Live Nation and Ticketmaster

The Price of the Ticket

What does it take to get to see your favorite band?

by John Seabrook August 10, 2009

ABSTRACT: ANNALS OF ENTERTAINMENT about Live Nation, Ticketmaster, and the live-music industry. With the collapse of the record business, the business of selling live music has become the main source of revenue for the popular music industry. This year, Live Nation, the world’s largest concert promoter, will promote some twenty-two thousand concerts. Last year, Ticketmaster Entertainment, the world’s largest ticket seller, sold more than a hundred and forty-nine million tickets. Yet almost everyone agrees that the business of live music is dysfunctional. Live Nation and Ticketmaster are loathed by fans and their stock prices are depressed. Two recent shows that Bruce Springsteen and the E Street Band performed at the Izod Center, in the New Jersey Meadowlands, on May 21st and May 23rd, have come to serve as a referendum on what’s wrong with the live music business. Discusses the decision by Springsteen and other prominent artists to price their tickets below market value, inadvertently creating a thriving secondary market for tickets. Tells about the history of scalping and the numerous attempts by public officials to prevent it through anti-scalping laws. The Internet, through sites such as StubHub and TicketsNow (which is owned by Ticketmaster), has made ticket scalping for events as common as day trading. However, the rock-concert industry has not, by and large, been able to take advantage of this new market. Writer describes a Springsteen fan, Maria Shwalb, attempting to obtain tickets to one of the Izod Center shows via the Ticketmaster Web site. She was redirected to TicketsNow, where tickets for the shows were available at much higher prices even though tickets at face value were still available. Tells how Live Nation and Ticketmaster came to achieve their places of prominence and the federal investigation into the proposed merger of Ticketmaster and Live Nation. Describes the controversy caused by the redirect of numerous Springsteen ticket buyers to TicketsNow. Springsteen himself posted a letter saying that he and his team were “furious.” More than two thousand complaints were filed with the New Jersey Division of Consumer affairs. A bill to make ticket selling more transparent was introduced in Congress. Ticketmaster, which blamed the redirect on a software malfunction, denied any wrongdoing but came to an agreement with the New Jersey Attorney General’s office to stop linking fans to TicketsNow for one year. Writer interviews independent promoter John Scher, who believes that the concert business was never right for consolidation. He also interviews Irving Azoff, the C.E.O. of Ticketmaster Entertainment. Azoff suggests that a dynamic pricing system, in which prices would fluctuate with demand, might be the future of concert ticketing.

My friend Justin Dantonio, something of a music industry buff, read the article and responded below:

"that was a really interesting article. it is unique in that it at times seems to paint Ticketmaster as almost misunderstood. I would argue there are some serious logic jumps in the article. Mainly, the author seems so focused on the ticketing industry he fails to recognize a few really important things about other aspects of the music industry such as selling records and radio. The premise that piracy killed the record industry, for example, is extremely misleading and perpetuated by the record industry themselves.

The record industry killed themselves through a terrible business model and by pissing off their consumers. All technology did was provide consumers with the ability to by-pass the record executive. Consumers of music will continue to support artists like via concert tickets, singles downloads, merchandise, etc it just needs to be done different than it was done from the late 60s til the early aughts (2003 or so). Artists will make less money than they did in the 80s and 90s but much like the housing and stock markets, a realignment was necessary. EVERYTHING was inflated. True story --- Napster went to major labels before Napster went live in 99 or so and said 'here is our technology, this is what it's going to do' and tried to make a deal to sell music as digital downlaods or subscriptions in return for access to major label's catalouges. This would have made Napster much more like iTunes about 5-6 years before iTunes existed. The labels laughed them off and turned them down. The labels made the mistake of believing that their was more value in the service they provided (marketing a band like a used car, getting radio play -- sometimes illegally [see: payola] and overcharging for a CD). The consumers want what the artists produces, not the record label.

The people who stand to lose the most are the major record labels. They are no longer needed. There are millions of people who want to and enjoy the practice of discovering bands on their own or through their friends. Marketing bands like you market laundry detergent holds increasingly less weight in this culture. Artist will still be paid enough to live off of, major record label types though serve little-to-no purpose.

