The U.S. Justice Department (DOJ) announced yesterday that it has filed suit, along with 29 states and the District of Columbia, charging Live Nation Entertainment Inc. and its subsidiary Ticketmaster LLC with monopolizing the live-events industry in violation of Section 2 of the Sherman Act.
The suit, filed in the U.S. District Court for the Southern District of New York, alleges that Live Nation’s so-called “flywheel” (its bundle of concert promotions, artist management, venue ownership, and ticketing services) allows it to extend its dominance in one market into the other adjacent markets. It seeks both a jury trial and structural relief, with U.S. Attorney General Merrick Garland declaring that: “It is time to break up Live Nation-Ticketmaster.”
Of course, for Ticketmaster, this is largely a case of deja vu all over again. Guess, for instance, what year this was written:
Ticketmaster Corp. has been summoned to court Wednesday on allegations the nation’s largest ticket distrib has become an entrenched monopoly whose ‘service charges’ have gouged thousands of Southern Californians for years.
Would that have been 2022? 2010? No, it was 1993, from the staff at Variety.
That piece continued:
At stake is the $1 billion-a-year tix purveyor’s unrivaled market position in the Southland for computer-and-telephone sales of seats to live events, from opera to ice hockey, from the Greek Theatre to the Whiskey. (emphasis added)
Despite all the technological changes since 1993, Ticketmaster has remained the big name in concert tickets for more than 30 years. And it was, of course, most notably back in the headlines in November 2022, after experiencing website issues during the sale of tickets for Taylor Swift’s first tour in five years.
At the time, antitrust proponents called for investigations of Ticketmaster and its dominant position in the ticket-sales market. Just two days after the Taylor Swift tour snafu, U.S. Senate Judiciary Subcommittee on Antitrust Chair Amy Klobuchar (D-Minn.) wrote an open letter to Ticketmaster’s CEO “to express serious concerns about the state of competition in the ticketing industry and its harmful impact on consumers.”
Most critics have fingered Ticketmaster’s 2010 merger with concert promoter Live Nation as central to the market’s alleged problems. In late 2022, shortly after the Taylor Swift ticketing fiasco, a coalition led by the American Economic Liberties Project launched “Break Up Ticketmaster,” a DOJ pressure campaign to unwind the merger, blaming it for “hiking up ticket prices, charging rip-off junk fees, and exploiting artists, independent venues, and fans.”
But there is little reason to believe that Ticketmaster’s failings would have been averted absent its merger with Live Nation (or, more generally, if it faced tougher competition). Put differently, the issues that reared their head in the Taylor Swift ticketing fiasco appear to have little to do with market power and its reinforcement—the harms that antitrust merger enforcement seeks to prevent. Indeed, there may well have been important benefits from the vertical combination of Ticketmaster and Live Nation.
With a breakup of Live Nation-Ticketmaster now on the table, it’s a good time to review the company’s history of mergers and acquisitions, and what role they may have played in frustrations with Ticketmaster.
A Brief History of Ticketmaster
It was not the 2010 merger with Live Nation that brought Ticketmaster to dominance. In many ways, that story actually starts with the company’s 1991 acquisition of Ticketron. And, in some ways, Ticketmaster’s broader story is that of a scrappy startup trying to compete against the then-monopolist. But Ticketron, not Ticketmaster, was that monopolist.
For a short period in the late 1960s, Ticketron and Computicket were the two companies competing in the field of computerized ticketing. But Computicket went under in 1970 and Ticketron was left as the only firm in the industry. Ticketmaster was subsequently founded in 1976, and grew quickly.
Initially, Ticketmaster competed with Ticketron by paying advances to venue owners and promoters, instead of simply charging ticket fees. This practice successfully fostered long-term exclusive agreements between Ticketmaster, venues, and promoters. By 1988, Ticketron was losing millions and was sold for $16 million to an investor group that continued to lose money. That investor group sold the company 15 months later to Ticketmaster.
Given that the deal was a combination of the two major players in the market at that time, the DOJ needed to clear the Ticketmaster/Ticketron merger, which it did. By 1993, we had that opening quotation from Variety about the company being an “entrenched monopoly.” In 1994, Pearl Jam—then, the best-selling band in the United States—sketched a complaint against Ticketmaster in a memo to the DOJ, but the agency closed its investigation in 1995 without action.
In the years following its acquisition of Ticketron, a series of mergers and acquisitions helped to consolidate Ticketmaster’s position as the industry’s dominant firm.
