September 26, 2006

Ah, the Music Industry:

It's gotten ridiculously expensive to go to a rock concert, in large part because of monopoly power wielded by Paul Allen's Ticketmaster, which bought out its main rival Ticketron and local rivals, and, perhaps, by concert promoters. As computers have gotten cheaper, the ticket agency fees have skyrocketed. This has a depressing effect on the rock concert industry, which was far more dynamic when I was young, and on rock music in general. It's always been hard to make money selling records, but now with fees often running to a 43% surcharge, lots of kids can't afford to see concerts. That's why the big concert draws these days are senile acts like The Rolling Stones and The Eagles.

From the LA Times:

Concert Giant Sees Cutting Prices as Ticket to Success
Live Nation blames high entry fees for turning off fans. But Ticketmaster poses a big obstacle.
By Charles Duhigg,

The nation's largest concert firm and the industry's ticketing powerhouse may be headed for a behind-the-curtain tussle.

At issue: control over the spiraling cost of show admissions that are turning off many music fans.

On one side is Live Nation Inc. Chief Executive Michael Rapino, who has vowed to drive down prices that last year soared to an average of $57 per ticket for the most popular shows. On the other side is Ticketmaster, which dominates music ticket sales through its thousands of outlets and Internet sites.

Great name for a music industry executive: Rapino.

"Seventy percent of people didn't go to a concert last year, and even the average concert fan only attends about two shows a year," Rapino said. "We can grow this industry by lowering prices."...

But to make good on his promise, Rapino must wrest power from Ticketmaster, a near-monopoly that built its empire locking up exclusive rights to sell admissions to major concerts and other live events. Last year, Ticketmaster reaped nearly $1 billion in fees and surcharges. Rapino began renegotiations with the company this month.

For some fans, those charges are boosting already expensive ticket prices by one-third or more. Los Angeles rock fan Eugene Kang bought six passes last month to see the Killers at the Wiltern LG theater, forking over $210 for the tickets and $90 more in fees, he said...

But picking a fight with Ticketmaster would be Rapino's boldest move yet. Ticketmaster built an empire giving venues and promoters — including Live Nation — a cut of its fees and establishing a powerful network of retail stores and phone banks that were too expensive for any one promoter to replicate. Last year, Ticketmaster sold tickets worth about $6 billion through the company's Internet sites, 3,500 retail outlets and 19 international call centers.

Fans for years have complained about Ticketmaster's fees. Now, the migration of ticket purchasing to the Internet has created more options.

"You don't need thousands of storefronts anymore because most tickets are bought through the Internet now," said Larry Magid, a Live Nation executive who operates the Electric Factory, a venue in Philadelphia. "There is an impression that Ticketmaster has gotten too comfortable and arrogant. You have to be more responsive to fans nowadays."

Alternatives include Irvine-based Paciolan Inc., which sells software that allows venues to manage their own ticketing. Recently, the Portland Trail Blazers, the Philadelphia 76ers and the Philadelphia Flyers — all previous Ticketmaster clients — have switched to Paciolan.

"The history of the ticketing business was about barriers to entry, which kept Ticketmaster protected," Rapino said. "That has changed."

People close to Ticketmaster say that other concert companies have made similar comments about the ticketing company, only to sign new Ticketmaster deals once they got the terms and upfront payments they demanded. They question whether Rapino's musings are a negotiating tactic.

Other industry insiders note that Live Nation pockets about 50% of the fees Ticketmaster collects, and if Rapino really wanted to lower ticketing costs, he could rebate those funds back to concertgoers.

Live Nation's real goal in challenging Ticketmaster, say some, is to keep the other 50% of fees.

In other words, if you buy a half dozen tickets for The Killers over the Internet, the face value of the ticket is $35, but Ticketmaster gets and additional $7.50 (21.4% extra) and Live Nation, the concert promoter, gets an additional $7.50 (21.4%).

Ticketmaster plays blatant monopolist hardball to keep these fees so high, as they showed by destroying the 1994 tour of the then top rock band in the country, Pearl Jam, for trying to keep ticket prices under $20. (Here's Pearl Jam's Congressional testimony.

My published articles are archived at -- Steve Sailer

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