2007 CIC Keynote

Thank you, Gary and the gang at Pollstar. It is an honor to be here today and to speak at this time of great change in our industry. I don’t profess to know where it all is going, but what follows comes some from the head and a lot from the heart, and I’m grateful to share it with all of you.

For a PDF version of the full script, please click here.

This is the view from my office window every day (the closed Tower Records store on Sunset Blvd.). What once was the place for music fans, a symbol of the passion, the possibility, the promise of music, is now an empty building, shuttered and padlocked. Tower Records was a partner, a client, and a friend to Ticketmaster for more than two decades.

For me, this view from the window serves as a reminder that in today’s world, if you don’t adapt quickly, you go the way of the dodo. Our industry – the music business – is fighting for its survival and, so far, we are struggling. One of the signs of the health of a business is its ability to innovate in changing times, and in the past several years we ain’t done so good. It took a 19-year-old college kid to create the tools for fans to share essentially every song on the planet – for free, of course. It took a guy from the personal computer business – a genius to be sure – to find a way to get people to pay for it and, more recently, it took two entrepreneurs who dropped out of Stanford business school to educate everybody on the huge ticket resale market, albeit so far at the expense of our industry and with little regard for either event organizers or local laws.

If we don’t break down the barriers that have always existed in our industry — the pervasive attitude of "What’s mine is mine and what’s yours, we’ll fight over"— and those unhealthy tensions that exist between manager and promoter and agent and ticketer and venue, and every which way in between, the innovation will continue to occur outside of this room. Our ability to provide value to the only two parties that matter in the end — the artist and the fan — will continue to diminish, and Tower Records won’t be the only once-proud-but-now-vacant landmark in the music business.

Kicking off a speech with "Here’s what happens if it all goes horribly wrong" is not particularly inspiring, and it isn’t particularly productive or useful to speculate on potential train wrecks when you have the ability to avoid them.

That is not my intention here today. I know that the answer to every challenge we face is in this room in the accumulated knowledge and talent here today, and if we can break down the barriers that stand in the way of us solving these problems our industry will thrive. I say that not because I am filled with wide-eyed optimism or underestimating the challenges and complexity of the task, I say it because we’ve already shown we can do it, we just need to do it more often.

Let me give some examples. When Bob Dylan recorded "The Times They Are A-Changin’" 40 years ago at a time of tremendous social change, and in a world struggling with incredibly heavy issues, he almost certainly understood the inherent timelessness of the song. He also almost certainly could not have known that the song title would be shamelessly appropriated for countless music industry presentations and panels, that it would be emblazoned on billboards all over the five boroughs as a Twyla Tharp musical, nor was he likely to have thought that he would have a No. 1 record 40 years later. Nonetheless, all of those things actually happened.

One of the things that was done in support of the album Modern Times and the tour is an example of what can happen when a true original embraces change, and what can happen when our industry works together to bring something unique to the fan. There is nothing earth-shattering in the concept — we simply bundled the digital music with the tickets, allowing fans who preordered the album on iTunes to buy tickets during a special preorder — but the program was very powerful in its execution. The album charted No.1, it was the No.1 preorder in iTunes history at the time, it was a Pollstar Top 50 tour for 2006, and all parties involved were thrilled with the results. We did the same thing with the Red Hot Chili Peppers — in this case a preorder for the Stadium Arcadium double album — and had similar success: a No. 1 record, a Top 50 tour, another No.1 preorder on iTunes, and happy fans. If we had done this promotion for 20 artists in 2006 instead of two, I’d say we were well on our way. We need to pick up the pace; this stuff works.

The most profound short-term problems facing our industry are those evil twins: pricing and marketing. Estimates for the North American secondary ticketing market across all categories — sports, arts, music, family — range between $2 billion and $10 billion. No one knows exactly what it is, but I do believe it is at least the low side of the $2.5 billion range, and probably represents 10 million tickets. A secondary market that exists because we can’t or won’t price our tickets right, and provide a way for fans to buy and sell tickets with other fans, is now a multibillion-dollar industry that sprung up before our very eyes.

