DNA Lounge: Wherein I find myself talking about anti-trust actions again. What year is this?

In case you haven't heard, Live Nation and Ticketmaster intend to merge into a single company. This would be a horrible thing for consumers, bands, and venues alike.

If you are like most people, all you know about Ticketmaster is that they are the exclusive ticket source for many venues, and that they have extortionate "convenience fees" of from 35% to 100% of the ticket price. But they don't only sell tickets: they are also an artist management company.

Live Nation, on the other hand, is the world's largest concert production and promotion company (for many artists, filling most of the roles traditionally filled by a record label), and the largest owner of live music venues. They also have exclusive booking contracts with many venues that they don't own outright. They were until recently owned by noted radio-station monopolists Clear Channel.

So if they merge, you have a single company that:

  • Manages the band;
  • Promotes the band's tour;
  • Owns all the venues on that tour route;
  • Sells all the tickets, merchandise, and alcohol.

Good luck trying to compete against that kind of vertical integration. If you're a booking a tour, you can't get the venues, because the venues' owners are also your booking/management competition. If you're a venue, you can't get the tours, because the bookers are also your local venue competition.

And with no competition, ticket prices can be whatever they like. Do you think they'll lower them?

Rep. Bill Pascrell is trying to block the merger. He says:

Under the proposed merger, the combined company would have control over nearly every aspect of the live music business: artist management, record sales, promotion, licensing, venue control, parking, ticket sales and resales, all the way down to the hot dogs and beer. According to James Hurwitz of the American Antitrust Institute:

"If the combination is permitted, [the merged company] will have a powerful or dominant position in virtually all of the industry's markets. Viewed in combination, the merger will give Live Nation Entertainment unarguable control of most competition within the industry."

The companies, if merged, would be over five times more powerful than their next eight rivals combined.

The proposed merger would create a vertically integrated entity whose power would extend across five of the industry's six main markets. An entrant or competitor in any of these markets would face the merged firm not only as a market rival, but also as a power in other critically related markets. A new promoter, for example, needs artists willing to perform and venues appropriate for staging the event. A new venue needs artists and promoters willing to book the facility. The vertically integrated firm can withhold these critical inputs, and its rival will suffer.

To avoid such problems, an entrant would need to enter the industry on several levels at once, a burden that makes entry far more daunting and costly. The combined entity could therefore use its five-market vertical integration to restrain trade both by chilling entry and disciplining rivals.