The Cost Of Dumping Eventim
It’s been more than two years since Eventim chief Klaus Peter Schulenberg took what he considers to be a breach of contract to the International Court Of Arbitration. The court was expected to let both sides know its verdict by the end of 2012.
Both sides may hope to make an announcement when it may get lost during the holiday period.
Schulenberg reckons Live Nation broke an agreement to license Eventim’s platform when it was close to merging with Ticketmaster. He also said the deal cost Eventim the chance of getting a foothold in the UK.
When the deal was announced in December 2007, Schulenberg said it was worth $100 million per year to Eventim. It was a 10-year deal and, taking some punitive damages into account, Schulenberg is believed to be asking the Paris-based court for $2 billion.
Eventim made its final submissions to the ICC court in New York November 2011, 18 months after the initial filing was made.
The arbitration court’s verdict was originally expected at the end February but the arbitrators had a few things to consider.
The court may have wanted to see the contract that Live Nation has allegedly breached, although even that isn’t as simple as it sounds.
Pollstar has learned there was no signed document and that both sides proceeded on the basis of what was in the letters of intent. Eventim is said to have supplied the platform and LN paid 45 cents per ticket.
Live Nation says the Eventim platform didn’t work, although that in turn raises the question of whether the L.A.-based firm did due technical diligence on it.
Although it’s been seen to work perfectly in Germany, the Eventim system has been known to break down when faced with the heavier onsale demand that occurs in the U.S., the UK, or even Holland, Finland and Sweden. Several LN onsales broke down.
The problem was exacerbated by Eventim pointing out that it could upgrade the system at a cost, while LN continued to complain about the German company’s lack of technical support and backup. Eventim never set up a U.S. office.
The two companies were quick to reach an impasse, which at times became a little terse.
“If you are not able or willing to see the real motivation that is driving Live Nation, and if you are really willing to believe what Rapino says, I can’t help you,” Eventim legal and communications chief Rainer Appel told Pollstar. That comment came after the Live Nation chief said during an earnings call that he was going back to Ticketmaster because of its superior sales platform.
Eventim’s argument that LN cost it a foothold in the UK could have some merit. In November 2011 Pollstar revealed that Schulenberg’s company had inked a five-year deal to service three of SMG Europe’s UK venues but kept quiet about it for fear of weakening the argument that it had laid before the ICC.
However, it’s still only three venues and hardly enough to be considered a foothold. Since the split with LN, Eventim has struggled to sell its platform or its services in the UK market.
Live Nation’s London office feels the various ICC court hearings went well for the company and is expecting to pay no more than double-digit millions of dollars to Eventim. They also believe the award will be at the lower end of that scale.
Both companies must now be looking at legal costs nearing the $20 million mark.
If the award is short of $50 million, it’s hard to see how Schulenberg’s firm could even claim a victory, while LN shareholders would likely lift Rapino on their shoulders and carry him down Wall Street.
The issues with Eventim are LN’s only hangover from the days before it merged with Ticketmaster and $50 million may be a fair price for getting rid of it.
But what if the ICC court was swayed by Eventim’s spurned lover act? The Germans are convinced the sole reason Rapino left their bed was so he could snuggle up to Ticketmaster.
What happens if it awards Eventim something in the order of $100 million, $150 million or even north of that? At what point does finding the cash become a problem? Even $150 million is a relatively small slice of the $2 billion that Schulenberg wants.
At what point would LN need to either go to the market or hive off an asset? What happens if the court won’t allow LN to defer paying any part of the award?
After all the time the court has taken and the legal fees accumulated, it’s likely both sides would now be happy with an outcome that will enable them to claim some sort of victory.