Every dollar that ends up in the secondary market outside of the industry is a dollar that doesn’t go to the artist or to the promoter or to the venue operator – that doesn’t contribute to the financial health of our business. We need to bring that money back into the industry, and we need to do it fast. One way to do it is to get the price right the first time. We launched our auction product back in 2003 to give our clients the opportunity to capture the market value of the ticket the first time, and give fans a fair shot to get the tickets they want at a price they are willing to pay. Since then, we’ve auctioned approximately 200,000 tickets for our clients, but we are only scratching the surface. When our industry is auctioning, or otherwise dynamically pricing a few million tickets a year, I will know we are addressing the opportunity.

But it is not just getting the price right for the best seats in the house, it is doing a better job of marketing shows, and making it easier and less risky for fans to buy concert tickets. Ticketmaster has nearly 15 million visitors to Ticketmaster.com every month, and we send personalized e-mails to nearly 25 million people each week about events they may be interested in. Our clients spend hundreds of millions of dollars marketing events every year across print, radio, television and, to a lesser extent, the Internet. Nonetheless, nearly 35 percent of concert inventory (approximately 37 million tickets on the Ticketmaster system) goes unsold and, if you ask fans why they don’t go to shows, one of the more popular reasons is, "I didn’t know about it." When fans are aware of a show, we don’t make it easy for them. We ask them to buy three to six months in advance, and they are typically buying three tickets. Average ticket price is about $50, so we are asking them to commit $150 to something they may not be able to go to when the time comes. We need to do better.

The subtitle to my session here is "How fan resale can help save the concert business" and I guess Gary wanted to make sure there was something provocative in the title to get you all here today, but I do believe fan resale is critical to the health of our business. We live in a world where the consumer rules, and we know the one thing they demand above all else is choice. Businesses that provide consumers with choices and options do profoundly well. One thing our fans have told us loud and clear is that they want access to good seats at any time, and at any price. They also want the ability to resell their tickets if they can’t go, and the thought that they might even make a little extra money in the bargain certainly makes them more likely to buy in the first place. They would prefer to buy and sell in a legal and transparent environment, and our industry has yet to provide one.

We estimate now that there are 700 broker sites operating in North America alone right now. Nonetheless, in spite of the success of brokers and scalpers migrating online, of the success of eBay, of StubHub, of RazorGator, I do not have a single concert industry success story of fan resale because collectively we have lacked the will to do it. I can tell you what our colleagues in professional sports have done because now over 50 percent of professional sports teams in North America in the four majors operate an exchange, primarily for their season ticketholders, their best customers.

It doesn’t matter if it is a winning team in a big market or a losing team in a small market, season ticketholders are grateful for the option and renew at higher rates. Many single ticket buyers, who for the first time had legitimate access to quality seats, have chosen to become season ticketholders. Shouldn’t we give music fans the same choice? I do believe this year can be the breakout year, and am encouraged by early signs of artist interest in providing resale to their fans, but we’ve got a long way to go, and as we know from the recorded music side, it is tough to play catch-up.

What concerns me most about where our industry stands today is rate of change. That is, we have a real opportunity to transform our industry right now, but the window may close on us if we don’t move swiftly. Fundamental changes in the world often happen incredibly quickly, often too quickly for participants to realize or react and even for bystanders to notice.

I was struck by this recently when reflecting on the life of one of my heroes in music. Jimi Hendrix went from playing Cafe Wha? in the West Village with Jimmy James and the Blue Flames to international superstar to dead at 27 in 1970 in four years – an incredibly short period of time in retrospect. And rock ‘n’ roll would never be the same. More recently, and in an entirely different sphere, we’ve watched as Google went from a company with no business model and weary investors in 2000 to a market value of $150 billion – one of the most valuable companies on Earth – and one that has taken the title from Microsoft as company most likely to take over the entire world. When profound change comes, it can come incredibly quickly.

