Ticket Retailer ETM Pulls Plug on Its Challenge to Ticketmaster

ETM Entertainment Network Inc., the Costa Mesa start-up that pushed its technology to transform the ticketing business, said Monday that it has run out of money and has handed over all of its business contracts to its biggest foe, industry giant Ticketmaster.

Tickets for the Los Angeles Dodgers, the San Diego Sports Arena and a number of other teams and events that helped give ETM credibility will be handled by Ticketmaster while the Pasadena company tries to renegotiate those contracts.

ETM’s demise, which comes at a time when investors are becoming more selective about what dreams they buy, follows recent failed attempts by company executives to raise additional financing.

The fate of the once-promising but financially struggling company is emblematic of “dot-com” companies that struggle--and often fail--to change traditional business models and still make a profit.

“We have to cease business,” said Peter Schniedermeier, president and co-founder of ETM. “We wanted to continue. But financially, we just ran out and we couldn’t find any more private funding.”

Executives at Ticketmaster, a division of USA Networks Inc., declined to comment Monday.

ETM will lay off all of its 100 employees in the next few weeks, Schniedermeier said. He and several other executives will continue to operate a 30-person ETM subsidiary called ICON, which sells computerized ticketing systems to movie theater chains.

Schniedermeier said that ETM has contacted all of its clients, and that Ticketmaster hopes to roll the ones that wish to sign up to its service by week’s end.

The San Diego Sports Arena, one of ETM’s largest clients, said repeated breakdowns in the ticket company’s computer system strained their relationship to the point that the arena was considering another firm to distribute tickets, said Ernie Hahn, the sports arena’s general manager.

Customers buying tickets to one of the 175 events handled at the 13,000-seat arena often waited in long lines because of snafus, Hahn said. When singer Ricky Martin appeared at the arena last November, for instance, ETM’s system had trouble handling the volume of ticket requests that the concert generated. Hahn said it took three hours for the venue to sell out, compared with only about a half-hour at other sites around the country.

“The very last situation you expect to be in with a ticketing company is one that has trouble selling tickets,” Hahn said. “But we were having breakdowns left and right.”

He said the arena already has agreed to terms with Ticketmaster on a long-term deal.

ETM had approached Ticketmaster several months ago to inquire whether it was interested in acquiring ETM, said sources close to the negotiations. Talks, though, fell through, and ETM decided to try to raise financing on its own.

ETM burst into the competitive ticketing business in the mid-1990s when the popular rock band Pearl Jam began using its high-tech system to sell tickets as part of an ill-fated boycott of Ticketmaster.

From there, ETM lured the Los Angeles Dodgers, persuading the baseball team to drop its 14-year relationship with Ticketmaster. The upstart Orange County company sold tickets through electronic kiosks in Southern California grocery stores.

But the deal wasn’t exclusive. The Dodgers control the sale of more than 22,000 tickets per game, and team executives acknowledged that sales through ETM’s kiosks were expected to be a small fraction of total sales. In fact, said Billy Hunter, the team’s director of ticket operations, ETM accounted for less than 5% of overall sales.

Hunter said he had not talked with ETM as of late Monday afternoon. He said the Dodgers would “explore other ticketing avenues,” though no decision has been made.

The Dodgers had signed up with ETM because, as officials said, “they’re heading in the direction of the future of ticket sales.”

Indeed, ETM painted an interactive vision of how consumers could buy tickets: By inserting a credit card into a slot in the kiosk, shoppers could view diagrams of, say, Dodger Stadium and see where seats are located before making a purchase.

ETM once had hopes of going public. In 1996, it filed an initial stock offering statement with federal regulators, saying it wanted to offer 2.5 million shares at $10 per share to raise $25 million, which would be used to complete the development of its automated ticket sales system.

The statement also noted that ETM, formed in April 1994, lost nearly $4.4 million through the end of 1995, while generating revenue of $473,000. The company’s outside accountants questioned whether it could continue as a going concern. But a lack of internal focus and uncertainty about the future persuaded ETM officials to avoid the stock market, sources said.

While deals with sports teams like the Dodgers and the New York Mets helped ETM establish both credibility and a physical presence in big markets, analysts noted that sports contracts usually aren’t as lucrative as entertainment deals, where service charges can be much higher.