Variety is reporting the amazing news that Live Nation is dumping Ticketmaster. This doesn’t mean all that much for consumers—it just means that Live Nation is just going to be fleecing its customers with an in-house staff, rather than just taking a cut from the company they’ve outsourced the activity to. But it is a hit for Ticketmaster—perhaps as much as 20 percent of its business, according to Variety’s Phil Gallo:

Talks between Ticketmaster and Live Nation, the world’s largest concert promoter, have broken down, leaving the door open for Live Nation to develop its own ticketing biz.

The loss of Live Nation, which also owns House of Blues, would be a devastating blow to Barry Diller’s Ticketmaster, the top event ticketing company in the world. Live Nation events represented 15%-20% of Ticketmaster’s U.S. business in 2006, generating about $100 million in service-charge fees for Ticketmaster.

Ticketmaster’s contract with Live Nation runs through the end of 2008, its House of Blues deal through 2009.

The ticket-selling business is as rancid as it comes. You’re being asked to compensate a business for the cost of doing business with you. In the pre-digital age, the logistics involved (co-ordinating the orders, mailing out the tickets with a bare minimum of screw-ups) meant that it made sense for different venues in a particular area, from stadiums to Sea Worlds, to make use of a central system, and for whatever reason the costs of it was passed along separately to consumers.

But as technology has evolved, there is less and less a need for it. In response, Ticketmaster has gone the extra mile to jack up the fees any way possible, as anyone who has bought a ticket to just about anything recently can attest. It gets away with it because of the distinctive economics of live events. Most of the people who want to see a show (or a touring Broadway musical, or a baseball game) really want to see it. A few extra dollars doesn’t matter. (Indeed, a lot of extra dollars often don’t matter, as scalpers know.)

Enter Ticketmaster, which discovered early on that consumer resistance to higher ticket fees was accordingly soft. The company’s genius was to realize that the only thing that could hurt it would be to kill the goose that lays the golden egg, which is why it institutionalized a way of doing business that in exchange for exclusive contracts kicked back some of the ticket fees to promoters, venues, and even bands. (Back in the heyday of the Pearl Jam/Ticketmaster set-to, Billboard quoted Aerosmith’s manager saying he’d gone to the company trying to get the fees reduced for an upcoming tour. He said that a Ticketmaster official had told him [I’m paraphrasing], “Hey, how about we raise the fee, and we’ll split it with you?”)

(It is, by the way, a fair point to note that there’s nothing illegal here or, arguably, belowboard. Folks know what the charges are, they don’t have to buy a ticket if they don’t want to, and what difference does it make if the ticket is priced $119 dollars flat or $100 with an extra $19 in fees tacked on? My response is a) It’s lying; b) if it makes no difference then they can do it with a flat price; c) it distorts the economics of the industry; d) it creates a monopoly business that controls access to a commodity in a way that doesn’t foster customer service; and e) the financial deals are all secret.)

This illustrates how consumers got screwed under the original way the business got set up. If a basketball arena, say, itself had to pay an outside service to handle its ticket-delivery service for it, it would try to keep the fees down as much as possible. But when it has a cozy long-term deal with Ticketmaster in which it gets a cut of the proceeds, it wants the fees *raised*. The result is the way things are today—millions of sports, music and theater fans metaphorically having their pockets picked in an institutionalized way as they walk through the venue doors.

Anyway, having been watching Ticketmaster perfect this art of legally mugging its patrons, Live Nation (which is the spun-off Clear Channel concert-promotion arm, and no stranger to shaking down customers itself) is doing the sensible thing of extracting itself from its agreements so it can do the fleecing all by itself.

In other words, the original justification for all those “service,” “convenience,” “mailing” and whatever-else fees was that the venues had to outsource it because of the difficult logistics of selling tickets. Now, in an era in which there are essentially zero logistical issues—indeed, in the age of the paperless ticket—Live Nation can pioneer some new revenue streams: “cell-phone delivery fees,” or perhaps “ticket-taker scanning fees,” all part of the elegant art of charging customers for being customers.