San Diego Ticketmaster's legal problems may have disappeared from the headlines, but they are far from over. The country's biggest sports and entertainment ticket broker is once again facing an antitrust action in court, this one brought against it by a San Diego-based rival.
In the suit, filed February 7 in federal court here, Destinet Service Corporation, which sells tickets primarily to campgrounds and national parks, accuses its mighty competitor of violating the Sherman Anti-Trust Act. Destinet claims a contract it signed last year to provide tickets for the Ringling Brothers and Barnum & Bailey Circus in the Denver market was scrapped due to pressure from Ticketmaster, which it accuses of having "monopoly power in virtually every major market throughout the United States."
"We are not a litigious company," says Jody Bishop, Destinet's marketing director. "But we must take action when faced with monopolistic and destructive practices. This antitrust action is designed to create a level playing field, not just for us, but for consumers. Their interest cannot be served by a monopoly."
The Destinet action comes nearly three years after Ticketmaster found its meteoric rise into a $160 million-a-year company challenged on several fronts. The popular rock band Pearl Jam in May 1994 filed an antitrust complaint, spawning a Justice Department investigation into claims that Ticketmaster uses its market dominance to charge excessive service fees and pressured venue operators and promoters to boycott a Pearl Jam tour the band tried to arrange with alternative ticketing. Two months later, another $185 million antitrust complaint was brought in Los Angeles by five concert fans. Class-action suits claiming Ticketmaster charges "exorbitant fees" were also filed in California, Florida, New York, Georgia, Texas, Massachusetts, Washington, and other states.
The Justice Department probe was dropped in July 1995 by Attorney General Janet Reno, citing the recent entry of new competitors into the ticket-selling business. The other suits were also subsequently dropped.
But now, Destinet - a Canadian company whose American headquarters is in San Diego - has picked up where the federal government left off. In its suit, Destinet claims that on July 10, 1996, just nine days after signing the contract with Ringling Brothers, it was "advised" by circus operators "that Ticketmaster had learned of the contract and was putting pressure on Ringling Brothers to get out of the deal." Later, according to the suit, Ticketmaster indeed "applied pressure" on the circus by raising its service charge in various other cities across the country. On December 17, according to the suit, Ringling Brothers canceled its contract with Destinet, citing poor ticket sales - a reason Destinet claims was "a pretext. The real reason was the pressure placed on Ringling Brothers by Ticketmaster." Destinet is seeking treble damages as well as punitive damages in an unspecified amount.
Steven Kramer, the New York attorney who is representing Destinet in the federal action, won't say exactly what led Destinet officials to conclude that Ticketmaster pressured Ringling Brothers into dropping the contract, other than to say, "We have sources." But Kramer is confident enough about the charges to demand a jury trial. "I want people with common sense to make the decision," he says.
Ticketmaster senior vice president and general counsel Ned Goldstein says Ticketmaster originally had the Ringling Brothers contract for the Denver area and claims Destinet "interfered with our contract" last July, when the circus decided to switch to the San Diego firm. But he dismisses the charges in the suit as groundless, saying, "The suit has no merit."
Goldstein notes that the Destinet suit against Ticketmaster was filed less than two months after Ringling Brothers filed a civil suit in Arapahoe County, Colorado, against Call Home Corp., Destinet's parent. That suit accuses Call Home of failing to turn over more than $330,000 in proceeds from two Denver-area events to which the San Diego company sold tickets last year: the Ringling Brothers and Barnum & Bailey Circus, October 3-14, and Walt Disney on Ice, December 11-15. Both shows are owned by Feld Entertainment of Vienna, Virginia.
"I'm sure their suit against us is in response to Ringling Brothers' breach-of-contract suit against them," Goldstein says. He adds that Destinet/Call Home's management includes several former Ticketmaster executives "who are no longer working for us because of their intelligence and business acumen."
Destinet spokesman Gerry Freeman says the Ringling Brothers suit is a "byproduct of the Ticketmaster action.... We have no quarrel with Ringling Brothers," he says. "Ringling Brothers is really an innocent victim. This is a matter in which Ticketmaster pressured Ringling Brothers to break their contract with Destinet, and Destinet then withheld monies it had collected. We've always enjoyed a good relationship with Ringling Brothers, and we are sure we'll come through with an agreement."
Laura Fitzgerald, director of public relations for Ringling Brothers, says that because both suits are still pending, "we are unable to comment on either of these cases."
The Destinet suit pits Ticketmaster against the descendant of one of its oldest nemeses, Lee DeLay. In 1983 DeLay, under the sponsorship of Padres owner Ray Kroc and capitalized with more than $1 million, founded a computerized ticket service called Teleseat, according to an April 1984 Reader story. At first the baseball team's in-house ticket agency, Teleseat swiftly branched out and within a year had inked exclusive contracts with most of San Diego's sports and entertainment operations, including the San Diego Symphony, Southland Concerts, the Andy Williams Open, and ball teams the Clippers and the Sockers.
But in May 1984, Ticketmaster, then a Scottsdale, Arizona-based upstart, announced plans to enter the San Diego market and almost immediately scored a major coup by signing Avalon Attractions, the Los Angeles concert-promoting firm that at the time produced most of San Diego's big rock shows. Within a few years, the Krocs decided to get out of the ticket business and sold Teleseat to G-Tech, the company that produced tickets for the California Lottery. DeLay formed his own company, Mystix, which in the late 1980s was absorbed by Destinet. DeLay could not be reached for comment.
Destinet was officially founded in 1986 and now claims to be the largest camping reservation service in North America, with a client roster of more than 40,000 campsites in California, Kentucky, Virginia, New York, Ontario, Canada, and elsewhere. Destinet also sells tickets to national and state parks and assorted tourist attractions, including Great Smokey Mountain National Park, Yosemite National Park, Hearst Castle, and Mammoth Caves.
Ticketmaster is not much older but is significantly bigger. In its latest corporate statement, the Los Angeles-based concern claims to have exclusive rights to sell tickets for two-thirds of the seats for U.S. concerts and sporting events. The firm, which pays facility managers and promoters a percentage of the fees it charges, employs more than 1400 people and reported annual sales last year of $161.3 million.
Ticketmaster was founded in 1978 in Scottsdale, when two Arizona State University students came up with a computer program that tracked ticket sales and availability. In 1982, Chicago investor Jay Pritzker, whose family owns the Hyatt Hotels chain, bought the company and hired one of his lawyers, Fred Rosen, to run it. Rosen shifted focus from sporting events to rock concerts and, to one-up all the other little ticketing companies as well as industry leader Ticketron, decided to cut promoters and facility managers in on the take instead of charging them. To do this he hiked service fees.
Rosen had hit on a winning formula, and Ticketmaster became the dominant ticketing company in the country, toppling even Ticketron, whose remains it bought in 1991. Two years later, Microsoft cofounder Paul Allen bought a majority interest in Ticketmaster for $300 million, and since then the company has continued to grow - despite the Pearl Jam controversy and Justice Department probe. Last year Ticketmaster unveiled Ticketmaster Travel and signed Reno Air as its first client.