Ticketmaster + Live Nation: Meet the new boss

Already reviled by many music fans, the two monolithic companies most responsible for skyrocketing ticket prices over the last two decades are expected to announce a merger today that will make them the dominant force on the concert scene.

The 50/50 union of controversial ticket brokers Ticketmaster and giant concert promoters Live Nation to form a new company called Live Nation Entertainment with nearly $6 billion in annual revenues will be subject to federal approval, and it’s expected to be the first major test of the Obama administration’s anti-trust policies.

“The merger would create the most powerful and influential entity the music business has ever known,” according to the industry trade Billboard. “As manager, ticketer, venue operator, merchandiser and more, this giant would tap into revenues, if not outright control them, from virtually every source in the chain: live performance, merchandising, ticketing, content, sponsorships, licensing and digital.”

And, most experts agree, consumers will likely lose, paying even steeper prices.

Based in West Hollywood, Ticketmaster was founded in 1978. It rose to prominence in the early ’80s when it was purchased by Chicago investor Jay Pritzker, and it drew criticism a decade later when Pearl Jam and other artists attacked what they called its egregious service fees.

Industry studies reveal that Ticketmaster adds between 15 and 50 percent to the cost per ticket–raising the final price of a $120 seat to between $138 and $180–with a portion of that fee being kicked back to the promoter and the venue. Nevertheless, a year-long investigation by the Clinton administration’s Justice Department in the mid-’90s found that the “exclusivity agreements” the company forges with venues to create a monopoly on ticketing was not a cause for anti-trust action. (The Justice Department sought Pearl Jam’s backing during its investigation; Pearl Jam did not prompt the investigation, as is often misreported.)

Based in Beverly Hills, Live Nation spun off from the media giant Clear Channel Communications in 2005. Its rise began in the early ’90s when it started buying out smaller regional promoters and venues across the U.S. In the Chicago area, it controls the First Midwest Bank Amphitheatre, the Alpine Valley Music Theatre, the House of Blues and–until the lease comes up for review at the end of this summer concert season–the Charter One Pavilion on Northerly Island. Prices for its shows have risen steadily, and it has championed “corporate synergy” via relentless advertising to the customers in its seats. (The company has said 20 percent of its revenues come from corporate sponsorships, but it has lost 4 percent on ticket sales.)

Live Nation is a ruthless competitor. In 2005, Chicago-based Jam Productions won a $90 million verdict against the firm in a highly publicized anti-trust suit after testimony that included executives at the larger company boasting that they’d love to “crush, kill and destroy” the regional promoter.

Earlier this year, Live Nation and Ticketmaster were moving toward an epic showdown as the promoter prepared to end its deal with Ticketmaster and sell tickets to its events through its own ticketing arm, vowing to lower service fees. It first major attempt to do this was proclaimed a failure, however, when ticket sales for a tour by the reunited Phish were plagued with snafus.

It remains unclear what led the two giants to abandon their animosity and combine forces. The companies have made no official statement on the merger as yet, though several news organizations are reporting that the deal was approved by Ticketmaster’s board on Sunday and by Live Nation’s on Monday.

The Chicago office of Live Nation is holding a press conference at 11 a.m. today at Wrigley Field to make a major summer concert announcement. Local executives are unlikely to address the merger, and are in fact almost always reluctant to speak on the record about their business.

The merger means that some of the most shrewd and calculating names in the industry will now be working together at the top of the new conglomerate. The New York Times has reported that Barry Diller, the executive who launched the Fox Broadcasting Company and a previous force behind Ticketmaster, will be the new chairman, while current Ticketmaster chief and former record company head Irving Azoff will be executive chairman and Live Nation boss Michael Rapino will be executive chairman and president.

In recent months, Live Nation has been making headlines for forging “360 deals” with superstar artists such as Madonna and Jay-Z, controlling every aspect of the stars’ careers. Meanwhile, as manager of acts such as Guns N’ Roses and the Eagles, Azoff has been alienating both the major labels and struggling mom-and-pop record stores by selling his groups’ new music exclusively through a single big-box retailer such as Walmart or Best Buy.

Notoriously unresponsive to its customers–the company has no office phone or complaint line listed in the Chicago directory–Ticketmaster became the subject of renewed criticism last week after fans, government officials and Bruce Springsteen himself objected to the company’s handling of sales for the E Street Band’s upcoming tour. Instead of getting the face-price tickets they sought, many fans were redirected to Ticketmaster’s subsidiary Tickets Now to bid much higher prices in an auction, with Ticketmaster essentially acting like a scalper before the face-price tickets had even sold out.

Ticketmaster also is the subject of a recently filed lawsuit in Canada that charges the company with acting as a scalper and violating that country’s laws.

Although executives so far are tight-lipped about changes the new company will make, industry observers predict:

* “Dynamic pricing”–corporate-speak for milking fans for as much as they’re willing to pay–could become the norm, with ticket prices escalating as fans bid for seats instead of buying them at a set cost. While some fans might get bargains, as with the Priceline model in travel, the best seats would almost certainly be locked out in perpetuity for the biggest spenders. (To quote John Lennon: “Would those of you in the cheaper seats clap your hands? And the rest of you, if you’ll just rattle your jewelry.”)

* Having suffered fans’ anger and bad publicity for years because of high service charges, the Ticketmaster name will be buried. The service fees at the heart of complaints about the company could now be buried, too, with one ticket price that makes it impossible for fans to discern what bands are charging them versus what Live Nation Entertainment is tacking on.

* Live Nation Entertainment may favor its own shows, and it could stop selling tickets to shows by competitors in an attempt to eliminate the few remaining challengers. In the local market, Jam sells all of its tickets through Ticketmaster, as does the second largest national promoter AEG Worldwide, which promotes numerous arena shows here. Both promoters have so far declined to comment on the merger.

* With the same huge company controlling live performance while simultaneously managing artists, musicians may find that they have few or no options for playing elsewhere or charging fans more modest or uniform ticket prices. The situation could well be “Play by Live Nation Entertainment’s rules, or don’t play at all”–as Pearl Jam discovered when it effectively was unable to tour for two years during its feud with Ticketmaster.

Check this space for developments as they unfold.