Company converts license into domain acquisition.
Event ticket seller Vivid Seats (NASDAQ: SEAT) disclosed a $17.3 million domain name acquisition in its latest annual report.
On October 22, 2024, we acquired a domain name that we had previously licensed (the “Acquired Domain Name”). In exchange for the Acquired Domain Name, we are required to disburse monthly interest-free cash payments totaling $31.4 million through June 2040 (the “Acquired Domain Name Obligation”).
We account for the Acquired Domain Name as a definite-lived intangible asset under ASC Topic 350, Intangibles—Goodwill and Other. The acquisition cost of the Acquired Domain Name was $17.3 million, which will be amortized over a period of 15.6 years (the “Acquired Domain Name Term”). As of December 31, 2024, the Acquired Domain Name had a carrying value of $17.3 million, which is recorded in Intangible assets – net in the Consolidated Balance Sheets.
As best I can tell, the acquisition is a conversion of a license it entered into in 2005.
In the company’s prospectus filed in 2023, Vivid Seats stated:
In 2005, the Company entered into an agreement for use of an internet domain name with an unrelated party. Under the terms of the agreement, the Company is obligated to pay approximately $2,500,000 per year until the agreement expires in 2040. The Company has the option to terminate the agreement at any time, provided they operate the domain for a period of thirty days after termination.
Because that leased domain had an expiration date, it makes sense that the company would want to lock up the domain even if it has to pay substantially more per year.
[See update below] Given the dates, it suggests that this mammoth payment is for the domain vividseats.com. What’s confusing is that the domain was registered to VividSeat’s founder, Jerry Bednyak, before 2005. It would seem this would have made him a related party. This would also make it more than just about a domain name.
The company also owns Vegas.com, but that was through an acquisition announced in November 2023.
Update: it appears this might be the LasVegas.com domain name, which George Kirikos spotted was under lease when Vivid Seats acquired Vegas.com. So it appears the company has converted the lease of LasVegas.com into a purchase agreement.
I contacted Vivid Seats. Its investor relations department said it would not be providing further information.
Well, they didn’t acquire vivid .com, unless they are in the process of pivoting into porn.
Seems like Seats.now would’ve been a better deal.
VividWebsite.com available on Dynadot for $99
Vividsucks and vividbs are open to reg
They didn’t say they acquired it for $17.3 million, they said they acquired it for $31.4 million. The $17.3 million is the present value of those future payments, which is what will be amortized over the 15.6 year useful life. The difference will probably be written off as interest expense or some other kind of liability adjustment, although they don’t say.
This is probably just the LasVegas.com deal being restated over and over again. Once in 2015 because it was about to convert from an obligation to a month-to-month. And once now probably because they’re converting it back to being an obligation and not a “cancel any time with 30 days notice” type of deal.
What also doesn’t make sense is that it was initially reported as a purchase agreement, not a licensing agreement. And now they’re saying it was a license agreement all along. Probably just accounting shenanigans to play games with how they can write it off.
Thanks for your thoughts on this. Wouldn’t the present value by the more relevant number?
Every time I’ve seen an LTO reported it was cash outlay not present value at the time of purchase. And it was widely reported as sold for $90m not whatever the present value was at the time.
That being said, I’m not sure any number is relevant in this situation, because they are buying it again every 10 years like clockwork. Yet somehow the buy was always actually a license agreement. When they buy it again in 2035 for $10 million we’ll see I guess.