match.com? Except for intentionally lowering its outlook, where is the BUSINESS SENSE in having that under the Ticketmaster umbrella when the parent operation also includes hotels.com and Expedia. Its a shell game. "Value for shareholders" is also a straw man. Diller has a controlling interest in the company. Whatever lines his pockets better (regardless of the paper bottom line) is what is in the best interest of the company.
The entire company is a profit center. The only reason they have any losses at all is because of Goodwill amortization. A good business doesn't become a bad business just because someone was willing to pay a premium for it.... but a profit can become a loss solely for that reason. Ticketmaster with the same revenues and same expenses but without being purchased by USA Networks would be a profitable company. Heck, the same purchase made today would not have those Goodwill amortizations (as they aren't allowed anymore). So the identical company purchased today instead of several years ago would likely be profitable with the same revenues and same expenses. There's a reason analysts don't just look at the bottom line when judging a company. The bottom line can be deceptive. The overall health of a firm is in the details.
There isn't a single company in America that is entirely comprised of profit centers. They MAY only have losses due to Goodwill, but I'm not convinced that taking out goodwill makes this an entity with a normal profit.
It's not equipment. It's goodwill almost entirely. And I'm not saying they're accounting incorrectly (considering the time of the purchase). I'm saying that just because USA Networks paid a lot for the company doesn't mean that the company is suddenly a bad business. To gauge the true health of the firm, you would likely ignore the goodwill amortization. And determining whether a company is gouging customers or not has nothing to do with how much another company paid to own that company even though that purchase price can be a large component in profit/loss.
So he has a controlling interest...so what? He does not own 100% of the outstanding shares. That being the case, he is legally responsible to the other shareholders. If he fails to maximize value and runs the business irresponsibly he could be the subject of a derivative suit and be liable for damages. That can even happen when the losses are caused by goodwill. He must conduct the business in a prudent manner consistent with the goal of maximizing shareholder value.
I agree with MOST of what you are saying. The real thought in this thread is that the service charges are unfair. All I'm saying is that this company is not making a gross amount of money per share. I like your analysis of the accounting issues, but I do have a question. In the annual report, is there a notation on where the goodwill came from? Are we sure that some of that goodwill is not derived from amounts paid for exclusive contracts with event promoters?
Well, 75% of the company's asset value is goodwill. So even if you wipe out only 75% of their depreciation and amortization, you've turned their operating loss into an operating profit.
Well, that wouldn't be goodwill. Notation 6 on page 26 says the goodwill resulted from the acquisition of Ticketmaster Group by USA Networks in June 1998, the merger of ticketmaster.com and Citysearch in September, 1998, the acquisition of Sidewalk.com assets in September, 1999 and several aquisitions made by Ticketmaster in 1999, 2000 and 2001.
Well I haven't seen the annual report so I was going on the information I had. I appreciate the facts that you bring to the table. Now I know... I still don't see how this makes them evil (you didn't say they are, but others have). What is really funny is that nobody would be complaining if the ticket price was adjusted up to cover the fees without breaking them out on the invoice.
Heck, it's been so long since I took an accounting class, I'm probably misremembering how everything works and reading the financials all wrong. I do recall, though, that it was in advanced accounting that we really delved into goodwill. That (horrible) class was entirely consolodated financial statements. I sometimes have nightmares about that class.
Payments made to entertainment providers for exclusive ticketing agreements could be classified as an asset, and as such would be allocated over time as expenses against revenue. Of course, they also might account it as an expense, depending on the length and type of the agreement. Either way, it is built into your ticket price, it just effects the financial statements differently.
My problem is that Clear Channel is locking up entire markets to competition - a highly un-capitalistic thing to do. Clear Channel not only owns more radio stations than any of its competition (it isn't even close. something like 350 and its next closest is like 70) but it owns the ticket sales vehicles and even the largest outdoor marketing (billboard) companies. As a result, they own virtually all of the advertising for concerts in addition to the ticket sales. What that means for them is that they can dramatically increase their bid for shows AND drive up the cost of tickets because the advertising comes virtually free. In Denver a little over a year ago, Bonnie Raitt was scheduled to come to town. Several local promoters bid between $100,000 and $150,000 for the show. The show was to be held at a theater there and tickets would be sold at the box office for between $25 and $30. Clear Channel stepped in, bid $250,000 and charged between $45 and $55 plus convenience fees through Ticketmaster. Isn't competition supposed to drive the marketplace and, ultimately, the cost DOWN, not UP? How is that possibly good for consumers? How does that reflect market values or capitalism? In many towns, Clear Channel is under investigation by the FCC for owning too many stations. They are only allowed to own something like 6 stations in any local market. There is strong evidence that they have bought up 10 or 12 and sold off the rights to all but 6 of them to companies that are run (through questionable means) by CC creating a tremendous monopoly. In numerous cities, there have been complaints that CC has told advertising clients that, if they want to have ads on ANY CC stations, they better not advertise on non CC stations but, surprise surprise, their ad rates are higher than the average. They are essentially dominating the marketplace. I understand being pro-business and supporting profits. I even understand supporting the free market and competition. What I don't get is supporting practices that are decidedly anti-free market and horrible for consumers. Just because they CAN charge that much for tickets or advertising or because they CAN dominate entire markets doesn't mean it is good for the consumer or for the market.
Right. It could be an intangible asset, but it's never classified goodwill. And that was the specific question.
I dramatize to the extreme to show the problem The point is. . . . Price Gouging is not kewl. Esp in a situation where a company is an overwhelming monopoly. Rocket River
But it's not even the same problem. Food is a necessity of life. Concert tickets are an expensive luxury. Is it gouging when only inDemand televises a prize fight and chrges $59.95 a pop? If inDemand said that the price was $29.95 with a $30.00 service charge you'd complain. Six of one, half a dozen of the other.
If it could be shown that that the cost of providing the service was $40 after everybody was paid, then charging $60 (whichever way it is billed) would indeed be price gouging.
Given that the infrastructure is paid for and the number of buys (including bars which pay $5,000 or more) I don't think it even costs $40 to deliver the fight to you. People want the product and are willing to pay the price. It's this little thing I call capitalism. If people weren't willing to pay it, then the price would go down. When these concerts stop selling out the price will drop. At this point people line up in droves to pay it and the shows sell out in a couple of hours.
