprise of the Beijing municipal government, and YIN TV station, a South Korean television station operating there. (Source: Wall Street Journal, By SARA SILVER and ZHOU YANG)