Monday, January 18, 2010

Antitrust Superstar--How merging Ticketmaster and Live Nation might change everything



Antitrust Superstar--How merging Ticketmaster and Live Nation might change everything


It's a marriage straight out of the most gruesome horror film: Two lumbering behemoths team up to wreak havoc on the landscape, their insatiable hungers never satisfied. No, it's not Alien vs. Predator. This is actually real, and this time the victim could be you, the music fan. At least, that's how opponents of the impending merger between Ticketmaster (the undisputed heavyweight in the ticket sales industry) and Live Nation (the country's largest concert promoter and second largest ticket seller) are framing it. Call it Night Of The Living Convenience Fees.

When the proposal was first announced last February, it was met with immediate disapproval by antitrust and consumer advocacy groups who say the merger will amount to an unfair competition edge for the new entity; one with a virtual stranglehold on the ticket selling industry. Ultimately, it will have an effect on your ability to see shows, and artists' chances of making a living.

But how much worse can things really get at this point? Ticket prices are already bad enough, aren't they? At some point, music fans will have to say enough is enough and just stop going. Won't they?

"You've seen ticket prices go up and up and up and, particularly in this economy, I think that's something that consumers are rightfully seeing and deciding to take their money elsewhere," says John D. Breyault of the National Consumers League. His group has partnered with the National Association of Ticket Brokers in an effort called "Ticket Disaster" designed to oppose the merger. "Unfortunately, if fans aren't going to see the shows, artists aren't going to play. Most [bands'] money now is coming from live events; not from CD sales the way it did in the past. We think the ability of artists to receive the benefits of competition from venue management and artist management is going to be compromised if this merger goes through. We're scared of what the results are going to be. But fans are gonna see less shows."

From an artist's perspective, the prospect is a bit daunting as well. "This sounds pretty terrible," says Christopher Chu of Rough Trade act the Morning Benders, who are set to head out on tour in March and April. "It's already becoming increasingly difficult to survive as an artist because fewer people are buying records, and even fewer people are going to shows. Increasing ticketing fees and prices isn't going to help. In the end, not only will the artists never see any of this money, but fewer people will go to shows because tickets are so expensive."

Brent Smith, frontman for modern rockers Shinedown, is surprised an agreement like this hasn't happened sooner. "I think that companies are having to merge together to keep afloat the way the industry is right now." Smith is less pessimistic about the idea than many others, suggesting that having all of the costs of going to a show under one umbrella may streamline the process. But there needs to be transparency involved. "I don't think people get upset as long as they know what they're getting, and know what they're going to have to pay." That means no surprise fees and no hidden costs. "Then again, it doesn't leave any room for any negotiations either. You got one company, you got to deal with what they give you." Therein lies the crux of the issue. Not all bands will get the short end of the stick like Chu suggests. When you consider Live Nation's relationship with hundreds of artists--some of whom are signed to all-encompassing deals with the promoter covering merchandise, albums, live shows and everything in between--and Ticketmaster's purchase of big time artists management company Front Line Management last year, it only further complicates matters. Now, it seems, the company would be controlling much of the concert industry from both ends, representing many of the artists fans would pay to see, the venues who promote the shows and setting the prices on a huge majority of the events that take place throughout the country. All of which is coming on the heels of Ticketmaster already purchasing secondary ticket sellers like TicketsNow. Bruce Springsteen was one of the many vocal detractors from that deal last year when it came to light that Ticketmaster was sending customers to TicketsNow for sold-out shows. In effect, they were scalping their own tickets. Shortly thereafter, Springsteen released a statement condemning the practice, adding, "The one thing that would make the current ticket situation even worse for the fan than it is now would be Ticketmaster and Live Nation coming up with a single system, thereby returning us to a near-monopoly situation in music ticketing."

Unsurprisingly, when the Boss speaks, the Garden State listens. Democratic U.S. Rep. Bill Pascrell, Jr. of New Jersey followed up with a letter to the Federal Trade Commission and the Department of Justice Antitrust Division asking for an investigation into the potential antitrust implications of that deal. Then again in July, he did the same concerning the Live Nation merger, alongside 50 other bipartisan members of the House of Representatives. It read in part:

"Ticketmaster Entertainment is the industry's overwhelmingly dominant ticket seller, its largest provider of talent management services, and its second largest reseller of tickets. Live Nation is the industry's largest promoter of live entertainment events, the second largest ticket seller, and the second largest owner/manager of entertainment venues. The transaction therefore would create an entity, Live Nation Entertainment, which would enjoy a virtual stranglehold over the live entertainment industry. Together, the two parties sold more than 100 million tickets domestically in 2008, and there are few artists, promoters, venue owners, or concertgoers that would not feel the impact of this merger. In our view, the merger should be prohibited....Consumers, business managers, artists, independent promoters, and music fans in every state are likely to suffer if the merger is allowed to occur. We urge you to give this transaction the closest possible scrutiny and provide citizens the antitrust protection they deserve."

