Fandango, MovieTickets thriving at 10-year mark

7:20 PM PST 07/21/2010 by Paul Bond, AP

Companies lining up gadget partners like Xbox, iPad

Fandango blogger Chuck Walton is a few weeks away from completing his quest: attending and reviewing 100 different movies at 100 different theaters in 100 days.

It's one of several endeavors taken up by Fandango to celebrate its 10-year anniversary. Another initiative had the company selling 4,000 movie tickets for a dime each.

But it's not all fun and games at Fandango. Purchasing movie tickets over the Internet has become big business, surprising some analysts who predicted that Fandango and its competitor, MovieTickets.com, would have gone belly-up when the Internet bubble burst at the turn of the century.

The two survived by abandoning their hastily conceived model of giving their services away for free while making money selling ads. As lesser Internet ventures were folding all around them, they embraced the radical notion that folks would pay extra to purchase their movie tickets in advance.

A decade later, millions of moviegoers pay an average of $1 extra to buy a ticket online, and Fandango and MovieTickets split those surcharges with the theaters. Plus, each still sells lots of online ads to film studios that covet their combined audience of about 12 million unique movie fans per month.

The business model works so well that Comcast purchased Fandango three years ago for about $200 million. Since then, the ticketer has doubled its employee ranks to 100 and doubled its office space to 30,000 square feet.

Fandango and MovieTickets, which also celebrates its one-decade anniversary this year -- the first ticket it sold was for "Mission: Impossible II" -- both say they have been consistently profitable for several years running.

What they won't say is how many tickets they sell annually or how much revenue they are driving for exhibitors. Theater owners also don't like to share such information, but industry insiders and public documents indicate that the share for exhibitors could reach as much as $30 million this year and is growing fast.

When Fandango launched in 2000, it sold 250,000 tickets at face value the entire year. Nowadays, it easily can sell that many for a single movie -- while charging a premium.

The pair have become consistent revenue generators for theater chains striving for growth. Deals vary, but insiders say exhibitors get about half of the premium that Fandango and MovieTickets charge.

Overall ticket sales for the exhibition industry have been fairly stagnant in the decade since MovieTickets and Fandango launched, but revenue gains have been coming courtesy of inflationary ticket price increases and 3D premiums. It's not hard to envision a day when online ticketing also will contribute in a meaningful way.

Last year, movie theaters in the U.S. and Canada sold 1.4 billion tickets, about 30 million fewer than in 1999. If Fandango and MovieTickets ever were to persuade 18% of all moviegoers to purchase their tickets online in advance, they could generate $250 million extra to split with exhibitors.

Eighteen percent isn't a random number, it's a Fandango record: 18% of tickets sold to "New Moon" opening weekend were purchased via Fandango, but sales plummeted quickly thereafter, as they usually do.

So if the online ticketers want 18% or more of all ticket sales, they first have to figure out how to attract consumers beyond opening weekend. It's not unheard of, as those looking to see "Avatar" and "Alice in Wonderland" were still hitting up Fandango and MovieTickets several weeks into their theatrical runs.

Judging from the hoopla at Comic-Con this week, both services undoubtedly will be attracting fanboys in droves for films starring the likes of Thor, Captain America, the Green Hornet and Green Lantern. Zack Snyder is showing scenes from his "Sucker Punch" at the San Diego confab, and the ticket sellers are there taking notes.

Last year at Comic-Con, "Avatar" was generating such massive buzz that it encouraged Fox to allow MovieTickets and Fandango to begin selling tickets three months before the film opened. It remains to be seen whether Warner Bros. sees a need to do likewise for "Sucker Punch," which opens in March.

That's an ancillary benefit to studios: The online ticketers can tell them if their marketing is working. Just as Fandango knew several months in advance that "Avatar" was going to open huge, for example, it also knew that "The Sorcerer's Apprentice" was in trouble.

The online ticketers also benefit exhibitors, beyond the extra cash they throw their way, by helping them staff their theaters more efficiently.

"Just imagine the benefit of knowing you have sold out certain showings in advance," MovieTickets CEO Joel Cohen said. "And no one wants to go to a movie and see a 'sold out' sign."



But MovieTickets and Fandango aren't relying solely on superhero and event movies to propel their growth. Both are looking to make their services ubiquitous for Web users.

MovieTickets said this week that it will be integrated into Xbox 360 Live and said last that month it struck a multiyear agreement to provide ticketing services to IMDb.com. Other affiliates include Yahoo, AOL, MSN and 200 others.

It also has an exclusive relationship with Moviefone, which AOL purchased for $400 million six years ago. Moviefone celebrates its 20th anniversary this year with a relaunch of its Web site and telephone service in September.

"It's an opportunity to put the phone back in Moviefone," said Kerry Trainor, senior vp of AOL Media, Entertainment.

Fandango has fewer big affiliate deals but has been lining up gadget partners, including Apple's iPhone and iPad, Google's Android, BlackBerry, Palm Pre, TiVo, Dish Network and a not-yet-announced partnership with Windows Phone 7.

Mobile ticketing, whereby folks can simply show a barcode on their cell phone to gain entry into a theater, is one new way the duopoly is driving convenience and usage. Another is reserved seating.

Still in its infancy, the sporadically available service is especially popular with groups wanting several seats together. Why would any parent hosting a birthday party at a showing of "Toy Story 3" not take advantage of reserved seating if it were available?

Disney, in fact, has done more dabbling in online movie ticketing than most other studios. It teamed with Fandango for a buy one, get one free promotion for "Sorcerer's Apprentice," and for "Toy Story 3" it created Disney Tickets Together, a Facebook application enabling friends to easily arrange a group moviegoing experience.

"You'll be seeing a lot more applications like this emerge over time," a Disney spokesman said.

Fandango and MovieTickets say they have the wind at their backs, having successfully pursuaded consumers to pay more for advanced tickets and having struck lucrative deals with exhibitors.

"We have a real business," Cohen said. "The barriers to entry are numerous."

Fandango COO Rick Butler added that business conditions have improved dramatically in just the past couple of years despite a poor overall economy because consumers are altering their moviegoing behavior in several ways, such as:

-- Fandango users who typically purchased the same day they attended a movie now are using the service weeks earlier.

-- They are using the site to research movies months before they open.

-- They are printing tickets at home in record numbers.

-- A year ago, only 2% of its customers were using the mobile application, but that will climb to about 10% by the end of this year.

Said Butler, "Our main challenge is on Hollywood's shoulders: to release good films."
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