My account follows the jump.
9:08 a.m.: The U.S. House of Representatives Judiciary Committee’s Subcommittee on Courts and Competition Policy’s hearing on “Competition in Ticketing & Promotion” is underway on Capitol Hill under the direction of Chairman Hank Johnson (D-Ga.).
After reiterating the claims of Ticketmaster and Live Nation that the merger is necessary because of the state of the economy, Johnson notes that the companies have presented five letters from artists supporting the merger, though “four of those five artists are managed by [these companies],” and there are no artists on the panel today “despite our monumental efforts” to add some to the witness list.
“It is our understanding that witnesses were reluctant [to testify] because of possible repercussions,” Johnson says.
The Chairman goes on to note that despite vowing to change its practices after the Bruce Springsteen ticket sale controversy, Ticketmaster is now selling seats to Leonard Cohen’s much-anticipated tour at $99 to $250 a seat, but customers are being redirected to Ticketmaster subsidiary Tickets Now to buy those seats at $568 to $856 a seat, “plus service charges ranging from $85 to $128 per ticket.”
“There is a risk that ticket prices will increase and consumers will be harmed by this merger,” Johnson says.
9:20 a.m.: As with the Senate hearing on Tuesday, once again, it seems as if lawmakers on both sides of the aisle oppose the merger. Rep. Howard Coble (R-N.C.), who proclaims himself “a bluegrass and old-time country fan” and who mispronounces the names of Christina Aguilera and Jay-Z, nevertheless seems skeptical of the merger.
“I’m not the hippest guy,” Coble says, but he notes that his constituents are angry with Ticketmaster because of convenience fees “which are anything but convenient.”
Rep. Lamar Smith (R-TX) once again cites the Springsteen controversy.
“The Boss was upset, his fans were upset and I can’t say that I blame them,” Smith says. He says he sees no reason to believe Ticketmaster and Live Nation when execs claim the merger will result in lower ticket prices.
9:25 a.m.: Rep. Bill Pascrell (D-N.J.), also is outraged about Springsteen–and he’s on fire.
“I was moved to act on this issue by the appeals of over 1,000 average Americans who feel they got a raw deal,” Pascrell says. “But when I read yesterday in [the congressional newspaper] Roll Call that a Live Nation spokesman said that this is an emotional issue, not a legal one, I went from cerebral to visceral.”
The merger, he says, “is quite simply a bad deal for the American people.”
He quotes the Boss saying that the only thing worse than the current Ticketmaster system would be a new one introduced by the combined Ticketmaster/Live Nation giant.
“This is a blatant attempt to dominate the concert market place and stifle competition,” Pascrell adds. “Pretty soon, you won’t be able to wash your hands at a concert without this company making a profit.”
9:34 a.m.: Once again, congressional hearings simply don’t get any stranger than this one.
In considering the power of music, Chairman Johnson recalls that when he was back in college, he “was feeling pretty low one day, and decided to go to a concert”–by George Clinton and “the Funkadelics.” Tickets were between $5 and $10, he says, and the concert “was a wonderful experience that definitely took my mind off my troubles.”
This prompts Pascrell to begin quoting the lyrics to Springsteen’s song “The Promised Land,” trying to inspire fans to seize the day and object to the merger.
“Folks need to know that we do have control over what is happening,” Pascrell says. “The average guy out there is getting stuck every day, and particularly when it comes to some entertainment, I think we need to take a real good look at this merger.”
9:42 a.m.: Live Nation CEO Michael Rapino disavows knowledge of the controversial statement in Roll Call, adding the surprising news that in 30 days, he will be sworn in as an American citizen. (He’s currently a Canadian — so it’s all a plot from up north!)
Rapino proceeds to say his company is hurting in this economy. “We put on 7,000 concerts a year for young artists where we lose 10 to 20 percent on those shows.”
The Live Nation boss also notes that its biggest competitor, AEG Entertainment, promoted five of the top 10 concerts last year, while Live Nation promoted four. AEG is a worse offender in terms of vertical integration than Live Nation, he contends. And in Washington, D.C., local promoter Seth Hurwitz (who testified against Live Nation at Tuesday’s Senate hearing) controls more of the concert market share than Live Nation.
Rapino further adds that AEG has made it clear that it will break from selling tickets through Ticketmaster if the merger goes through.
Live Nation, according to Rapino, is just a little guy trying to make its way in a tough business, and AEG is nipping at its heels. (Cue the violins.)
9:50 a.m.: Ticketmaster head Irving Azoff is up now. He begins by noting that his poor little company “is a lightning rod for complaints from fans,” who blame the company for everything wrong in the concert world.
