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Tuning in with Thomas Conner

A Q&A with the Justice Department on the Ticketmaster/Live Nation merger

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The following is a transcript of an interview conducted Thursday afternoon with representatives of the Department of Justice in response to a request for answers to numerous questions regarding its approval on Monday of the merger of Ticketmaster and Live Nation. This interview was conducted under the agreement that the responses would be attributed to the Justice Department, rather than naming the participants in the interview.

Q. I'd like to start by asking about the exclusivity agreements that Ticketmaster signs with almost every venue in America. The Department of Justice first investigated Ticketmaster during the Clinton administration, after which the government took no action. Pearl Jam famously was credited as spearheading that fight, though the Department of Justice actually went to the band instead of the band going to the Department of Justice. Because the band chose not to work with Ticketmaster, it couldn't play anywhere in the U.S. for almost two years, and it was one of the biggest bands in the world at the time. More than one independent promoter has said to me over the last few days--and throughout the yearlong consideration of this merger--that while those exclusivity agreements are still in place, there really can be no competition. During the press conference announcing this settlement, Assistant Attorney General Christine Varney noted that 20 percent of those exclusivity agreements will expire this year. But that means that 80 percent of them will stay in place.

A. The point is that 20 percent of them come up every year, so that while a lot of venues have these exclusive provisions with Ticketmaster--or with other ticketing companies, for that matter--that they typically don't run longer than five to seven years on average. Roughly 20 percent of them are coming up every year for renewal, so that provides an opportunity for the venues when their contracts come up to actually go out and renew them.

I also think it's important to recognize that the exclusive agreements are not just for the benefit of Ticketmaster, or insisted upon by Ticketmaster--that actually, in the course of our investigation in talking to a lot of venues, venues don't want to have more than one ticketing company, either. For some of them, a contract of a reasonable length in term of five years or something like that is actually a benefit to the venue itself in order to be able to have predictability in terms of those costs and expenses and know that, "O.K., we've settled now who are ticketer is and we [won't have to deal with that again until] our contract expires. So I wouldn't consider them to be just unilaterally imposed by Ticketmaster; that certainly wasn't what we found in the course of our investigation.

Q. I know that venues prefer these deals. But in Chicago, every major concert venue in the area has a deal with Ticketmaster, and if a band or a promoter or the combination of the two wants to play in this market to 2,000 or 20,000 people, and they chose for whatever reasons not to work with Ticketmaster, they just can't do it. It just seems like there can't be competition if these contracts remain in place.

A. I definitely understand that point, but I don't think it's something related to the merger itself, which is what we were investigating. Those agreements, to the extent they exist in your market, all predate Live Nation and are unrelated to the merger with Live Nation and I don't think are directly affected by that.

Q. It seems to me that it is part of the merger, in terms of the vertical integration. Live Nation, now that it is Ticketmaster and vice versa, is not going to not renew with Ticketmaster when the ticketing contracts on the 140 venues that it owns expire. You can say, "Well, that's not every venue in America." But in fact, Live Nation owns the vast majority of the outdoor amphitheatres in America, so that entire tier of the business is going to be locked into Live Nation and Ticketmaster.

A. Well, they would have been locked into Live Nation before, right? Irrespective of the merger, those Live Nation venues were going to be controlled by Live Nation.

Q. Sure. But let's say the Department of Justice had said, "One thing we think has to be done for this merger to take place is for Live Nation to divest of its venues. It's promoting bands, it's managing bands, it's selling tickets--competition can't exist if it also own the venues." If Live Nation had to divest all the amphitheatres, the new owners of the amphitheaters would have been free to choose between these three ticketing companies that are being created: Live Nation, AEG or Comcast-Spectacor.

A. The problem is that there isn't a good basis in antitrust laws for challenging vertical integration just sort of for the sake of challenging vertical integration. It's one thing where you have the ticketing company that dominates--Ticketmaster, which has a level of dominance over the ticketing business--but if you start looking at promotion and venue ownership and concerts, and those are things that are not directly affected by horizontal competition as a result of the merger, when you start talking about those vertical theories, aligning the different chains, you get torn between whether that can provide some real benefits to consumers versus whatever less competitive outcomes might happen.

