The online ticketing space has attracted much attention from private equity and venture capital firms – but both investor types appear to be taking opposing stances on the market, writes Plural Strategy Group’s Phil Stone.
Online ticketing has attracted frenzied attention in recent months from all classes of investor. In December, Providence-backed Ambassador Theatre Group (ATG) acquired the Ticket Machine Group to add to its theatre ticket operations. The deal was announced only days after rival Encore was sold for a rumoured £60m to UK private equity house ECI Partners.
The rate of investment accelerated in the first half of 2014, with a rash of start-ups attracting significant capital as they seek to disrupt the market with lower-cost, technology-driven models. In Europe these include fast-growing Ticketscript, which received a capital injection from FF&P Private Equity; and Ticketea, a Spain-based competitor that captured series-B funding from Seaya Ventures. Meanwhile, US investors poured cash into a range of early-stage businesses, most notably Eventbrite, which has now achieved a valuation of $1bn.
Such intense investor interest in both incumbents and potential disruptors in the same market is unusual. Venture capitalists are usually attracted by the potential to shake up a market while private equity tends to prefer more mature, stable businesses. It is rare to see both private equity and venture funds simultaneously taking opposing views on the same market, and clearly not everyone can win.
The argument in favour of disruption is a strong one: almost all start-ups are keen to attack the position of Ticketmaster and other established players, arguing that commissions and fees as high as 10-15% of the ticket price are unsustainable in a world where the online technology is ubiquitous.
However, there are few signs that any of the challengers are able to provide the sophisticated wrap-around services needed to compete for the largest accounts. Equally, the integrated model of companies such as ATG means the majority of their sales will always be captive to in-house ticketing operations. There is little sign of the established players quaking in their boots just yet.
Instead, much of the growth is to be found in the under-penetrated long-tail, where self-serve and white-label solutions are accessing a market that has never previously been reached. In the very short term, it may well mean that all investors can feel safe for now. Industry observers suggest that it will take at least two more years before the initial land-grab is complete and the strongest of the disruptors begin to fight for the middle-ground, and that is when things are likely to get interesting.
Hybrid models are likely to emerge, as the strongest players hoover-up some of the start-ups, while Eventbrite, Ticketscript and others develop ever-more sophisticated services and infrastructure. The unusual sight of venture and private equity money going head-to-head is not quite happening yet, but a full-scale collision is perhaps not too far away.