In a move that gives an unprecedented amount of power in the concert industry to one mega-corporation, the U.S. Department of Justice has approved the merger of giant national concert promoters Live Nation and monopolistic ticket brokers Ticketmaster.
After nearly a year of review, the Justice Department held a briefing in Washington, D.C. on Monday to announce its endorsement of the new merged company, to be called Live Nation Entertainment, providing it meets several conditions, including licensing its ticketing software to competitors, selling off one small part of its ticketing business and agreeing not to penalize any venues that chose to do business with competing ticketing companies for the next 10 years.
The merger is expected to remake the concert industry in the U.S., further shifting the business from small regional promoters--the new company will own more than 140 concert venues around the world, selling 140 million tickets to some 22,000 concerts a year--and its approval was seen as the first major test of the Obama administration's position on anti-trust issues.
Ignoring the many complaints from consumer groups, artists and independent promoters--starting with those voiced at a contentious Senate hearing last winter and continuing in recent months via anti-merger Web sites such as TicketDisaster.org--the Justice Department contends that the merger will not hurt competition in the live music industry.
"I was prepared to litigate at any and all points, until a settlement was achieved that efficiently dealt with all our anti-competitive concerns," Christine Varney, head of the Justice Department's Antitrust Division, said at the briefing.
Commenting on the conditions being imposed on the deal, Varney added, "It's going to benefit competition and benefit consumers. Generally when you see robust competition, you would expect to see prices coming down."
The conditions require that Ticketmaster sell one of its small subsidiary ticketing companies, Paciolan Inc., to the sports and entertainment company Comcast-Spectacor, and that it license its ticketing software to AEG Live, the second largest national concert promoter. In theory, Ticketmaster, Comcast and AEG will then be able to fairly compete in the ticketing business, offering venues three choices to sell their tickets.
However, the Justice Department does not seem to have addressed the fact that Ticketmaster has signed most major venues in the U.S. to long-term exclusivity agreements that prohibit them for using any other ticket broker. These exclusivity agreements were at the heart of the Justice Department investigation of the company in the mid-'90s, and though they were widely criticized by many artists, including Pearl Jam, no action ever was taken against Ticketmaster.
In the Chicago area, every major concert venue above the level of 1,500 seats--from theaters such as the Chicago, Auditorium, and Rosemont theaters to arenas including the United Center, the Allstate Arena, and the U.I.C. Pavilion--have exclusive deals with Ticketmaster.
"The conditions seem to be relatively benign," Tuna Amobi, an equity analyst at Standard & Poor's, told the Reuters news service. "There are no major divestitures required. I don't know that is going to create the kind of even competitive field that was intended."
"The DOJ has asked consumers, independent promoters, ticket brokers, artists and venue owners to take a very large leap of faith that the conditions imposed on the merger will improve competition and ultimately lead to greater choice and lower prices," Sally Greenberg, executive director of the National Consumers League, said in a statement released by TicketDisaster.org. "While we appreciate the efforts of the DOJ to extract meaningful concessions from the parties, we remain concerned that these two companies, with a history of anti-consumer behavior, will abide only by the letter, and not the spirit of the settlement agreement."
Chicago is one of the few major cities in the U.S. where an independent local promoter remains in vibrant competition with Live Nation for theater and arena shows. Jam Productions sells almost all of its tickets through Ticketmaster. Company officials have contended that Live Nation will now have an unfair advantage when competing to promote an artist's local appearance since it will now be one and the same company with Ticketmaster, and it will be privvy to information that will give it a competitive edge.
Jam executive Jerry Mickelson, who testified against the merger during last year's Senate hearings,
did not respond to a request for comment, said he had not read the Department of Justice statement, so he could not comment yet.
More comments on the merger follow the jump.
Live Nation President and CEO Michael Rapino:
"This is a good and exciting day for the music business, and we are close to finalizing the creation of a new company that will seek to transform the way artists distribute their content and fans can access that content. The Department of Justice was thorough and aggressive in their analysis and their remedies, and we are confident that with this resolution the playing field is competitive and broader as a result of this transaction. We believe that this merger will now create a more diversified company with a great selling platform for artists and a stronger financial profile that will drive improved shareholder value over the long term."