Over the intervening months while the Department of Justice continues its nearly yearlong investigation into the merger, opposition has grown exponentially, partly through the efforts of Ticket Disaster. The group are calling on music fans to contact their representatives and the Attorney General to voice their displeasure. "As far as what DOJ is planning, they are very tight lipped about where they are in the process," says the National Consumer League's Breyault. A spokesperson from the DOJ responded to a request from AP by stating that the matter was pending, and that they have no further information to share at this time.

Originally, Live Nation and Ticketmaster expected the deal to be done by the end of last year, although general consensus seems to be that a decision is impending. People who are following the situation expect a decision anytime from this week to within the next month. Despite the uncertainty over whether or not they will actually be allowed to proceed, the two companies have taken it all in stride, forging ahead with their plans. Earlier this month, Ticketmaster and Live Nation shareholders voted overwhelmingly to approve the deal. In a statement released in response, David Balto, former Federal Trade Commission policy director and counsel to the consumer and industry groups opposed to the merger, said stockholder approval has no bearing on public approval. "While this move is necessary for the companies to proceed, it has no impact on alleviating antitrust concerns or DOJ's decision in how to move forward."

Adding further fuel to the speculative fire, the United Kingdom Competition Commission approved the same merger in December of this year, arguing that the potential share of the market controlled in that country (roughly 50 percent) does not amount to its control in the States (near 80 percent). Does that bode ominously for the outcome here? "I don't think so," says Breyault. "We were surprised to see the U.K. do a 180 [degree turn] on this. In the fall last year, they came out with a preliminary report opposing the merger. Then they approved it without asking for any significant concessions. That said, the U.K. is not the U.S. These are two U.S. companies, and the DOJ should be conducting a thorough review. The U.K. market is very different than the U.S. Most shows you have choices from where you're going to buy your tickets from. In the U.S., it's not that way. Unless you're buying your tickets directly from the box office, nine times out of 10 you're going to be paying Ticketmaster."

It all sounds very grim, but one wonders if there's isn't an element of hyperbole at work here. How bad can it actually be? The bottom line, says Mark Cooper of the Consumer Federation of America, is that "it's anti-competitive, it will raise prices and have other negative effects on consumers."

Breyault says, "We think it's as bad as everyone is making it out to be, honestly. We've heard from tens of thousands of consumers through this coalition who have e-mailed the DOJ to register their complaint, and signed online petitions. We've got the major consumer organizations in the country as part of our coalition, along with independent venue owners and ticket brokers. From our point of view, the only people that seem to be in favor of this merger are the two companies merging. It's not hard to see why. This is a merger that's going to give Ticketmaster an unprecedented level of control over the primary ticketing industry, where it already has 70 to 80 percent market share. It's also going to give them control over every level of the live event industry--from selling the tickets to managing the acts to promoting the shows, all the way down to selling concessions. We think, from our point of view, it's a no-brainer for Justice to block this on antitrust grounds and we hope they're listening to our voice in the coalition and the consumers we've organized."

Another group with a lot to lose is a smaller companies like Ticket Biscuit, the online ticketing agency that cedes much of the control to the 400+ venues they work with throughout the country. They've decided to put their money where their mouths are by establishing the Music Liberation Fund. The effort allocates $10 million for venues and promoters looking to become or remain independent of Ticketmaster and Live Nation.

"This is a campaign that we came up with as soon as we heard about the proposed merger," says Ticket Biscuit CEO Jeff Gale. "We pretty quickly concluded that that was going to be no good for anyone but Live Nation and Ticketmaster. We wanted to do what we could to preserve the independent spirit of the American music community, venues, artists and promoters outside of that umbrella. It was a portion of our projected revenue that we set aside to help further that effort by being able to make very attractive ticketing deals with venues that want to remain or become independent of that conglomeration, or artists or promoters that want to do the same thing."

While many companies may be inclined philosophically--if not financially--to operate independently, there is a very real fear among them that damaging their relationship with these larger companies may ultimately hurt them, or put them out of business. In this David and Goliath story, it's usually not the little guy who wins.

