Brown Paper Tickets has been asked for our reaction to the Department of Justice's (DOJ) decision to allow the merger on January 25, 2010. If your business involves ticketing, you can’t ignore what’s happened, but will it matter?
Ticketmaster was the most powerful ticket provider and sold 140 million tickets in 2008 generating $1.4 billion in revenue representing over 200 musical acts from Neil Diamond to Aerosmith. LiveNation was the largest concert promoter in the world with 2008 revenue topping $4.1 billion worldwide while operating over 75 venues in the United States. But the two always had a relationship. Between 1996 and 2003 the two corporations worked together to corner the market and produced dramatic revenue growth, with ticket prices growing 82%. Competition only began in December of 2008, when LiveNation launched its own ticketing system and took 4.4 million tickets from Ticketmaster's market share. After just one year of competition, the merger of the two companies was announced on February 10, 2009 under the name LiveNation Entertainment Inc.
After the announcement, the merger was portrayed as a potential monopoly. On February 12, 2009, the DOJ launched an investigation into whether the merger should be blocked in court. A monopoly on ticketing became the focus. On January 25, 2010, after nearly a year-long investigation, the DOJ concluded that the merger could proceed but placed several conditions on the deal. Although the merger itself may do little to change the landscape of the ticketing world, some of the conditions could be significant.
Under the ruling, LiveNation Entertainment Inc. is required to license its ticketing software to AEG, the second largest venue owner in the market with 65 amphitheaters, creating a large ticketing competitor. Ticketmaster's Paciolan division, which tickets college sports, was sold to Comcast-Spectator, creating a third large ticketing service. This makes two new competitors to the large arena market place. However, aside from the divestiture of Paciolan, the announcement from the DOJ does not mention Ticketmaster's other associated companies such as TicketWeb, a ticket provider, and TicketsNow, a ticket reselling business. A great deal is unknown about the influence of this condition over the smaller venue and resale markets where these companies play.
Additionally, the merged company is barred for 10 years from retaliating against venue operators that want to use competitors' ticketing services. As companies under contract to Ticketmaster come up for renewal at a rate of 20% per year, they have the option of working with other ticketing services. This condition is intended to prohibit LiveNation Entertainment Inc. from blocking their artists and acts from performing at venues they don’t have under contract. In theory, this is a huge boon for venues or acts who want options. But pessimists will tell you the DOJ is naive in assuming this condition can effectively open the market since retaliation is a subtle business; it’s favoritism not an overt act.
Other well intentioned conditions state LiveNation Entertainment will be unable to offer ticketing and promotion services as a bundle, and a firewall will isolate ticketing data from the rest of the company's operations. This is an effort to keep competitive information found in the wing providing ticketing services separate from venue promotions. The method of enforcing these provisions has yet to be determined by the DOJ. This should prove interesting.
The pricing model of Ticketmaster and LiveNation placed them beyond the means of many smaller events. We assume their combined pricing model will continue that trend, though the companies have claimed the merger will bring about streamlined operations and reduce fees. Smaller venues, occasionally run by novice producers, need a custom approach for a variety of program types and ticketing styles requiring higher service levels. LiveNation Entertainment faces competitors willing to provide a lot of guidance and support for very low margins in this price-sensitive market space. Big-arena ticketing survives on large margins to pay for locking-in venues. The low fees of smaller shows starve their model. Therefore, the new company will serve only one sector of the live entertainment industry: huge arena shows.
Meanwhile, the landscape of large events is undergoing a significant change. “With the exception of old, established acts and the very occasional pop sensation, very few bands can fill large arenas or football stadiums. This trend will accelerate as the last bands from the golden age of radio retire, labels take even fewer big promotional risks, and the market continues to fragment under the explosion in recording releases." says Matt Rosoff of cnet.com. When you consider the fact that the market share LiveNation and Ticketmaster dominated is shrinking you see why it made sense to join forces to solidify. You will also see there is no expansion to be had.
With the large arena market dwindling, a model that can't compete in other market sectors, and with the new DOJ conditions it appears that LiveNation Entertainment is a non-expanding entity sequestered to a small corner of the marketplace that just got very crowded. Historically, Brown Paper Tickets has been well served by people’s negative feelings about Ticketmaster. Perhaps we’ve lost that, or maybe LiveNation Entertainment, AEG, and Comcast will provide us even greater opportunity to shine.
Brown Paper Tickets remains hopeful that greater competition will lead to lower fees for ticket buyers and the conditions of anti-retaliation will enable producers to choose a better way of ticketing. We've seen how massive fees, kickbacks, stifling contracts, and a lack of transparency worked for Ticketmaster and Live Nation. With or without this decision by the DOJ, times are changing. AEG and Comcast may have been handed some huge contracts and some temporary gains but, this merger is just a final desperate act to hang on to yesteryear. Our reaction? Brown Paper Tickets isn't concerned with how ticketing used to be done.