Ticketmaster Entertainment CEO Irving Azoff:
"We appreciate the Department of Justice's effort. Their resolution is a great win for fans. The entertainment industry needs innovation and we are ready to deliver. I'm truly excited that as this new company goes forward, we will be able to create more choices for family entertainment, sports, artists, teams and other rights holders."
Timothy Leiweke, president and CEO of AEG:
"Together with other provisions of the Department of Justice's proposed final judgment, including required divestitures and significant behavioral remedies, we are confident that the arrangements we have reached with the parties will serve to increase competition and further the interests of consumers and other participants in the live entertainment industry, not only in the United States, but in a number of key international markets (including Canada and the United Kingdom, among others)."
U.S. Rep. Bill Pascrell, Jr. (D-N.J.), who led a group of at least 50 members of Congress opposed to the merger:
"I am currently reviewing the Justice Department's decision, but clearly I am disappointed. One has to wonder what it was that U.S. antitrust authorities saw as a greater priority than American consumers and the free market."
David Balto, former Federal Trade Commission policy director and counsel to TicketDisaster.org:
"The dominant market power of the newly-merged Live Nation Entertainment will require both the DOJ and FTC to commit to a vigorous oversight capacity, including additional enforcement actions where necessary. It will be incumbent upon enforcement authorities to listen to the voices of millions of consumers who attend live events to ensure that they, not the merged company, are the ultimately beneficiaries of this agreement."
And here is the full statement released today by the Justice Department
Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Monday, January 25, 2010
Justice Department Requires Ticketmaster Entertainment Inc. to Make Significant Changes to Its Merger with Live Nation Inc.
Software Licensing Agreement, Divestiture and Anti-Retaliation Provisions Will Preserve Competition in Ticketing in the United States
WASHINGTON - The Department of Justice announced today that it will require Ticketmaster Entertainment Inc. to license its ticketing software, divest ticketing assets and subject itself to anti-retaliation provisions in order to proceed with its proposed merger with Live Nation Inc. The department said that the proposed settlement will protect competition for primary ticketing, which will in turn maintain incentives for innovation and discounting. The department said that the merger, as originally proposed, would have substantially lessened competition for primary ticketing in the United States, resulting in higher prices and less innovation for consumers.
The Department of Justice's Antitrust Division, along with 17 state attorneys general, filed a civil antitrust lawsuit today in the U.S. District Court in Washington, D.C., to block the proposed transaction. At the same time, the department and the states' Attorneys General filed a proposed settlement that, if approved by the court, would resolve the competitive concerns in the lawsuit. The state attorneys general offices are: Arizona; Arkansas; California; Florida; Illinois; Iowa; Louisiana; Massachusetts; Nebraska; Nevada; Ohio; Oregon; Pennsylvania; Rhode Island; Tennessee; Texas; and Wisconsin.
The Department of Justice cooperated closely with the Canadian Competition Bureau throughout the course of its investigation, and the two agencies worked together to obtain the same remedy that preserves competition in both the United States and Canada.
Under the proposed settlement, Ticketmaster must license ticket software and divest ticketing assets to two different companies --Anschutz Entertainment Group (AEG) and either Comcast-Spectacor or another buyer suitable to the department, respectively --allowing both companies to compete head-to-head with Ticketmaster. Ticketmaster will also subject itself to court-ordered restrictions on its behavior.
"The Department of Justice's proposed remedy promotes robust competition for primary ticketing services and preserves incentives for competitors to innovate and discount, which will benefit consumers," said Christine Varney, Assistant Attorney General in charge of the Department of Justice's Antitrust Division. "The proposed settlement allows for strong competitors to Ticketmaster, allowing concert venues to have more and better choices for their ticketing needs, and provides for anti-retaliation provisions, which will keep the merged company in check."