If you look at the most successful sites on the web, the one thing many of them have in common is that they share what Tim O’Reilly calls "the architecture of participation." That is, they provide people the tools to help themselves. MySpace launched in 2003 and is now one of the most heavily trafficked Web sites on the planet, with more than 150 million MySpace accounts. It quite simply allows people to share and connect. YouTube launched in 2005, and now tens of millions of people are viewing videos online hundreds of millions of times a month. YouTube did not even exist two years ago, and this fall was purchased by Google for $1.6 billion – a site that simply lets people share video content with one another. Wikipedia, a community-powered online encyclopedia, now supposedly rivals the Encyclopedia Brittanica for depth, breadth, and accuracy, and it consists of free contributions made by millions of people across the world. MySpace, YouTube, Wikipedia – three of many examples of the power of platforms that allow individuals to connect and share, which are among the most powerful of human motivations.

Our industry needs to create a participatory platform for live entertainment, one that allows the artist and fan to interact in rich and deep ways of their choosing. At Ticketmaster, we understand that we need to do some changing of our own to help create this platform, building tools for our clients that allow artists and fans to connect, and still do all the hard stuff that they can’t do for themselves – access control hardware, ticket printers, credit card processing, refunds, cancellations, fulfillment.

A recent example of the way we are changing is our investment in iLike, a wonderful new music discovery and community site created by two talented twins, Ali and Hadi Partovi. We fundamentally believe that every time someone is listening to music, we have an opportunity to get them to try something new, and an obligation to let them know if the artist they are listening to is on tour or will be soon. If we can get people to buy tickets just a little bit more frequently, it will be a huge boon for our industry.

ILike allows fans to discover music together, and it makes music recommendations based on what people are actually listening to, rather than just what they say they like. ILike also has great tools for artists to reach an audience, whether in the form of iCast, a product that allows the artist to update their fans in real time across the web with a new SMS message, photo, or video mail. ILike also operates Garageband.com, a site where more than 200,000 emerging artists have created a space online and made their music available for free in the MP3 format.

One of the things we’ve learned is that some of the old ways don’t work anymore. Notions of lock-in or hard barriers to entry are in many cases antiquated, and the best competitive advantage to be found comes in the form of great partnerships and collaboration.

Indeed, most great human achievements are the results of partnership. Sir Edmund Hilary is known as the first man who summitted Mount Everest but fewer people remember Tenzing Norgay, the sherpa who was the second man on the summit. Hilary would be the first to tell you he could not have done it himself. There is no better example of the power of partnership than in the recent Apple iPhone announcement at MacWorld, where Steve Jobs worked his usual magic and once again showed the world the better way to do something. What struck me most was how much the iPhone appears to be enriched by partnership, and perhaps the most profound stroke of genius was Steve Jobs’ ability to get Jerry Yang of Yahoo and Eric Schmidt of Google on the same stage to celebrate the launch, each company contributing something of real value to the iPhone product.

In that same spirit of partnership, I am excited to share with all of you that Ticketmaster and Apple have reached an agreement to work together on some initiatives that hold great promise for our entire industry and we believe will help sell more music and more concert tickets.

First, we are going to make sure when people are looking for concert tickets we treat them like music fans and market music to them. Second, when they are listening to music – and there are tens of millions of installed iTunes players out there – we want to make sure they know when the artists they are listening to are on tour. Third, we want to create a unique offering for music fans – and a wonderful gift – that allows people to buy music and tickets together. The Ticketmaster/Apple combo gift card will be available in more than 1,500 Target stores this June.

Last, we want to build some excitement around the summer concert season and get people fired up about music this year, which means that for every concert ticket sold on Ticketmaster.com this year, Apple and Ticketmaster will fund one free download for a song in the iTunes store. These are the beginnings of an incredible new partnership between Apple and Ticketmaster, and just the start of a whole slew of great new offerings for music fans.

I understand we need to compete, and that to compete means you can’t always work together. But we need to do better and we can do better. Without partnership, we’ve got gridlock. When we aren’t moving forward, others are. Let’s break down the barriers, let’s reinvent our industry by drawing on the strength that is already there, and let’s build a platform together that creates real and lasting value for the two eternal parties in our business – the artist and the fan.

Thank you.