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Razorgator layoffs reportedly due to $3.5 million loss on World Cup tickets
Tue, Jul 27th 2010 3:52 pm EDT
By Alfred Branch Jr.
Struggling secondary ticket company Razorgator, which recently cut about 25 percent of its staff and restructured its business model, reportedly lost $3.5 million on underperforming World Cup ticket sales, which contributed to the layoffs.
The company announced the layoffs, which totaled about 30 employees, earlier in the month and said it would no longer sell its own ticket inventory, opting instead to turn into a ticket exchange similar to rivals StubHub, TicketsNow and TicketNetwork. At the time, Razorgator President and CEO Brendan Ross said the reorganization was necessary to help the company better focus on its core business of selling tickets through its exchange.
"By narrowing our focus, we'll ensure that our talent and creative energy is focused on the activities where we are best positioned to grow and create value. I look forward to continuing to build a stronger Razorgator based on our most exciting, core assets," Ross said in a statement.
But, the immediate reason behind the moves was unknown until now. According to a report by sports business journalist Darren Rovell of CNBC, the bet on buying thousands of World Cup tickets for resale did not pay off for Razorgator, and other ticket resellers, because several of the 64 matches in South Africa did not sell out. The announcement of Razorgator's restructuring occurred just days after the World Cup concluded on July 11. See the video below.
Losses occur all the time in the secondary ticket market, in part because so many events initially fail to sell out, but a $3.5 million loss on one event is substantial, particularly for an already anxious company that slowly had been paring down staff for months. The loss helped lead to Razorgator jettisoning its Atlanta-based PrimeSport ticket and travel package business back to Sam Soni, who is currently running it.
When reached for comment today, July 27, Ross declined to comment on the World Cup, but sought to reassure brokers that the company was in a stronger fiscal position since making the moves. By becoming a commercial ticket exchange only, Razorgator assumes less risk, and also stops it from competing with its own broker clients on ticket sales.
"The important thing for brokers to know is that we're selling tickets and paying brokers just as we have since 2001," he told TicketNews.
TicketNetwork is the parent company of TicketNews.
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Comments represent the opinions of users and do not necessarily reflect the views of TicketNews.The secondary ticket market was a game of musical chairs. There were three decent exit routes; be acquired by Ticketmaster, Ebay or Live Nation. And at least 10 companies pursuing these three. Stubhub did the Ebay exit, TicketsNow did Tickemaster and LiveNation was out of the picture because of the merger. So now the music has stopped and Razorgator dosen't have a chair. Plus so much money has been been spent that it can't be recovered. TicketOS really isn't (and never was) a viable business. The margins on brokered tickets are much thinner than owned inventory. As far as selling the "platform" I'm not sure there is much to buy, and it's all custom developed for Razorgator. The investors will probably liquidate the company to avoid putting any more money into it.
I remember at first the rumors inside the company were that the losses were around 10 million. Eventually the numbers came a bit down and stayed at 7 million. So I think 3.5 is downplayed with creative accounting, not reality.
And I do agree there simply isn't a chair left for RZG. Their tickets aren't selling enough. Their software is rigged with so many bugs that it will be lucky to last another year without some major blow up, this one will be huge. It's unlikely they will be bought, they just do not offer any market share for the big players.
When I was there the whole problem was in the leadership. Their view back then of how things were did not match reality at all. Ego was way too high, reality too bleak. Tickets were not really selling, they spread themselves all over the place without concentrating on anything specific to make money and ended up getting almost nothing.
Of course there is a chance they will succeed. If their new CEO (Brandon I think is the name) will manage to turn the company around somehow. However, I do not see it, since they completely cut down their technology which means they really do not have much future if any.
I don't think those guys even had $10m to lose. I would doubt the losses are the magnitude they are suggesting. This is just a way to position the downward spiral of the company so the layoffs and eventual liquidation seem plausible. There was a genuine opportunity here around (1) moving the existing secondary market online and (2) raising capital to consolidate the better players in the market. Stubhub did the best job of building a pure marketplace and selling to ebay. Ticketsnow got the TicketMaster deal because Razorgator couldn't pass the public company due diligence.
There is no turnaround -- the market has moved on... too much money has been spent on this failed effort. No good exits even exist.
Brendan Ross is literally vision-less when it comes to the entertainment, ticketing, sports and music industries. When he took the job he didn't even know when the rose bowl was (seriously).
The fact that he is getting paid 350k annual salary and a 10k/month 'housing allowance' (true) is absurd.
He lobbied hard to turn Razorgator back into an inventory-owning broker, an absolutely horrible decision for so many reasons I don't have time to discuss them all. He handed the reigns of the company to Sam Soni who basically ran the place for the last 18 months (fact). And as icing on the cake, he is without question one of the most narcissistic, self-aggrandizing, dull and non-charasmatic people I've ever met.
Looks like karma came calling..
As a ex employee of the "mighty Razorgator", I agree with your statement. The CEO
could have been a wooden head puppet and did a better job. They only have themselves to blame for crashing into the iceberg.
http://www.youtube.com/watch?v=g3ZSMXY1jwg
At 4:43 in to the interview Brendan says "we'll also be doing a good World Cup business this year. I don't know how corporate it will be, but fans are defiantly headed to South Africa this year and that's going to be REALLY EXCITING" :-)
It was certainly more than 30 employees.
Not exactly the easiest place to get to. Not exactly the most charming place to go either. With the economic woes in Europe and the US, there is no excuse for this type of thing. Just plain stupid.
Cmon-give them a little credit. 2+ years of world wide poor economic woes and host country location/security questions leaning toward this might be a good event to 'sit out' is WAY to short to figure that out.
You are kind saying it was stupid.
Mmmm...so the warnings have been there for many months. All of the teams returned some tickets because of fan concerns about cost of flights, hotels and the economy. So Razorgator thought they could buck that trend? Did they really think fans were going to travel last minute to South Africa when flights and hotels were already sky high in a faltering world economy?
I also doubt Razorgator know much about European soccer fans-their habits and preferences are totally different from US soccer fans. Also, if Razorgator had checked they might have discovered plentiful cheaper tickets in South Africa.
Alas, Razorgator will continue to slowly sink. No way can it compete with Stubhub. The only way is getting sellers back with low commission, even then where are the buyers? I used to list the same tickets cheaper on Razorgator than Stubhub and they always sold on Stubhub first. With no sales in 18 months, I gave up on Razorgator a long time ago.
the other exchange wannabes who wanted to raise 8 million $ to reinvent the wheel
or how about this, open up its batch upload interface to small brokers - you could attract brokers who can't afford TN/EI's exhorbitant fees, and build up inventory immediately. if you force small brokers to list tickets with the ticketsnow like interface one by one, nobody'll post any inventory to RG. it's just not worth the time.
[Comment has been moderated for: Inappropriate Content]
Not so easy to be a ticket broker, is it Razorgator? ROTFLMAO