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A Ticketmaster Compromise or a Rival's Bribe?

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Appeasing a vocal opponent still won't help customers.

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Ticketmaster (TKTM) and Live Nation (LYV) are so desperate for the Justice Department to approve their planned merger, they've reportedly offered what essentially amounts to a legal bribe to rival Anschultz Entertainment Group to make sure it happens.

AEG president and CEO Tim Leiweke called the proposed Live Nation-Ticketmaster merger "troubling" and "not good for the industry" at a Billboard symposium last year.

According to sources quoted by the New York Post, Live Nation-Ticketmaster is now offering to sell Live Nation-owned venues to AEG at below-market prices in exchange for the company dropping its opposition to the deal, thus paving the way for government approval.

The Post also reports that some think AEG's opposition was nothing more than a "big negotiating ploy played out in public from day one." The source explains that all AEG really wants "is to get more venues at a [good] price."

While AEG may be poised to walk away with some nice bargain prices, consumers will be stuck with just the opposite.

For years, Ticketmaster has made it impossible for concert-goers to purchase tickets at face value. One frustrated fan wrote of his exasperation when trying to see the hard rock band Lamb of God:

Without added fees, or at door price, one Lamb of God ticket cost $38. After filling out my quantity of tickets and seating preferences, I proceeded to find the website charging me an extra $9.90 for "convenience." Thinking it over thoroughly and deliberately, I swallowed my pride and selected the cheapest, yet slowest form of shipping (free), and went on to the next page, only to find Ticketmaster had charged me another $5.15 for an "Order Processing Charge."

So let's recap. The original ticket price for one ticket was $38, and $15.05 was added to that price for "convenience" and "order processing," bringing the total price of my single ticket to $53.05… a 40% increase in price from the original.


Hang on -- he forgot the "Building Facility Charge." Oh, and if you don't want to wait for your tickets to be shipped (or if the concert is occurring too soon to have them mailed), you'll be subject to an additional $2.50 for "Paperless Delivery," which is a fancy way of describing the process of printing out a ticket-like object on YOUR OWN printer, using YOUR OWN paper, and YOUR OWN ink, ostensibly bought with YOUR OWN money. Ticketmaster sold one million such tickets last year.

A post by Deron W. on TicketmasterSucks.org expressed his frustration similarly:

"To put a concert ticket in an envelope and mail it first-class, which is the cost of ONE stamp -- they charge $14.50. Building Facility Charge $4.50?!?!?? Convenience Charge which is $11 ???? $2.50 for the "luxury" of letting me print out the ticket from an email?"

Dealing with absurd markups on tickets bought at box office prices is one thing. But what if you can't even get your hands on a ticket for face value in the first place?

That's exactly what the folks at Ticketmaster (and there's no reason to believe a combined Ticketmaster-Live Nation would have any impetus to change this) like to see. Which is why they conveniently own TicketsNow, a "secondary marketplace" (read: scalper) which Ticketmaster said sold more than 141 million tickets in 2008 worth $8.9 billion.*

For a recent New Yorker article, John Seabrook interviewed Princeton economist and United States Assistant Secretary of the Treasury for Economic Policy Alan Krueger, who described studying concert-ticket sales as "not all that different from analyzing mortgage-backed securities."

He explains that both are bought and then resold on a secondary market, and that "both markets are also subject to price bubbles, lack of trust, inadequate regulation, and imperfect information."

And we all know how well mortgage-backed securities worked out for everyone.

New Jersey Representative Bill Pascrell Jr. wrote a letter to the FTC and the Justice Department outlining his thoughts on the matter:

"I am concerned that the business affiliation between Ticketmaster and TicketsNow may represent a conflict of interest that is detrimental to the average fan. There is a significant potential for abuse when one company is able to monopolize the primary market for a product and also directly manipulate, and profit from, the secondary market."

Exactly how this manipulation takes place is as follows:

Let's say tickets to the concert you want to attend go on sale at 9 a.m. You sign on to Ticketmaster.com at exactly 9 a.m. and enter the necessary information to make your purchase by 9:01 a.m. Suddenly, the Ticketmaster site mysteriously goes "down for maintenance" and redirects buyers to TicketsNow, where there are plenty of great tickets available -- at prices hundreds, if not thousands of dollars higher than those set by the artist.

The most expensive ticket to see Jay-Z at Madison Square Garden is $139.50. Good luck getting one from Ticketmaster -- the show is sold out.

Luckily, there are still plenty of available seats via TicketsNow.

Good ones are going for a mere $2,737.

*Editor's note: An earlier version of this story incorrectly stated that the tickets brought in $8.9 billion in revenue for Ticketmaster.

No positions in stocks mentioned.
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