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FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 2000.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TICKETMASTER ONLINE-CITYSEARCH, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 95-4546874
(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
790 E. COLORADO BOULEVARD, SUITE 200
PASADENA, CALIFORNIA 91101
(626) 405-0050
(Address including zip code, telephone number, including area
code, of Registrant's principal executive offices)
CHARLES CONN
CHIEF EXECUTIVE OFFICER
790 E. COLORADO BOULEVARD, SUITE 200
PASADENA, CALIFORNIA 91101
(626) 405-0050
(Name, address, including zip code, and Telephone number,
including area code, of agent for service)
Copies to:
Kenneth M. Doran, Esq. Richard A. Fink, Esq.
Gibson, Dunn & Crutcher LLP Brobeck, Phleger & Harrison LLP
333 South Grand Avenue 38 Technology Drive
Los Angeles, California 90071 Irvine, California 92618
(213) 229-7000 (949) 790-6300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. / /
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / / ____________
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ___________________
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. / /
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CALCULATION OF REGISTRATION FEE
========================================== ================== ================= ==================== =================
Proposed Maximum Proposed Maximum
Title of Shares Amount To Be Aggregate Price Aggregate Offering Amount of
To Be Registered Registered Per Share(1) Price Registration Fee
- ------------------------------------------ ------------------ ----------------- -------------------- -----------------
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Class B Common Stock, 243,620 $42.8125 $10,429,981 $2754
par value $.01 per share
========================================== ================== ================= ==================== =================
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(1) The price of $42.8125 was the average of the high and low prices of the
Class B Common Stock on the Nasdaq National Market System on January 26,
2000, and is set forth solely for the purpose of computing the registration
fee pursuant to Rule 457(c).
-----------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED JANUARY , 2000
243,620 SHARES
TICKETMASTER ONLINE--CITYSEARCH, INC.
CLASS B COMMON STOCK
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This prospectus relates to the public offering of 243,620 shares of Class B
Common Stock, par value $.01 per share, of Ticketmaster Online-CitySearch,
Inc. which are held by one of our current stockholders. The selling
stockholder intends to employ a broker-dealer to sell its shares.
The prices at which this stockholder may sell the shares will be determined
by the prevailing market price for the shares or in negotiated transactions.
We will not receive any of the proceeds from the sale of the shares, except
as described in "Use of Proceeds."
Our Class B Common Stock is listed on the Nasdaq National Market under the
symbol "TMCS." On January 26, 2000, the average high and low price of our
Class B Common Stock was $42.8125 per share.
Investing in the Class B Common Stock involves risks. See "Risk Factors"
beginning on page 4.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is truthful and complete. Any representation to the contrary
is a criminal offense.
----------------
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. The selling stockholder is offering to sell,
and seeking offers to buy, shares of our Class B Common Stock only in
jurisdictions where offers and sales are permitted. The information contained
in this prospectus is accurate only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or of any sale of the
Class B Common Stock. In this prospectus, references to "Ticketmaster
Online-CitySearch," "we," "us" and "our" refer to Ticketmaster
Online-CitySearch, Inc. and its subsidiaries.
The date of this prospectus is January __, 2000
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TABLE OF CONTENTS
PAGE
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PROSPECTUS SUMMARY....................................................................1
THE COMPANY...........................................................................1
RECENT DEVELOPMENTS...................................................................2
THE OFFERING..........................................................................3
RISK FACTORS..........................................................................4
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS....................................24
USE OF PROCEEDS......................................................................24
SELLING STOCKHOLDER..................................................................24
PLAN OF DISTRIBUTION.................................................................25
LEGAL MATTERS........................................................................26
EXPERTS..............................................................................26
WHERE YOU CAN FIND MORE INFORMATION..................................................26
INCORPORATION OF DOCUMENTS BY REFERENCE..............................................27
</TABLE>
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PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION CONTAINED IN THIS PROSPECTUS, INCLUDING THE CONSOLIDATED
FINANCIAL STATEMENTS AND THE NOTES TO THE FINANCIAL STATEMENTS AND OTHER
INFORMATION INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
THE COMPANY
We have combined CitySearch and Ticketmaster Online to create a
leading provider of local city guides, local advertising and live event
ticketing on the Internet. CitySearch was incorporated in September 1995 and
launched its first local city guide in May 1996. Ticketmaster Online was
formed in 1993 to administer the online business of Ticketmaster Corporation
and began selling live event tickets and related merchandise online in
November 1996. Prior to the merger, Ticketmaster Online was operated as a
wholly-owned subsidiary of Ticketmaster Corporation, a leading provider of
live event automated ticketing services in the United States. We are
integrating our local CitySearch city guides with our Ticketmaster Online
live events ticketing and merchandising distribution capabilities to offer
online ticketing, merchandise, electronic coupons and other transactions to a
broader audience of consumers. The CitySearch city guides provide up-to-date
information regarding arts and entertainment events, community activities,
recreation, business, shopping, professional services and news/sports/weather
to consumers in metropolitan areas. Ticketmaster Online offers consumers
up-to-date information on live entertainment events and a convenient means of
purchasing tickets and related merchandise on the Web for live events in 44
states and in Canada and the United Kingdom. Consumers can access the
Ticketmaster Online service at WWW.TICKETMASTER.COM and from CitySearch owned
and operated city guides at www.citysearch.com and through numerous direct
links from banners and event profiles. Subject to specific limitations,
Ticketmaster Online is the exclusive agent for Ticketmaster Corporation for
the online sale of tickets to live events presented by Ticketmaster
Corporation's clients.
We intend to accelerate the expansion of different versions of the
CitySearch city guides into new local territories. We include selected
CitySearch editorial content on the Ticketmaster Online Web site, thereby
providing additional information to assist purchasing decisions. We believe
that by expanding our branded network of local city guides and increasing the
sales of tickets sold online, our Web sites will increasingly attract local,
regional and national advertisers and local consumers seeking to transact on
our Web sites. We have recently expanded our Internet offerings by purchasing
CityAuction, Inc., an online person-to-person auction company, two leading
online personals companies, Match.com, Inc. and Web Media Ventures LLC (d/b/a
One & Only Network), and the arts and entertainment portion of Sidewalk.com.
We have two classes of authorized Common Stock outstanding, Class A
Common Stock and Class B Common Stock. On December 2, 1998, we filed a
Registration Statement on Form S-1 for our initial public offering of
8,050,000 shares of Class B Common Stock. As of January 10, 2000, there were
approximately 52,815,836 shares of Class A Common Stock outstanding and
approximately 32,139,532 shares of Class B Common Stock outstanding. The
rights of the holders of Class A Common Stock and Class B Common Stock are
substantially identical, except with respect to voting, conversion and
transfer. Except as otherwise required by applicable law, each share of Class
A Common Stock entitles its holder to 15 votes and each share of Class B
Common Stock entitles its holder to one vote on all matters submitted to a
vote or for the consent of stockholders. Except as otherwise required by
applicable law, the Class A Common Stock and the Class B Common Stock vote
together as a single class on all matters submitted to a vote or for the
consent of stockholders. We have also authorized Class C Common Stock which
is nonvoting and of which no shares are issued and outstanding.
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We are currently a direct, majority-owned subsidiary of Ticketmaster
Corporation, an Illinois corporation, which is an indirect, wholly-owned
subsidiary of USA Networks, Inc., a Delaware corporation, which is referred
to in this prospectus as USAi. USAi beneficially owns 43,782,544 shares, or
approximately 52%, of our total outstanding Common Stock, representing
approximately 76% of the total voting power of the outstanding Common Stock.
Our principal executive offices are located at 790 E. Colorado
Boulevard, Suite 200, Pasadena, California 91101, and our telephone number at
that address is (626) 405-0050.
RECENT DEVELOPMENTS
INVESTMENT IN ACTIVEUSA.COM AND RACEGATE
On December 16, 1999, we completed the purchase of 6,031,128 shares
of preferred stock of ActiveUSA.com, Inc. (formerly known as RaceGate.com,
Inc.), a Delaware corporation, an online participatory sports registration
and information company. In connection with and immediately preceding our
investment, ActiveUSA.com, Inc., a Florida corporation engaged in the same
business as RaceGate.com, merged with and into a wholly owned subsidiary of
RaceGate.com and pursuant to the merger RaceGate.com's name was changed to
ActiveUSA.com. The total consideration we paid to ActiveUSA.com for the
preferred stock is valued at $15.5 million, consisting of shares of our Class
B Common Stock with a fixed value of $10 million, $2.5 million in cash, and
$3.0 million in services we are to provide to ActiveUSA.com under a
distribution agreement.
Upon the closing of our investment, we issued 243,620 shares of our
Class B Common Stock to ActiveUSA.com. These shares have been deposited into
escrow and are being registered pursuant to this prospectus. Pursuant to our
agreement with ActiveUSA.com, the escrow agent will deliver $10 million of
the net proceeds from the sale of the shares to ActiveUSA.com and the
remainder, if any, of the net proceeds will be delivered to us. If the net
proceeds from the sale of the shares are less than $10 million, we will make
up the difference to ActiveUSA.com in cash. In the event the sale of the
shares is expected to generate net proceeds in excess of $10 million,
ActiveUSA will elect to sell only that number of shares which are expected to
yield net proceeds of $10 million. At any time prior to the sale of the
shares, we have the option to pay ActiveUSA.com $10 million in cash and have
the shares returned to us.
INVESTMENT BY TICKETMASTER CORPORATION
On December 1, 1999, Ticketmaster Corporation purchased 1,302,401
shares of our Class B Common Stock for an aggregate purchase price of
$40,000,000. The purchase price per share of approximately $30.71 represents
the average closing price of our Class B Common Stock over the five trading
days immediately preceding the investment.
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THE OFFERING
THE FOLLOWING SUMMARIZES THE SELLING STOCKHOLDER'S OFFERING OF OUR CLASS B
COMMON STOCK.
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<S> <C>
Class B Common Stock to be offered
by the selling stockholder................................. 243,620 shares
Common Stock to be outstanding after the offering:
CLASS A COMMON STOCK.............................. 52,815,836 shares
CLASS B COMMON STOCK.............................. 32,139,532 shares
Total Common Stock................................ 84,955,368 shares
Use of Proceeds............................................ We will not receive any proceeds from
the sale of the shares, except as
described in "Use of Proceeds."
Nasdaq National Market Symbol.............................. TMCS
</TABLE>
The information concerning outstanding Common Stock above is as of
January 10, 2000. Each share of Class A Common Stock automatically converts
into one share of Class B Common Stock upon transfer.
Unless otherwise stated, all information contained in this
prospectus excludes:
(1) 1,896,582 shares of Class A Common Stock issuable upon the
exercise of options outstanding at January 10, 2000 at a
weighted average price of $5.04 per share under our 1996 Stock
Plan;
(2) 3,709,643 shares of Class B Common Stock issuable upon the
exercise of options outstanding at January 10, 2000 at a
weighted average price of $24.39 per share under our 1998
Stock Plan;
(3) 1,991,275 shares of Class B Common Stock issuable upon the
exercise of options outstanding at January 10, 2000 at a
weighted average price of $39.38 per share under our 1999
Stock Plan; and
(4) an aggregate of 2,199,191 shares of Class B Common Stock
available for future grant or issuance as of January 10, 2000
under our 1998 Stock Plan, our 1999 Stock Plan and our 1998
Employee Stock Purchase Plan.
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RISK FACTORS
An investment in our Class B Common Stock offering is very risky.
You should carefully consider the following risk factors in addition to the
remainder of this prospectus before purchasing the Class B Common Stock. This
prospectus contains forward-looking statements that involve risks and
uncertainties. Many factors, including those described below, may cause
actual results to differ materially from anticipated results.
WE HAVE A HISTORY OF LOSSES, WE EXPECT FUTURE LOSSES AND WE CANNOT ASSURE YOU
THAT WE WILL ACHIEVE OR MAINTAIN PROFITABILITY.
We incurred net losses of $17.2 million and $72.4 million for the
eleven months ended December 31, 1998 and the nine months ended September 30,
1999, respectively. We expect to expend significant financial and management
resources on the roll-out of our service in new CitySearch owned and operated
and partner- led markets, site and content development on our CitySearch.com,
CityAuction.com, Match.com and Ticketmaster.com sites, integration of the
CitySearch, CityAuction, Match.com, One & Only Network and Ticketmaster
Online services, strategic relationships, technology and operating
infrastructure. As a result, we expect to incur significant additional losses
and continued negative cash flow from operations for the foreseeable future.
