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Picture of Christopher A. Hopkins, CFA

Christopher A. Hopkins, CFA

Does the Justice Department suit mean curtains for Live Nation?

The US Department of Justice has filed a lawsuit against concert colossus Live Nation, accusing it of repeatedly violating US antitrust laws and seeking a breakup of the company. The filing alleges that the entertainment giant uses its market dominance to suppress competition by locking concert promoters and entertainment facilities into exclusive agreements and retaliating against artists and venues that seek to do business with rivals.

The DOJ was joined by a bipartisan collection of 29 states and the District of Columbia. The states signing onto the action cross political boundaries and include California and New York as well as Tennessee and Florida. Ron DeSantis and Gavin Newsome on the same page?

According to the lawsuit, Live Nation and its subsidiary Ticketmaster violated the Sherman Antitrust Act, an 1890 law that makes it unlawful to form or attempt to form a monopoly in restraint of commerce or trade. The Biden administration has been more aggressive in pursuing antitrust cases than its recent predecessors, but in this case many observers agree that the company has demonstrably impeded competition, raising prices and ancillary fees by exercising its market dominance.

Live Nation already didn’t have many friends among concertgoers, but anger boiled over in 2022 when Taylor Swift fans got locked out of the Ticketmaster system during presales for the superstar’s tour. The meltdown led to a contentious Senate Judiciary Committee hearing and the reopening of a DOJ investigation. Hell hath no fury like a Senator’s granddaughter scorned.

Live Nation began its life in 1993 as SFX Broadcasting, a media company founded by Robert F. X. Sillerman to acquire and operate radio stations in the Northeast. In 1996, Sillerman entered the concert promotion business, using his radio properties to publicize the live events his company was staging. SFX expanded into sports marketing and talent management and continued aggressively snapping up competitors.

In 2000, the company was sold to Clear Channel Communications. However, the deal never produced the expected synergies and Clear Channel spun off the concert, events, and talent business to shareholders in 2005 under the new name of Live Nation.

Ticketmaster was the 1976 brainchild of a computer programmer and a box office manager in Scottsdale, Arizona. Struggling to gain market share from the dominant player, Ticketron, they sold the company to Jay Pritzker, the scion of the Hyatt Hotel dynasty. Pritzker hired an aggressive CEO, Fred Rosen, who turned the tables on Ticketron: instead of charging venues for providing ticket services, Ticketmaster offered to pay them in exchange for exclusive contracts, funded by jacking up the service fees charged to fans. Pritzker purchased Ticketron in 1991 making Ticketmaster the 800-pound gorilla, expanding from $1 million in sales in 1982 to $2.5 billion in 1998 under Rosen’s tenure.

In 2008 Ticketmaster, the reigning sovereign of primary ticketing, entered the talent management and promotion businesses, invading Live Nation’s turf and triggering an intense rivalry that should theoretically have increased competition and lowered prices. Instead, the two giants announced their intention to merge and finalized the marriage in 2010 becoming Live Nation Entertainment.

Even at the time, regulators recognized the potential for anticompetitive mischief the new juggernaut posed and opened an investigation. In the event, however, Live Nation entered into a consent decree that included a few minor concessions and the government approved the merger. The Department reopened the matter in 2019, finding the company had consistently violated the 2010 order, and administered another slap on the wrist.

To appreciate the impact of Live Nation’s enormous footprint, consider the live event supply chain: artists and performers, agents and managers, event promoters, venue operators, ticket sellers, and fans. In a robust free market, each link in the chain operates within its own competitive sphere. The merger of Live Nation and Ticketmaster substantially fused the middle 4 links of the chain, known as a vertical integration. The entertainment behemoth now manages 400 artists, controls 60% of the concert promotion for major events, owns or controls 265 North American concert venues including 60 of the top 100 amphitheaters, and sells 80% of the prime event tickets. It also hoovers up troves of data on 80 million fans to market its events.

Live Nation’s effective control of the supply chain powers what the company refers to as its “flywheel”, providing the momentum driving increasing profits by excluding competitors. In addition to raising prices, Ticketmaster has tacked on a steadily increasing array of fees ranging from 15% to over 40% of the ticket price. Anger erupted last year when extra fees charged to fans of the band The Cure exceeded the actual ticket price, pressuring the firm to issue partial refunds.

Live Nation has called the allegations “absurd”, insisting that most of the take goes to artists (many of which they manage) and venues (many of which they own). They also blame secondary sales, the reselling of tickets purchased from Ticketmaster. Turns out that Live Nation controls around a third of all resales as well.

The case is likely to drag on and could be dropped or diluted by a future Attorney General, but this DOJ is taking an aggressive tack, pursuing a breakup and seeking a jury trial, which is unusual in an antitrust case. And Merrick Garland is a Swiftie. At the press conference announcing the lawsuit, Garland quoted a 2017 hit from the pop singer, saying the American people are “Ready for It”.

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