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Ticketmaster + Live Nation: Meet the new boss

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Already reviled by many music fans, the two monolithic companies most responsible for skyrocketing ticket prices over the last two decades are expected to announce a merger today that will make them the dominant force on the concert scene.

The 50/50 union of controversial ticket brokers Ticketmaster and giant concert promoters Live Nation to form a new company called Live Nation Entertainment with nearly $6 billion in annual revenues will be subject to federal approval, and it's expected to be the first major test of the Obama administration's anti-trust policies.

"The merger would create the most powerful and influential entity the music business has ever known," according to the industry trade Billboard. "As manager, ticketer, venue operator, merchandiser and more, this giant would tap into revenues, if not outright control them, from virtually every source in the chain: live performance, merchandising, ticketing, content, sponsorships, licensing and digital."

And, most experts agree, consumers will likely lose, paying even steeper prices.

Based in West Hollywood, Ticketmaster was founded in 1978. It rose to prominence in the early '80s when it was purchased by Chicago investor Jay Pritzker, and it drew criticism a decade later when Pearl Jam and other artists attacked what they called its egregious service fees.

Industry studies reveal that Ticketmaster adds between 15 and 50 percent to the cost per ticket--raising the final price of a $120 seat to between $138 and $180--with a portion of that fee being kicked back to the promoter and the venue. Nevertheless, a year-long investigation by the Clinton administration's Justice Department in the mid-'90s found that the "exclusivity agreements" the company forges with venues to create a monopoly on ticketing was not a cause for anti-trust action. (The Justice Department sought Pearl Jam's backing during its investigation; Pearl Jam did not prompt the investigation, as is often misreported.)

Based in Beverly Hills, Live Nation spun off from the media giant Clear Channel Communications in 2005. Its rise began in the early '90s when it started buying out smaller regional promoters and venues across the U.S. In the Chicago area, it controls the First Midwest Bank Amphitheatre, the Alpine Valley Music Theatre, the House of Blues and--until the lease comes up for review at the end of this summer concert season--the Charter One Pavilion on Northerly Island. Prices for its shows have risen steadily, and it has championed "corporate synergy" via relentless advertising to the customers in its seats. (The company has said 20 percent of its revenues come from corporate sponsorships, but it has lost 4 percent on ticket sales.)

Live Nation is a ruthless competitor. In 2005, Chicago-based Jam Productions won a $90 million verdict against the firm in a highly publicized anti-trust suit after testimony that included executives at the larger company boasting that they'd love to "crush, kill and destroy" the regional promoter.

Earlier this year, Live Nation and Ticketmaster were moving toward an epic showdown as the promoter prepared to end its deal with Ticketmaster and sell tickets to its events through its own ticketing arm, vowing to lower service fees. It first major attempt to do this was proclaimed a failure, however, when ticket sales for a tour by the reunited Phish were plagued with snafus.

It remains unclear what led the two giants to abandon their animosity and combine forces. The companies have made no official statement on the merger as yet, though several news organizations are reporting that the deal was approved by Ticketmaster's board on Sunday and by Live Nation's on Monday.

The Chicago office of Live Nation is holding a press conference at 11 a.m. today at Wrigley Field to make a major summer concert announcement. Local executives are unlikely to address the merger, and are in fact almost always reluctant to speak on the record about their business.

The merger means that some of the most shrewd and calculating names in the industry will now be working together at the top of the new conglomerate. The New York Times has reported that Barry Diller, the executive who launched the Fox Broadcasting Company and a previous force behind Ticketmaster, will be the new chairman, while current Ticketmaster chief and former record company head Irving Azoff will be executive chairman and Live Nation boss Michael Rapino will be executive chairman and president.

In recent months, Live Nation has been making headlines for forging "360 deals" with superstar artists such as Madonna and Jay-Z, controlling every aspect of the stars' careers. Meanwhile, as manager of acts such as Guns N' Roses and the Eagles, Azoff has been alienating both the major labels and struggling mom-and-pop record stores by selling his groups' new music exclusively through a single big-box retailer such as Walmart or Best Buy.