We believe that our future profitability and success will depend in
large part on, among other things:
- our ability to generate sufficient revenues from online
ticketing, online auctions, sales of our Web sites to
businesses and from the licensing of our technology and
business systems to partners setting up our services in
partner-led markets;
- the ability of Ticketmaster Corporation to maintain existing
relationships and enter into new relationships with live
event venues, sports franchises, promoters and other clients
for which it sells live event tickets;
- the ability of Ticketmaster Corporation to obtain or retain
for us the right to sell live event tickets and related
merchandise online;
- our ability to effectively maintain existing relationships
with our media partners;
- our ability to successfully enter into new strategic
relationships for distribution and increased usage of our
services;
- our ability to provide superior customer service;
- our ability to continue to develop and upgrade our
technologies and commercialize our services incorporating
these technologies; and
- and our ability to generate sufficient online traffic and
sales volume to achieve profitability.
As a result of the merger of Ticketmaster Online and CitySearch in
September 1998, we recorded a significant amount of goodwill which will
adversely affect our earnings and profitability for the foreseeable future.
We recorded an aggregate of $315.9 million of goodwill and other intangibles,
$154.8 million of which related to the transaction in which Ticketmaster
Group, Inc. became a wholly-owned subsidiary of USAi, and is to be amortized
through 2008, and $161.1 million of which related directly to the merger of
Ticketmaster Online and CitySearch and is to be amortized through 2003. In
addition, our acquisitions of CityAuction, Match.com and One & Only resulted
in an aggregate of $107.1 million in goodwill which will be amortized through
2004. To the extent the amount of recorded goodwill is increased or we have
future losses and are unable to demonstrate our ability to
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recover the amount of goodwill recorded during these time periods, the period
of amortization could be shortened, which may further increase annual
amortization charges. In this case, our business, financial condition and
results of operations could be materially and adversely affected. In
addition, our acquisition of the Sidewalk assets resulted in $333 million of
amortizable allocated value to the assets, which will be amortized over five
years.
Furthermore, we completed our initial public offering in December
1998 and have a limited history as a company with public reporting
obligations. We are hiring additional management personnel and are expanding
our operating systems to address these reporting obligations. To the extent
these expenditures precede and are not subsequently followed by increased
revenues, our business, financial condition and results of operations could
be materially and adversely affected.
OUR ONLINE TICKETING SERVICE IS DEPENDENT UPON OUR RELATIONSHIP WITH
TICKETMASTER CORPORATION
In connection with the merger of CitySearch and Ticketmaster Online,
Ticketmaster Online, Ticketmaster Corporation and USAi entered into a license
agreement which designates, subject to certain limitations, Ticketmaster
Online as Ticketmaster Corporation's exclusive agent for online live event
ticket sales and as its non-exclusive agent for the online sale of
merchandise.
For the foreseeable future, we anticipate that a majority of our
revenues will be derived from the online sale of tickets. We also expect that
we will continue to derive a substantial portion of our revenues from per
ticket convenience charges and per order handling charges paid by consumers
in connection with online purchases of tickets to live events presented or
promoted by clients of Ticketmaster Corporation We do not have contractual
relationships with the entities for which our Ticketmaster Online service
sells tickets as Ticketmaster Corporation's agent and we are restricted under
the license agreement from having such relationships, whether with current
Ticketmaster Corporation clients or its potential clients. Accordingly, our
future revenues and business success are dependent on Ticketmaster
Corporation's ability to maintain and renew relationships with its existing
clients and to establish relationships with additional clients.
For the year ended December 31, 1998, Ticketmaster Corporation
processed ticket sales for over 3,750 clients. Approximately 20% of
Ticketmaster Corporation's client contracts are subject to renewal each year.
We are dependent upon Ticketmaster Corporation's ability to enter into and
maintain client contracts on terms that are favorable to Ticketmaster
Corporation and our Ticketmaster Online service. There can be no assurance
that Ticketmaster Corporation will be able to enter into or maintain client
contracts on such terms.
All of our online ticket sales are processed through Ticketmaster
Corporation's systems. Under the license agreement, Ticketmaster Corporation
is generally obligated to provide order fulfillment services at least at the
same level as such services were generally provided as of the date of the
license agreement. The license agreement obligates Ticketmaster Corporation
to process a specified number of tickets sold online each year through
December 31, 2001. As a result, our future online ticketing revenues are
dependent upon Ticketmaster Corporation's ability to process online ticket
sales in an accurate and timely manner. While we believe that, due to our
perpetual right to serve as Ticketmaster Corporation's exclusive agent for
online live event ticket sales, Ticketmaster Corporation has a substantial
interest in its relationship with us, there can be no assurance that
Ticketmaster Corporation will provide fulfillment services to us in excess of
the requirements of the license agreement and, in particular, after December
31, 2001.
Our ability to generate ticket and merchandise sales on our
Ticketmaster Online Web sites is also dependent in part on Ticketmaster
Corporation's ability to maintain and enhance the Ticketmaster brand name.
Any failure on the part of Ticketmaster Corporation to maintain its existing
base of clients, to establish relationships with new clients upon terms
favorable to our Ticketmaster Online service, to obtain or retain for us the
right to sell tickets and merchandise online for Ticketmaster Corporation's
clients, to process our online ticket sales in a timely
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and accurate manner or at levels necessary to support our business or to
maintain and enhance the Ticketmaster brand name would have a material
adverse effect on our business, financial condition and results of operations.
WE ARE CONTROLLED BY USAI.
We are currently a direct, majority-owned subsidiary of Ticketmaster
Corporation, which is an indirect wholly-owned subsidiary of USAi. As of
January 10, 2000, USAi owned approximately 52% of our total outstanding
Common Stock, representing approximately 76% of the total voting power of our
total outstanding Common Stock. As a result of its ownership of Class A
Common Stock, USAi generally has the ability to control the outcome of any
matter submitted for the vote or consent of our stockholders, except where a
separate vote of the holders of Class B Common Stock is required by Delaware
law. Subject to applicable Delaware law, USAi is generally not restricted
with regard to its ability to control the election of our directors, to cause
the amendment of our Amended and Restated Certificate of Incorporation, or
generally to exercise a controlling influence over our business and affairs.
This control relationship may have the effect of delaying or preventing a
change in control of our company and might adversely affect the market price
of the Class B Common Stock.
Subject to applicable Delaware law, USAi could elect to sell all or
a substantial portion of its equity interest in us to a third party, which
would represent a controlling or substantial interest in us, without offering
to our other stockholders the opportunity to participate in such a
transaction. In the event of a sale of USAi's interest to a third party, that
third party may be able to control us in the manner that USAi is able to
control us, including the ability to control the election of directors.
USAi is currently controlled by Barry Diller, who is also a director
of our company. Mr. Diller is the Chairman and Chief Executive Officer of
USAi. Under stockholder and governance agreements with Liberty Media and
Universal Studios, two other significant USAi stockholders, Mr. Diller
generally has the right to control the outcome of any matter requiring the
approval of USAi stockholders, other than with respect to specified
fundamental changes relating to USAi or its subsidiaries. To engage in these
fundamental changes, the approval of each of Mr. Diller, Liberty Media and
Universal Studios is generally required. Copies of the governance and
stockholders agreements among USAi, Universal Studios, Liberty Media and Mr.
Diller have been filed with the Securities and Exchange Commission as
Appendices B and C, respectively, to USAi's Definitive Proxy Statement, dated
January 12, 1998 and are available from the SEC. Mr. Diller does not have an
employment agreement with USAi, although he has been granted options to
purchase a substantial number of shares of USAi common stock. The vesting of
the unvested portion of these options, which should occur in the next two
years, is conditioned on Mr. Diller remaining at USAi. If Mr. Diller no
longer serves in his positions at USAi, generally Universal Studios and
Liberty Media will be able to control USAi. Any change in the governance,
management, operations or business of USAi could have a material adverse
effect on our relationship with USAi and Ticketmaster Corporation, and could
materially and adversely affect our business, financial condition and results
of operations.
CONFLICTS OF INTEREST MAY ARISE BETWEEN OUR COMPANY AND USAI.
Conflicts of interest may arise between us, including our
Ticketmaster Online service, on the one hand, and USAi and its affiliates,
including Ticketmaster Corporation, on the other hand, in areas relating to
past, ongoing and future relationships and other matters. These also include:
- corporate opportunities;
- indemnity arrangements;
- tax and intellectual property matters;
- potential acquisitions or financing transactions;
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- sales or other dispositions by USAi of shares of the our
Class A Common Stock held by it; and
- the exercise by USAi of its ability to control our
management and affairs.
These conflicts also may include disagreements regarding our license
agreement with Ticketmaster Corporation, including possible amendments to, or
waivers of provisions of, the agreement. Due to USAi's ability to control our
board of directors and subject to Delaware law, USAi may be able to effect
amendments without seeking the approval of any other party. These amendments,
modifications or waivers may adversely affect our business, financial
condition and results of operations.
Ownership interests of our directors or officers in the USAi common
stock, or service as both a director or officer of us and a director, officer
or employee of USAi, could create or appear to create potential conflicts of
interest when directors and officers are faced with decisions that could have
different implications for us and USAi. Several of the members of our board
of directors are also directors, officers or employees of USAi.
In addition, USAi is engaged in a diverse range of media and
entertainment- related businesses, including businesses engaged in electronic
and online commerce including Home Shopping Network and its USA Interactive
business. These businesses may have interests that conflict or compete in
some manner with our businesses. Subject to applicable Delaware law, USAi is
under no obligation, and has not indicated any intention, to share any future
business opportunities available to it with us except as expressly provided
by our license agreement with Ticketmaster Corporation. Our Amended and
Restated Certificate of Incorporation also includes provisions which provide
that:
- USAi shall have no duty to refrain from engaging in the same
or similar activities or lines of our business, thereby
competing with us;
- USAi, its officers, directors and employees shall not be
liable to us or our stockholders for breach of any fiduciary
duty by reason of any activities of USAi in competition with
us; and
- USAi shall have no duty to communicate or offer corporate
opportunities to us and shall not be liable for breach of
any fiduciary duty as a stockholder of us in connection with
these opportunities, provided that the relevant procedures
set forth in our Amended and Restated Certificate of
Incorporation are followed.
There can be no assurance that any conflicts that may arise between
us and USAi, any loss of a corporate opportunity to USAi that might otherwise
be available to us, or any engagement by USAi in any activity that is similar
to our businesses will not have a material adverse effect on our business,
financial condition and results of operations or our other stockholders.
USAI MAY SELL A SIGNIFICANT PORTION OF OUR COMMON STOCK THAT IT OWNS WHICH
COULD ADVERSELY EFFECT THE PRICE OF OUR STOCK.
Subject to applicable federal securities laws, USAi may sell a
significant portion of the shares of Class A Common Stock beneficially owned
by it or distribute any or all of its shares of Class A Common Stock to its
stockholders. At January 10, 2000, USAi's holdings represented approximately
52% of the outstanding Common Stock, representing approximately 76% of the
voting power of our total outstanding Common Stock. Pursuant to our Amended
and Restated Certificate of Incorporation, each share of Class A Common Stock
will generally be converted automatically into one share of Class B Common
Stock upon any transfer by the initial registered holder. Any sales or
distributions by USAi of substantial amounts of Common Stock in the public
market or to its stockholders, or the perception that these sales or
distributions could occur, could adversely affect the prevailing market
prices for our Class B Common Stock. USAi is not subject to any obligation to
retain any portion of its
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controlling interest in us. We have not granted to USAi any registration
rights with respect to the shares of our Common Stock owned by it.
OUR FUTURE OPERATIONS DEPEND ON THE SUCCESSFUL INTEGRATION OF OUR COMPONENT
COMPANIES.
Before the transactions that combined CitySearch and Ticketmaster
Online, these companies operated independently and Ticketmaster Online
operated as a wholly-owned subsidiary of Ticketmaster Corporation and USAi.
CityAuction, Match.com and One & Only Network also operated independently
prior to their acquisition by us. Our future success will depend to a
significant extent on the efficient, effective and timely integration of the
operations of these companies. This integration includes the combination of
different business models, different technologies and personnel with
different expertise and backgrounds and the development of services in which
CitySearch's local content, CityAuction's auction functionality, Match.com's
and One & Only Network's Internet personals technology and Ticketmaster
Online's live event-specific content and transactional capabilities are
integrated with each other. To the extent we close additional acquisitions,
we will need to integrate those companies as well.
We are also evaluating our existing technologies and our ability to
support the expanded range of products and services we are expected to offer.
We are currently linking the Ticketmaster Online ticketing service more
closely with some of our CitySearch city guides and promoting CityAuction's,
Match.com's and One & Only Network's services throughout the city guides. We
have not executed this integration in the past, and this integration could
require adaptation of existing technologies or development of new
technologies. There can be no assurance that we will be able to coordinate
either operational or technological integration effectively or efficiently
with these entities. If we do not effectively accomplish the integration of
the companies' operations or lose any key employees from these companies, our
business, financial condition and results of operations could be materially
and adversely affected.