As part of the proposed settlement, Ticketmaster must license a copy of its primary ticketing software to AEG, the nation's second-largest concert promoter and operator of some of the most important concert venues in the country. With a copy of the Ticketmaster software, AEG will be able to market a ticketing system that is an attractive choice to venues. AEG will have incentives similar to Live Nation to provide better services at lower prices. Within five years, AEG can purchase the Ticketmaster ticketing software, decide to create its own software, or partner with a ticketing company other than Ticketmaster. The department said that this remedy enhances short and long term competition in the primary ticketing market.
Ticketmaster must divest Paciolan Inc., a ticketing company that it currently owns, within 60 days to either Comcast-Spectacor, which has already signed a letter of intent to purchase the assets, or some other buyer suitable to the department. Comcast-Spectacor is a sports and entertainment company with management relationships with a number of concert venues and ticketing experience with its New Era Tickets company. Paciolan is used by hundreds of venues to sell tickets including major concert venues around the country. Venues that contract with Paciolan have greater flexibility to lower the ticket service fees that are charged to consumers who buy tickets. The department said that divesting Paciolan to Comcast-Spectacor, or another suitable buyer, in conjunction with the AEG license, will replace the competitive pressure on Ticketmaster lost as a result of the merger.
Under the settlement, the merged firm will be forbidden from retaliating against any venue owner that chooses to use another company's ticketing services or another company's promotional services, including restrictions on anticompetitive bundling. The merged firm must also allow any client that leaves and chooses to use another primary ticketing service to take a copy of the ticketing data related to that client's sales. The settlement also sets up firewalls that protect confidential and valuable competitor data by preventing the merged firm from using information gleaned from its ticketing business in its day-to-day operations of its promotions or artist management business. Additionally, the merged firm must provide notice of any other acquisitions of a ticketing company so that the department may investigate the competitive effect of such an acquisition.
Together, these remedies will preserve the competition that Ticketmaster faced from Live Nation, a new ticketing entrant, the department said. Prior to its proposed merger with Ticketmaster, Live Nation had established incentives to reduce service fees to sell more tickets. Today's settlement offers a new competitor comparable incentives to ensure ticket sales are maximized for the benefit of consumers, the department said.
Ticketmaster is a Delaware corporation headquartered in West Hollywood, Calif. Ticketmaster is the world's largest ticketing company. In 2008, Ticketmaster sold more than 141 million tickets valued at more than $8.9 billion on behalf of more than 10,000 clients worldwide and earned approximately $1.4 billion in gross revenues.
Live Nation is a Delaware corporation headquartered in Beverly Hills, Calif. It is the world's largest promoter of live concerts, with 2008 worldwide gross revenues of $4 billion. Live Nation also owns or operates more than 75 concert venues of various sizes in the United States.
AEG, headquartered in Los Angeles, is one of the leading sports and entertainment presenters in the world. AEG, a wholly owned subsidiary of the Anschutz Company, owns or controls a collection of venues, such as the Staples Center (Los Angeles), Prudential Center (Newark, N.J.), Sprint Center (Kansas City, Mo.) and Citizen's Business Bank Arena (Ontario, Canada). The company's live entertainment division, AEG Live, is one of the world's leading concert promotion and touring companies with 15 regional offices that has recently promoted national tours on behalf of artists such as Prince, Usher, Kenny Chesney, Rod Stewart, Paul McCartney, Yanni, The Eagles, George Strait, Justin Timberlake, Christina Aguilera, Dixie Chicks, Hannah Montana and American Idol. AEG is also a 50 percent owner of Wright Entertainment Group, which manages major artists such as the Jonas Brothers, Justin Timberlake, Janet Jackson and 'N Sync.
Comcast-Spectacor, headquartered in Philadelphia, has more than $1 billion in annual sales. It is a joint venture between a private investor and Comcast Corp., a leading provider of cable, Internet and phone services in the United States. Comcast-Spectacor owns a national ticketing services company, owns and operates major venues and sport franchises, manages approximately 90 public assembly facilities, and runs a major North American food and beverage concessions company.
As required by the Tunney Act, the proposed 10-year settlement, along with the department's competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement during a 60-day comment period to John R. Read, Chief, Litigation III Section, 450 Fifth Street, N.W., Suite 4000, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the U.S. District Court for the District of Columbia may enter the proposed settlement upon finding that it is in the public interest.