Q. Let me cite the example of an antitrust ruling against vertical integration that is being quoted by a lot of consumer advocates and independent promoters: the Supreme Court ruling in 1948 in "United States vs. Paramount Pictures, et al." At that point, the Supreme Court said, "Hey, Hollywood movie studios, you make the movies; you distribute the movies; you cannot also own the theaters that show the movies." With Live Nation now, we'll have them creating or at least managing the content, distributing or promoting the content across the country, selling the tickets--not to mention the T-shirts and concessions and the rest--and owning the venues.

A. It's definitely true that that's the result of the merger. Paramount is a bit of a different era in antitrust law, I think you'd have to say. I don't think it would be as simple a case to bring in 2010.

Q. The Department of Justice does not think there would be the basis of a Supreme Court challenge here?

A. I don't know. Obviously, what we thought was the case that we saw competitive harm in was the case that involved the ticketing industry. In other areas, we certainly heard from many people presenting complaints along the lines that you are setting forth, and we felt that we didn't have the evidence to challenge on those fronts.

Q. I'm curious about the firewall provision in section nine of the settlement ruling: It's one paragraph. Let's say Jam Productions in Chicago wants to bring a fantastic band to town; it's competing with Live Nation and AEG to host that concert, and miraculously, it wins. It has to use Ticketmaster to sell the tickets, because as I said, Ticketmaster is locked into every major venue in Chicago until those exclusivity agreements expire. Jam's biggest competitor, Live Nation--a company that, court testimony shows, once expressed its desire to "crush, kill and destroy" Jam--is now going to know how Jam put that deal together and how it does business, and it's going to make money off of Jam's work via those egregious service fees that it tacks on to every ticket. How does the firewall actually help Jam?

A. The firewall is designed to protect the confidential information that sort of arises out of the ticketing. If Jam goes and promotes a concert at a venue that is ticketed by Ticketmaster, it stops that confidential information from being shared with the rest of the combined merged company. So they can't take the data that comes out of the ticketing relationship with Jam or the ticketing event that's being promoted by Jam and take that information and use it in their promotion business or use it in their artist management business to compete against Jam, or for any other reason, for that matter. That's the purpose and the intent of the firewall, to protect the people who need to go in and have a show put on at a venue that is ticketed by Ticketmaster, but who are competing with the Live Nation promotion business, or whose artists are competing with the [Live Nation-owned] Front Line Management side of the company.

Q. There are no specific provisions in the government ruling about how the firewall will be enforced, though it does say that people won't be able to have access to information from a competing promoter unless they need it as part of their job.

A. Right. The people in the ticketing business of course need access to the ticketing information, because their job is related to ticketing. It just prohibits those people from taking that information and moving it over into the other side of the business, into the concert promotion or artist management business.

Q. But who will enforce that?

A. Obviously, the Justice Department, the antitrust division which is headed by Christine Varney, will enforce it. There are substantial provisions in the final judgment that give us the right to go in and request information and documents, to request regular reports, to conduct investigations if we find that there is any evidence of a violation or if we want to assure ourselves that there is no evidence of any violation. We have those rights to affectively and aggressively enforce the decree and we will certainly take advantage of those provisions.

Q. But it's not as if there is going to be a Department of Justice hall monitor sitting on a stool in between the door from the ticketing office at Live Nation and the door to the promotion office at Live Nation.

A. Of course there's not going to be someone in their actual building, but there will be someone with the right to look at their emails and interview them and investigate any possible wrongdoing that they might commit.

That's an important point, and don't take that lightly. We do actively monitor consent decrees. We really do have a staff that does this, and will really monitor what's going on in the industry. We have a long history and experience in dealing with these kinds of things. It is an important point and I wouldn't take it lightly.

Q. My experience as a reporter covering these two companies for the last 15 or 20 years has been that transparency is not their strong suit. They don't answer questions, they don't respond to the press, it is very difficult for a consumer to find a complaint number to express dissatisfaction with Ticketmaster or Live Nation...

A. But there's a difference between reporters and the Department of Justice, who can use law enforcement, the courts, they can be held in civil contempt, they can be fined, so it's a little different.