“If somebody gets hurt in a mosh pit, they try to sue us,” Azoff says. “We take so much heat for everything we do, you’d think we’re the IRS.”
The executive infamously known in the music world as “the poison dwarf” proceeds to give a long explanation of the Springsteen ticket sale. “What we strive to do is the best job we can,” but there was a “mistake” on the Springsteen tour, he says.
He concludes by echoing Rapino in contending that AEG actually is a much bigger threat to the concert world than the merged Ticketmaster/Live Nation mega-corp.
9:54 a.m.: Washington attorney Robert Doyle says the merger will eliminate the only potential competitor to Ticketmaster, since Live Nation had begun shortly before the merger to begin selling tickets to its own events, breaking away from Ticketmaster.
“We all stood by, we all saw these two significant competitors going head to head and we waited to see what kind of response there would be in the market,” Doyle says. “Well, the market didn’t get any response at all, because in February, these two companies decided to merge.”
Doyle adds: “The merger eliminates the only potential viable competitor that could challenge the monopoly of Ticketmaster in the marketplace.”
10 a.m.: Up now: Peter A. Luukko of Comcast-Spectacor, which runs all of the sports teams and sports venues in Philadelphia.
“Let’s talk about vertical integration,” Luukko begins after pumping up his resume. To paraphrase: It’s a good thing, although exactly how is never spelled out.
“Content providers want to have more control of the direct connection to their fans,” Luuko says. “I believe that the merger of Ticketmaster and Live Nation is an exciting combination” that will be good for the economy in these troubled times and offer “fresh, exciting new ideas” for a troubled business.
“I also believe that this type of combination will encourage other competitors, like myself… I certainly don’t believe that the combination will in anyway stifle competition,” Luuko concludes.
10:08 a.m.: Vanderbilt University professor Luke Froeb contends that the biggest benefit of the merger will be “innovation,” which “is important to the music industry because it’s changing rapidly.”
“This kind of experimentation and innovation is crucial to the industry.”
The professor offers no details and does not explain how he came to this conclusion.
10:10 a.m.: Ed Mierzwinski, Consumer Program Director of U.S. PIRG, the Federation of Public Interest Research Groups, relates the group’s history in siding with Pearl Jam and other bands in the mid-’90s against Ticketmaster.
Why are there no artists testifying about this issue on Capitol Hill? Mierzwinski notes that Pearl Jam’s career was derailed for two years because it dared to criticize Ticketmaster, and artists are simply afraid to speak out.
If the merger goes through, “we would all have no choice but to accept their terms or higher prices,” Mierzwinski says. Yes, there would be alternatives: Local VFW halls. But major American concert venues would be dominated by Ticketmaster/Live Nation.
Mierzwinski also asks, re: the relationship of Ticketmaster and Tickets Now, “Really, how can the company that controls primary ticketing also control scalping?”
“I would be remiss as a consumer advocate if I didn’t point out that consumers are outraged, absolutely outraged” over Ticketmaster’s service fees. “Nobody else who sells anything on the Internet” charges fees such as these, Mierzwinski concludes.
10:16 a.m.: Questioning begins
In response to a question from Chairman Johnson, Azoff asserts the company will build a firewall between primary ticket sales and secondary sales through Tickets Now. He says he would not have purchased Tickets Now if he’d been running the company at that time, but “the model is broken” and Ticketmaster is trying to use Tickets Now to fix it.
Rapino follows by further decrying scalping, though he does not explain how Ticketmaster/Live Nation-controlled scalping would be any different from regular old scalping.
10:21 a.m.: Chairman Johnson delves into history to recall the Pearl Jam/Ticketmaster dispute in 1994. Azoff defends Pearl Jam’s assault on the service charges Ticketmaster adds by saying his company does not set those charges.
“Ticketmaster can’t unilaterally set any service charge,” Azoff says. “We think the industry needs a complete overhaul in how it does figure out these service charges.”
Azoff says that shortly after he took over Ticketmaster, he convinced the most famous clients he manages, the Eagles, to go to “all-in” ticket prices. This doesn’t reduce service charges, of course; it merely buries those costs in one bottom-line ticket price, so customers can no longer tell they’re paying, say, $250 a seat plus $80 in service charges, they simply pay $330 a ticket.
10:27 a.m.: Azoff blames the expense of touring for high ticket prices. “Every artist I speak to would like to charge less, but they have to meet their nut.”
He says his merged company will be “a neutral Switzerland” when it comes to setting prices, simply taking its direction from what artists want and need.
10:35 a.m.: The committee takes a recess so congressmen can go cast their votes on two unrelated issues before the House.
11:16 a.m.: The hearing resumes under new acting Chairman Brad Sherman (D-Calif.). (Johnson had other obligations.)