WE MAY HAVE FUTURE CAPITAL NEEDS AND MAY NOT BE ABLE TO OBTAIN ADDITIONAL
FINANCING ON ACCEPTABLE TERMS.
We expect to continue to experience significant negative cash flow
from operations for the foreseeable future. USAi has no obligation or
agreement to provide any future capital or other funding to us. We may be
required to raise additional funds at some point in the future. If additional
funds are raised through the issuance of equity securities, our stockholders
may experience significant dilution. Furthermore, there can be no assurance
that additional financing will be available when needed or that if available,
such financing will include terms favorable to our stockholders or us. If
this financing is not available when required or is not available on
acceptable terms, we may be unable to develop or enhance our services, take
advantage of business opportunities or respond to competitive pressures, any
of which could have a material adverse effect on our business, financial
condition and results of operations.
OUR FUTURE REVENUES ARE DIFFICULT TO PREDICT AND WE EXPECT OUR OPERATING
RESULTS TO FLUCTUATE.
As a result of our limited operating history and the emerging nature
of the markets in which we compete, we are unable to accurately forecast our
future revenues. Our current and future expense levels are based
predominantly on our operating plans and estimates of future revenues and are
to a large extent fixed. For example, the CitySearch business model,
particularly in our owned and operated markets, requires significant staffing
to develop content and to create and maintain relationships with small- and
medium-size businesses. We may be unable to adjust spending in a timely
manner to compensate for any unexpected revenue shortfall. Accordingly, any
significant shortfall in revenues would likely have an immediate material
adverse effect on our business, financial condition and results of
operations. Furthermore, we currently intend to increase our operating
expenses to roll out our CitySearch service in new markets, to fund increased
sales and marketing and customer service operations, to further develop our
technology infrastructure, to integrate our local content with the
event-specific content and transactional capabilities of our Ticketmaster
Online service and to broaden our management personnel. To the
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extent these expenses precede or are not subsequently followed by increased
revenues, our operating results will fluctuate and net anticipated losses in
a given quarter may be greater than expected.
We expect to experience significant fluctuations in our future
operating results due to a variety of factors, many of which are outside of
our control. Factors that may adversely affect our operating results include,
but are not limited to:
- Ticketmaster Corporation's ability to maintain and increase
the number of clients for which it provides online ticketing
services;
- the ability of our partners to meet roll-out schedules for
CitySearch city guide services;
- the timing and amount of license and royalty payments from
our partners;
- our ability to increase the volume of online ticket sales
through the Ticketmaster Online Web site;
- our ability to offer our online ticketing services through
our city guides in our partner-led markets on terms
acceptable to us;
- our ability to increase the number of users of the
CityAuction service and revenues generated from auctions;
- our ability to retain existing business customers, attract
new business customers at a steady rate and maintain
customer satisfaction;
- the timing and volume of new business Web site orders and
our capacity to meet such orders;
- our ability to maintain or increase current rates of sales
productivity;
- the announcement or introduction of new or enhanced sites
and services by us or our competitors;
- the amount of traffic on our online sites;
- the amount of expenditures for online advertising by
businesses;
- the level of use of the Web and online services and consumer
acceptance of the Internet for services such as those
offered by us;
- our ability to upgrade and develop our systems and attract
personnel in a timely and effective manner;
- the amount and timing of operating costs and capital
expenditures relating to expansion of our business and
infrastructure, technical difficulties, system downtime or
Internet brownouts;
- political or economic events affecting the cities in which
we operate; and
- general economic conditions.
Unfavorable changes in any of the above factors could adversely affect
our revenues, gross margins and results of operations in future periods. In
addition, we derive a majority of our Ticketmaster Online revenues directly or
indirectly from the sale of tickets and related merchandise for live
entertainment, sporting and leisure events and this revenue is directly affected
by the popularity, frequency and location of these events. Factors affecting the
demand for and attendance of these events include general economic conditions,
consumer trends and
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work stoppages. Any occurrence or condition that results in decreased
attendance or demand for these entertainment, sporting and leisure events
would likely have a material adverse effect on our business, financial
condition and results of operations.
As a result of the foregoing, we believe that period-to-period
comparisons of our results of operations should not be relied upon as an
indication of future performance. In addition, the results of any quarterly
period are not indicative of results to be expected for a full fiscal year.
The foregoing factors are largely unpredictable and our quarterly results of
operations may be below the expectations of public market analysts or
investors in some future period.
WE COMPETE IN NEW AND EMERGING MARKETS AND OUR SERVICES MAY NOT GAIN
WIDESPREAD ACCEPTANCE IN THESE MARKETS.
The markets for our services have only recently begun to develop,
are rapidly evolving and are characterized by a number of entrants that have
introduced or plan to introduce competing services. As is typical in the case
of new and rapidly evolving industries, demand and market acceptance for
recently introduced services are subject to a high level of uncertainty and
risk. It is therefore difficult to predict the size and future growth rate,
if any, of these markets.
There can be no assurance that the markets for our services will
develop or that demand for our services will emerge or become economically
sustainable. For example, the success of our Ticketmaster Online service will
depend on the willingness of consumers to purchase tickets to live events and
related merchandise online and our ability to significantly increase online
traffic and sales volume. The success of the CityAuction service will depend,
in part, on users' willingness to post and purchase goods or services online.
The success of Match.com's and One & Only Network's service will depend on
the willingness of single adults to subscribe to online dating services. The
success of CitySearch's city guide service will depend, in part, on the
willingness of local businesses to pay for custom business Web sites
developed by us and to retain the service, which in turn may depend on the
popularity of the guides to consumers and on the actual or perceived revenues
attributable to the services. If the markets for our services fail to develop
or develop more slowly than anticipated or we are not successful in gaining
widespread acceptance in these markets, our business, financial condition and
results of operations could be materially and adversely affected.
OUR TURNOVER RATE OF BUSINESS CUSTOMERS FOR THE CITYSEARCH SERVICE IS HIGHER
THAN WE INITIALLY HAD ANTICIPATED AND, IF IT DOES NOT IMPROVE, OUR CITYSEARCH
SERVICE WILL SUFFER.
The turnover rate of business customers using our CitySearch service
has been higher than we had anticipated, and we cannot provide assurance that
turnover rates will decrease and will not in the future materially and
adversely affect our business, financial condition and results of operations.
Specifically, the turnover rate has been higher than we expected due to
several factors, including:
- our early belief that our services would be suited to a
broader base of business customers;
- the challenges of proving advertising value to a broad range
of small businesses that may not have significant experience
with online services;
- our continuing refinements to our sales, production and
customer service processes to meet the needs of our business
customers; and
- our initial underestimation of the need for continuous
marketing support of our business customers.
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We cannot provide assurance that businesses will elect to outsource
the design, development and maintenance of their Web sites to services such
as CitySearch. Businesses may elect to perform such tasks internally,
particularly if third-party providers of such services prove to be
unreliable, ineffective, too expensive or if software companies offer
user-friendly and cost-effective tools for such purpose. In the event that a
significant number of businesses internalize tasks, our business, financial
condition and results of operations could be materially and adversely
affected.
WE DEPEND ON THE CONTINUED GROWTH OF ONLINE COMMERCE.
Our future revenues and any future profits are substantially
dependent upon the widespread acceptance and use of the Web and online
services as an effective medium of commerce by consumers. The rapid growth in
the use of and interest in the Web, the Internet and commercial online
services is a recent phenomenon. There can be no assurance that acceptance
and use will continue to develop or that a sufficiently broad base of
consumers will adopt, and continue to use, the Web and online services as a
medium of commerce, particularly for purchasing tickets to live events and
related merchandise.
Demand for recently introduced services and products over the Web
and online services is subject to a high level of uncertainty, and there are
relatively few proven services and products to date. The development of the
Web and online services as a viable commercial marketplace is subject to a
number of factors, including:
- continued growth in the number of Internet users and users
of such services;
- concerns about transaction security;
- continued development of the necessary technological
infrastructure; and
- the development of complementary services and products.
If the Web and online services do not become a viable commercial
marketplace, our business, financial condition and results of operations
would be materially and adversely affected.
THE SUCCESS OF OUR CITYSEARCH SERVICE DEPENDS IN PART ON ESTABLISHING AND
MAINTAINING STRATEGIC RELATIONSHIPS WITH LOCAL MEDIA COMPANIES
An important element of our past business strategy with respect to
the CitySearch service was to enter into agreements with local media
companies to establish and support city guides. We have entered into
agreements with media companies to address opportunities. In these
"partner-led" markets, we develop and design a city guide for local media
companies and license certain intellectual property to these companies in
exchange for certain up-front and continuing license payments and royalty
payments. These royalty payments are based on the amount of revenues
generated by these companies through the partner-led city guides. While we do
not currently anticipate that royalty payments from these agreements will
constitute an increasing portion of our revenues in future periods, because
of the long-term nature of our agreements with existing partner-led markets
our success will continue to depend in part upon the ability of our partners
to generate revenue through their city guides.
Under the terms of our agreements with our media company partners,
we have very limited control over the amount of time and financial resources
that a partner devotes to the launch of a city guide or over the day-to-day
operations and management of the city guide, including the marketing and sale
of business Web sites to potential business customers. Some of our agreements
also grant exclusivity in certain territories. There can be no assurance that
our partners that are in the process of developing new city guides or any
future partners will launch their sites in a timely manner, or at all, or
that if launched, such sites will generate revenues consistent with our
expectations. Furthermore, we are unable to accurately forecast our revenues
to be derived from these agreements with the
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partners. The exclusivity provisions in some of our agreements also place
certain limitations on our ability to license our intellectual property to
other partners. In addition, some of our agreements with our media company
partners may be terminated for failure to meet performance criteria. Any
failure by one of our proposed partner-led city guides to launch in a timely
manner or by one of our existing partner-led city guides to generate
sufficient revenues, or a failure by us to enter into or to renew agreements
with media company partners on terms favorable to us or early termination of
certain existing agreements could have a material adverse effect on our
business, financial condition and results of operations.
We have entered into a license and services agreement with
Classified Ventures, pursuant to which we license elements of our technology
and business systems to Classified Ventures and provide services in
automotive and real estate classified advertising categories. We receive
significant revenues from licensing and service fees under this agreement.
Under this agreement, we are restricted from entering into certain classified
advertising markets and from licensing our technology and business systems to
competitors of Classified Ventures. Our inability to compete with Classified
Ventures or to license technology to competitors of Classified Ventures may
have a material adverse effect on our business, financial condition and
results of operations.
In our owned and operated markets, we have entered into co-promotion
or distribution agreements with a number of television, radio, print media
and online companies. Some of these agreements are of a short duration and
there can be no assurance that our co-promotion or distribution partners with
respect to the CitySearch business will not terminate their agreements with
us or that we will secure additional co-promotion or distribution partners in
the future which could have a material adverse effect on our business,
financial condition and results of operations.
OUR TICKETMASTER ONLINE SERVICE ALSO RELIES ON STRATEGIC RELATIONSHIPS.
Our Ticketmaster Online service is to an extent dependent on its and
Ticketmaster Corporation's relationships with certain strategic partners
relating to the sharing of certain Ticketmaster Online Web site and user
links. We hope to derive significant benefits, including increased revenues
and consumer awareness, from these relationships. The arrangements also
include, in certain cases, non-competition provisions that restrict our
ability to engage in similar activities on our own or with other partners.
There can be no assurance that these relationships will continue, that the
relationships will be successful in any respect or that we will be able to
find suitable additional or replacement strategic partners. The failure of
these relationships could have a material adverse effect on our business,
financial condition and results of operations.
A SHORTAGE OF TRAINED SALES PERSONNEL WOULD LIMIT OUR ABILITY TO SELL OUR
SERVICES.
We currently derive and, for the foreseeable future, intend to
derive a substantial portion of our revenues from sales of business Web sites
to local businesses in markets in which we own and operate CitySearch city
guides. We depend on our direct sales force to sell business Web sites in
these markets. The creation of new revenue from CitySearch's city guide
service and our roll-out in additional cities requires the services of a
highly trained sales force working directly for us. Accordingly, a shortage
in the number of trained salespeople could limit our ability to sell business
Web sites as we roll out our service in new cities or to maintain or increase
our number of business customers in cities in which we already operate. We
have in the past and expect in the future to experience a high rate of
turnover in our direct sales force. There can be no assurance that turnover
will not increase in the future or have a material adverse effect on our
sales, which could have a material adverse effect on our business, financial
condition and results of operations.
In addition, we currently derive a portion of our Ticketmaster
Online revenues from the sale of banner advertising and sponsorships. A
shortage in the number of trained salespeople could limit our ability to sell
additional banner advertising or sponsorships or renew existing sponsorship
or advertising relationships, which could have a material adverse effect on
our business, financial condition and results of operations.
