In its attempts to find a buyer by June 9, Pandora officials are weighing a number of options – including a potential sale of Ticketfly, according to a recent report in Bloomberg.
The news comes after CEO Tim Westergren announced Pandora had been thrown a lifeline last week through a $150 million investment from private-equity firm KKR & Co. He also announced the creation of an independent board committee to explore a sale of the company. Now Pandora officials are racing against the clock to execute a potential sale before the deal with KKR closes in June. If the company doesn’t find a buyer, it’s also considering selling off Ticketfly, getting out of the ticketing world and concentrating on the music-streaming business.
A sale would be a surprise move — Pandora has only owned Ticketfly since October 2015, purchasing the ticketing company for $450 million in a deal that was supposed to link streaming data with ticket-buying to create a next-generation event discovery tool. Ticketfly has seen accelerated growth under the arrangement, signing a number of high-profile clients that include Jam Productions and The Anthem, Seth Hurwitz’s new venue in Washington D.C., but the deal has never been fully embraced by some of Pandora’s large institutional investors who think it distracts from Pandora’s key vertical in streaming music.
What could a selloff by Pandora mean for Ticketfly? Below are three things to think about when looking at the impact of a potential sale.
Pandora and Ticketfly’s Futures Are Tied Together (For Now)
Sure, Pandora paid a premium for Ticketfly and much of the media has been fixated on the $450 million price tag. Most analysts agree that if Pandora were to pursue a sale of Ticketfly, it would do so at a significant loss. Many believed Pandora overpaid for Ticketfly in 2015 and because of Pandora’s distressed financial position, the company has little leverage to demand a high premium for the ticketing service.
More importantly, the two companies’ futures are tied together and unwinding them would likely devalue Ticketfly, who has been selling new clients on the power of the Pandora integration.
“This is the beginning of the realization of the promise of the Ticketfly-Pandora combination,” Ticketfly CEO Andrew Dreskin told Amplify in June when some of the company’s new features were starting to take shape. “This is going to change the way artists and promoters can market and sell tickets to shows. Pandora is the largest and the most powerful music platform in the United States with the most engaged audience and presents an amazing opportunity for venues and promoters to reach this audience.”
Unwinding the progress the two have made in the last year would be a serious strategic setback for Ticketfly and unravel a key selling point to close clients. It’s possible that Ticketfly and Pandora could continue to work together even if the company did sell off Ticketfly, but the disruption would be significant and require a serious recalibration and mean an uncertain future for the ticketing company.
Ticketfly is doing really well under Pandora
The ticketing company may represent only a fraction of Pandora’s revenue, but it was one of the company’s strongest units in 2016. According to an earnings call in February, Ticketfly brought in $86.6 million in revenue in 2016, representing year-over-year growth of 25 percent.
“In 2016, Ticketfly generated more than half a billion dollars in gross transaction value,” Westergren said on the call, noting Ticketfly sold “six million new tickets, an increase of approximately 25 percent year-over-year in gross transaction value. In total, Ticketfly sold over 15 million fee-generating tickets in 2016 to more than five million unique customers.”
And remember that when Pandora announced layoffs late last year, Ticketfly employees were excluded from the cuts. Despite Pandora’s ongoing cash problems, Ticketfly has signed a number of clients including the 110-year-old Civic Theatre in New Orleans managed by Bowery Presents, the Charleston Music Hall, which is now booked by NS2 and Nashville’s Mercy Lounge, Cannery Ballroom and High Watt.
Bottom line: the two companies have seen strong growth as a combined platform. Selling off Ticketfly at a loss for short-term cash gain seems premature and short-sighted.
Nathan Hubbard’s Read on The Situation is Wrong
Ticketfly officials have been unusually hush-hush about a potential sell-off by Pandora — Amplify reached out directly to Dreskin for comment and was handed off to the company’s PR team who informed us “we don’t comment on rumor or speculation.”
Well, we do! And so does former Ticketmaster CEO Nathan Hubbard, who went on a tweet-storm Monday about a potential Pandora sale. You can read the entire thread here, but the gist of his thoughts are this: Pandora’s attempt to vertically integrate Ticketfly into its platform is flawed because of Ticketfly’s large but limited client base. Fans, he argues, want tickets for mega-tours like Lady Gaga, Bruno Mars, the Weeknd and Kendrick Lamar, and since such tours are organized by Live Nation and AEG, who own their own ticketing companies, Pandora is missing the mark and not connecting fans with the concerts they want to see.
Here’s the thing — Live Nation doesn’t need help selling Lady Gaga or Bruno Mars tickets. They sell themselves. The growth opportunity in ticketing will always be distressed inventory and helping promoters connect with potential fans who were not aware of their events but who might be persuaded to buy a ticket.
By integrating with Pandora, Ticketfly gives its customers an advantage over its competitors — the ability to get in front of Pandora’s huge listener base and connect them with events based on their listening preferences. It’s never been about connecting fans with every single live event — it’s about notifying fans of concerts they might not have been aware of and incrementally increasing sales for clubs, theaters and festivals on the Ticketfly platform.
If Pandora was trying to create an all-encompassing events site, then the Ticketfly purchase would not have made sense. But as a platform to drive incremental sales and connect promoters and event organizers with new customers, the integration does appear to be working. Ticketfly’s own financial reporting proves there’s still plenty of upside potential to be achieved from the partnership.