"They're caught between the frying pan and the fire," says Gale. "While they're scared of losing out on whatever their relationship with Ticketmaster affords them, they're also scared to death of being under the thumb of this company that's going to be two or three times as powerful as it already was. They're frightened any way they turn. We think they've got to take one of those fears head on and liberate themselves. Their businesses are so already controlled either Ticketmaster or Live Nation, or any in many cases, both of them already. Once those two companies combine and control the entire supply chain from the fan to the artist to the venue to the ticketing, an independent promoter or venue is holding no cards at that point. The combined company can go to the a venue that was previously independent and say, 'We know that you don't like the Ticketmaster system and the high fees that Ticketmaster charges, but if you want us to continue putting these artists who sell a lot of tickets and get people onto your stage then you're gonna use the Ticketmaster system.' I think Ticketmaster has attempted to probably deny that that's gonna be the type of business practice they'll follow, but I don't believe it for a second."

Most people who would respond to the spirit of the MLF wouldn't be interested in maintaining their relationship with Ticketmaster anyway, he says. "Basically, it's gonna result in fewer choices for the customer. Whenever the customer has fewer choices they get shafted." Self-interest certainly plays a role in the push back from companies like Ticket Biscuit. It also plays a role in music fans' opposition as well. After all, much of their fear is based on the idea of having to pay more than they already do to see a show.

But aside from the companies in question, there seems to be little upside evident in the merger. Either that, or no one who is willing to make the case--no one without a vested interest. Among the big name artists who have expressed their support for the merger in letters to Congress include Shakira, Eddie Van Halen, Seal, Journey and Billy Corgan of Smashing Pumpkins. "This is a new model that puts power into the hands of the artist, creating a dynamic synergy that will inspire great works and attract healthy competition," Corgan wrote to the Senate Committee on Antitrust, Competition Policy and Consumer Rights. "Anything that can strengthen the link between music creators and music lovers has my support," wrote Seal. "I believe the combined company will achieve that by aligning resources, talent and services."

It should be noted that Corgan, Seal, Journey and Van Halen are currently managed by Ticketmaster CEO Irving Azoff and Front Line Management. Shakira is under contract with Live Nation. Testifying before the Subcommittee on Antitrust, Competition Policy and Consumer Rights of the Senate Committee on the Judiciary last February, Azoff made his case for the deal. "This merger will let us fully integrate our complementary strengths and eliminate about $40 million in inefficiencies--money that could be invested in more innovation. It is designed to address the obvious inefficiencies in the entertainment supply chain -- the large volume of unsold tickets to events, higher costs, surcharges and the explosion of the resale market. It will give us greater flexibility in how we promote, market and sell tickets to events. It will give us a pathway to alternative pricing and fee structures. And we will be better able to develop new and innovative products and services that enhance the fan experience and make all forms of entertainment more accessible to everyone."

One of the key points of his argument was the effect that secondary ticketing has had on the industry. "Secondary ticketing is driving up prices for the fans, with absolutely no benefit to the artist," he said. "We cannot just cling to old ways. This merger will allow the live music industry to avoid repeating the mistakes of the record business." It's a good point, and it would be a lot more believable if Ticketmaster hadn't bought up secondary ticketing companies like TicketsNow, a deal that has lead to suggestions of impropriety like those implied in the Springsteen scalping scenario.

One big-name musician who finds the secondary ticketing scenario particularly problematic is Trent Reznor. In a post on the Nine Inch Nails message board around the time of the Springsteen issue, Reznor wrote "My guess as to what will eventually happen if/when Live Nation and Ticketmaster merges is that they'll move to an auction or market-based pricing scheme--which will simply mean it will cost a lot more to get a good seat for a hot show. They will simply become the scalper, eliminating them from the mix."

A spokesperson for Ticketmaster declined to comment for the story. Instead they directed us to the Lefsetz Letter, the long running music-industry newsletter written by Bob Lefsetz. It's a piece that aims to move some of music fans' and smaller ticketing companies' ire towards musicians and back onto themselves. It's difficult not to conclude that Ticketmaster at least tacitly supports this line of thinking. Ticketmaster and Live Nation are stagnating on Wall Street. The mercurial fan dollar has become harder and harder to pin down and the musicians themselves rule the game, says Lefsetz. "But the acts don't want to appear greedy, so they utilize Ticketmaster to generate more dollars. By adding fees, that are kicked back to themselves, or starving concert promoters, or utilizing Ticket Exchange/platinum packages to in essence scalp their own tickets. Because, you see, the acts are greedy, they want more money! But they don't want you to know this. Ticket brokers are also greedy," he says. "Efforts like Ticket Disaster are just a ploy to get you the fan to buy tickets from them instead of the bigger company."

