As the U.S. economy continues to stumble, and the company’s plan to cut about 300 jobs still hanging in air, Ticketmaster, the nation’s largest...

As the U.S. economy continues to stumble, and the company’s plan to cut about 300 jobs still hanging in air, Ticketmaster, the nation’s largest ticket company, today announced it is acquiring a controlling equity interest in industry powerhouse Irving Azoff’s Front Line Management.

Ticketmaster is using the move to change its name to Ticketmaster Entertainment and launch a broadside assault into the artist management industry dominated by its rival Live Nation. Ticketmaster is installing Azoff as CEO of the newly named company, replacing Sean Moriarty at the top, but Moriarty will remain as president of Ticketmaster Entertainment and will be CEO of Ticketmaster.

The deal could have some impact on Live Nation’s soon-to-be-launched ticketing initiative and how Live Nation will fare in scooping up prime Ticketmaster clients. Live Nation will start its own ticketing operation in 2009 in the venues it owns and in its House of Blues franchise in 2010, and the company will also handle ticketing for hundreds of venues operated by SMG and for New York’s Roseland Ballroom, both of which are currently Ticketmaster clients.


But with Ticketmaster’s addition of Azoff, now venue operators will have to take into account the impact of Azoff and Ticketmaster, especially in major markets where there is more than one comparable venue. During the summer months, Live Nation typically tries to route its tours through its amphitheaters, but has to utilize arenas in the off season, which usually have contracts with Ticketmaster. It is possible that venues used to have to think that if they stayed with Ticketmaster, Live Nation may try to bypass the venue or even the market. But now, venues will have to analyze if going with Live Nation Ticketing could cause Azoff to bypass that venue with his acts.

All of this jockeying for position comes at a time when the ticket industry is collectively holding its breath over what impact the slowing economy will have on the primary and secondary ticket markets.

During the summer, Ticketmaster announced that it was planning to cut $35 million from its operations, which foreshadowed this week’s move to fire 300, or about 5 percent of its worldwide workforce. Despite the previously mentioned intentions, news of the layoffs hit the industry hard. Ticketmaster stock (symbol: TKTM) was trading under $11 per share at about 1:15pm today, October 23, as news of the Azoff deal offered no immediate bounce to the stock. In fact, shares had dropped more than 2 percent on the news. See ticker below.
“This is a natural fallout for a company that has been overspending for a number of years to shore up its secondary business while also losing some of its most significant customers in Live Nation and SMG,” said one ticketing executive, who spoke on a condition of anonymity, concerning the layoffs. “Ticketmaster is now accountable to shareholders and Wall Street and will be forced to play on a much more level playing field with the rest of the ticket industry.”

Another broker said 2009 could be a bumpy year for the industry. “[Next year] will be the year of massive consolidation in this industry, a drastic reduction in the number of professional full-time resellers, and a more realistic expectation of those surviving as to where the future is heading.”

Ticketmaster, which had bought a minority stake in Front Line last year, will acquire the other minority equity stake in Front Line currently owned by Warner Music Group for approximately $123 million in cash. In connection with the transaction, Ticketmaster will issue restricted stock awards to Azoff, representing approximately 4.5 percent of Ticketmaster’s stock; a portion of the equity stake in Front Line currently held by Azoff will be canceled and Azoff will retain a sizable equity stake in Front Line and has the option to purchase 2 million shares of Ticketmaster common stock at an exercise price of $20 per share.

“While the Ticketmaster name has been synonymous with live entertainment for some time, today we took a significant step in solidifying our position in the music business,” Barry Diller, chairman of Ticketmaster, said in a statement. “And, we will greatly benefit in having Irving Azoff lead Ticketmaster. In joining with the excellent Ticketmaster management of Sean Moriarty, Terry Barnes, and Eric Korman, we’ll have a superb group of executives capable of growing the Company every which way.”

Since being founded by Irving Azoff and Howard Kaufman in 2004, Front Line has amassed nearly 200 clients and more than 80 executive managers as it rolled up the operations of other major management companies. Its roster of clients include Tim McGraw, the Dixie Chicks, Brooks & Dunn, Van Halen, The Eagles, Jimmy Buffett, Neil Diamond and Christina Aguilera.

Front Line also owns FEA Merchandising, maker of T-shirts and other memorabilia.

“Front Line and its artists have never had a better partner than Ticketmaster and Barry Diller,” added Azoff. “Now we have the opportunity to redefine the business at a time of great change and opportunity. Consumers, artists, teams and venues will all benefit from this exciting new Ticketmaster Entertainment platform going forward. I can’t wait to create the future of the business with my new senior colleagues at Ticketmaster, Sean Moriarty, Terry Barnes, and Eric Korman.”

Azoff added that Warner Music Group, which invested $110 million in the company in 2007, “has been a great partner to Front Line Management Group. Warner’s commitment to artists remains extraordinary, and our roster of talent will continue to seek new opportunities to work together in the future.”

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