But anyway, I'll probably write you a really long email tonight/tomorrow with more thoughts on this. I have to jet for now.

I have to say I have no problem with the idea of ticket prices fluctating based on demand, seat location, etc via a company like Ticketmaster. Unfortunatly my distrust of greedy people leads me to believe this won't really happen; ie - I dont believe Ticketmaster would really lower the price of a ticket if the demand wasnt there. I think they'd just let it go unsold. They could do that right now if the 40% of all seats being unsold was something they were that concered about. If it was that big of a deal, why not slash the cheap seats in the final 5 days before a show that was not sold to a level they were satisifed with? Also, the line about the TicketsNow link for the Springsteen show being a technology glitch seems like BS. I've seen it happen for years and I've seen TicketsNow and StubHub advertise tickets they don't own yet for years too"

I am inclined to agree with Justin since he is much more knowledgeable on the subject than me. I wrote an analysis both Justin's comments and the article below. Enjoy.

The music business is an industry with so many variables with so many moving parts and variables that it’s difficult to make sense of it all. However, as Justin observed above, even casual followers of the music scene will note that

• 1) The rise of the “file to file sharing” movement sometime in the late 90s allowed for the free distribution of music files and, as a result, an increase level of piracy.
• 2) Concert ticket prices remain stratospheric---not only is there a difference between seat price and the purchase price of a ticket (fees, tack-ons, surcharges) but there exists a “spread” between the purchase price and often what the ticket fetches on the secondary market, e.g. craigslist, StubHub, TicketNow, and other brokers.

At first glance, these two points appear to be unrelated, i.e. the profits made from record sales do not correlate well with market prices and quantities for concert ticket sales. But I will try to connect the two below.
One would be hard-pressed to find someone who hasn’t burned a c.d. for someone else or downloaded a song/album for free off of Napster, Kazaa, or bit-torrent sites. Okay, let’s face it: we’ve all done it. The question then becomes, “what has this meant for the music business?” Justin observes in his review of the article that, “the premise that piracy killed the record industry, for example, is extremely misleading and perpetuated by the record industry themselves.” I might argue with Justin here although I think he and I would reach the same conclusion. Throughout much of the modern music era the production of music and its promotion was controlled by four major recording labels and their subsidiaries: Universal Music Group, Sony Music Entertainment, Warner Music Group and EMI group. This oligopoly served as a de facto gateway for aspiring musicians and exerted an enormous ability to control the terms of an artist’s recording contract. Want to record a few albums and be heard on the radio? You have to go thru them, and not without selling a pound of flesh.

Very few industry observers would argue that musicians were “coerced” into signing recording contracts at disadvantageous terms (I’ll leave the thuggish and knee-capping tactics of Suge Knight out of the analysis for the moment). Furthermore, I fully support the doctrine of free contract: two capable parties who CONSENSUALLY enter into a contractual arrangement ought not to have that arrangement altered by external forces. However, an artist’s first record deal was notoriously stacked in favor of the recording labels, e.g. musicians earning less than $1 for every $13 LP or compact disc sold, and artists had no alternatives save for producing their own cd’s and selling them out of their garages or vans.
Even the staunchest free market advocates, such as me, had considerable trouble watching David Geffen and his ilk reap billions off his artists and then threaten to sue them into the Stone Age for breach of contract if the artist’s production lapsed. A couple of highly publicized squabbles between artists and labels, such as the one between Prince and Warner brothers, coincided with a populist backlash against the music empire. Over time, however, the music industry evolved the way most industries evolve when only a few firms make windfall profits: market participants innovate and find ways to increase reward and lower cost. The rise of the internet and file sharing programs shattered the status quo and threatened record producers’ bulldog grip on profits. Every musicphile by now has heard of Napster or Kazaa, and technologically astute music lovers have found ways to avoid paying altogether for a record or album .
Justin Dantonio argues the following:

“The premise that piracy killed the record industry, for example, is extremely misleading and perpetuated by the record industry. All technology did was provide consumers with the ability to by-pass the record executive.”

