Redbox enters ticket biz, but challenges await

Ticketmaster, Live Nation control most large venues

DVD rental operator Redbox’s incursion into the event ticketing market, offering ducats at its kiosk outlets with minuscule add-on fees, can be seen as a bold engagement with established ticketing firms.

But while the Coinstar unit has won territory in the homevideo market previously ruled by brick-and-mortar firm Blockbuster and by-mail rental service Netflix, Redbox may face an uphill battle in the live marketplace, as exclusive deals with existing ticket giants will likely restrict the upstart ticketer’s potential inventory.

Though Redbox may not end up with a large selection of high-profile venues, the ticketing effort is one of the ways the vending machine operator may try to prop up revenues as DVDs go away.

The Redbox initiative bowed Wednesday in the Philadelphia market. First dates being serviced include a Carrie Underwood concert at the Wells Fargo Center, the Philadelphia Film Festival, NASCAR races and Villanova U. sporting events. Tickets are available at Redbox’s 650 area kiosks and via the company’s website.

Los Angeles will reportedly become the second market for the service in early 2013. Nationwide, Redbox operates approximately 38,500 kiosks.

Most attractive element of the Redbox service is a user-friendly service fee just $1 above face price per ticket. Market leader Live Nation Entertainment’s service charges, which typically run $10-$15 above face value, have long been a bone of contention with consumers.

LNE rival AEG also operates a propriety service, the recently christened Axs, but it is still not up and running in all the company’s venues.

Going up against the giants in the ticketing biz will present a formidable challenge for Redbox. According to concert tracker Pollstar, LNE sold more than 22 million tickets worldwide last year, while No. 2 player AEG moved 12.2 million ducats.

Pollstar editor Gary Bongiovanni noted that, with most venues making exclusive pacts with the biggest ticketing operations, “It’s pretty much a Ticketmaster world.”

He added, “Ticketmaster makes exclusive deals with various vendors. If you want to go to a show at Staples Center, you’ve got to use (LNE ticketing division) Ticketmaster, because they’re the exclusive vendor. You have no choice. When (the AEG venue) switches (ticketing) to Axs, you’ll still have no choice — you have to use that vendor. The problem is that, if you have a deal with Ticketmaster or Axs, you’re not going to be able to vend tickets through Redbox.”

In most cases, Redbox will be frozen out of the largest venues; LNE and AEG operate dozens of the biggest venues in the country. LNE’s scores of venues already boast Ticketmaster exclusives, while AEG is actively moving to get its venues up and running with Axs.

“The problem’s going to be that the highest-profile events are going to be unavailable,” Bongiovanni said. “If they can strike some deals with some major players that control their own inventory, whether it’s sports teams or whatever, then there’s potential there. It sounds like a great idea, to be able to vend at all those standalone locations. You do it autonomously with no overhead, basically, no clerk to sell it.”

Consumers may cheer Redbox’s low service charge, but high fees will continue to be standard operating procedure in the concert biz, Bongiovanni said.

“The biggest stumbling block is going to be that the industry has become addicted to all these add-on fees. They’ve become major revenue streams for, really, everybody — the venues, the promoters, the artists themselves. That I don’t think is going to go away. I don’t think Ticketmaster is going to take a part of its inventory and allow the vending of tickets through Redbox at face value plus a dollar. The public would love it, but it ain’t gonna happen.”

This risky play by Redbox suggests the company sees the writing on the wall regarding its core business, as the life of the DVD format is limited. “What are they going to vend in these boxes when that gravy train stops?” Bongiovanni said. “They’re being smart by looking for new ways to use the infrastructure they’ve created.”

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