MLBAM In Acquisition Talks With Tickets.Com, Sources Say
November 23, 2004
By RUSSELL ADAMS
Staff writer, Sports Business Journal

The Internet arm of Major League Baseball is in talks to buy all or part of online ticketing service provider Tickets.com, industry sources said.

The acquisition would be a major step toward MLB Advanced Media's broader goal of centralizing and controlling rights to all MLB business transacted online. The fact that discussions are taking place is also a sign of an era in which more content owners are seeking greater control over distribution channels.

Executives from both MLBAM and Tickets.com declined comment.

MLBAM, publisher of mlb.com and the MLB team sites, now has three preferred ticketing providers: Tickets.com, Ticketmaster and Paciolan.

Tickets.com in 2004 handled ticketing for 15 MLB clubs, while Ticketmaster had 10 clubs and Paciolan had five. Those companies take a transaction fee from each ticket sold through the league or team sites. MLB.com in 2004 sold more than 9 million tickets online.

Such an acquisition would represent an attractive opportunity for both MLBAM and Tickets.com. Since MLB centralized its Internet rights in 2000, MLBAM has pushed aggressively for complete control of rights to all products and services distributed or sold online. The original goal was to maximize MLBAM's value and take the company public, offering a windfall for the 29 club owners, who each own an equal share of the company.

Those plans were shelved when the Internet bubble burst, but talks of a public offering have heated up again as the market rebounded and MLBAM has become a profitable company with a thriving subscription business.

On a broader scale, any attempt by a property such as MLBAM to control the delivery of its products and services should come as little surprise given the continued convergence of content and distribution in the media industry. Comcast-Spectacor, which owns the Philadelphia 76ers and Flyers, recently made a multimillion-dollar investment in Paciolan that gives Comcast control over ticketing when its deal with Ticketmaster expires in 2006.

Ticketmaster's hold on the sports market appears safe in the short term, even if a deal between MLBAM and a competitor materializes. Ticketmaster maintains a virtual monopoly among NFL, NBA and NHL teams, deep sponsorship ties with those leagues, and multiyear agreements with many of its MLB partners.

In the long term, though, outside vendors increasingly seem to represent an unnecessary diversion of revenue, and it's safe to say leagues will explore alternatives.

For Tickets.com, industry sources view such an acquisition as something of a life preserver. The Costa Mesa, Calif.-based company went public in November 1999 at $12.50 per share, but by June 2001 the stock had fallen below Nasdaq's $1 minimum bid price. Tickets.com stock was delisted from the Nasdaq National Market in February 2003 after failing to comply with the Nasdaq rule requiring net tangible assets of $4 million.

Tickets.com has struggled to maintain a foothold in the market for handling primary ticketing.

Tickets.com became the dominant online ticketing provider in MLB before the 2001 season, when it signed a three-year deal with MLBAM to be the exclusive online ticketing partner of the league. By the 2003 season, Tickets.com was handling ticketing services for 20 of the 30 MLB clubs. The other clubs were locked into long-term deals with either Ticketmaster or Paciolan, so those companies continued to handle many of those teams' ticketing services even after Tickets.com became the exclusive, front-end provider.

The Tickets.com-MLBAM deal expired at the end of the 2003 season, though, and MLBAM took on the three preferred providers after Tickets.com executives determined that the cost of exclusivity was too high.

Tickets.com prior to the 2004 season lost five of its MLB clients (Philadelphia, Houston, San Diego, Colorado and Arizona), and since the end of the 2004 season it lost one more, Cleveland, to Ticketmaster.

"There are very good reasons on each side this could make a lot of sense," said a longtime ticketing executive.