We put a lot of time and effort into enforcing decrees, and it's very possible to get to the bottom of these things when you're trying to find out the facts regarding a particular incident. It might be that there's no public number for the public to call up, but there's definitely a number that we can call if we need information, and we can get documents, information, take depositions, and conduct any kind of investigation we might need to in order to enforce the decree, and we will.

Q. Let me ask more generally: There is a well-documented history than many congressmen and senators and consumer advocates referenced during the congressional hearings on the merger last year of neither of these companies being particularly consumer-friendly. Yet Ms. Varney several times during the press conference said this merger settlement will be good for consumers, there will be competition and prices will come down. I am having a hard time squaring the history with those statements.

A. What we saw when we looked at the merger was an opportunity to really protect competition by the divestitures that we ordered and by the conduct provisions that we have, and obviously when you do that kind of protection of competition, that is going to force the companies to engage in more pro-consumer behavior and behave more responsibly. That's what we were focused on enabling and that's what we think the decree successfully does.

Q. AEG and Comcast-Spectacor obviously have said they support this merger, since the settlement gives each of them a piece of Ticketmaster's business. But what about the fact that every other remaining independent promoter of size in the United States opposes this? There seems to have been no consideration given to the independent promoters.

A. I wouldn't say that there was no consideration. We talked to a lot of different people, and obviously, we don't disclose exactly who we talked to, but I can certainly assure you that we talked to a lot of these companies and tried to take into consideration the best we could the facts as they appeared to us and as we learned them in our investigation. That's why we put together a decree that has three prongs to it, that sets up AEG in the ticketing business, which is someone smaller promoters can use if they want to; and Comcast-Spectacor, which gets all the assets from the Paciolan business, and when you put those together with the behavioral provisions, you put all those things together, they don't just protect AEG and Comcast. They protect all the promoters and all the venue owners, from the largest ones down to the smallest ones.

Q. But you guys must be reading the press: From coast to coast, every single independent promoter that I've seen quoted in any publication, or the many that I've interviewed myself, all are against this settlement and really hate it. I have not seen a single quote from a smaller promoter saying, "I'll be really happy now to have three choices for ticketing, and I guess this merger isn't going to be as bad as I initially feared." Not a single one!

A. I'm not sure how to answer, or if that's really a question. All I can tell you is what we found in our investigation.

Q. I'm asking that if every independent promoter in America seems to disagree with the ruling, is that cause for concern for the Department of Justice to consider if maybe it missed something?

A. All I would say is that we've heard all of the concerns expressed all the way throughout our investigation. I don't think we're learning new things by the things that are coming out and people are saying in public. We took it all into account in the decision that ultimately we made.

Q. O.K. Now, I'm in Chicago, and you can't be a reporter in Chicago and not always have one eye on politics. Ticketmaster's board of directors included President Obama's longtime friend Julius Genachowski, until he resigned to accept the appointment to chair the FCC. Live Nation's board of directors includes Hollywood superagent Ari Emanuel, the brother of the President's chief of staff, Rahm Emanuel. Did either of them file letters in support of the merger?

A. There was no... We don't make our decisions that way. We make our decisions based on the facts and the law and the facts that are before us.

Q. I understand that. I'm just wondering if either of them, as part of the mountains of information on the merger that was considered pro and con, if either of these members of the companies' boards weighed in?

A. Again, I think if you want to ask questions of who might have weighed in, we don't talk about who. We get comments from the outside from people as we look at transactions. We don't talk about that. But obviously, anybody who's weighed in, whether it's you or your neighbor, if they want to talk about it, it's up to them. But this decision was made at the Department of Justice by the career staff and the folks in the antitrust decision, and it was based on the facts. There was no influence from anyone--no influence at all, it was all based on the facts.

Q. On the micro-level, Ticketmaster owns TicketWeb, which does ticketing on the level of clubs down to 100 or 150 people. TicketWeb does its best to mask its connection to Ticketmaster, and in fact its Web design goes out of its way to look as if it's done by a punk rocker in his basement. I've talked to several small club owners since the decision on the merger who've said that they don't want to do business with TicketWeb anymore, now that it's part of Live Nation, and they want to get out of their contracts. This goes back to the issue of, "I thought I was doing business with one company, and now I'm in bed with another."