The idea that the prevalence of free, perhaps unlawful, distribution of music “killed” the record industry (I don’t have knowledge of the industry’s sales and profits over the last 20 years) seems intuitively correct to me. I would guess that the profits of the recording industry declined along with its intrinsic relevance to the production process. Musicians don’t need big record labels carry them anymore. An array of musical production software programs can assist any aspiring musician, and the internet provides plenty of forums to promote and publicize.
Justin also attributes the decline of record industry profits to a “bad business model,” specifically the failure of major record labels to adapt to technological change. Specifically, he mentions the record labels’ refusal to “read the tea leaves” and cooperate with the developers of file-to-file software, particularly Napster. I am inclined to agree with Justin on this particular anecdote since he is more knowledgeable on the subject that me.

However, Justin and the article miss an important development. The record companies filed a copyright suit against Napster and won a fairly large settlement. I should also note that Napster lost its appeal in the appellate court for the Ninth Circuit, a court that is notorious for its left-leaning and presumably anti-business opinions. In fact, the New Yorker article fails to even mention the Napster/Metallica/record label lawsuit and its implications. So while I agree with Justin that it is difficult for anyone to view the record labels as victims of the millions of digital pirates, there is an important intellectual property factor that is being overlooked. Napster did not receive cooperation from the record companies for the distribution of their library, so they acted illegally and contributed to its theft. It’s a bit like saying the banks aren’t making the huge profits they used because bankrobbers, hustlers, and other miscreants stole from them----then turning around and blaming the record labels for a bad business model.

Profit is a dirty word to many. The argument goes something like this: music is a form of art and should not be subject to the ruthless ways of profit-maximization and capitalism. But I am not as reflexively anti-corporate as Justin. Everyone is entitled to make as much money as they want. A brazen disregard for intellectual property and the sanctity of contract is undesirable, even if it presumably benefits consumers of art and music.

Sidenote: Time Magazine contributing editor Mark Helprin wrote an intriguing book on copyright and the public domain in book entitled Digital Barbarism; A Writer’s Manifesto. Joseph Epstein reviewed the book in the Claremont Review of Books here.

LiveNation, Ticketmaster, and concert ticketing is a different story. Ticketmaster seems to have made some very shrewd moves in the late 1980s with the acquisition of several of its smaller, poorly run competitors. I will also assume that the Justice Department and the Federal Trade Commission examined these mergers at the time and concluded they did not or would not restrict competition.
Few would deny that, in the internet age, Ticketmaster does offer the benefits of expediency and avoiding the hassle of going to the box office. Furthermore, Ticketmaster does disclose its fees up front, so customers know what additional costs they are paying.

Ticketmaster’s business does not seem prone to the competitive pressures that have afflicted other businesses that have specialized in transactions. Many different types of credit cards offering no fees and a variety of special interest rates have put downward pressure on both fees and interest rates. In cities where multiple banks offer “free checking,” ATM fees and check writing ordering fees have gone down as well (conversely, rebates by banks for competitor’s ATM fees have kept them at current levels, as how most subsidies work). Competition between airline ticket sellers, e.g. cheaptickets.com, orbtiz.com, expedia, et al, has kept their transaction fees low as well.
Ticketmaster, with its use of contractual relationships with LiveNation and other concert venue owners, has managed to sidestep competitive pressure. And some bands (Pearl Jam comes to mind) have tried to challenge Ticketmaster’s grip on ticketing but have largely failed. But this will not last. It is only a matter of time before some entrepreneur comes along and says “I can provide a ticketing service for less money, and the fans will like us more.”
The secondary market for tickets and the so-called business of “scalping” or speculation are different issues. Ticket prices are subject to the laws of supply and demand, so whenever the price of the ticket is below what the market should dictate, then a vibrant and vigorous secondary market will emerge. We see this in high profile sporting events all the time. And secondary markets exist in real estate, art, and finance and mostly without the same degree of vituperation from its “customers.” Efforts to ban it outright have been unsuccessful, both legally and practically, as the article points out. So what, if anything, should be done about ticket scalpers?
What offends people the most is that scalpers are essentially “pricing out” the true consumers of music. In other words, there appears to be a huge disconnect between those who really want to the see the musical acts and those who can ultimately afford to go to the concerts. Consumers of music are not exceptionally wealthy, as opposed to say real estate speculators or art collectors. So millions of fans feel left out and alienated.
One solution would be to build bigger venues and create more supply, hence putting downward pressure on the market price of tickets. To be sure, bigger venues would imply seats that are far away from the stage, but at least tickets would become affordable for fans. Concert venues can try to restrict the “transferability” of tickets to reduce the ability of resale. Another would be for the bands and venues to charge a ticket price that is closer to the market price, effectively reducing the “spread” that scalpers can earn. This would ensure that most of the money from ticket sales go to the actual bands and not the heartless, disinterested scalpers. In this case, however, bands risk the negative publicity that comes with charging lots of money for tickets, i.e. being perceived as entirely motivated by money.


