Stacking oligopolies
The proposed merger of Live Nation and TicketMaster is a clear case of two oligopolies stacking on one another to extend their near-monopoly control vertically.
Live Nation either owns of has the right to book nearly every major pop music venue in the US (71 at lest count), plus a number of venues abroad. It also, through an earlier vertical expansion, provides "artist management services" - basically promotion and ticketing. In other words, the implicit threat is that musical acts that do not use their services, unless they are already established, might have a lower priority at getting booked in key venues nationwide. Even the biggest musical acts have to negotiate with Live Nation about tours, ticket costs, and schedules, with the implicit threat that there is no alternative should negotiations get bogged down.
Touring is all the more critical for music groups, in that sales of recorded music are way down and much of that revenue stream goes to the big music companies in any case. Bands and singers typically make the real money on the road, not in the studio.
TicketMaster is the largest ticket agency by far in the US (and in many other countries). As an agent, it takes commissions on each ticket sold, and it charges hefty fees as well, under such names as "Convenience fee", "Building Facility Charge", and "Order Processing Charge." It is estimated that the company charges 35% or more of the face value of the ticket, and often it is impossible to buy tickets at face value at the venue's box office.
TicketMaster also now owns Tickets Now, an online service for reselling tickets, which adds even higher fees, and TicketMaster has been accused of steering customers to that service to reap even higher profits, up to 100% markups. In that way, some say, TicketMaster scalps its own tickets. The company sells tickets to athletic events, theatre shows, and other non-music events (where it does have some competition from Tickets.com), but chances are if you want to go to a rock concert, you go through TicketMaster.
A merger of the two cements what is already a strong alliance. Most Live Nation venues sell tickets through TicketMaster already. As Jon Fine writes in BusinessWeek ("TicketMaster-Live Nation: An Obama Layup," 1/10/09):
unlike much of the media world, these businesses still have pricing power. The music industry has been file-shared into oblivion. Live events can't be. There is great power in controlling the last bastions of scarcity, as anyone who has marveled at the 'convenience' fees tacked onto a simple ticket purchase on the Web knows. TicketMaster and Live Nation have built formidable franchises on these advantages. Live Nation's position in the venue ecosystem allowed it to offer nine-figure deals that include recording rights to the likes of Madonna and Jay-Z.
Live Nation, which was spun off from hated radio oligopoly Clear Channel Entertainment in 2005, breaking up a vertical oligopoly. It has since acquired the chain House of Blues (12 venues), and sold off much of its Broadway ticket sales operation. TicketMaster itself was spun off from Barry Diller's IAC online conglomerate in 2006, and since then has acquired Getemein.com, a UK ticket reseller, and Paciolan, a developer of ticketing system applications.
Many see this as a monstrous anti-competitive move. But since the companies are not direct competitors, it is unlikely that antitrust officials in the US will challenge the deal. As Fine notes "An individual familiar with the companies' calculus regarding regulatory concerns argues that the entities are 'overwhelmingly complementary'-as opposed to competitive-and few such mergers have been challenged. And that consumers and performers would still have other options."
We'll see whether the Obama Justice Department might sing a different tune.