Live Nation Merger
Live Nation is another story of a startup founded to compete with what it considered the dominant firm—in this case, Ticketmaster. Founded in 1996 as SFX Entertainment to consolidate concert promoters into a larger, national entity to counter Ticketmaster’s dominance in ticket sales, the company was acquired in 2000 by Clear Channel Communications (now known as iHeartMedia) which, in turn, spun it off as Live Nation in 2005. It entered the venue business with its purchase of the House of Blues chain in 2006, and launched its ticketing business the following year.
In February 2009, Live Nation announced it had reached an agreement to merge with Ticketmaster in a $2.5 billion, all-stock deal. In January 2010, the DOJ approved that merger under a settlement agreement. Both the merger and the DOJ’s approval were controversial at the time. At a 2010 presentation at South by Southwest, then-Assistant U.S. Attorney General Christine Varney noted:
- Ticketmaster had maintained a market share of more than 80% over the prior 15 years;
- Consolidation in the sector had been ongoing for some time, resulting in “economic pressures” on local management companies and promoters;
- Entry by new competitors was difficult for both technological and reputational reasons;
- Consumers viewed Ticketmaster’s ticketing fees as “unfair, too high, inescapable, and confusing.” At the time of the announcement, The New York Times said the company was “known for the ever-rising cost of an assortment of tacked-on fees”; and
- Live Nation posed an “existential threat” to Ticketmaster when it launched its own ticketing system.
The Ticketmaster/Live Nation merger had elements of both a vertical merger and a horizontal merger. The combination of venues and promotional services with ticketing was considered vertical integration in the concert business. Because of Live Nation’s then-recent entry into ticketing, the merger was also seen as horizontal. Varney pointed out:
To be sure, Ticketmaster and Live Nation were strongest at different points in the live music chain, but Live Nation’s foray into ticketing only made clearer that the merger would help to preserve Ticketmaster’s power in the primary ticketing line of its business. Thus, the merger posed a threat to growing competition in primary ticketing.
The DOJ’s settlement with the merged company included several structural remedies to address these outstanding concerns, which included creating two new competitors to Ticketmaster. Ticketmaster was also required to license its ticketing platform to AEG—another major promoter and owner of venues—and Ticketmaster would be forbidden from servicing AEG venues in the future. This second condition effectively required AEG to have its own ticketing platform, or to direct its business to one of Ticketmaster’s competitors.
In addition, Ticketmaster was required to divest its Paciolan line of business to Comcast-Spectacor. Paciolan allows venues to host their own primary ticketing services on their own websites. It was thought that this divestiture would allow the venues themselves to compete with Ticketmaster.
The settlement also included several behavioral remedies for the following 10 years, or until 2020. Among these were:
- Ticketmaster and Live Nation would be expressly prohibited from retaliating against any venue that considered working with or actually worked with another primary ticketing service.
- The businesses would be prohibited from creating mandatory bundles of their services. For example, the merged firm would not be allowed to require that a client accept Live Nation as a promoter in order to access Ticketmaster’s primary ticketing services, or vice versa.
- Ticketmaster would either (1) be forbidden from using its ticketing data in its promotion and management business or (2) it would have to give that information to other managers and promoters.
Violating the Decree
In 2019, the DOJ and the merged company agreed to extend the settlement agreement for another five years, despite the DOJ finding that the company had violated the decree. The DOJ alleged at the time that Live Nation had withheld or threatened to withhold concerts from venues where the venue chose a ticketer other than Ticketmaster. Variety reported that the company was not fined for the action, but had agreed to pay the DOJ’s attorney fees.
It should be noted that it appears to be no coincidence that the suit announced yesterday by the DOJ comes with just six months remaining in that 2019 extension of the company’s settlement agreement.
The Taylor Swift Fiasco
According to Ticketmaster, more than 3.5 million fans registered to be able to buy tickets for Taylor Swift’s tour when tickets went on sale in November 2022. Historically, the company’s experience was that roughly 40% of registered fans would show up to buy tickets. Yet when sales opened for the Taylor Swift tour, the system had 3.5 billion total requests—four times the previous peak.
On its face, this appears to be neither an antitrust violation, nor at all relevant to the company’s 2010 settlement with the DOJ. Nevertheless, some have framed that technical glitch (albeit a gigantic one) as an antitrust offense. For example, Yale economist Florian Ederer argued:
The allegations against Ticketmaster are that it abused its dominant market position by underinvesting in site stability and customer service. Thus, rather than causing harm to consumers by charging exorbitant prices, Ticketmaster is alleged to have caused harm by providing inferior quality—which it could not have done had it faced credible competitors.