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WE DEPEND ON KEY PERSONNEL AND NEED TO HIRE ADDITIONAL QUALIFIED PERSONNEL.
Our success depends to a significant degree upon the continued
contributions of our executive management team, including Charles Conn, our
Chief Executive Officer, John Pleasants, our President, and Dan Marriott, our
Executive Vice President, Corporate Strategy and Development. The loss of the
services of Messrs. Conn, Pleasants, Marriott or other members of our
management team could have a material adverse effect on our business,
financial condition and results of operations. In addition, the Ticketmaster
Online service has been managed historically by the management of
Ticketmaster Corporation. Our success will depend upon a successful
completion of the transition of the Ticketmaster Online management
responsibility to our senior management team.
Our employees, including our senior officers, may voluntarily
terminate their employment with us at any time, and competition for qualified
employees is intense. Our success also depends upon our ability to attract
and retain additional highly qualified management, technical and sales and
marketing personnel. The process of locating and hiring such personnel with
the combination of skills and attributes required to carry out our strategy
is often lengthy. The loss of the services of key personnel or the inability
to attract additional qualified personnel could have a material adverse
effect on our business, financial condition and results of operations.
WE MUST MAINTAIN AND PROMOTE OUR BRANDS TO BE SUCCESSFUL.
We believe that maintaining and promoting the CitySearch brand and,
to a lesser extent, the CityAuction and Match.com brands, are critical to our
efforts to attract consumers and business customers to our sites. We also
believe that the importance of brand recognition will increase due to the
growing number of Internet sites and relatively low barriers to entry to
providing Internet content. Promotion of our brands will depend largely on
our success, and, to a lesser extent, the success of our media company
partners, in providing high quality Internet content.
Under the terms of our agreements with media company partners, we
have very limited control over the content provided on the CitySearch
partners' sites. If consumers and business customers do not perceive the
content of our or our partners' existing sites to be of high quality, we may
be unsuccessful in promoting and maintaining the CitySearch brand.
Furthermore, not all of our partners promote the CitySearch brand on their
services with a high level of prominence. In addition, users accessing
partner-led market sites that contain different interfaces from our owned and
operated sites may be confused by the differences in interface or navigation,
and this confusion may inhibit our ability to develop our brand and network.
In order to attract and retain consumers and business customers, and
to promote our brands in response to competitive pressures, we have found it
necessary to increase our budget for content and to increase substantially
our financial commitment to creating and maintaining a distinct brand loyalty
among consumers and business customers. If either we or our media company
partners are unable to provide high quality content or otherwise fail to
promote and maintain our brands or if we incur excessive expenses in an
attempt to improve our content or promote and maintain our brands, our
business, financial condition and results of operations could be materially
and adversely affected.
WE MUST CONTINUE TO RAPIDLY ROLLOUT OUR CITYSEARCH SERVICE IN ADDITIONAL
CITIES IN THE UNITED STATES AND INTERNATIONALLY TO BE SUCCESSFUL.
Our future success will depend to a significant extent on our
ability, on our own and with partners, to continue to rapidly roll out the
CitySearch local city guide service in additional cities in the United States
and internationally. As of January 10, 2000, we have launched our local city
guide service in 43 metropolitan areas and have launched a national city
guide site with some local content in an additional 34 cities in the U.S. and
we intend to expand our service in additional cities in the United States and
internationally. There can be no assurance that we will be able to continue
to launch our CitySearch service in additional markets in a cost-effective or
timely manner
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or in accordance with our planned schedule, or that any newly launched
service will achieve market acceptance. Any new service that is not favorably
received by local businesses or consumers could damage our reputation or the
CitySearch brand.
The continued rollout of the CitySearch service or future services
offered by us will also require significant additional expenses and will
strain our management, financial and operational resources. In particular,
the continued launch of the CitySearch service in additional cities will
require us to expand and upgrade our technology infrastructure and business
systems, including our enterprise management system and our business Web site
production system. There also can be no assurance that the existing
technology used with respect to our Ticketmaster Online service will be able
to accommodate increased volumes of traffic and transactions that may arise
in the future. Expansion of our technology capabilities could result in
significant expenses. Moreover, the strain placed on our resources by
simultaneous launches of the CitySearch service in multiple cities and our
efforts to integrate CitySearch's local content with the event-specific
content and transactional capabilities of Ticketmaster Online and the product
specific content of the CityAuction, Match.com, One & Only Network and
Sidewalk asset acquisitions may adversely affect the roll-out schedule or
quality of the service in a particular city. Our failure to launch the
CitySearch service in new markets in a timely and cost effective manner in
accordance with our planned schedule or the lack of market acceptance of new
services would have a material adverse effect on our business, financial
condition and results of operations.
OUR FIXED PRICE CONTRACTS EXPOSE US TO COST OVERRUNS AND OTHER RISKS.
The services we offer to CitySearch business customers typically
consist of the design, implementation, hosting and maintenance of customized
Web sites, for which the customers are billed on a fixed-price basis,
consisting of an up-front fee and monthly fees. Our failure to estimate
accurately the resources and time required for providing such services, to
manage client expectations effectively regarding the scope of services to be
delivered for the estimated fees or to complete the services within budget,
on time and to clients' satisfaction would expose us to risks associated with
cost overruns and customer dissatisfaction.
THE MARKETS IN WHICH WE SELL OUR SERVICES ARE INTENSELY COMPETITIVE AND OUR
BUSINESS WOULD BE ADVERSELY AFFECTED IF WE FAIL TO GROW OUR MARKET SHARE OR
OTHERWISE FAIL TO SUCCESSFULLY COMPETE IN THESE MARKETS.
The markets for local interactive content and services, the selling
of live event tickets and related merchandise and our other services are
highly competitive and diverse. CitySearch's primary competitors include
Digital City, Inc., a company wholly owned by America Online, Inc., Tribune
Company, Cox Interactive, Knight Ridder's Real Cities and InfoSpace.
CitySearch also competes with numerous search engines and other site
aggregation companies, media, telecommunications and cable companies,
Internet service providers and niche competitors which focus on a specific
category or geography and compete with specific content offerings provided by
us. Furthermore, additional major media and other companies with financial
and other resources greater than ours may introduce new Internet products
addressing the local interactive content and service market in the future.
Ticketmaster Corporation's and Ticketmaster Online's online services
compete with event facilities and promoters that handle their own ticket
sales and distribution through online and other distribution channels, live
event automated ticketing companies with Web sites which may or may not
currently offer online transactional capabilities and certain Web-based live
event ticketing companies which only conduct business online, including
Tickets.com and Ticketweb.com. In certain specific geographic regions,
including certain of the local markets in which CitySearch provides or
intends to provide our local city guide service, one or more of Ticketmaster
Corporation's and our Ticketmaster Online service's competitors may serve as
the primary ticketing service in the region. We believe that our Ticketmaster
Online service will experience significant difficulty in establishing a
significant online presence in such regions and, as a result, any local city
guide for such a region may be unable to provide significant ticketing
capabilities. In addition, there can be no assurance that one or more of
these regional automated ticketing companies will not expand into other
regions or nationally, which could have a material adverse
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effect on our business, financial condition and results of operations.
Furthermore, substantially all of the tickets sold through our Ticketmaster
Online Web site are also sold by Ticketmaster Corporation by telephone and
through independent retail outlets. These sales by Ticketmaster Corporation
could have a material adverse effect on our online sales, and as a result, on
our business, financial condition and results of operations.
The online dating services market is very competitive. Match.com's
and One & Only Network's primary competitors include FriendFinder, Inc. and
Matchmaker.com, Inc., both of whom charge subscribers fees for use of their
services. In addition, Match.com and One & Only Network face significant
competition from online dating services which are free to subscribers and
which are offered by most major portal sites, including Yahoo! Inc., Excite
Inc. and America Online, Inc., among others.
We believe that the principal competitive factors for all our
services include:
- depth, quality and comprehensiveness of content;
- ease of use;
- distribution;
- search capability; and
- brand recognition.
Many of our competitors have greater financial and marketing
resources than we and may have significant competitive advantages through
other lines of business and existing business relationships. There can be no
assurance that we will be able to successfully compete against our current or
future competitors or that competition will not have a material adverse
effect on our business, financial condition and results of operations.
Furthermore, as a strategic response to changes in the competitive
environment, we may make certain pricing, servicing or marketing decisions or
enter into acquisitions or new ventures that could have a material adverse
effect on our business, financial condition and results of operations.
WE NEED TO SUCCESSFULLY INTRODUCE NEW SERVICES TO GROW OUR BUSINESS.
We expect to continue to introduce new and expanded services in
order to generate additional revenues, attract more businesses and consumers,
and respond to competition. We also offer services facilitating the purchase
of goods by consumers from CitySearch's business customers or others. A key
element of our strategy is to technologically enable our city guides so that
consumers and our business customers can buy and sell goods and services
online through our city guides. We have limited experience in building
e-commerce functionality with our city guides. There can be no assurance that
we will be able to offer e-commerce or other new services in a cost-effective
or timely manner or that our efforts would be successful. Furthermore, any
new service launched by us that is not favorably received by consumers could
damage our reputation or our brand names. Expansion of our services in this
manner would also require significant additional expenses and development and
may strain our management, financial and operational resources. If we do not
generate revenues from expanded services sufficient to offset their costs,
our business would suffer.
WE HAVE RECENTLY EXPERIENCED AND ARE CURRENTLY EXPERIENCING RAPID GROWTH AND
OUR INABILITY TO MANAGE THIS GROWTH COULD HARM OUR BUSINESS.
Our businesses have grown rapidly in recent periods. The growth of
these businesses and expansion of our consumer bases have placed a
significant strain on our management and operations. The growth of our
businesses has resulted, and is expected in the future to result, in the
growth in the number of our employees, in the
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establishment of offices in disparate regions of the country and in increased
responsibility for both existing and new management personnel. In addition,
this growth has and will put additional pressure on existing operational,
financial and management information systems. Our success will depend to a
significant extent on the ability of our executive officers and other members
of senior management to operate effectively, both independently and as a
group. To manage our growth, we must continue to implement and improve
operational, financial and management information systems and hire and train
additional qualified personnel, including sales and marketing staff. There
can be no assurance that we will be able to manage recent or any future
expansions successfully, and any failure by us to do so could have a material
adverse effect on our business, financial condition and results of
operations. There also can be no assurance that our CitySearch, CityAuction,
Match.com (including the One & Only Network) or Ticketmaster Online services
will be able to sustain the rate of expansion that each has experienced in
the past.
OUR SERVICES ARE SUBSTANTIALLY DEPENDENT ON OUR ABILITY TO CONTINUE TO
DEVELOP COMPELLING CONTENT.
Our success depends in part, upon our ability to deliver compelling
interactive content on our CitySearch service, such as local events
information, recreation, business, shopping, professional services and
news/sports/weather and online ticketing services. We need to develop this
content in order to attract consumers with demographic characteristics
valuable to CitySearch's business customers. Our success also depends on our
ability to develop and integrate compelling content with existing ticketing
capabilities on our Ticketmaster Online Web site.
There can be no assurance that we will be successful in developing
new content and services or enhancing CitySearch's existing local city guide
service, or the Ticketmaster Online, CityAuction, Match.com or One & Only
Network services on a timely basis, or that such content and services will
effectively address consumer requirements and achieve market acceptance. If
we, for technological or other reasons, are unable to develop and enhance our
local interactive content and services in a manner compatible with emerging
industry standards and that allows us to attract, retain and expand a
consumer base possessing demographic characteristics attractive to
CitySearch's business customers, Ticketmaster Online's advertisers and
sponsors, and CityAuction's, Match.com's and One & Only Network's users, our
business, financial condition and results of operations would be materially
and adversely affected.
OUR BUSINESS DEPENDS ON THE INCREASED USAGE OF AND THE STABILITY OF THE
INTERNET.
The usage of the Internet for services such as those offered by us
will depend in significant part on continued rapid growth in the number of
households and commercial, educational and government institutions with
access to the Internet, in the level of usage by individuals and in the
number and quality of products and services designed for use on the Internet.
Because usage of the Internet as a source for information, products and
services is a relatively recent phenomenon, it is difficult to predict
whether the number of users drawn to the Internet will continue to increase
and whether any significant market for usage of the Internet for such
purposes will continue to develop and expand. There can be no assurance that
Internet usage patterns will not decline as the novelty of the medium recedes
or that the quality of products and services offered online will improve
sufficiently to continue to support user interest. If the Internet fails to
stimulate user interest and be accessible to a broad audience at moderate
costs, the markets for our services would be jeopardized.