Sherman, seems favorably inclined toward the giant corporations, begins by asking if the merger will result in layoffs at Ticketmaster or Live Nation. Rapino and Azoff say that if the layoff goes through, they actually will be hiring people. So it will help the economy.
“We believe that right now we are really understaffed om the consumer/technology side of the business,” Rapino says. The new company will need to hire to compete with online scalpers, he adds, comparing these insidious forces to the “online pirates” who download music without paying for it.
Sherman’s next questions are designed to underscore that competitors readily can set up their own alternative ticket broker services — it’s not all that hard, therefore Ticketmaster isn’t nearly the monolithic impediment others claim it is.
Sherman also claims that the reason the artists aren’t appearing at these congressional hearing isn’t because they’re afraid of repercussions from Ticketmaster/Live Nation. It’s because “they’re shy”!!!
The congressman from California further underscores his cluelessness by asserting that “99.999 percent of listenings to a song” come from recorded, not live, music. He believes Ticketmaster/Live Nation’s assertion that the average concertgoer only goes to two concerts a year, and he adds, “I myself haven’t been to a concert since I had hair!” he says.
11:33 a.m.: Rapino claims he talks to artists all the time, and their main concern is that since the major label system is withering and dying, they all want to know, “Who is going to take care of me?” Why, Ticketmaster/Live Nation, of course!
He adds that artists “continually embrace” the merged company’s plan to provide alternate streams of revenue: T-shirt sales, etc., on top of concert tickets.
11:37 a.m.: Discussion turns toward Tickets.com, which is owned by Major League baseball. But the company only sells tickets for a fraction of the Major League teams, Doyle says. The reason it doesn’t sell for all of them: Ticketmaster is so powerful, even Major League baseball can’t compete.
11:40 a.m.: Rep. Darrell Issa (R-Calif.) also seems to be siding with Ticketmaster/Live Nation, forwarding the inscrutable assertion that since the company won’t be able to control Google or Yahoo searches, it won’t really corner the ticketing market, since there’s no guarantee that fans searching for “Bruce Springsteen tickets” will be directed to the new company on their very first hit. (No, this made absolutely no sense to me, either.)
Bizarrely, this prompts Sherman to start rattling on about Google and Yahoo, as well. And he makes even less sense than Issa.
Sherman then leads Luuko through a series of questions highlighting the benefits of vertical integration in the sports world, intimating the same would be true in the music world. (Nevermind that there are dozens and dozens of, say, Cubs games in Chicago each season, but only one or two Springsteen shows a year.)
11:52 a.m.: Sherman asks: “Mr. Rapino, Mr. Azoff, your detractors say ticket prices have gone up. Is that true, and if so, why?”
Rapino maintains the average ticket price is $50. “When we poll consumers, they do not tell us that the ticket price is too expensive. When they see a Madonna show, they think it’s good value.”
Top ticket price in Chicago during Madonna’s 2006 tour: $350 a seat. Plus service charges, of course.
Azoff repeats that Ticketmaster does not set ticket prices; the artist sets ticket prices. And instead of blaming artists for escalating costs, he blames the secondary market. He says artists see scalpers charging $1,600 a seat for the front row, and they ask, “Why can’t I charge an extra $10 a ticket?” Or, in Madonna’s case, “Why can’t I charge $350 a seat?”
Sherman and Azoff then begin a mutual stroke-fest about the benefits of “dynamic pricing,” both asserting that artists should be free to charge whatever they’re worth–“at least for the best 1,000 seats in the house.”
Why do artists shy away from dynamic pricing? Because they’re all afraid of the negative press that will come from being unrepentant greed heads. So ultimately reporters and critics are to blame, and, as Azoff says, “That’s the guy who’s getting in for free!”
And with that, the hearing comes to an end.
Another account of this hearing can be found on Bill Wyman’s Hitsville blog here. Wyman picked up on a key exchange I intended to go back to, but since he got there first, let’s let him tell it:
Sherman is asking by far the best questions. Now he’s pinning Azoff down on where tickets to a concert go. Inventory control is not a perfect science, Azoff says. That’s an extraordinary euphemism, given Azoff’s replies immediately following. Sherman: If there’s ten thousand seats in the area, are you selling 10,000 tickets? Azoff: Never. On average we might see 80 or 85 percent of the seats. Sherman: Are those the good ones or the bad ones you’re not getting? Azoff: The vast majority of the best seats in the house. This is the first time to my knowledge this has been publicly acknowledged by a major person in the music business. It’s the headline of the day.
Left unanswered: Who exactly is responsible for holding back those “best seats in the house” and turning them over to scalpers to sell? The artists? The venue? The Wizard of Oz? Oh, if we only knew the real power hiding behind the curtain…