Live Nation Entertainment: A Cheer for Sellers II of II
Now that the Ticketmaster/Live Nation merger, albeit with certain amendments to the original proposal, has received the blessings of the US Department of Justice, the well-publicized and debatably over-dramatized ordeal barrels forward into reality much to the chagrin of industry prognosticators, indie promoters, and consumer advocacy groups. Even before the ink from the DOJ’s approval stamp could dry, the teeth gnashing over the issue reached a deafening level by many of these same industry intermediaries whose professional livelihoods are now in jeopardy of being squeezed out by the new media giant. Much of the criticism being leveled at Ticketmaster and Live Nation, or now known simply as Live Nation Entertainment, isn’t without merit. Ticketmaster’s infamous reputation for monopolizing ticket sales and providing a woefully unsatisfactory ticket-buying experience helps propagate the general public’s objection to the world’s largest ticket broker becoming an even larger and more controlling media behemoth. This article will provide a pragmatic analysis of the post-merger aftermath and attempt to predict the industry landscape.
The first order of business for President/CEO Michael Rapino and executive chairman Irving Azoff will be dealing with the secondary ticket market. The brokers of this multi-billion dollar sub-industry have adopted a different approach to ticket valuation than the tradition, flat, “face value” model. They believe a ticket’s true value is subject to a fan’s willingness to pay top dollar for it, which quite often yields a ticket price many times the original face value. While there’s some valiance in maximizing profit in a free economy — truly there is a decent argument to be made that an object’s worth IS only what someone will pay for it — the fan ends up suffering higher prices.
Shortly after the merger, Live Nation Entertainment will implement the dynamic pricing model they’ve been touting since before their consolidation. This model will replace the archaic flat rate and often-suboptimal pricing scheme currently in place and will lead to a clearer, truer ticket value based on, among other things, seat location and proximity to stage. This measure will help stymie “off-brand” secondary ticket brokers and will work to increase ticket availability to fans. However, “name brand” ticket-resellers, namely Ticketmaster’s own TicketsNow, have curiously escaped the Justice Department’s interest for oversight and will continue to resell tickets for inflated prices.
The eventual abolishment of the dreaded “convenience charge” will receive a positive reception and lead to a drastic change in the public’s valuation of live music. Live Nation will proclaim the changes as efforts to promulgate a more fan-friendly experience, all the while increasing parking fees, merchandise prices, etc. in order to generate higher ancillary revenue. The entire concert experience for fans will cost more.
The roles certain industry intermediaries play in the current business structure will also change. The operative singularity of Live Nation Entertainment is a double-edge sword offering increased consolidation and convenience but, on the other hand, the risk of marginalizing certain once-inalienable segments of the business (READ: independent promoters). With a single entity controlling and managing artists, their touring, their tour’s ticketing, the venue, and the associated merchandise, independent promoters will indeed find themselves wholly disadvantaged when competing with Live Nation’s new and formidable vertical integration.
But this is not the death of all things independent. To the contrary, independent segments of the industry will survive through strategic partnerships and consolidation. Independent venues will provide a stage for popular acts not associated with Live Nation Entertainment and offer an opening to local ticket brokers. Independent record labels will maintain their role as a vital channel for upcoming talent and continue to offer better long-term artist support and development options than their corporate counterparts, which, thanks to the recent affordability of recording and ease of distribution, have been facing mounting insignificance over the past decade. In reality, the once-predominant major labels weren’t even included in the DOJ’s dialogue about the merger furthering solidifying their sheer irrelevance to the industry.
Despite the opportunity to cut out agencies like William Morris and Creative Artist Agency (CAA) by dealing directly with artist management, Live Nation Entertainment will avoid direct expansion into booking realm and remain resolute in preserving the status quo. In fact, many artists signing with Live Nation Entertainment will reap the benefits of the strategic relationship with William Morris and Clear Channel Communications thanks to the CEO and Chairman of the Board, respectively, serving on the Live Nation Board of Directors.
However, several years after the merger, mounting public and legal pressure will prompt Congressional inquiry into the company signaling the death knell for what many executives will deem the “Golden Age of Touring.” Based on the Supreme Court’s Paramount Pictures decision of 1948, a monumental legal precedent against similar vertical integration of the motion picture industry, Live Nation Entertainment will suffer eventual divestiture at the hands of a Republican administration.
Ultimately, the merger will prove to be a brilliant business move providing much-needed streamlining and improved efficiency to the live music/touring machine. The cost of live music will waver and ultimately rise. But how close an eye does the Department of Justice plan to keep on Live Nation Entertainment? How will Live Nation and the large talent agencies co-exist in the future? Most importantly, does the merger possess long-term sustainability? These are stories for another day.
By Andrew Chandler