Moreover, issues regarding the stability of the Internet's
infrastructure remain unresolved. The rapid rise in the number of Internet
users and increased transmission of audio, video, graphical and other
multimedia content over the Internet has placed increasing strains on the
Internet's communications and transmission infrastructures. Continuation of
such trends could lead to significant deterioration in transmission speeds
and reliability of the Internet and could reduce the usage of the Internet by
businesses and individuals. In addition, to the extent that the Internet
continues to experience significant growth in the number of users and level
of use without corresponding increases and improvements in the Internet
infrastructure, there can be no assurance that the Internet will be able to
support the demands placed upon it by such continued growth. If the Internet
fails to support an increasing number
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of users due to inadequate infrastructure or otherwise, the development of
the Internet as a viable source of local interactive content and services
would be severely limited, which could materially and adversely affect the
acceptance of our services.
OUR PLANS TO EXPAND INTERNATIONALLY WILL REQUIRE US TO DEVELOP LOCALIZED
VERSIONS OF OUR SITES AND ADDRESS OTHER RISKS OF OPERATING INTERNATIONALLY.
A key component of our strategy is to continue to expand our
services into international markets. We expect to expend significant
financial and management resources to operate overseas and, with respect to
the CitySearch service, create localized user interfaces through the launch
of additional partner-led markets. We believe Ticketmaster Corporation
intends to continue to expand its operations outside of the United States,
which will require additional resources from our Ticketmaster Online service
to the extent it distributes tickets online in those markets. If the revenues
generated by these international operations are insufficient to offset the
expense of establishing and maintaining such operations, our business,
financial condition and results of operations will be materially and
adversely affected. There can be no assurance that our partners or we will be
able to successfully market or sell our services in these international
markets. In addition to the uncertainty as to our ability to expand our
international presence, there are certain risks inherent in conducting
business on an international level, such as:
- unexpected changes in regulatory requirements, tariffs and
other trade barriers;
- difficulties in staffing and managing foreign operations;
- political instability;
- currency rate fluctuations; and
- potentially adverse tax consequences.
There can be no assurance that one or more of the foregoing factors
will not have a material adverse effect on our current and future
international operations and, consequently, on our business, financial
condition and results of operations.
OUR BUSINESS RELIES ON THE PERFORMANCE OF OUR SYSTEMS AND THE PERFORMANCE AND
AVAILABILITY OF THIRD PARTY SYSTEMS.
The satisfactory performance, reliability and availability of our
city guides, online ticketing services, auction services, Internet personals
services and our network infrastructures are critical to attracting Web users
and maintaining relationships with business customers and consumers. System
interruptions that result in the unavailability of sites or slower response
times for consumers would reduce the number of business Web sites and
advertisements purchased and reduce the attractiveness of our CitySearch
local city guides, CityAuction, Match.com and One & Only Network services,
and Ticketmaster Online's online services to business customers and
consumers. Our services have experienced system interruptions in the past and
we believe that such interruptions will continue to occur from time to time
in the future.
Any substantial increase in traffic on our services will also
require us to expand and adapt our network infrastructure. Our inability to
add additional software and hardware to accommodate increased traffic on our
services may cause unanticipated system disruptions and result in slower
response times.
In addition, our Ticketmaster Online operations are substantially
dependent upon services and infrastructure provided by Ticketmaster
Corporation that enable Ticketmaster Online to access information on ticket
and merchandise inventory, events and consumers maintained by Ticketmaster
Corporation. In addition,
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Ticketmaster Corporation has agreed to provide all order processing, payment
processing and fulfillment services for tickets to live events and
merchandise ordered through Ticketmaster Online pursuant to the terms and
subject to the limitations of our license agreement. Any discontinuation or
disruption of these services by Ticketmaster Corporation would be disruptive
to the Ticketmaster Online business and would likely have a material adverse
effect on our business, financial condition and results of operations.
We use a custom-developed system for our Ticketmaster Online
ticketing operations and certain aspects of transaction processing.
Ticketmaster Online has experienced temporary system interruptions, which may
continue to occur in the future from time to time. Any substantial increase
in the volume of traffic on our online sites or the number of tickets
purchased by consumers will require us to continue to expand and upgrade
further Ticketmaster Online technology, transaction- processing systems and
network infrastructure.
The Ticketmaster Online service has experienced, and we expect to
continue to experience, temporary capacity constraints due to sharply
increased traffic for certain events, which may cause unanticipated system
disruptions, slower response times and degradation in levels of service. In
addition, to the extent we experience delays in processing ticketing
confirmations and reporting accurate financial information, our operations
would be adversely affected. There can be no assurance that our Ticketmaster
Online service's transaction-processing systems and network infrastructure
will be able to accommodate such increases in traffic in the future, or that
we will, in general, be able to accurately project the rate or timing of such
increases or upgrade our systems and infrastructure to accommodate future
traffic levels on our online sites. In addition, there can be no assurance
that we will be able to effectively upgrade and expand our Ticketmaster
Online transaction-processing systems in a timely manner or to successfully
integrate any newly developed or purchased components of its existing
systems. Any inability to do so could have a material adverse effect on our
business, financial condition and results of operations.
SECURITY BREACHES OF OUR NETWORK SYSTEMS WOULD SIGNIFICANTLY ADVERSELY AFFECT
OUR BUSINESS.
A fundamental requirement for online commerce and communications is
the secure transmission of confidential information over public networks. We
rely on encryption and authentication technology licensed from third parties
to provide the security and authentication necessary to effect secure
transmission of confidential information, such as consumers credit card
numbers. In addition, we maintain an extensive confidential database of
consumer profiles and transaction information. There can be no assurance that
advances in computer capabilities, new discoveries in the field of
cryptography, or other events or developments will not result in a compromise
or breach of the methods used by us to protect consumer transaction and
personal data contained in our database. If any such compromise of our
security were to occur, it could have a material adverse effect on our
reputation and on our business, operating results and financial condition. A
party who is able to circumvent our security measures could misappropriate
proprietary information or cause interruptions in our operations. We may be
required to expend significant capital and other resources to protect against
security breaches or to alleviate problems caused by breaches.
Concerns over the security of transactions conducted on the Internet
and commercial online services and the privacy of users may also inhibit the
growth of the Web and online services as a means of conducting commercial
transactions. To the extent that our activities or those of third-party
contractors involve the storage and transmission of proprietary information,
such as credit card numbers or other personal information, security breaches
could expose us to a risk of loss or litigation and possible liability. In
addition, we may suffer losses as a result of orders placed with fraudulent
credit card data, even though the consumer's payment for such orders has been
authorized by the associated financial institution. Under current credit card
practices, a merchant is liable for fraudulent credit card transactions
where, as is the case with the transactions processed by us, no cardholder
signature is obtained. There can be no assurance that we will not suffer
significant losses as a result of fraudulent use of credit card data in the
future, which could have a material adverse effect on our business, financial
condition and results of operations.
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OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO ADAPT TO THE RAPID TECHNOLOGICAL
CHANGES THAT CHARACTERIZE THE INTERNET AND THE ONLINE COMMERCE INDUSTRY.
The Internet and the online commerce industry are characterized by
the following:
- rapid technological change;
- changes in user and customer requirements and preferences;
- frequent new product and service introductions embodying new
technologies; and
- the emergence of new industry standards and practices that
could render our existing online sites and proprietary
technology and systems obsolete.
The emerging nature of these products and services and their rapid
evolution will require that we continually improve the performance, features
and reliability of our online services, particularly in response to
competitive offerings. Our success will depend, in part, upon our ability:
- to enhance our existing services;
- to develop new services and technology that address the
increasingly sophisticated and varied needs of our
prospective customers; and
- to respond to technological advances and emerging industry
standards and practices on a cost-effective and timely
basis.
The development of online sites and other proprietary technology
entails significant technical and business risks and requires substantial
expenditures and lead time. There can be no assurance that we will
successfully use new technologies effectively or adapt our online sites,
proprietary technology and transaction-processing systems to customer
requirements or emerging industry standards. If we are unable, for technical,
legal, financial or other reasons, to adapt in a timely manner in response to
changing market conditions or customer requirements, our business, operating
results and financial condition could be materially adversely affected.
INFORMATION DISPLAYED ON OR ACCESSED FROM OUR WEB SITES MAY SUBJECT US TO
LIABILITY.
We may face potential liability for defamation, negligence,
copyright, patent or trademark infringement and other claims based on the
nature and content of the materials that appear on the CitySearch,
CityAuction, Match.com, One & Only Network or Ticketmaster Online sites or on
sites operated by our partners. These claims have been brought, and sometimes
successfully pressed, against online services. Although we intend to maintain
our general liability insurance at current levels, our insurance may not
cover claims of these types or may not be adequate to indemnify us for any
liability that may be imposed. Any imposition of liability, particularly
liability that is not covered by insurance or is in excess of insurance
coverage, could have a material adverse effect on our reputation and our
business, financial conditions and results of operations.
OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE ARE UNABLE TO PROTECT OUR
INTELLECTUAL PROPERTY RIGHTS FROM THIRD PARTY CHALLENGES OR IF WE ARE SUBJECT
TO LITIGATION.
We regard our copyrights, service marks, trademarks, trade dress,
trade secrets, proprietary software and similar intellectual property as
critical to our success, and rely on trademark and copyright law, trade
secret protection and confidentiality and/or license agreements with
employees, customers, partners and others to protect our proprietary rights.
We do not hold any patents. We pursue the registration of certain of our key
trademarks and service marks in the United States and internationally.
Effective trademark, service mark, copyright and trade secret
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protection may not be available or sought by us in every country in which our
products and services are made available online.
We have licensed in the past, and expect to license in the future,
certain proprietary rights, such as trademarks or copyrighted material, to
third parties. In addition, we have licensed in the past, and expect that we
may license in the future, certain content, including trademarks and
copyrighted material, from third parties. While we attempt to ensure that the
quality of our brands is maintained by such licensees, there can be no
assurance that such licensees will not take actions that might materially
adversely affect the value of our proprietary rights or reputation, which
could have a material adverse effect on our business, financial condition and
results of operations.
There can be no assurance that the steps taken by us to protect our
proprietary rights will be adequate or that third parties will not infringe
or misappropriate our copyrights, trademarks, trade dress and similar
proprietary rights. In addition, there can be no assurance that other parties
will not assert infringement claims, including patent infringement claims,
against us.
We license the trademark "CitySearch" from a third party, and there
can be no assurance that we will be able to continue to license the trademark
on terms acceptable to us.
We license the trademark "Ticketmaster" and related trademarks from
Ticketmaster Corporation pursuant to our license agreement with Ticketmaster
Corporation. We may be subject to legal proceedings and claims of alleged
infringement of the trademarks and other intellectual property rights of
third parties by us and our licensees. Such claims, even if not meritorious,
could result in the expenditure of significant financial and managerial
resources which could result in a material adverse effect on our business,
financial condition and results of operations. We are dependent upon
Ticketmaster Corporation to maintain and assert its rights to the trademarks
and defend infringement claims, if any.
IF WE FAIL TO COMPLY WITH THE LAWS AND REGULATIONS THAT GOVERN OUR SERVICES,
OUR BUSINESS COULD BE ADVERSELY AFFECTED.
We are subject to regulations applicable to businesses generally and
laws or regulations directly applicable to access to online commerce.
Although there are currently few laws and regulations directly applicable to
the Internet and commercial online services, it is possible that a number of
laws and regulations may be adopted with respect to the Internet or
commercial online services covering issues such as:
- user privacy;
- pricing;
- content;
- taxation;
- copyrights;
- distribution;
- antitrust; and
- characteristics and quality of products and services.
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Furthermore, the growth and development of the market for online
commerce may prompt calls for more stringent consumer protection laws that
may impose additional burdens on those companies conducting business online.
The adoption of any additional laws or regulations may decrease the growth of
the Internet or commercial online services, which could, in turn, decrease
the demand for our products and services and increase our cost of doing
business, or otherwise have a material adverse effect on our business,
financial condition and results of operations. Moreover, the applicability to
the Internet and commercial online services of existing laws in various
jurisdictions governing issues such as property ownership, sales and other
taxes, libel and personal privacy is uncertain and may take years to resolve.
For example, tax authorities in a number of states are currently reviewing
the appropriate tax treatment of companies engaged in online commerce, and
new state tax regulations may subject us to additional state sales and income
taxes. Any such new legislation or regulation, the application of laws and
regulations from jurisdictions whose laws do not currently apply to our
business, or the application of existing laws and regulations to the Internet
and commercial online services could have a material adverse effect on our
business, financial condition and results of operations.