Justin read this post and responded below. Fyi, my nickname is "Sandy"


The Ticketmaster / LiveNation and Record Label sagas are interrelated as is the decline of Radio with Clear Channel as the other mega player in this story of dying Dinosaurs.

Obviously I am anti-corporate when it comes to music. That probably doesn't surprise anyone.

Sandy you are very correct that the rise of do-it-yourself technology as well as the internet's ability to explain how to use do-it-yourself technology has left us in a place where more people can record, produce and distribute music without a record label. It has also give independent labels with much smaller budgets tools to sell records and maximize their profits greater than ever before. Indie labels, as you can imagine, have much less overhead.

But we need to stick with the majors for now. Some counter-points and addendums:

Sandy: 1) The rise of the “file to file sharing” movement sometime in the late 90s allowed for the free distribution of music files and, as a result, an increase level of piracy.

* Point - MP3s and file sharing increased piracy. MP3s, however, did not allow for popular music to be copied for the first time. Cassette tapes could be copied VERY easily and the music industry had no way to track how much that occured because it didn't have the internet to study / track / observe said piracy.

If you recall most boomboxes came with a record function. You could record radio or tape to tape. The shear population of developed countries alone prove that tape sharing wasn't as big as MP3 sharing, but it was such an issue that the major labels unsuccesfully tried to sue electronics companies for making devices that allowed tapes to be copied. The courts ruled against the labels. This was the mid to late 80s. It is a very important point in the story because of 3 things:

(1) Major label profits were big but not as excessive as they were from 98-03 (their peak)
(2) The MP3 was invented in the late 80s
(3) Major labels slowly but surely accepted the CD.

The CD is an important precursor to the technology aspect of the story. Labels were extremely slow to accept it as a viable means to distrube music even though the sound quality was better and longer lasting, and the physical product itself proved more durable, if properly stored, than a cassette tape. At the time there were 6 major record labels --- pre mergers --- and one of them, I believe Sony, went all-in on manufactoring CD players and redistributing it's catalog on CD. Once they started to rake in unbelievable profit the other 5 joined the CD game.

So major labels resist technology until one of it's own starts making tons of money then copy them, join in and phase out the tape --- consumers pay the labels (who get a bigger share than the artists) for the same music twice. Labels profit sky-rocket.

Sandy: "Want to record a few albums and be heard on the radio? You have to go thru them, and not without selling a pound of flesh."

* Point - Major labels involvement in payola scandals goes back to the 1950s. Labels have been sued successfully at least 3 times to my knowledge and most recently in New York by Govenor Spitzer. Labels effectively owned radio. It was 99.99% impossible to get on the radio without a contract with a major label because the labels paid radio stations millions of dollars (both direclty and indirectly). Thus, want to get on the radio? You HAVE to sign a terrible deal that favors the majors.

Further, I would argue this backfired on the majors long term and its part of the broken model. Radio stations all went to similair formats and similair playlists thus disregarding any desire a consumer might have to hear more bands. Radio no longer because a viable format to hear new bands that weren't approved by Majors which was a band or two a year, the rest of the play time slots were alloted for releases by bands that had already sold a ton of records. People who enjoy the act of hearing new / fresh bands that might bring something different or new to the table were essentially forced to look elsewhere for different / new / non mainstream sounds.

