SeatGeek Co-Founders Eric Waller, Jack Groetzinger, Russ D’Souza.

SeatGeek is potentially giving up an equity stake valued at $30 million as part of a larger ticketing deal with the Dallas Cowboys once the team’s contract with Ticketmaster expires in March, sources familiar with the negotiations tell Amplify.


What a $30 million stake means as a percentage of the company is unclear, since SeatGeek is private and its value is unknown, although a source close to the negotiations said the number was about three-percent of the company’s total equity, which meant a total valuation of $1 billion. We contacted a representative from SeatGeek who could not comment for this story, but when presented with both figures did not say they were inaccurate.

Since the story broke yesterday at Amplify, it has been picked up by ESPN’s sports business writer Darren Rovell, who estimated the equity position in the company was equal to a 15% stake.

He has since walked his story back, later tweeting the the equity stake wasn’t actually tied to the ticketing contract, which had some folks scratching their heads.

Is Dallas Cowboys owner Jerry Jones buying a stake in SeatGeek at the same time he’s signing a long-term ticketing contract with SeatGeek? Is he putting his own money into a company that competes with Live Nation, which brings him the bulk of his concert content?

That’s not inconceivable — Jerry Jones owns a must-play 100,000-seat stadium in the fourth largest metropolitan area in the U.S., and he knows few touring stadium shows would skip a venue that reliably generates eight-figure grosses, especially for popular country artists.

Most likely, the answer lies close to a third option, which isn’t that different than the original premise — that the Cowboys and SeatGeek will try to spin the equity piece as a separate transaction, coincidentally happening at the same time as the ticketing deal, and it’s up to outside observers to decide whether they buy any of it.

After all, if SeatGeek is really giving a chunk of its equity to the Cowboys, the last thing they want to do is publicly tout the deal terms — every team SeatGeek pitches going forward will want a piece of the company. On Tuesday’s (Feb 27) investor earnings call, Live Nation CEO Michael Rapino said he knew exactly what SeatGeek was offering the Cowboys and told investors “You wouldn’t want us to win that deal.”

“When I hear stories about competitors giving substantial portions of their equity to get a contract, to us that would generally imply that it’s not very scalable,” Live Nation President Joe Berchtold said, answering a similar question on the call. “I assume if you’re the next guy talking to them, you’re asking where your big chunk of equity is.”

What SeatGeek isn’t getting with its Cowboys deal is resale rights for the team. Those belong to the NFL, which sold them to Ticketmaster as part of a league-wide, five-year renewal signed in October. SeatGeek isn’t currently an authorized reseller with the NFL or Ticketmaster and faces significant restrictions on how it resells Cowboys tickets. While the company could conceivably become authorized in the future, Ticketmaster will probably make more money selling the Cowboy’s high-margin secondary tickets than SeatGeek will make on primary tickets, which requires investments in hardware and access control and is generally not a big money maker since the best tickets have already been sold to season ticket holders.

They’ll also lose money because they overpaid, according to the Live Nation earnings call, where Rapino essentially said he didn’t match SeatGeek’s offer because it was a “loss leader.”

The same can be said for SeatGeek’s ticketing deal with the New Orleans Saints, which has projected losses between $500,000 to $1 million per season for the company. There’s also questions about how much money, if any, the company makes on its Major League Soccer dealso why would SeatGeek be incentivized to operate at a loss?

First, the barriers to entry in sports ticketing are very high — firms like AXS, and Paciolan have had limited success picking off professional sports teams, but its difficult for the ticketing firms to generate revenue with just a few teams, especially those facing competitive pressure from Ticketmaster which has a vastly larger marketshare — 30 out of the NFL’s 32 teams use Ticketmaster.

So the most obvious way for a firm like SeatGeek to win business is to overpay and essentially buy their way into the market. SeatGeek has a ton of cash right now — since 2014, it has raised at least $150 million from multiple VCs. The plan could be to spend some of that money, buy a few clients and see topline revenue grow quickly, boosting overall valuation — it’s not that different from how companies like Spotify, Netflix and Uber built their businesses.

And signing the Dallas Cowboys is a really big deal and working with Jerry Jones has serious cachet, despite the $2 million in fines he’ll have to pay over past disputes with the NFL. Having that big of a team sign on with SeatGeek could be a disruptive force in ticketing that pushes more teams on to SeatGeek’s platform, even if the company can’t give others the same deal terms it signed with the Cowboys.

The next thing to watch is the official announcement and how the Cowboys and SeatGeek frame the deal. In some respects, they have the benefit of hindsight, watching the industry’s reaction to the agreement unfold in real time, giving SeatGeek a chance to craft their message. But…they better come up with something quick, because the consensus that’s currently percolating in ticketing circles is that SeatGeek overpaid for the Cowboys and it’s now stuck with an unsustainable model going forward. We’re all now patiently waiting to hear what they have to say.