Our Ticketmaster Online service is regulated by certain state and
local regulations, including, but not limited to, a law in Georgia that
establishes maximum convenience charges on tickets for certain sporting
events. Other legislation that could affect the way our Ticketmaster Online
service does business, including bills that would regulate the amount of
convenience charges and handling charges, are introduced from time to time in
federal, state and local legislative bodies. We are unable to predict whether
any such bills will be adopted and, if so, whether such legislation would
have a material effect on our business, financial condition and results of
operations.
WE MAY BE SUBJECT TO GOVERNMENTAL INVESTIGATIONS AND LITIGATIONS.
From time to time, federal, state and local authorities have
conducted investigations or inquiries with respect to Ticketmaster
Corporation's compliance with antitrust, unfair business practice and other
laws. In 1994, the Antitrust Division of the Department of Justice commenced
an investigation, which was concluded in 1995 with no enforcement action
being taken against Ticketmaster Corporation. Ticketmaster believes it has
not taken any action which is improper. In addition, we are a party to
various legal proceedings involving commercial disputes and intellectual
property issues arising in the ordinary course of business. While the
outcomes of these proceedings are uncertain, we do not currently expect that
they will have a material adverse effect on our business, financial condition
or results of operations.
During 1994, Ticketmaster Corporation was named as a defendant in 16
federal class action lawsuits filed in United States District Courts
purportedly on behalf of consumers who were alleged to have purchased tickets
to various events through Ticketmaster Corporation. These lawsuits alleged
that Ticketmaster Corporation's activities violated antitrust laws. On
December 7, 1994, the Judicial Panel on Multidistrict Litigation transferred
all of the lawsuits to the United States District Court for the Eastern
District of Missouri for coordinated and consolidated pretrial proceedings.
After an amended and consolidated complaint was filed by the plaintiffs,
Ticketmaster Corporation filed a motion to dismiss and, on May 31, 1996, the
District Court granted that motion ruling that the plaintiffs had failed to
state a claim upon which relief could be granted. On April 10, 1998, the
United States Court of Appeals for the Eighth Circuit issued an opinion
affirming the district court's ruling that the plaintiffs lack standing to
pursue their claims for damages under the antitrust laws and held that the
plaintiffs' status as indirect purchasers of Ticketmaster Corporation's
services did not bar them from seeking equitable relief against Ticketmaster
Corporation. Discovery on the plaintiffs' remanded claim for equitable relief
is ongoing in the District Court and a trial date of July 17, 2000 has been
set. On July 9, 1998, the plaintiffs filed a petition for writ of certiorari
to the United States Supreme Court seeking review of the decision dismissing
their damage claims. Plaintiff's petition for writ of certiorari in the
United States Supreme Court was denied on January 19, 1999.
Ticketmaster Corporation has stated that the Court's affirmance of
the decision prohibiting plaintiffs from obtaining monetary damages against
Ticketmaster Corporation eliminates the substantial portion of plaintiffs'
claims. With respect to injunctive relief, the Antitrust Division of the
United States Department of Justice had previously investigated Ticketmaster
Corporation for in excess of 15 months and closed its investigation with no
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suggestion of any form of injunctive relief or modification of the manner in
which Ticketmaster Corporation does business.
In March 1995, MovieFone, Inc. and The Teleticketing Company, L.P.
filed a complaint against Ticketmaster Corporation in the United States
District Court for the Southern District of New York. Plaintiffs allege that
they are in the business of providing movie information and teleticketing
services, and that they are parties to a contract with Pacer Cats
Corporation, a wholly owned subsidiary of Wembley plc, or the Pacer Cats, to
provide teleticketing services to movie theaters. Plaintiffs also allege
that, together with Pacer Cats, they had planned to begin selling tickets to
live entertainment events, and that Ticketmaster Corporation, by its conduct,
frustrated and prevented plaintiffs' ability to do so. Plaintiffs further
allege that Ticketmaster Corporation has interfered with and caused Pacer
Cats to breach its contract with plaintiffs. The complaint asserts that
Ticketmaster Corporation's actions violate Section 7 of the Clayton Act and
Sections 1 and 2 of the Sherman Act, and that Ticketmaster Corporation
tortiously interfered with contractual and prospective business relationships
and seeks monetary and injunctive relief based on such allegations.
Ticketmaster Corporation filed a motion to dismiss. The court heard oral
argument on September 26, 1995. In March 1997, prior to the rendering of any
decision by the Court on Ticketmaster Corporation's motion to dismiss,
Ticketmaster Corporation received an amended complaint in which the
plaintiffs assert essentially the same claims as in the prior complaint but
have added a RICO claim and tort claims. Ticketmaster Corporation filed a
motion to dismiss the amended complaint in April 1997, which is scheduled to
be heard on January 28, 2000. Some of the claims in this litigation are
similar to claims that were the subject of an arbitration award in which
MovieFone was a claimant and Pacer Cats a respondent. Among other things, the
award included damages from Pacer Cats to MovieFone of approximately $22.75
million before interest and an injunction against some entities, which may
include affiliates of Ticketmaster Corporation, restricting or prohibiting
their activity with respect to aspects of the movie teleticketing business
for a specified period of time. Neither USAi, Ticketmaster Corporation, nor
any entity owned or controlled by Ticketmaster Corporation, were parties to
the arbitration. In May 1998, MovieFone filed a petition in New York state
court to hold an entity affiliated with Ticketmaster Corporation in contempt
of the injunction provision of the arbitration award on the grounds that such
entity is a successor or assignee of, or otherwise acted in concert with,
Pacer Cats. In November 1998, the court ruled that the Ticketmaster
Corporation affiliate is bound by the arbitrators' findings that it is the
successor to Pacer Cats and, as such, liable for breaches committed by Pacer
Cats and subject to the terms of the arbitration award's injunction. The
court further found that the Ticketmaster Corporation affiliate had violated
the injunction and awarded MovieFone approximately $1.38 million for losses
it incurred as a result of such violations. On May 17, 1999, the Ticketmaster
Corporation affiliate posted a bond to stay enforcement of the damage award
for violations of the injunction. Further, on July 9, 1999, the Ticketmaster
Corporation affiliate filed a motion for declaratory judgment that it is not
in violation of the injunction by respecting the rights and refusing to
interfere with the operation of American Movie Cinemas, Inc., a third party
that is the owner of certain ticketing software currently maintained by the
Ticketmaster Corporation affiliate. On July 20, 1999, MovieFone filed a
cross-motion for further contempt sanctions requesting that the court hold
the Ticketmaster Corporation affiliate in contempt and award damages based on
MovieFone's allegation that the Ticketmaster Corporation affiliate is in
violation of the injunction. The Ticketmaster Corporation affiliate denies
that it is in violation of the injunction. The court held a hearing on
December 21, 1999, and extended the injunction for six months to June 30, 2000.
On July 22, 1999, a class action entitled ANTHONY MASON V.
TICKETMASTER LLC; TICKETMASTER CORPORATION, TICKETMASTER GROUP, INC.; TIME
CONSUMER SERVICE, INC. AND JOHN DOES 1-10 was filed in the United States
District Court for the Northern District of Illinois. The plaintiff alleges
that Ticketmaster engages in unlawful business practices in connection with
offering "Entertainment Weekly" and "Sports Illustrated" to consumers. The
complaint, which alleges that Ticketmaster's policies violate 39 U.S.C. 3009
(mailing of unordered merchandise) and Section 2 of the Illinois Consumer
Fraud and Deceptive Business Practices Act, seeks restitution, damages,
punitive damages and attorney's fees. Ticketmaster believes that these
allegations have no merit.
On December 17, 1999, a purported class action entitled Adriana
Garza v. Southwest Ticketing, Inc., Ticketmaster L.L.C., Ticketmaster Group
and May Department Stores was filed against Ticketmaster, alleging that a
consumer was charged a surcharge for using a credit card to purchase ticket
at a Ticketmaster outlet in Hidalgo County, Texas. Ticketmaster offers a
discount for cash purchases in Hidalgo
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County, Texas. Ticketmaster offers a discount for cash purchases in
accordance with state law. Ticketmaster denies the allegations.
There can be no assurance that we, Ticketmaster Online or
Ticketmaster Corporation or our affiliates will not become the subject of
future governmental investigations or inquiries or be named as a defendant in
claims alleging violations of federal or state antitrust laws or any other
laws. Any adverse outcome in such litigation, investigation or proceeding
against us, Ticketmaster Online or Ticketmaster Corporation or our affiliates
could limit or prevent Ticketmaster Online from engaging in its online
ticketing business or subject us to potential damage assessments, all of
which could have a material adverse effect on our business, financial
condition or results of operations. Regardless of its merit, source or
outcome, any such litigation, investigation or proceeding would at a minimum
be costly and could divert the efforts of our management and other personnel
from productive tasks, which could have a material adverse effect on our
business, financial condition or results of operations.
ANY ACQUISITIONS THAT WE UNDERTAKE COULD BE DIFFICULT TO INTEGRATE, DISRUPT
OUR BUSINESS, DILUTE STOCKHOLDER VALUE AND ADVERSELY AFFECT OUR OPERATING
RESULTS.
As part of our business strategy, we intend to make acquisitions of
or significant investments in, complementary companies, products or
technologies. For example, we recently completed our acquisitions of
CityAuction, Match.com, One & Only Network and the Sidewalk assets. In
addition, we made investments in foodline.com, an online restaurant
reservation company, FairMarket, Inc., an online auction company, and
ActiveUSA.com, an online participatory sports reservation and registration
company. These acquisitions and investments and any future acquisitions and
investments are and will be accompanied by the risks commonly encountered in
acquisitions of companies. These risks include, among other things:
- the difficulty of assimilating the operations and personnel
of the acquired companies;
- the potential disruption of our ongoing business;
- the diversion of resources from our existing businesses,
sites and technologies;
- the inability of management to maximize our financial and
strategic position through the successful incorporation of
the acquired technology into our products and services;
- additional expense associated with amortization of acquired
intangible assets;
- the maintenance of uniform standards, controls, procedures
and policies; and
- the impairment of relationships with employees and customers
as a result of any integration of new management personnel.
There can be no assurance that we would be successful in overcoming
these risks or any other problems encountered with such acquisitions. Our
inability to overcome such risks could dilute our stockholder value and
materially adversely affect our operating results.
OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE DO NOT MAINTAIN THE VALUE OF
OUR DOMAIN NAMES.
We currently hold and license various Web domain names relating to
our brand, including the "citysearch.com", "cityauction.com", "match.com",
"ticketmaster.com" and "sidewalk.com" domain names. The acquisition and
maintenance of domain names generally is regulated by governmental agencies
and their designees. The regulation of domain names in the United States and
in foreign countries is subject to change. Governing bodies may establish
additional top-level domains, appoint additional domain name registrars or
modify the requirements for holding domain names. As a result, there can be
no assurance that we will be able to acquire or
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maintain relevant domain names in all countries in which we conduct business.
Furthermore, the relationship between regulations governing domain names and
laws protecting trademarks and similar proprietary rights is unclear. We,
therefore, may be unable to prevent third parties from acquiring domain names
that are similar to, infringe upon or otherwise decrease the value of our
trademarks and other proprietary rights. Any such inability could have a
material adverse effect on our business, financial condition and results of
operations.
WE ARE SUBJECT TO ANTI-TAKEOVER PROVISIONS THAT MAY AFFECT THE PRICE OF OUR
STOCK.
Our Restated Certificate of Incorporation and the Restated Bylaws
and Delaware General Corporation Law Section 203 contains provisions that may
render more difficult, or have the effect of discouraging, unsolicited
takeover bids from third parties or the removal of our incumbent management.
These provisions include the right of the holders of the Class A Common Stock
to 15 votes per share, versus one vote per share for the holders of Class B
Common Stock and provide that the stockholders may not call special meetings.
In addition, our Restated Certificate of Incorporation authorizes the Board
of Directors to issue, without stockholder approval, 2,000,000 shares of
preferred stock, par value $.01 per share, with voting, conversion and other
rights and preferences that could adversely affect the voting power or other
rights of the holders of our Common Stock. Although we have no current plans
to issue any shares of Preferred Stock, the issuance of Preferred Stock or
rights to purchase Preferred Stock could render more difficult, or have the
effect of discouraging, unsolicited takeover bids from third parties or the
removal of incumbent management, or otherwise adversely affect the market
price for the Class B Common Stock. Although such provisions do not have a
substantial practical significance to investors while USAi, through its
ownership of Class A Common Stock, is in a position to effectively control
all matters affecting us, such provisions could have the effect of depriving
stockholders of an opportunity to sell their shares at a premium over
prevailing market prices should USAi no longer be in such control.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that relate to
future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "intend," "potential," or "continue" or the negative of such
terms or other comparable terminology. These statements are only predictions.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of various factors, including the risks outlined under "Risk Factors"
and elsewhere in this prospectus.