A. That can happen in any merger. It's not an antitrust issue in the sense of competition being lost in the merger as a result of a change in the ownership. In any merger, a company may get bought by someone that somebody else doesn't like and doesn't want to do business with anymore. What we're trying to do is preserve when those people's contracts are up that they have good choices to go to and good opportunities to take advantage of. I know we've seen at the club level that there are tons and tons and tons of competitors out there that provide ticketing services for those types of venues. Obviously, we have no real basis to go in and break all the Ticketmaster contracts that they have with venues.

Q. You could have asked them to divest.

A. I don't think that that was really an area where we saw a level of concentration or competitive concern that you see at the bigger venues. If people are telling you they'd like to leave for someone else, we never heard from people at that level who felt that they didn't have anyone else to go to.

Q. What about the management component? That wasn't ever a consideration for divesting?

A. You can look at market shares and things like that in management, but the area where we found the competitive concern was in ticketing, and that's what we focused on in our remedy and that's where we required the divestitures and other behavioral provisions. Obviously, we looked at the management in the context of the effect it might have in the ticketing market, and along with the promotional it's the reason you have those firewall and data portability and behavioral restrictions, but in and of itself, it's a market that... well, there are a lot of managers out there. Even thought Front Line is large, and it may be even larger than all of its competitors, it doesn't actually have a very large share of the overall market when you look at it.

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2 Comments

Jim, you know I respect the hell out of you, and you know I have long admired you as a journalist... That said, your reporting has taken a necessary backseat to your music criticism over the last few years. No longer. You've been on top of this story from the get-go, obviously, but this right here is easily the most vital piece of reporting you have done in ages. The TicketNation (if I may give it a Brangelina name) merger is disturbing on a whole lot of levels, and the only good that can come out of it is that perhaps it will force smaller and/or unknown bands to invent new ways of performing (street corners, forest preserves, etc.). It won't be pretty, and it won't be fully electric... but it is definitely a possibility.

Really, the ones who'll be handicapped are those old "mid-level bands struggling to come to grips with success," to quote Cameron Crowe. Let's be honest... new and underground bands will still have tiny venues (and some established acts like, say, acoustic anarcho-punks Ghost Mice, prefer it that way), and moneymakers like U2 and Weezer aren't going to have a problem getting their stuff out there. But aside from crappy outdoor festivals with bad sound and sightlines, I can't see how new acts are supposed to break into the "mainstream." What I'm really worried about is what this merger will mean for bands that seem poised to hit the big-time but haven't quite gotten there yet -- acts like Ponytail and St. Vincent and Girls, ones that have been critically lauded but who haven't quite (yet) got the chops to be major headliners as far as TicketNation is concerned.

There is one big caveat here, though: the Schubas extension Lincoln Hall is turning out to be one rad place, at least as far as Chicago is concerned. Just look at the lineup in the first ten days of April! And their ticketing is done completely through the venue, which is just wonderful. I know it's not much, but isn't it at all possible that other clubs like this can rise up, independent of TicketNation, all over the country?

As a founding partner of a competing ticketing software and service vendor (with 20 million tickets issued annuall) I'd have to say you missed the point. It doesn't matter how many Ticketmaster contracts come up for renewal each year, so long as venues fear they CAN'T CHANGE because to do would cost them big$ concert opportunities that only come from renewing with Ticketmaster. We have watched first-hand as the message is delivered clearly to arena owner/operators: Use anyone but Ticketmaster, and you can kiss your major concerts/shows goodbye. To make things worse, that message is often delivered indirectly by Ticketmaster "partners" such as venue management companies and promoters, keeping Ticketmaster's hands clean. The Live Nation merger will multiply fears of venue owners who even dream of leaving the Ticketmaster Vertical Family. Forget fed protection against retaliation - it's a pipedream. The fed created a Big 3 ticketing monopoly where none existed before, but did nothing to encourage competition among the 60 or more competing ticketing vendors that Ticketmaster treads on daily.

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