This isnt toothpaste were there majors could package and sell the same commodity over and over again and that seems to be what they tried to do. But with art, our culture subscribes to fads, trends and breaking ground. This is true of paintings, music, sculptures, architexture, etc. Newness means something and the majors forgot about that or disregarded it in failing to develop new artists on the radio at a level deemed acceptable by it's consumer base. This ties in direclty to what Live Nation and Ticketmaster are worried about. Sure the small venues (the Metro in chicago) are selling more Arcade Fire tixs but STARS like U2, Dave Matthews, John Mayer --- where these corporations make their most profit --- are not being "developed" by the majors at nearly the same clip as the 80s, 90s and early 00s.

Sandy: "...market participants innovate and find ways to increase reward and lower cost. The rise of the internet and file sharing programs shattered the status quo and threatened record producers’ bulldog grip on profits. Every musicphile by now has heard of Napster or Kazaa, and technologically astute music lovers have found ways to avoid paying altogether for a record or album."

* Point - Record labels knew about the MP3 in the late 80s and refused to acknolowedge it as a means to sell/distribute music until after Napster. While I realize computers didn't run at the speeds they do now, then, it's important to note that file-sharing was not something a slacker in SoCal invented. Big wigs knew about this just like they knew about the CD and they ignored it like they did the CD originally. Only difference is that the speed of technology & culture in the late 90s was infinetly faster than the 80s so before a corporate businessman could get around to figuring out the potential impact of the MP3 (like they did with the CD over the course of say 1-2 years), hundreds of computer experts were figuring out how to create and distribute them (the rise of hacking and code-writing as a hobby plays into this too).

It is also important to point out that major labels cashed in on the CD and increased there reward and lowered their costs but never passed on ANY of this savings to the consumers. In fact the major labels have been successfully sued twice in the last 10 years for (1) All the majors were found guilty of strong-arming distributors to buy their products and ridiculous bulk amounts and refusing to buy back any of unsold products, and (2) the labels were successfully sued for --- I think -- price collusion. Or something similair where the record stores who were forced to sell the products at a value so high they couldnt sell as many records were able to prove that the majors had all secretely agreed to a minimum price to sell the CD at.

Final thing then I have to end with a big TO BE CONTINUED......

When I say the model was broken here is what I mean. The idea that you had to pay for the entire album, or get nothing at all was stupid. Always was. Singles became obsolete because the label chose the single and pumped millions of dollars into it. No choice. Consumers wanted choice. The biggest thing Napster SHOULD have told the labels was that people no longer wanted to be forced to buy an entire album or nothing at all.

Unfortunately we cant go back in time but I have a feeling that the iTunes model of cost per song and then albums at slightly less than cost-per-song would have been EXTREMELY effective. More so than it is today because iTunes didnt come along until 6 years after file-sharing was very popular and free. Too late. Also it was developed by Apple who is not a record label. Huge mistake.

This ties back into radio and major label promotion the business model of having only a handful of artists / albums actually making money each year but they make SO much damn money that it pays for a hundred albums that didnt make money.

He had more to say on this late last week. Read below:

4 parts of the model were/are broken, all inter-related:

(1) Radio. We've touched on this plenty but the labels shot themselves in the foot by standardizing playlists everywhere a radio station would accept a financial handout. This will tie directly into parts 2 and 3. Short term ramification in the 90s was that people gave up on radio but not a ton of people. The reason I got into more indie bands was that I gave up on radio by the end of high school and started turning to message boards / blogs about bands I liked to turn me onto other bands. it didn’t matter to me if they were major label or not but what ended up happening is that the stuff coming out on labels sounded increasingly homogenized so I wasn’t nearly as interested in the product or radio.

