Schwenkow Throws Down The Gauntlet

Despite some pretty moderate trading figures, DEAG chief Peter Schwenkow has thrown down the gauntlet to his biggest market rival by announcing that he’s going into the Internet ticketing business.

“Yes,” he replied, when Pollstar asked if the ongoing negotiations with “a strong international partner” mean that he’s about to take on CTS Eventim in its own backyard.

When asked about the identity of the partner, Schenkow said, “I can’t comment on that at the moment – it’s too important.”

Paul Lafontaine – VP of European business development for global market leader Ticketmaster – fueled speculation by declining to comment.

The Prague-based Ticketpro, geographically the nearest major ticket agency to DEAG’s Berlin HQ, denies it’s the mystery suitor. The guessing game doesn’t end there as the August 12th DEAG ad hoc press release announcing the move doesn’t say its future “joint venture” partner is even in the ticketing business.

One theory that can be struck out is that former Ticketmaster chief exec John Pleasants, who resigned his post August 23rd to “pursue a new endeavour,” is in the frame. Schwenkow denied Pleasants has any connection and Lafontaine says the ex-CEO’s future plans lie outside of ticketing.

At CTS, where first-half earnings have almost doubled, chairman / CEO Klaus-Peter Schulenberg shrugged off Schwenkow’s announcement.

“We will react to DEAG entering the ticketing market once they’ve done so,” Schulenberg said.

Both companies are recovering from a rocky start to the decade, after borrowing to acquire live music businesses, but Schulenberg’s apparent lack of concern about Schwenkow moving in on his patch will be down to the fact that CTS’s ticketing turnover is now four times what it was five years ago.

Half-year figures released August 17th show group revenues are up 18.5 percent to euro 144.3 million, earnings before interest and tax (EBIT) has increased 51 percent to euro 20.7 million and the group earnings almost doubled to euro 9.2 million.

If DEAG is to be a serious Internet ticketing competitor, then it’s taking on a rival that has seen its Internet business increase by 68 percent to 1.5 million sales during the first half of 2005. Around 40 million music and event fans visited the Internet portals at eventim.de and getgo.de.

Ticketing segment revenues as a whole were up 92 percent to euro 33 million, with half of that increase being put down to such special projects as the ConfedCup and World Cup 2006.

The gross profit margin from ticketing activities was 53.1 percent with earnings before interest and tax almost tripling to euro 10.5 million.

Although the Medusa Group – which includes CTS’s (roughly) half-share in FKP Scorpio, Marek Lieberberg, Peter Rieger, Dirk Becker, Semmel Concerts and Argo Concerts – saw its turnover rise 6 percent, earnings remain flat.

DEAG’s live music business has edged into profit, but the figures are still only a little better than flat and obviously missing the income from Zurich Hallenstadion, which is undergoing a facelift.

Earnings before interest and tax for the second quarter were half a million euro (it was minus that amount in Q1). A direct comparison with the company’s 2004 Q2 EBIT of euro 3.5 million is hardly like-for-like as around euro 3.6 million of that was a tax windfall

A year ago, Schwenkow’s search for additional revenue streams led him to increase the company’s involvement in classical music; he’s since secured a euro 23.4 million (US$30 million) private finance guarantee to fund more tours. A successful move into ticketing would put DEAG’s business model on a broader base, but a disaster could be as damaging as the estimated euro 3.9 million that it lost when its Stella Ag musical and theatre division went bust in 2002.

Schulenburg may be looking back a little further to 2001, when Qivive – an Internet ticketing portal in which DEAG had a 33 percent interest – went bust with debts of more than euro 10 million.

What was left of Qivive (basically the technology) was snapped up by Ticketcorner, which brings that company into the frame as a possible partner for Schwenkow.

In related news, DEAG CFO Wingolf Mielke has retired, one year after joining the company to oversee its restructuring. He’s been replaced by Dr. Ingo Steine, who began his career with German neighbours Bertelsman and has gone on to hold several senior management positions in the media industry.

— John Gammon