Notoriously unresponsive to its customers--the company has no office phone or complaint line listed in the Chicago directory--Ticketmaster became the subject of renewed criticism last week after fans, government officials and Bruce Springsteen himself objected to the company's handling of sales for the E Street Band's upcoming tour. Instead of getting the face-price tickets they sought, many fans were redirected to Ticketmaster's subsidiary Tickets Now to bid much higher prices in an auction, with Ticketmaster essentially acting like a scalper before the face-price tickets had even sold out.

Ticketmaster also is the subject of a recently filed lawsuit in Canada that charges the company with acting as a scalper and violating that country's laws.

Although executives so far are tight-lipped about changes the new company will make, industry observers predict:

* "Dynamic pricing"--corporate-speak for milking fans for as much as they're willing to pay--could become the norm, with ticket prices escalating as fans bid for seats instead of buying them at a set cost. While some fans might get bargains, as with the Priceline model in travel, the best seats would almost certainly be locked out in perpetuity for the biggest spenders. (To quote John Lennon: "Would those of you in the cheaper seats clap your hands? And the rest of you, if you'll just rattle your jewelry.")

* Having suffered fans' anger and bad publicity for years because of high service charges, the Ticketmaster name will be buried. The service fees at the heart of complaints about the company could now be buried, too, with one ticket price that makes it impossible for fans to discern what bands are charging them versus what Live Nation Entertainment is tacking on.

* Live Nation Entertainment may favor its own shows, and it could stop selling tickets to shows by competitors in an attempt to eliminate the few remaining challengers. In the local market, Jam sells all of its tickets through Ticketmaster, as does the second largest national promoter AEG Worldwide, which promotes numerous arena shows here. Both promoters have so far declined to comment on the merger.

* With the same huge company controlling live performance while simultaneously managing artists, musicians may find that they have few or no options for playing elsewhere or charging fans more modest or uniform ticket prices. The situation could well be "Play by Live Nation Entertainment's rules, or don't play at all"--as Pearl Jam discovered when it effectively was unable to tour for two years during its feud with Ticketmaster.

Check this space for developments as they unfold.

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10 Comments

Fantastic article (you even mentioned Springsteen in a positive light!) on a not-so-fantastic future... one has to wonder if ANYTHING good could possibly come out of this. In particular, the insanely high fixed prices for the most expensive seats at, say, Eagles concerts are currently bad enough, but I don't even want to think about bidding becoming the norm.

Thankfully I live in Australia and Live Nation's reach doesn't seem to extend here. At least not under their own name.

Though AEG hasn't commented directly on the merger, AEG head Randy Phillips did make some interesting comments about Live Nation in this Forbes interview from yesterday.

Either way, nice summary of the case so far.

To see my attempt at chronicling the Live Nation Ticketmaster merger, head on over to Satan's Box Office...

http://jamtopia.com/blog/satans-box-office/

It's updated daily with information and analysis plus more links than you can shake a pitchfork at.

Take care,
TL

Jim, PLEASE, PLEASE, PLEASE let us know who to contact in our government so we can voice our plea to not let this merger happen! Who do we call/mail/email? What can we do to stop this?

Thank you!!

Jim, first off, absolutely phenomenal article.

Now, far be it for me to say that this could end up being a good thing, buuuut... This could end up being a good thing.

Oh, not for consumers of major concerts, arena bands, and big-city festivals like Lollapalooza. No, those are going to be pretty much dead to me and everyone else who likes the idea of paying a fair price for tickets, and seeing at least some of that money go to the artist performing and the venue, rather than to the promoter (not that promoters don't deserve a cut; but the Live Nation and Ticketmaster cuts have gotten obscene).

But this could lead to another underground. To quote Battlestar Galactica (yes, I'm a geek, sue me), "All this has happened before and will happen again." Think back, if you will, to the ultra-corporatized 1950s and early '60s. Corporations were taking over... and, in part as a response to it, subcultures grew tremendously. Same thing happened in the mid-'70s, the early '80s, and the early '90s. Every time corporate culture takes over, the underground culture fights back.

