The WSJ reports tonight that the two companies are in talks to merge, though details have not been worked out:

The newly created company would be called Live Nation Ticketmaster, and would combine the world’s biggest concert promoter with the world’s dominant ticketing and artist-management company. The combined firm would be able to take advantage of close relationships with hundreds of major artists to find new ways to do business in the ailing music industry.

The boards of both companies have yet to approve any merger, these people said, and sticking points remain. One potential hitch: Because the merger would concentrate so much power in the music industry under one company it would require review by antitrust authorities. Nonetheless, the deal, which would not entail an exchange of cash, could be announced as early as next week.

You’ll recall that Ticketmaster recent took over Irving Azoff’s Front Line management and put him in charge; the new deal, if it comes off, would presumably put Azoff at the head table of, if not the single most powerful entity on the business, the one that exists at ground zero of the only part of it that’s assured of having a product people will actually pay money for in the foreseeable future: the live concert industry.

There are at least three interesting things going on here. For the first, the merger, if it does get formally proposed, will draw a lot of attention to Azoff and his enormous management company, and the weird deal that merged it with Ticketmaster.

As I understand it, Ticketmaster consolidated some outside ownership and bought him out, and in return he got a bit less than 5 percent of the new company.

The weirdness came from how the relationship of Azoff’s artists and Ticketmaster would shake out. He presumably is supposed to be working for them, right? (The artists, I mean.) What were they getting out of the deal? (What if a different ticketing company offered them an even bigger kickback?)

Indeed, back then, Live Nation was breaking off relations with Ticketmaster and creating its own ticketing company, making that a real possibility.

But, of course, back then, Ticketmaster was worth almost twice what it is today.

As for Live Nation … well, it was worth almost twice what it is today as well.

The irony is that, even with so-called 360 deals on the ascent, artists, led by the groundbreaking work Azoff himself did in this area, can now do the math, and will demand ever-greater guarantees. In crude terms, if they can sell out a 20,000-seat arena with an average $75 ticket price, they can in essence just ask for a $1.5 million guarantee, and let the promoter try to make some money on beer sales, or selling ads on the beer cups.

But that’s when the artists have an arm’s-length deal with the concert industry—and have intimidating, Azoffian-style representation to squeeze as much money out of the process as possible.

Right now, there are two models. For the straight-up 360 deals both companies have made with the likes of Madonna and U2, the artists get a huge, upfront payment and it’s up to the companies to make money on the deal. This over time will guarantee all sorts of offensive monetization, including even more cheesy advertising at venues, even more songs in TV commercials, ever-more-cramped concert conditions, and higher fees for things like parking.

But there’s also going to be an interesting subset of the hundreds of artists Front Line manages. If the management company takes ten percent of the artists’ income, that means that the new Live Nation Ticketmaster will have a built-in premium for any deals it makes with them, right?

(I.e., if the company offers the Eagles $200 million for a stadium tour, won’t it be getting back $20 million of that as the band’s manager?)

How this will evolve with Azoff at the wheel will be interesting to watch.

Secondly, all that said, I hope that the deal may also provoke discussion about what a useless and parasitical institution Ticketmaster is.

In an ideal world, Live Nation would merge with Ticketmaster and essentially shut it down.

Consider: When you go to the grocery store, a guy doesn’t step between you and the cash register demanding a $5 handling fee for the privilege of checking out.

But over the years Ticketmaster managed to carve out a niche for itself by doing just that (though the days when the company’s fees were as low as $5 are long gone), using as justification the alleged complexity of the universal ticketing.

This complexity has of course evaporated as technology has evolved, and can now be accomplished with a fairly simple web program. But the company’s fees have both gone up and multiplied. (Indeed, as I explained here, the company charges extra for you to print your ticket out at home.)

A merger with Live Nation would obviate the last justification of Ticketmaster’s existence. In the past, concert promoters could say, Hey, selling tickets is a complicated process. We have to use Ticketmaster; they’re the only game in town, and we can’t control their fees.

(Actually, the fees were so high because Ticketmaster kicked a hefty chunk of them back to the venues and the artists. It was just a sleazy backdoor way to jack up concert ticket prices, and keep the venues tied to Ticketmaster.)

In any case, since the ticketing operation is essentially being brought in house to the largest, by far, concert operation in the country, you could make the argument that the fees should disappear entirely, at least at the 150 or so major venues the company owns or controls.

Otherwise, the company is saying, The cost of a U2 ticket is, say, $125 … plus you have to give us another, say, $17 dollars in assorted fees to another department of our company for the privilege of selling you the ticket!

How long can the new Live Nation Ticketmaster get away with that?

As it is, this pointless company has a market valuation equal to that of the company that essentially controls the U.S. concert industry.

And finally, of course, Ticketmaster has been flirting with eliminating the ticketing fees. What the deal may be a step toward is a grand vision that will jettison the fees in favor of greater concentration of ticket reselling.

It has long rankled the concert industry that scalpers get away with selling tickets at many times their face value. That’s a increase that makes the 30 percent markup Ticketmaster was getting away with seem paltry.

The Holy Grail would on one level be a true auction of tickets for concerts, where people are allowed to bid up better seats. That would allow the company to milk each show for every last dollar it’s worth. (And the big scalping industry demonstrates that concert tickets are underpriced to a surprising degree.)

The only drawback is that it’s all aboveboard, and the artists would just demand the extra money being made.

So the bigger prize might be merely overseeing the resale market, a much-less high-profile activity. If Live Nation Ticketmaster can sell someone that $125 U2 ticket and then grab a continuing piece of the action as it is resold, that might turn out to be a bigger cash cow than even Ticketmaster.

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Previously in Hitsville:

Is Ticketmaster trying to muddle the fees issue?
The Azoff-Ticketmaster deal: Bad news for concert-goers—and the music industry
Why you so seldom read about obscene Ticketmaster-style ticketing charges