Live Nation Entertainment and Groupon Team to Transform Ticketing

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The ticketing business took a turn for the worse last year — ticket sales down by double digits.

Now Live Nation Entertainment and Groupon are teaming up to rev up the business with a whole new business model, launching a joint venture, called 'GrouponLive.'

The CEOs of both companies — Live Nation Entertainment's Michael Rapino and Groupon's Andrew Mason — joined me in an exclusive interview to discuss why they made this deal and what it'll mean for their businesses.

Rapino says GrouponLive aims to bring in a whole new customer, which seems necessary considering the fact that attendance at Live Nation concerts dropped 9.4 percent in 2010 from 2009. By partnering with the daily deal site LiveNation gets to put its ticket deals in front of Groupon's 70 million registered users, 31 million of which are in North America. And as Rapino explained to me off camera this is a destination site for all types of live events, even ones that aren't run by LiveNation, but by AEG or the like. So by owning a piece of this business, it expands the pool of concerts from which LiveNation can benefit.

Will GouponLive cannibalize Ticketmaster, Live Nation Entertainment's ticketing business? Rapino didn't deny that it was a possibility, saying "it's time maybe we cannibalize ourselves to grow the pie overall." But Rapino doesn't expect GrouponLive to eclipse Ticketmaster, but to be a key ancillary business to fill unsold seats.

For Groupon, this deal with the biggest concert promoter in the world stakes a claim in a massive business. CEO Mason said that this deal is designed to allow the company to live up to its tag line that it offers "The best stuff to do, see, eat, and buy." Up until now, Mason says, the "see" category was sorely lacking — the company didn't offer enough good tickets to events.

This is just the latest in a string of partnerships with national brands that expand Groupon's offerings beyond local mom-and-pop-shops. The company has offered deals with Lionsgate , Gap , and even Virgin America. I asked Mason if today's deal indicates anything about his strategy. He demurred, saying it's all part of the plan to exposure customers to the best things to do in their city. What about IPO rumors about the company, which is expected to generate $3 billion in revenue this year? All Mason would say is: "it's all good in the IPO world."

How did this partnership come about? Madonna's manager Guy Oseary, who's on Groupon's advisory board has been credited with helping develop the partnership. Rapino tells me that when it came time to sit down and negotiate a deal, Oseary did play a role. But it evolved more organically — that last summer when the company struggling with weak sales Rapino says it examined all the ways it could offload discount tickets, and started to test Groupon offers in a markets.

Good news for Groupon-watchers — Live Nation Entertainment will have to disclose the performance of this new venture in its quarterly filings. That should provide a rare window into Groupon's real sales numbers.

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