Admittedly, it'll suck not to be able to afford to see some big bands; but there are others that I think will be with us -- anti-corporate acts like Radiohead, DIY-ers like the Flaming Lips (if they're not tempted by the gallons of money that'll be heaved their way), and maybe, if it gets bad enough, Pearl Jam, who are long overdue for some righteous rage. Meanwhile, there'll be tons of new acts springing up underneath, ready to play in parks and at block parties and for free festivals. It might even return some to that old love-of-music thing that seems missing a lot of the time nowadays -- y'know, the kind where the band crashes at a fan's house, travels around in a van that reeks of gasoline and pot, plays acoustic shows at national parks...

Okay, sure, that sounds kinda far-fetched; but what recompense will a struggling band have if they're locked out of the Great Master of Tickets Live Nation Enterprise?

Ticketbast*rd and live nation are the main reason i very rarely go to many live shows. The add-on fees and sales shenanigans, like with the recent Springsteen ticket sales (I was immediately redirected to tickets now every time I tried to conect on-line at 10:00am when they went on sale.) these have just driven me away.

Not sure you want to use Detroit as an example. I doubt there are lotsa other promoters or ticket companies that are dying to get into such a depressed market. AEG seems to be opening shops in places like China where the economy isn't so depressed...maybe that's the ticket!

If Jam Productions could snap their fingers and become Live Nation, they would in a Chicago second. "Crush, kill and destroy" was their motto back in the day, and they were very successful at it.

But times, they are a changin'...

Jim, I think you misunderstood what I was saying. If there's going to be a millennial indie scene, it's going to have to go waaaaaaay underground. I mean, we're talking basements, trailer parks, street musicians...

The very business model for the music industry is changing already. I mean, look at what the internet has done. It used to be that bands that came up organically or semi-organically got popular by word of mouth and tape-trading, making them a niche market among fans of certain genres... and when the band got popular enough, the big label and big promoter snatched them up (this was as true of shitty bands like the Dave Matthews Band as it was of actually talented ones like R.E.M.).

To some extent, that still happens, but not nearly as much, because the old bands don't go away. The Rolling Stones, Springsteen, McCartney, Elton John, Billy Joel, Fleetwood Mac... all those Boomer stalwarts are still traipsing through the flowers, supplemented by the occasional breakthrough of your U2s or Nirvanas.

What does that leave us, then? The major artists are going to get major billing; the minor artists will still (somehow) get shows, since Live Nation isn't just going to let a club the size of, say, the Metro sit around empty. Many will fold; lots of people will lose business; and it's going to be insanely difficult to get a band going, especially to get it on the road and get people listening to your live music.

So my theory is that the concert industry will be revolutionized the same way the record industry is being as we speak: through the internet. It isn't that hard to set up a streaming video or to record a podcast. The middle man can often be cut out completely. So these live shows can then be broadcast to as many fans as want to see them -- even though they're coming out of a parent's basement or a coffee shop.

Does this hold the same kind of thrill as did, say, seeing the Pumpkins at the Rosemont Horizon in 1996 did for me as a kid? Not a chance. But so long as you keep doing your job, and we, as fans, keep doing ours -- spreading the news about awesome new bands, sharing files (which is a helluva lot easier than trading tapes), bringing people along with us to tiny little crowded bars to see a 24-piece band of hippies in white robes, we can still save the concert industry.

We do agree that this Live Nation thing is troubling, if not downright illegal (let's see what Obama's antitrust people do, or else I'm going to dig up the skeleton of Teddy Roosevelt). But I guess I'm just not into the doom prophesies. Music, I believe, will find a way, and fans will find a way to see it. I know there are plenty of bands out there who will figure out ways around Live Nation.

I guess the better question is, then, how do we fix it? If the government doesn't bust the trust, and if Live Nation is allowed to gobble up whatever it wants, how do you, sir, suggest we fight back, if not by revolutionizing the industry ourselves?

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This page contains a single entry by Jim DeRogatis published on February 10, 2009 7:56 AM.

The 51st Annual Grammy Awards: Wake me when they're over was the previous entry in this blog.

Live Nation's local execs: Merger, what merger? We're here to talk about Billy and Elton is the next entry in this blog.

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