USE OF PROCEEDS
As described in more detail in "Summary--Recent Developments,"
pursuant to our agreement with ActiveUSA.com, the escrow agent will deliver
$10 million of the net proceeds from the sale of the shares to ActiveUSA.com
and the remainder, if any, of the net proceeds will be delivered to us. If
the net proceeds from the sale of the shares are less than $10 million, we
will make up the difference to ActiveUSA.com in cash. In the event the sale
of the shares is expected to generate net proceeds in excess of $10 million,
ActiveUSA will elect to sell only that number of shares which are expected to
yield net proceeds of $10 million. At any time prior to the sale of the
shares, we have the option to pay ActiveUSA.com $10 million in cash and have
the shares returned to us. We will use any amounts received from the escrow
account for general corporate purposes, including working capital. See the
discussion under the caption entitled "Selling Stockholder."
SELLING STOCKHOLDER
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As of January 10, 2000, the selling stockholder, ActiveUSA.com,
Inc., owned 243,620 shares of our Class B Common. These shares represent less
than 1% of our equity. There can be no assurance that the selling stockholder
will sell all or any of the shares offered hereby.
The shares described above were originally issued by us in
connection with our investment in ActiveUSA which is described more fully
under "Prospectus Summary--Recent Developments." The shares were issued
pursuant to exemptions from the registration requirements of the Securities
Act of 1933, as amended. The shares are being registered by us pursuant to
the Series D Preferred Stock Purchase Agreement, dated November 17, 1999 by
and among us, ActiveUSA.com, Inc. and certain other parties.
The shares have been issued in name of ActiveUSA.com and deposited
in an escrow account. Pursuant to our agreement with ActiveUSA.com, the
escrow agent will deliver $10 million of the net proceeds from the sale of
the shares to ActiveUSA.com and the remainder, if any, of the net proceeds
will be delivered to us. If the net proceeds from the sale of the shares are
less than $10 million, we will make up the difference to ActiveUSA.com in
cash. In the event the sale of the shares is expected to generate net
proceeds in excess of $10 million, ActiveUSA will elect to sell only that
number of shares which are expected to yield net proceeds of $10 million. At
any time prior to the sale of the shares, we have the option to pay
ActiveUSA.com $10 million in cash and have the shares returned to us.
In connection with our investment in ActiveUSA, we also entered into
a three year content licensing and distribution agreement with ActiveUSA
pursuant to which we will feature ActiveUSA content on the CitySearch web
sites and provide services and advertising to ActiveUSA.com.
PLAN OF DISTRIBUTION
The selling stockholder (and its respective donees, distributees,
pledgees and personal representative(s)) may, from time to time, offer for
sale and sell or distribute the shares of our Class B Common Stock offered
hereby in transactions executed on the Nasdaq National Market, in negotiated
transactions, or through other means. The selling stockholder under some
circumstances might be deemed an underwriter under the Securities Act of
1933. As a precaution against such a possibility, the selling stockholder
intends to deliver prospectuses to its purchasers in accordance with Section
5 of the Securities Act of 1933. Sales may be effected at market prices
prevailing at the time of sale or at such other prices as may be negotiated
by the selling stockholder. The Shares may be sold by one or more of the
following: (a) a block trade in which the broker-dealer so engaged will
attempt to sell the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction; (b) purchased by a
broker-dealer as principal and resold by such broker-dealer for its account
pursuant to this prospectus; (c) an exchange distribution in accordance with
the rules of such exchange; and (d) ordinary brokerage transactions and
transactions in which the broker solicits purchasers. In effecting sales,
broker-dealers engaged by the selling stockholder may arrange for other
broker-dealers to participate in the resales.
In connection with distributions of the shares or otherwise, the
selling stockholder may enter into hedging transactions with broker-dealers.
In connection with such transactions, broker-dealers may engage in short
sales of shares of our Class B Common Stock in the course of hedging the
positions they assume with the selling stockholder. The selling stockholder
may also sell shares of our Class B Common Stock short and deliver the shares
offered hereby to close out such short positions. In connection with the
foregoing transactions, the selling stockholder may be required to deliver
this prospectus. The selling stockholder or such other broker-dealers that
require the delivery to the broker-dealer of the shares registered hereunder,
which the broker-dealer may resell or otherwise transfer pursuant to this
prospectus. The selling stockholder may also loan or pledge the shares
registered hereunder to a broker-dealer and the broker-dealer may sell the
shares so loaned, or upon a default the broker-dealer may effect sales of the
pledged shares, in each case pursuant to this prospectus.
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Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from the selling stockholder in amounts
to be negotiated in connection with the sale. Such broker-dealers or agents
and any other participating broker-dealers may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act of 1933 in
connection with such sales and any such commission, discount or concession
may be deemed to be underwriting discounts or commissions under the
Securities Act of 1933. In addition, any securities covered by this
prospectus which qualify for sale pursuant to Rule 144 may be sold under Rule
144 rather than pursuant to this prospectus. In order to comply with the
securities laws of certain states, if applicable, the shares will be sold in
such jurisdictions only through registered or licensed brokers or dealers.
The selling stockholder will be responsible for any fees,
disbursements and expenses of any counsel for the selling stockholder. All
other expenses incurred in connection with the registration of the shares
offered hereby, including SEC registration fees, printer's and accounting
fees and the fees, disbursements and expenses of our counsel will be borne by
us. Commissions and discounts, if any, attributable to the sales of the
shares offered hereby will be borne by us. The selling stockholder may agree
to indemnify any broker-dealer or agent that participates in transactions
involving sales of the shares against certain liabilities, including
liabilities arising under the Securities Act of 1933. We have agreed to
indemnify the selling shareholder against certain liabilities in connection
with the offering of the shares, including liabilities arising under the
Securities Act of 1933.
We have undertaken to keep a registration statement of which this
prospectus constitutes a part effective until the earliest to occur of (i)
all shares offered hereby being sold pursuant to the registration statement
or (ii) the three month anniversary of the date on which the registration
statement of which this prospectus constitutes a part was declared effective
by the SEC. After such period, if we choose not to maintain the effectiveness
of the registration statement of which this prospectus constitutes a part,
the shares offered hereby may not be sold, pledged, transferred or assigned,
except in a transaction which is exempt under the provisions of the
Securities Act of 1933 or pursuant to an effective registration statement
thereunder.
LEGAL MATTERS
The validity of our Class B Common Stock to be offered in this
prospectus will be passed upon for us by Gibson, Dunn & Crutcher LLP, Los
Angeles, California. Certain legal matters in connection with the offering
will be passed upon for the selling stockholder by Brobeck, Phleger &
Harrison LLP, Irvine, California.
EXPERTS
The consolidated financial statements of CitySearch, Inc. at
December 31, 1996 and 1997 and for the period from September 20, 1995 (date
of formation) to December 31, 1995 and for the years ended December 31, 1996
and 1997, and the financial statements of Ticketmaster Online-CitySearch,
Inc. (Ticketmaster Online) (formerly Ticketmaster Multimedia Holdings, Inc.)
at January 31, 1998 and December 31, 1998 and for the years ended January 31,
1996 and 1997 and the eleven month period ended December 31, 1998,
incorporated herein by reference, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon and are
incorporated by reference in reliance upon such reports given on the
authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
26
<PAGE>
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may
inspect and copy these reports, proxy statements and other information at the
public reference facilities of the SEC at:
- Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549;
- 7 World Trade Center, Suite 1300, New York, New York 10048;
and
- Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois, 60661.
You may also obtain copies of these materials from the public reference
section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. You should call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. The SEC also maintains an Internet
web site that contains reports, proxy and information statements and other
information regarding companies and other persons that file electronically
with the SEC. The SEC's Internet web site address is http:\\www.sec.gov. You
may inspect reports and other information that we file at the offices of
Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
We have filed a registration statement and related exhibits with the
SEC under the Securities Act of 1933. The registration statement, which
includes this prospectus, contains additional information about our company
and the shares to be sold by the selling stockholder. You may inspect the
registration statement and exhibits without charge at the office of the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549, and you may obtain copies
from the SEC at prescribed rates.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information that we
file with it, which means that we can disclose important information to you
by referring to those documents. The information incorporated by reference is
an important part of this prospectus, and the information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the following documents that we have filed with the
SEC:
- Annual Report on Form 10-K for the year ended December 31,
1998
- Quarterly Report on Form 10-Q for the quarter ended March 31,
1999
- Quarterly Report on Form 10-Q for the quarter ended June 30,
1999
- Quarterly Report on Form 10-Q for the quarter ended September
30, 1999
- Current Report on Form 8-K filed on April 29, 1999
- Current Report on Form 8-K filed on August 3, 1999
- Current Report on Form 8-K filed on September 29, 1999
- Current Report on Form 8-K filed on January 28, 2000
- The description of our Class B Common Stock contained in our
Registration Statement on Form 8-A (File No. 000-25041) filed
on November 6, 1998, pursuant to Section 12(g) of the Exchange
Act, including any amendment or report filed for the purpose
of updating such description
We are also incorporating by reference additional documents that we
may file with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act between the date of the prospectus and the termination of the
27
<PAGE>
offering of the shares offered hereby. You may request a copy of these
filings at no cost, by writing or telephoning us at the following address and
phone number:
Ticketmaster Online-CitySearch, Inc.
Attn: Chief Financial Officer
790 E. Colorado Boulevard, Suite 200
Pasadena, California 91101
Telephone: (626) 405-0050
You should rely only on the information incorporated by reference or
provided in this prospectus and any supplement. We have not authorized anyone
else to provide you with different information.
28
<PAGE>
243,620 SHARES
TICKETMASTER ONLINE--CITYSEARCH, INC.
CLASS B COMMON STOCK
----------------
Until ___________, 2000 (25 days after the date of this prospectus), all
dealers effecting transactions in these securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
We will pay all expenses incident to the offering and sale to the
public of the shares being registered including any commissions and discounts
of underwriters, dealers or agents and any transfer taxes. Such expenses are
set forth in the following table except commissions, discounts and transfer
taxes. All of the amounts shown are estimates, except for the SEC
registration fee:
<TABLE>
<CAPTION>
AMOUNT
TO BE
ITEM PAID
- ----------------------------------------------------------------------------------------- -------------
<S> <C>
SEC Registration fee.................................................................. $ 2,754
Accounting fees and expenses.......................................................... 5,000
Legal fees and expenses............................................................... 15,000
Nasdaq listing fees .................................................................. 4,900
Blue Sky fees and expenses............................................................ 1,000
Transfer agent and registrar fees..................................................... 500
Miscellaneous......................................................................... 5,000
-------------
Total.................................................................................... $34,154
=============
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
We are a Delaware corporation. Section 145 of the General
Corporation Law of the State of Delaware (the "Delaware Law") empowers a
Delaware corporation to indemnify any persons who are, or are threatened to
be made, parties to any threatened, pending or completed legal action, suit
or proceeding, whether civil, criminal, administrative or investigative
(other than action by or in the right of such corporation), by reason of the
fact that such person was an officer or director of such corporation, or is
or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such officer
or director acted in good faith and in a manner he reasonably believed to be
in or not opposed to the corporation's best interests, and, for criminal
proceedings, had no reasonable cause to believe his conduct was illegal. A
Delaware corporation may indemnify officers and directors in an action by or
in the right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation in the performance of
his duty. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation
must indemnify him against the expenses which such officer or director
actually and reasonably incurred.
Our Amended and Restated Certificate of Incorporation provides for
the indemnification of directors to the fullest extent permissible under
Delaware law.
The effect of these provisions is to eliminate our rights and the
rights of our stockholders (through stockholders' derivative suits on our
behalf) to recover monetary damages against a director for breach of
fiduciary duty of care as a director (including breaches resulting from
negligent or grossly negligent behavior), except in certain limited
situations. These provisions do not limit or eliminate our rights or any of
our stockholder's rights to seek non-monetary relief such as an injunction or
rescission in the event of a breach of a director's duty of care. These
provisions will not alter the liability of directors under federal securities
laws.
