The Case Against Ticketmaster

Anti-trust lawyer David Balto, with the Center for American Progress, recently made the case against Ticketmaster’s proposed merger with LiveNation in testimony to the US Congress. The testimony also provides an excellent summary of Ticketmaster’s existing monopoly, some of which I excerpt below:

Let’s be straightforward about one transparent fact: Ticketmaster is a monopolist and exercises that power to exploit consumers.  It has a substantial market share by any meaningful measure. Moreover, it has regularly increased prices.  This is not a situation where a monopolist is accused of reducing prices in a predatory fashion, or a market where price increases are justified by cost increases. Millions of consumers pay what seem like fairly astronomical surcharges to receive the very simple task of having a ticket dispensed. Although Ticketmaster labels their fees “convenience” and “service” fees, consumers pay a very high price for a basic level of convenience and service. As The Boston Globe observed in a
recent editorial “Ticket to Gouge,” due to Ticketmaster’s charges the price of a “$50 seat can rise by 20 percent and that does not include the extra $2.50 per order if the customers want to print out tickets on their home computer.”

Today consumers can purchase almost anything electronically. When consumers purchase an airline ticket, railroad ticket, movie ticket, or other goods there are few if any surcharges. Only in the market for entertainment tickets where Ticketmaster controls the bottleneck are there surcharges. Often these surcharges can exceed 20 percent of the value of the ticket, especially when Ticketmaster adds on additional charges for unused services.

The recent entry of Live Nation into ticketing posed a very substantial threat of unsettling Ticketmaster’s monopoly hold on the market. Because it is the largest concert promoter and owns over 140 venues (including several marquee venues), it was in a unique position to succeed in attacking Ticketmaster’s dominance. In 2008, Live Nation terminated its previous arrangement with Ticketmaster, under which Ticketmaster sold tickets for Live Nation concerts. Live Nation’s entry threatened to siphon off a
significant portion of Ticketmaster’s revenue. Industry analysts suggested that Live Nation would control the ticketing of over 22 million tickets this year. With the beachhead established with its venue and artist base, Live Nation would have been able to engage in substantial head-to-head competition with Ticketmaster leading to lower prices and better services.

… The Antitrust Division should review Ticketmaster’s exclusionary conduct including long term contracts with venues to determine whether they are anticompetitive. A decade ago the DOJ chose not to challenge a wide variety of exclusionary conduct by Ticketmaster based on theoretical arguments that entry was easy or that consumers benefited from exclusivity arrangements. History has proven that it was a mistake. Moreover, both the case law and economic theory have matured sufficiently to recognize in a far more sophisticated fashion how these practices can harm competition. The DOJ should reopen its investigation of these practices to determine how to restore competition to the ticket marketplace.

While it seems obvious why the merger should not be approved, the presence of LiveNation as a competitor to Ticketmaster is presumed to lead to “lower prices and better services”. While LiveNation would certainly cannibalize Ticketmaster’s revenue stream, it is not obvious to be why a duopoly would lead to lower service charges for consumers. Indeed, the total pie could well increase as in years past, because the market is characterized by monopolisitic competition – each show is a mini-monopoly, so if you want to see Springsteen you will pay the prevailing service charges, whether the ticketing company is Ticketmaster of LiveNation or anyone else; you don’t get to purchase the same Springsteen ticket from either company.

One answer to monopolistic practices is increased competition, but that solution does not always work depending on market structure. Profit margins in the aggregate will get squeezed the more competition there is, and with only a few major competitors, there are powerful incentives from them to align their pricing practices. Such is the nature of capitalism.

Other alternatives are price regulation or the creation of a utility (which could be nationalization, as I have opined tongue-in-cheek, but could also be created as a cooperative or other entity owned by the artists themselves). In any event, it would be nice to see Ticketmaster nailed for gouging consumers and prevented from continuing on in the future. Chalk it up as a small win for the average family.

Coda: A seperate issue in all of this is rising prices due to fees paid to artists. This I do not have a problem with as it is the revenue flipside of downloadable music. If albums are increasingly distributed for free, the artists need to make money and do so by touring. In many ways this is fairer than excessive copyright protection and enforcement over recorded materials. The Recording Industry Association of America and its lawsuits against people who have downloaded music is not about artists but protecting the revenue streams of massive entertainment companies.