Yes, everyone is greedy. Including fans, who've become notoriously stingy and entitled over the past few years, viewing music as a free commodity. But there are so many layers of self-interest at work in this issue, it's hard to get a foothold on who stands to gain what. Better perhaps to focus on who stands to lose. While Ticket Biscuit's Gale admits companies like his aren't acting entirely out of charity to the fan, there are places where their interests overlap. "Certainly our opposition to the merger comes from the fact that it's going to reduce competition in our market place and make it harder to do business," Gale says. "I'm not gonna say the only reason we're opposed to the merger is that we care about the fan and we want to have best thing happen for them. But it turns out what's in our interest is also in the interest of the fan. When competition is preserved in the market place for the businesses, it's also preserved for the customer. Those are the kind of things you don't have when you have one giant guerilla company controlling the marketplace. That's the reason antitrust laws in this country were developed. The Sherman Antitrust act was developed [in 1890] because a single company controlled all of the oil and put all of the small producers out of business. We want to see those laws put into effect to do what they were originally intended to do."

The Consumer Federation of America's Cooper agrees. "We think it obviously hurts the consumer because it hurts competition. Our primary concern is the consumer, but the status of competition is what determines the consumer's fate."

There are opportunities to break the stranglehold, says Cooper, particularly with the internet as a ticketing marketplace. "There are aspects of this merger having to do with the resale of tickets that the merging parties have already begun to exercise their market power and that's why we need to constantly be vigilant about people who want to restrain trade, which is what they're doing. The secondary market is one way to put downward prices on tickets, and they're trying to strangle that market."

All of this is essentially speculation at this point, and no one really knows how things are actually going to play out, or what will happen when it does. Not even the parties involved says Gary Bongiovanni, editor in chief of Pollstar, the concert industry trade publication. "This whole thing is gonna have an impact on this industry one way or another, even if it doesn't go through. That will force both of those companies to make alternative moves. And even if it does go through, we don't know if there will be some conditions imposed by Justice that will effect the competitive nature of the markets."

Some have speculated that possible concessions might include Ticketmaster selling off some of its subsidiaries, or licensing its ticketing software to other competitors like AEG, the second largest promoter in the country. AEG currently uses Ticketmaster for its ticketing purposes. It seems unlikely that they will continue to do so if it becomes a part of Live Nation, their chief competition. AEG CEO Tim Leiweke has spoken out strongly against the proposed merger. Bongiovanni says, "All of the other promoters are concerned about the fact that if it goes through, they're going to have use essentially a competitor, as their ticketing vendor, and that doesn't sit well with them. Whether Justice does anything to make that point moot or not is another question."

In the meantime, it's become a waiting game, as Justice continues its lengthy review. One thing that does seem evident, is that people aren't happy with the prices they're paying now to see live music, particularly the type of "convenience fees" and add-ons that Ticketmaster made notorious, but have since become standard industry-wide. Nearly everyone we spoke to for this article seems to agree that it's that issue, one of transparency, that is the crux of the problem, and the one thing people seem to think will only get worse if the merger is allowed to go through. "I think from a fan perspective, the bigger issue is all of the add-ons that go into the ticket price," says Pollstar's Bongiovanni. "I think it's disingenuous and probably deceptive the way we sell concert tickets to the public now. You don't even know what it's going to cost you until you get to the end of the transaction. I think that's probably what pisses people off more than anything else. It's not just Ticketmaster, most of the other ticketing companies are doing the same thing. Just tell people what it's gonna cost and then they can decide. Don't lure them in with a lower price, then when they get to the final check out find out that it's 30 percent higher. It's unconscionable that we do it, but it's just become the way it's handled."

That's the real monster in this so-called horror story, one that's not likely to stay dead even if the DOJ strikes a blow to the merger in the month to come. Like any villain worth its salt, it's one that will likely keep haunting us forever.

Alternative Press

2 comments:

娃娃 said...

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Greg said...

The real problems are already surfacing. Bon Jovi, Black Eyed Peas, they're all scalping their own tickets now. When the merger goes through, only the very well to do will be able to sit anywhere near the stage.