II-1
<PAGE>
Our Bylaws provide for the indemnification of officers, directors
and third parties acting on behalf of us if such person acted in good faith
and in a manner reasonably believed to be in and not opposed to our best
interest, and, with respect to any criminal action or proceeding, the
indemnified party had no reason to believe his conduct was unlawful.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE NOTES
------- ------------- -----
<S> <C> <C>
2.1 Agreement and Plan of Reorganization, among CitySearch, Inc., MB Acquisition Corporation,
MetroBeat, Inc., Mark Davies and Joshua White, dated May 31, 1996. (A)*
2.2 Amended and Restated Agreement and Plan of Reorganization, among CitySearch, Inc.,
Tiberius, Inc., USA Networks, Inc., Ticketmaster Group, Inc., Ticketmaster Corporation and
Ticketmaster Multimedia Holdings, Inc., dated August 12, 1998. (A)
2.3 Agreement and Plan of Reorganization, dated January 8, 1999, by and among Ticketmaster
Online--CitySearch, Inc., Nero Acquisition Corp., Inc., CityAuction, Inc., Andrew Rebele
and Monica Lee as amended. (B)
2.4 Agreement and Plan of Reorganization, dated as of February 8,1999, by and among USA
Networks, Inc., Ticketmaster Online-CitySearch, Inc., Lycos, Inc., USA Interactive Inc.,
Lemma, Inc. and Tycho, Inc. (the "Merger Agreement"), including Form of Certificate of
Designations, Preferences and Rights of Series A Convertible Redeemable Preferred Stock of
USA/Lycos Interactive Networks, Inc. (Exhibit B to the Merger Agreement). (C)
2.5 Exchange Agreement by and among Cendant Corporation, Cendant Intermediate Holdings, Inc.
and Ticketmaster Online--CitySearch, Inc. dated as of May 14, 1999. (D)
2.6 Agreement and Plan of Reorganization dated June 10, 1999 among Ticketmaster
Online--CitySearch, Web Media Ventures LLC (dba One & Only Network) and William Bunker,
David Kennedy and Glenn Wiggins. (D)
2.7 Agreement and Plan of Merger by and among Sidewalk.com, Inc., Microsoft Corporation and
the Registrant, dated as of July 19, 1999. (E)
4.1 Specimen Class B Common Stock Certificate. (F)
4.2 Form of Class B Common Stock Purchase Warrant of the Registrant to be delivered upon
closing of the Sidewalk acquisition (3,000,000 shares). (E)
4.3 Form of Class B Common Stock Purchase Warrant of the Registrant to be delivered upon
closing of the Sidewalk acquisition (1,500,000 shares). (E)
5.1 Opinion of Gibson, Dunn & Crutcher LLP as to the legality of
the securities being registered.
23.1 Consent of Independent Auditors.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
</TABLE>
- -------------------------
* Confidential treatment has been granted with respect to portions of this
exhibit.
II-2
<PAGE>
(A) Incorporated by reference to exhibits filed in response to Item 16,
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
333-64855) filed with the Commission on September 30, 1998.
(B) Incorporated by reference to the Company's Report on Form 10-K filed with
the Commission on March 31, 1999.
(C) Incorporated by reference to exhibits filed in response to Item 7,
"Exhibits," of the Report on form 8-K filed by USA Networks, Inc. (File
No. 000-20570) with the Commission on February 26, 1998.
(D) Incorporated by reference to exhibits filed in response to Item 16,
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
333-81761) filed with the Commission on June 29, 1999.
(E) Incorporated by reference to exhibits filed in response to Item 6,
"Exhibits," of the Report on Form 10-Q filed with the Commission on August
16, 1999.
(F) Incorporated by reference to exhibits filed in response to Item 16,
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
333-64855) filed with the Commission on November 6, 1998.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS.
A. UNDERTAKING PURSUANT TO RULE 415
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to
include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of this offering.
B. UNDERTAKING REGARDING FILINGS INCORPORATING SUBSEQUENT EXCHANGE
ACT DOCUMENTS BY REFERENCE
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities and Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
C. UNDERTAKING IN RESPECT OF INCORPORATED ANNUAL AND QUARTERLY
REPORTS
The undersigned registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report, to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to be
presented by Article 3 of Regulation S-X is not set forth in the prospectus,
to deliver, or cause to be delivered to each person to whom the prospectus is
sent or given, the latest quarterly report that is specifically incorporated
by reference in the prospectus to provide such interim financial information.
D. UNDERTAKING IN RESPECT OF INDEMNIFICATION
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
II-4
<PAGE>
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
E. UNDERTAKING PURSUANT TO RULE 430a
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or Rule 497(h) under the
Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Pasadena, California, on the 28th
day of January, 2000.
TICKETMASTER ONLINE-CITYSEARCH, INC.
By: /s/ Charles Conn
----------------------------------------
Charles Conn
Chief Executive Officer
POWER OF ATTORNEY
Know All Men By These Presents, that each person whose signature
appears below constitutes and appoints Charles Conn, Brad Serwin and Thomas
McInerney, jointly and severally, his attorney-in-fact, each with the power
of substitution for him in any and all capacities, to sign any amendments to
this Registration Statement (including post-effective amendments), and to
sign any registration statement for the same Offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities indicated below on the 28th day of January 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------- --------------------------------------- ----------------
<S> <C> <C>
/s/ Charles Conn Chief Executive Officer (Principal January 28, 2000
- --------------------------------------- Executive Officer) and Director
Charles Conn
/s/ Thomas Mcinerney Chief Financial Officer, Executive Vice January 28, 2000
- --------------------------------------- President, Finance and Treasurer
Thomas McInerney (Principal Financial and Accounting
Officer)
/s/ Barry Baker Director January 28, 2000
- ---------------------------------------
Barry Baker
/s/ Terry Barnes Director January 28, 2000
- ---------------------------------------
Terry Barnes
/s/ Barry Diller Director January 28, 2000
- ---------------------------------------
Barry Diller
/s/ Joseph Gleberman Director January 28, 2000
- ---------------------------------------
Joseph Gleberman
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C> <C>
/s/ William Gross Director January 28, 2000
- ---------------------------------------
William Gross
/s/ Lawrence Jacobson Director January 28, 2000
- ---------------------------------------
Lawrence Jacobson
/s/ Victor A. Kaufman Director January 28, 2000
- ---------------------------------------
Victor A. Kaufman
/s/ Robert Kavner Director January 28, 2000
- ---------------------------------------
Robert Kavner
/s/ Dara Khosrowshahi Director January 28, 2000
- ---------------------------------------
Dara Khosrowshahi
/s/ William D. Savoy Director January 28, 2000
- ---------------------------------------
William D. Savoy
/s/ Alan Spoon Director January 28, 2000
- ---------------------------------------
Alan Spoon
/s/ Thomas Unterman Director January 28, 2000
- ---------------------------------------
Thomas Unterman
</TABLE>
II-7
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE NOTES
------- ------------- -----
<S> <C> <C>
2.1 Agreement and Plan of Reorganization, among CitySearch, Inc., MB Acquisition Corporation,
MetroBeat, Inc., Mark Davies and Joshua White, dated May 31, 1996. (A)*
2.2 Amended and Restated Agreement and Plan of Reorganization, among CitySearch, Inc.,
Tiberius, Inc., USA Networks, Inc., Ticketmaster Group, Inc., Ticketmaster Corporation and
Ticketmaster Multimedia Holdings, Inc., dated August 12, 1998. (A)
2.3 Agreement and Plan of Reorganization, dated January 8, 1999, by and among Ticketmaster
Online--CitySearch, Inc., Nero Acquisition Corp., Inc., CityAuction, Inc., Andrew Rebele
and Monica Lee as amended. (B)
2.4 Agreement and Plan of Reorganization, dated as of February 8,1999, by and among USA
Networks, Inc., Ticketmaster Online-CitySearch, Inc., Lycos, Inc., USA Interactive Inc.,
Lemma, Inc. and Tycho, Inc. (the "Merger Agreement"), including Form of Certificate of
Designations, Preferences and Rights of Series A Convertible Redeemable Preferred Stock of
USA/Lycos Interactive Networks, Inc. (Exhibit B to the Merger Agreement). (C)
2.5 Exchange Agreement by and among Cendant Corporation, Cendant Intermediate Holdings, Inc.
and Ticketmaster Online--CitySearch, Inc. dated as of May 14, 1999. (D)
2.6 Agreement and Plan of Reorganization dated June 10, 1999 among Ticketmaster
Online--CitySearch, Web Media Ventures LLC (dba One & Only Network) and William Bunker,
David Kennedy and Glenn Wiggins. (D)
2.7 Agreement and Plan of Merger by and among Sidewalk.com, Inc., Microsoft Corporation and
the Registrant, dated as of July 19, 1999. (E)
4.1 Specimen Class B Common Stock Certificate. (F)
4.2 Form of Class B Common Stock Purchase Warrant of the Registrant to be delivered upon
closing of the Sidewalk acquisition (3,000,000 shares). (E)
4.3 Form of Class B Common Stock Purchase Warrant of the Registrant to be delivered upon
closing of the Sidewalk acquisition (1,500,000 shares). (E)
5.1 Opinion of Gibson, Dunn & Crutcher LLP as to the legality of
the securities being registered.
23.1 Consent of Independent Auditors.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
</TABLE>
- -------------------------
* Confidential treatment has been granted with respect to portions of this
exhibit.
(A) Incorporated by reference to exhibits filed in response to Item 16,
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
333-64855) filed with the Commission on September 30, 1998.
II-8
<PAGE>
(B) Incorporated by reference to the Company's Report on Form 10-K filed with
the Commission on March 31, 1999.
(C) Incorporated by reference to exhibits filed in response to Item 7,
"Exhibits," of the Report on form 8-K filed by USA Networks, Inc. (File
No. 000-20570) with the Commission on February 26, 1998.
(D) Incorporated by reference to exhibits filed in response to Item 16,
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
333-81761) filed with the Commission on June 29, 1999.
(E) Incorporated by reference to exhibits filed in response to Item 6,
"Exhibits," of the Report on Form 10-Q filed with the Commission on August
16, 1999.
(F) Incorporated by reference to exhibits filed in response to Item 16,
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
333-64855) filed with the Commission on November 6, 1998.
II-9
<PAGE>
EXHIBIT 5.1
OPINION OF GIBSON DUNN & CRUTCHER LLP
JANUARY 28, 2000
(213) 229-7000 C 92492-00002
Ticketmaster Online-CitySearch, Inc.
790 E. Colorado Blvd., Suite 200
Pasadena, CA 91101
Re: REGISTRATION STATEMENT OF FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 (the
"Registration Statement") of Ticketmaster Online-CitySearch, Inc., a Delaware
corporation (the "Company"), filed with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), in connection with the offering from time to
time by ActiveUSA.com, Inc. of 243,620 shares of Common Stock, par value $.01
per share, of the Company (the "Common Stock"). All capitalized terms which
are not defined herein shall have the meanings assigned to them in the
Registration Statement.
For the purpose of the opinion set forth below, we have examined and
are familiar with the proceedings taken and proposed to be taken by the
Company in connection with the authorization and issuance of the Common
Stock, including such corporate records of the Company and certificates of
officers of the Company and of public officials and such other documents as
we have deemed relevant and necessary as the basis for the opinion set forth
below. In such examination, we have assumed the genuineness of all signatures
on, and the authenticity of, all documents submitted to us as originals and
the conformity to original documents of all documents submitted to us as
copies. With respect to agreements and instruments executed by natural
persons, we have assumed the legal competency of such persons.
On the basis of the foregoing examination, and in reliance thereon,
we are of the opinion that (subject to compliance with the pertinent
provisions of the Securities Act and to compliance with such securities or
"blue sky" laws of any jurisdiction as may be applicable) the Common Stock
has been duly authorized and, when sold in accordance with the terms of the
Registration Statement, will be validly issued, fully paid and nonassessable.
We render no opinion herein as to matters involving the laws of any
jurisdiction other than the laws of the United States of America and the
General Corporation Law of the State of Delaware. In rendering this opinion,
we assume no obligation to revise or supplement this opinion should current
laws, or the interpretations thereof, be changed.
We consent to the filing of this opinion as an exhibit to the
Registration Statement, and we further consent to the use of our name under
the caption "Legal Matters" in the Registration Statement and the prospectus
which forms a part thereof. In giving these consents, we do not thereby admit
that we are within the category of persons whose consent is required under
Section 7 of the Securities Act or the Rules and Regulations of the
Commission.
Very truly yours,
/s/ GIBSON, DUNN & CRUTCHER LLP
KMD
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 dated January 28, 2000) and related
prospectus of Ticketmaster Online-CitySearch, Inc. and to the incorporation
by reference of our report dated March 11, 1998 (except Note 10, as to which
the date is September 28, 1998) with respect to the financial statements for
the period from September 20, 1995 (date of formation) to December 31, 1995
for each of the two years ended December 31, 1997 of CitySearch, Inc.
included in its Annual Report (Form 10-K) for the transitional period ended
December 31, 1998, filed with the Securities and Exchange Commission.
We also consent to the incorporation by reference of our report dated January
29, 1999 with respect to the financial statements of Ticketmaster
Online-CitySearch, inc. for each of the two years ended January 31, 1998 and
the eleven month period ended December 31, 1998 included in its Annual Report
(Form 10-K) for the transition period ended December 31, 1998, filed with the
Securities and Exchange Commission.
Woodland Hills, California /s/ Ernst & Young LLP
January 27, 2000