It is, of course, more than a bit of a stretch to connect the ticketing fiasco to a merger that occurred more than a decade earlier, at the tail end of the Great Recession. The glitch also happened in the midst of the nation’s recovery from the COVID-19 pandemic, when many companies might be excused for diverting information-technology resources toward more pressing matters.
Moreover, it is nearly impossible for any online firm to plan effectively for huge, unexpected traffic. For example, in 2018, Amazon’s website experienced service disruptions due to the unexpectedly large volume of traffic on “Prime Day.” Two facts make the Prime Day crash even more surprising. First, Amazon is the best in the world at handling web traffic at scale. Second, Prime Day sales fell each second the website was down.
Indeed, part of the business of Amazon Web Services—the company’s largest profit-making unit—involves consulting on how to scale IT services. But despite both Amazon’s technological capabilities and its economic incentive to keep the company’s website up and running, it still went down for more than an hour.
Whatever one concludes about the effects of the Ticketmaster/Live Nation merger, it seems clear that website issues stemming from the largest traffic volume ever experienced can only count as minor evidence (at best) of the merger’s effects.
A Multisided Market
It’s also important to recognize that Ticketmaster operates in a two-sided (or even three-sided) market between fans and venues/artists. But the artists and venues side of the ticketing market would not magically become perfectly competitive if the Ticketmaster/Live Nation merger was unwound tomorrow.
On the venue side, each major city generally has only one (or, at most, a few) large-scale venue—typically, the local sports stadium or arena. In a city like Minneapolis, an artist like Taylor Swift will only perform at the professional football stadium, which accommodates about 70,000 fans. If disputes could not be resolved, she could maybe downgrade to the professional baseball stadium, which holds about 40,000 fans, but other professional stadiums are far smaller (the Target Center—the city’s basketball arena—only holds around 20,000 fans).
Artists Are Market Makers, Too
Even for the artists, those at the top are not passive in the market for tickets. They respond to incentives and must receive benefits, or they would not continue to use Ticketmaster. Artists have a virtual monopoly on tickets for their shows, and their performing schedules (and, of course, the limits of physical time and space) are the primary determinant of the number of tickets available and at what price.
As Irving Azoff (longtime music-industry executive and former CEO of Ticketmaster) has aptly noted:
The biggest issue is that demand sometimes exceeds supply for many artists . . . More people want to see Taylor Swift, Beyoncé, Adele or Garth [Brooks] than there are tickets for sale. There’s not a congressional hearing in the world that fixes the reality that demand exceeds supply. There’s nothing that Ticketmaster, the building, the promoter or the artists can do to fix that.
Meanwhile, while venues may be Live Nation’s primary customers, servicing artists is also important to the company’s success. As a result, Live Nation has continually increased its investment in concerts to “over $9.6 billion [in 2022 vs. 2019] as Live Nation continues to be the largest financial supporter of musicians.” Indeed, the most recent data suggest that annual record-label A&R spending only amounted to about $5.8 billion.
The late Princeton economist Alan Krueger identified the primary source of increasing concert-ticket prices in the early 2000s as “the erosion of complementarities between concerts and album sales because of file sharing and CD copying.” While music piracy may not be the threat it was when Krueger was writing in 2005, the subsequent rise of streaming services as the primary way that fans consume music has certainly contributed to collapsing revenues from either digital or physical-media sales.
With fans paying much less for recorded music in the age of streaming, the primary revenue source for performers has shifted from selling recorded music to selling concert tickets. Rising ticket prices reflect precisely that shift in artists’ incomes.
Live-Event Ticketing Is More Competitive Than It Seems
While Ticketmaster remains the leading ticketing company, it’s actually failed to materially increase its market share in the 14 years since the Live Nation merger. Moreover, it has not stopped new competitors from entering the market and achieving some measure of success.
Though precise figures are difficult to come by, Ticketmaster’s market share appears to be between 65% and 70%, down from the 80% share it enjoyed at the time of the merger. It also faces important competitors that stand to gain should failures such as the Taylor Swift fiasco repeat themselves. These competitors include the likes of StubHub and SeatGeek—companies that, together, hold an estimated 30% of the market.
Also notable is that SeatGeek only entered the market in earnest following the Live Nation/Ticketmaster deal, belying the notion that the merger would make the entry and growth of new rivals impossible. The history of the merger is thus more consistent with Ticketmaster and Live Nation maintaining their positions in a complicated, multisided market.
More fulsome analysis of the DOJ’s complaint will be forthcoming, but the commonly floated assertion that the Live Nation/Ticketmaster merger foreclosed competition or created net harms to consumers has a high evidentiary burden to clear.