Buying concert tickets is a hassle, as Taylor Swift fans know all too well.
When tickets first went on sale for his highly anticipated Eras Tour in November 2022, fans were agonized by hours-long queues and frozen screens before the Ticketmaster website finally crashed . Many failed to secure tickets, which were ultimately sold on the secondary market for up to $11,000.
Ticketmaster’s failure to adequately prepare for this onslaught of demand by underinvesting in the customer’s shopping experience could have amounted to an abuse of its market power, some economists have pointed out. Ticketmaster controls approximately 70 percent of the live event and ticketing market and more than 80 percent of the major concert ticketing market.
The Department of Justice opened an investigation into Ticketmaster’s parent company, Live Nation Entertainment, shortly after the Eras tour fiasco. This investigation appears close to its conclusion and the government now appears ready to take the company to court for alleged anti-competitive behavior. The Wall Street Journal reported that the DOJ’s antitrust lawsuit could be filed as soon as next month.
The exact contours of the trial are not yet known. But Live Nation Entertainment has already faced government scrutiny.
The DOJ allowed Ticketmaster and Live Nation, a venue operator and event promoter, to merge and become Live Nation Entertainment as part of a 2010 settlement. But that required Ticketmaster to take steps to improve competition , in particular by divesting from one of its ticketing subsidiaries and granting a license for its ticketing software. The DOJ also prohibited Live Nation Entertainment from “retaliating against any venue owner who chooses to use another company’s ticketing services or another company’s promotional services.”
In 2019, the DOJ charged the company with violating this requirement and appointed an external monitor to monitor its continued compliance.
However, since then, critics have argued that the provisions of the 2010 deal never actually spurred competition in the ticketing market and that Live Nation Entertainment should be broken up.
“The Department of Justice should never have given the green light [Live Nation-Ticketmaster] merger, because as a vertically integrated monopoly, they have a vested interest in encouraging higher prices and fees, and there is no [one] able to discipline the industry, either by bringing in an alternative promoter or a ticketing agent,” said Tim Wu, a key architect of the Biden administration’s antitrust policies and a professor at Columbia Law.
What are the antitrust concerns surrounding Live Nation Entertainment?
Regardless of how the DOJ frames its lawsuit, it will need to demonstrate that Live Nation Entertainment engaged in anticompetitive behavior that stifled competition and harmed consumers by excessively raising prices or offering inferior products. .
Some experts, like Fiona Scott Morton, a professor at the Yale School of Management and former chief economist of the DOJ’s antitrust division, think the government may have a strong case.
“If we have a well-defined market and Ticketmaster has 70% of the share, it seems very likely that they have market power in the sense that we usually understand it in an antitrust context, and they will be able to increase the price or decrease quality or restrict the options available to consumers on terms worse than they would get in a competitive market,” she said.
At the very least, there’s a certain incestuousness to the way Live Nation promoters — the employees who put on live events — advise artists on ticket prices on sites like Ticketmaster and negotiate with venues, including including the top 78% of arenas in the country operated by Live Nation. These sites then give Ticketmaster a cut of the service fees. And that should ring alarm bells, Scott Morton said.
The company has already sought to preempt some of these potential charges. In a blog post last month, Dan Wall, Live Nation Entertainment’s executive vice president of corporate and regulatory affairs, claimed that neither Ticketmaster nor Live Nation were responsible for the high ticket prices.
Wall writes that tickets sold on Ticketmaster are “really set by the artists and crews,” not Ticketmaster itself. But artist teams can include Live Nation promoters.
Wall also refutes the idea that service fees, which go to venues and ticketing companies like Ticketmaster, are just a sneaky way for Ticketmaster to raise prices.
Service fees vary by venue and event, but average about 27% of the price of a ticket, according to a 2018 Government Accountability Office report. As part of its fight against “junk fees,” President Joe Biden criticized ticket retailers for not disclosing these fees up front. On Ticketmaster, fees are only visible at checkout.
Wall states that “Ticketmaster does not set service fees, the sites do. » But that oversimplifies what happens behind the scenes.
When negotiating contracts with ticketing companies, venues offer a service fee. Ticketing companies, including Ticketmaster, then structure their offers for the contract – which includes a reduced service fee – based on the proposed fee. However, the proposed service fees “depend on one’s outside option in a negotiation game,” Scott Morton said. And for venues, there aren’t many outside options in a market where Ticketmaster controls the vast majority of ticket sales.
In this sense, venues might want to charge higher service fees so that Ticketmaster, by far the biggest ticket seller, gets a bigger cut and can therefore bid on a contract.
“Ticketmaster highlights the undeniable power of others to obscure its own monopolistic role in facilitating the extraordinary growth in fares and also, to some extent, ticket prices,” Wu said. Live Nation Entertainment sought to introduce itself “ as a passive, almost disinterested actor, as it does everything it can to encourage price and fee growth while discouraging competition,” he added.
Wu cited Songkick as an example. In the 2010s, the company attempted to launch a direct artist-to-fan sales model, “only to find the artists who worked with it facing threats and retaliation from Ticketmaster/LiveNation,” he said.
In his statement, Wall also claims that neither Ticketmaster nor Live Nation makes enough money to suggest they are abusing their market power. Ticketmaster earns about 5-7% of the average ticket price from these service fees, which it says is much lower than other digital distribution platforms like Airbnb and StubHub, and Live Nation gets about 2% of the revenue. concerts.
But the question is whether Ticketmaster should earn that much and whether antitrust action can improve the ticket-buying experience for consumers. The answers to these two questions remain to be seen.
“It’s just trying to use numbers to distract us from what’s really important,” Scott Morton said. “It’s not really how important Ticketmaster’s revenue is relative to other arbitrary numbers – like how much people spend on concerts in America or how much they spend in other major markets – but rather what those would be. income in an environment with stronger competition.
