Ray Waddell, in Billboard, crunches the numbers and makes what seems to me to be the best case possible for the situation concert promoters find themselves in these days. Waddell covers the concert industry for the magazine, and probably knows as much as anyone about it. It’s a long and complex piece, with lots of figures and not much of the lies and posturing we saw at the hearings from the merger’s principals, and worth reading, even if you don’t agree with it.

He raises many interesting points. I want to address one, stemming from a case study he gives of a show by a Latin singer, Luis Miguel:

The concert grossed $808,575, according to Billboard Boxscore, an impressive total for a 19,000-capacity venue. Miguel could have made up to $730,000, based on the common concert industry practice of giving the artist 90% of the box-office gross and leaving the other 10% for the promoter. But the promoter in question—concert business giant Live Nation—may not have made money on the show.

The concert appears to be a success until one looks at the money left on the table. Although the Cricket Wireless Amphitheatre can hold 19,391 fans, only 11,045 bought tickets to see Miguel. The singer made money, thanks to a gross driven by a high top-ticket price. But Live Nation makes most of its money on the things people buy once they get to the concert: concessions, parking and its split of Ticketmaster’s service charges. And all of those things sell better when a venue is full—no matter how much people pay for tickets.

As I’ve said before, I find it hard to account for LN capo Michael Rapino’s contention that he’s playing on average to 40 percent empty houses. But for the purposes of the argument, let’s stipulate that.

Hmm .. it sems like an almost insoluble economic problem. They have inventory … it’s sitting on a shelf  … and it’s highly perishable—worthless at a minute after showtime.

Whatever can be done?

The article crystalized a feeling that I had several times while watching the hearings on the merger: Why does Live Nation need to merge with Ticketmaster to deal with the alleged broken concert industry?

In this case, why couldn’t it just, you know, sell the farther-back seats for less money?

I mean, I studied Latin, not economics, and I could figure that out. The promoter wants as many bodies as possible in the venue. What do they care how much the tickets are? The artist can do the math, and continue to take 90 percent of the gross. If I’m remembering correctly, Rapino said he made $14 in concessions and the like from each patron in addition to the relatively tiny $4 he made off the tickets. Let’s take those as the truth. Hell, the could give the empty seats away for free and make money.

Waddell notes farther down in the story that some promoters do just that. Why doesn’t Live Nation? As I noted before on the subject of what average capacity LN is operating at, I don’t want to be glib about an industry I don’t work in, but I still think that if all Michael Rapino can do is fill his venues to 60 percent capacity on average, the concert industry isn’t broken, Live Nation’s management is.

Indeed, I recently got an email from someone who added an additional wrinkle: Paraphrased, the point was simply that LN controls too many goddamn venues.

Why are the company’s bookers not putting acts in smaller rooms? Because LN has to keep its own buildings in action, even if they’re too big for the artist in question.

Are these guys squirrelly or what?

In an ideal market, concert promoters would have arms-length relationships with all of the venues in any particular town, so that they could place their shows with as much correspondence to their audience estimates as possible. (There will always be flops and unexpected sellouts, of course, but the promoters ideally would like the tools to place their bets according to their best intelligence.)

Live Nation chose not to do that, instead investing in purchasing lots and lots of huge structures and making management deals for lots and lots more. (And let’s face it, they did that to grab a monopoly control of the industry.)

It turns out that that might not be the best way to run a concert promotion company. Another thing Rapino asked for sympathy for during the hearings was the fact that the real estate market was tanking.

In both cases, why should consumers have to worry about a company that made bad business decisions?

Finally, all that said, I’m not sure if I even buy the premise. One thing Rapino and Azoff never made clear was who exactly was holding a gun to Rapino’s head when he overpays for rock tours in the first place. The only thing I can think of is that a competitor (AEG is really the last one standing) wants a particular show as well. If that’s the case, again, it’s Rapino’s job not to make bad deals.

(And let’s not forget that supermanager Azoff is the guy who spearheaded the move into sky-high tickets and demanding every last dime from promoters.)

As far as I can tell, the position as articulated by Rapino and Azoff in the press and before Congress is that they would like reality to be different for them. They would like the anti-trust laws to be relaxed, they’d like people to stop complaining about high ticket prices and just pay them, they want to sell tickets and scalp them, they’d like AEG to go away and they would like artists to stop asking for so much money.

That last item might be the key one—but more on that next week.