(2) The 'There’s only 1-2 good songs on this album but I had to buy the whole thing' problem. I like to call it 'The Sugar Ray Phenomenon.' In the 90s we ALL bought those albums. One sweet song or video, but the album is 90% crap and sounds nothing like the 1 song that got on the radio. You had no choice. The single was a promotional tool on the radio and MTV to sell the $12-$17 album. In a way, it inflated the notion of how much people wanted to pay for art. I referenced Sugar Ray b/c let's think about this....Sugar Ray had put out a handful of albums before their one with "I just wanna fly" on it and they never sold anything, never got on popular radio, never got on MTV. They make the song "fly" which doesn’t sound ANYTHING like the rest of their album which was primarily hard rock / metal-ish. Record execs hear a hit and pour tons of $$ into getting the song on the radio and the video on MTV. Millions of people have only the option of buying the entire album for approx $15. *IF* the sold a single -- which labels started to do less and less -- the single would have no other songs on it. There would be no opportunity to hear the rest of the product. Which leads to problem #3

(3) you couldn’t hear 95% of the art before you bought it. You could only hear what labels let you hear which was the singled. Why would consumers buy any product without knowing what you were getting if there was technology available to allow them to hear the album and then decide if they want to own it? I still legitimately buy something like 90% of all music I have on my iPod. I’m in the minority there. BUT my favorite thing now is that I can actually hear an entire album before I buy it or at least hear 4-5 songs that are on their MySpace. I am not forced to take shots in the dark because certain blogs or critics like them and it sounds like it might be something I might like.

(4) The '1 band to pay for 100' philosophy. Majors have been operating like this since the 80s when people started to purchase music more than ever -- and there were more people with disposable income than ever before. Majors have hundreds of artists, most of which even I have never heard of. The overwhelming majority of these artists never make money and most of them lose money. Majors have 20 maybe 30 artists that make them money and of those only maybe 10 put out an album a year. BUT they make so much g'damn money it pays for all the losses and then some. The losses for the bands that don’t make a ton of money are minimized by the fact that the majors don’t pump really any money into the release of an album/artist they aren’t 100% sure is going to sell millions of records. This is why sugar ray was on a major label but you never heard of them until "Fly." They never got marketing dollars so their losses on the first few records were small and covered for by the fact that the Smashing Pumpkins put out an album that year.

Now with people legally buying just the songs they want (referencing the inflation of profit I discussed in #2/3) the profits aren’t so humungous. They don’t cover as much of the losses as they use to. Obviously stealing then plays a huge factor here too.

This again ties to #1 because the labels set-up an illegal kickback system with radio and radio expects X amount of $ to play a band. So when the marketing dollars are being divided up the only bands that are going to get a push are the bands that are guaranteed to sell albums. So now the record labels are in a situation where they need to increase the number of bands that can make them money since each band that makes money is making less than before. But they would have to undo the amount of $ they pump into each band to get them on the radio, mtv, etc because they don’t have as big of a budget to work with. Finally there is a matter of the art itself. It remains to be seen if record labels can make decisions about what bands to push based on anything other than popularity and 'does this band sound like another band that makes a lot of money.' The system has been set-up void of the artist side of it and what consumers have been demanding --- and the mp3 & internet allows for -- is more choice. More different types of bands/music/sounds. Majors so far have not been able to supply that for one reason or another.

So to bring it back to Sugar Ray. If Sugar Ray's 'Fly' came out now instead of over 10 years ago, a certain % of people who bought their album for $15 would still do that. Some would buy the hard copy and some would just by the digital version which would only be $10 and a cut of that goes to Apple who came up with the iTunes model first before the labels did. Another % would steal the song and/or album. Another % would listen to the album for free as a stream on MySpace and decide they don’t like it and only buy the songs they liked at $0.99 a song --- most of that would just be 'fly.' Can anyone even name another single off that album? I can’t. All I remember is that their next album sure sounded like 10 songs that wanted to sound as catchy as "fly." (this also leads into the idea of the sophomore slump which is basically a band trying their hardest to catch lightning in a bottle again in order to make money which is hard to do).

So now I think you could say at least 1/3 of the people who bought the sugar ray album in the 90s for $15 would only pay for a handful of songs at .99 cents each. Further, some of them wouldn’t pay for it for $15 b/c all they care about is the mp3 which they get cheaper than the CD and label loses out a little bit more b/c of the agreement they have to succumb from apple. So the label is no longer in complete control of the market.

And I for one am not the least bit sad about that.