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By Dina ElBoghdady
Washington Post Staff Writer
Tuesday, August 3, 2004; Page E01

America Online's Moviefone, the company that pioneered selling movie tickets by phone and later online, agreed yesterday to transfer its ticketing business to the fledgling MovieTickets.com.

The deal intensifies an already heated rivalry between the nation's largest online movie-ticketing services, pitting MovieTickets against Fandango.com. Both firms entered the ticketing business in 2000, each backed by different theater chains. Moviefone began in 1989.

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Each company claims to be the industry leader. MovieTickets claims access to 32 theater chains and says it offers tickets to more than half of the top-grossing screens in North America. Fandango, formed by seven of the 10 largest U.S. theater chains, says it sells tickets to more than 1,000 theaters and 11,500 screens, dominating nearly 70 percent of the U.S. theaters able to sell tickets remotely. There are 35,774 movie screens in the country, according to the National Association of Theatre Owners.

Despite the competitive clamor, industry analysts say remote ticketing remains a niche industry. Last year, only 4.3 percent, or $400 million, of movie-ticket sales occurred online, according to Jupiter Research. Juliana Deeks, a Jupiter analyst, said the online business is not a huge moneymaker.

"The opportunity [online] is really about advertising films," Deeks said. "It's not about selling tickets so much."

Moviefone made the same argument when it handed over its ticket operations to MovieTickets yesterday. The AOL unit said it would focus more on promotions, trailers and reviews on its site.

"We wanted to concentrate on our core strength," said Steven Yee, general manager of AOL Movies and Moviefone.com. "We felt it was good business efficiency to migrate movie operations and infrastructure to MovieTickets.com."

MovieTickets is privately held; major investors include Viacom, AMC Entertainment and Hollywood Media Corp. AOL is a minority investor in MovieTickets.

Moviefone dominated the online ticket purchasing business in 1995, when it expanded beyond telephone sales to the Internet. Four years later, America Online purchased the company for $388 million. But Moviefone soon came under pressure with the debut of MovieTickets and Fandango.

Moviefone and MovieTickets then agreed to sell each other's tickets on the Web. Yesterday's deal goes further by handing over all of Moviefone's theater contracts to MovieTickets. That means consumers who go to Moviefone's site should be seamlessly linked to a co-branded transaction page.

Under this deal, MovieTickets also provides tickets for Moviefone's signature 777-FILM phone service.

As with Fandango, consumers can plug in their Zip code or city and find the nearest theater showing the movie of their choice. Consumers purchase the ticket by credit card and pay a $1 surcharge. That fee is split between the theater and the ticketing company. At the box office, moviegoers can bypass the ticket lines and print their ticket at an electronic kiosk.

Some industry watchers expect that in a few years only one of the online services will be left standing. Having different theaters offering tickets on different Web sites gets confusing for consumers, they argue.

"We'll probably see a further consolidation down the road, maybe a cross-linking arrangement where both sites can survive," Mitch Rubenstein, co-chief executive of MovieTickets.com, said in a recent interview. "It's best for users to get all the inventory in one location so they won't have to figure out what theater is in what service."


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