Just caught up with the All Things Digital interview with Irving Azoff. Kara Swisher is not an unformidable person, but the eight minutes of excerpts we get do not indicate that she was informed or knowledgeable enough about the issues involved to take advantage of a prime opportunity to question a guy who is poised to be the most powerful single person in the history of the music business.

Instead, using a decrepit journalist trope, she merely quotes the opposition, Bruce Springsteen:

AZOFF: We think that everything we do evolves first around what’s good for the artist and good for the fan; that’s our new business plan.

SWISHER: The criticism from Bruce Springsteen, who is not a small act, is that, I don’t want to go through this. I don’t want to be sucked though this..

AZOFF: [flash of irritation] I would basically just say that Bruce Springsteen is uninformed about what the potential of this could be for him.

SWISHER: The idea that you have all these levels, that have to come through you, could be frightening to people …

AZOFF: Everything that’s gone on in the music business has always been frightening … They were frightened of Napster, frightened of iTunes. This is just normal evolution of where the business is going. It’s a myth that there’s not competition out there.

Azoff artully deflects her question into an answer about the industry being frightened, rather than fans and artists. Then he makes a statement that any head of a potential massive combine might make … and Swisher didn’t follow up.

Here’s what else she didn’t ask:

One: Isn’t there a conflict of interest between being a manager and booking a concert tour? What’s good for Live Nation might not be good for a particular artist. It’s like having a real estate agent selling you houses he already owns. Two: Auction pricing. The easiest way for Live Nation to get around scalping is to scalp the tickets themselves, by auctioning them off to the highest bidder. The company’s term for this is “dynamic pricing.” It’s coming.

Three: Both of these companies are in precarious financial shape; shouldn’t a Wall Street Journal reporter ask whether both shouldn’t be allowed to let their respective stockholders take it out on their misguided managements? Specifically, Live Nation used to be called Clear Chanel; that company bought up the U.S. concert industry, and now can’t make it work. (Case study here.)

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The American Antitrust Institute has just published an anaysis of the merger. It’s not positive:

The discussion considers two other attributes of the proposed transaction that make it even more problematic.  First, one of the chief concerns raised by the merger is that Live Nation Entertainment would be a vertically integrated enterprise with dominance or substantial power on six market levels.  The new entity would therefore be able to use its strengths in some markets as leverage to gain customers or compliance in others.  Moreover, this vertical integration would effectively frustrate new entry, because as a practical matter it would require firms seeking to compete seriously against Live Nation Entertainment to enter the industry on several levels at once.  The second factor is that the merged entity would likely enjoy market power not just as a seller but also as a buyer.  In essence, the company’s market dominance would benefit it in both ways.

The paper also considers whether the merger, suspect on its surface, might yield efficiencies that warrant not challenging the transaction.  In this regard, the Department of Justice may consider only efficiencies that (a) arise specifically from the merger and would not be attainable in other reasonable way, (b) are not speculative and whose benefits are
verifiable, and (c) outweigh the harm caused in every adversely affected market.  The efficiencies claimed by the parties satisfy none of these requirements.

Emphases added. The whole paper is available here.

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Previously in Hitsville:

A new Ticketmaster Phish screwup
An economist on scalping
Live Nation’s NYC parking fee three-card monte
Ticketmaster’s definition of the word ’scalping’
Bono, noted Live Nation employee, ducks merger questions from DeRo!
The Corgan meltdown—It gets worse
Ticketmaster, Live Nation, and the ’secondary market’
The best article yet on the Ticketmaster/Live Nation debate
Hillary Rosen—She’s baaaack!
Ticketmaster service fees: Where the money goes
Live-blogging the House hearings on the Ticketmaster/Live Nation Merger
“Re”-selling tickets that don’t yet exist
Liveblogging the Senate’s Ticketmaster/Live Nation Merger hearings
Seal & Van Halen in Azoff’s corner!
Updated! 26 questions that should be asked at the Ticketmaster/Live Nation merger hearings tomorrow Ticketmaster shareholders sue to stop merger
How Live Nation does business
Will the Live Nation/Ticketmaster merger mean higher concert prices?
Another suit against Ticketmaster
Constantly updated: The Ticketmaster-Live-Nation unholy-matrimony news round-up!
Five arguments against the Live Nation/Ticketmaster merger
Irving Azoff kicks it old school
The music industry’s Putin
Bad merger coverage
WWBD (What would Bono do?)
Billboard’s analysis of the Ticketmaster/Live Nation merger
Springsteen and Landau bash Ticketmaster and Live Nation!
P.S. on Ticketmaster: A case study, starring Bruce Springsteen
Why the potential Live Nation-Ticketmaster merger is a very bad idea
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

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This AP story doesn’t make the case. A few $20 tickets at a Keith Urban show doesn’t mean anything, and cheap seats in the back have been around for a long time.

The story cheerfully parrots the Ticketmaster-Live Nation line: That cheaper concert tix are on the way! As for the artists, they don’t want to make money either:

“It’s a balance for me,” Urban added, “because we want to put on a good show. I’d make every ticket $10, but we’d be up there with a megaphone and a flashlight with some colored paper over it.”

Sure he would. The AP writer, John Gerome, incredibly, doesn’t even mention the impending merger of Live Nation and Ticketmaster, in which the entities most responsible for rising ticket prices are actually joining forces.

Why confuse readers with all that annoying context, when it’s easier to quote Live Nation execs about all the fabulous things they are doing for music fans?

I didn’t know this, incidentally:

[A]lt-country star Lucinda Williams, also worried about the economy and miffed about fees tacked on to her concert tickets, is offering a credit on concert merchandise, about $7 on clothing and $5 on CDs, and on merchandise on her online store, lucindawilliams.com. The offer is through July 31 to accommodate people who attended her shows before the announcement.

“I understand that this may only be a small gesture and in no way solves the problem long-term, but I feel that it is important to try and do something to make it a little easier during this time,” she said in a statement.

I’ll insert the full statement at the end of this post. You can also read it here.

The economics of her offer are sad, illustrating the craziness of the concert industry. Since Ticketmaster and Live Nation have the ticketing industry sewn up, you have to believe her when she says she doesn’t have control over ticket fees.

She could try an independent touring route, but that’s a lot of work to make a point. I assume she makes a decent living, but she’s also one of those artists whose succès d’estime livelihood isn’t necessarily a permanent one.

Anyway, if you use her discount at a show, you’re paying show prices—marked up prices, that is, because the venues (and, I’m sure in some cases, the promoters) take a cut of the merchandise sales. It would be interesting to hear whether the discount Williams is offering is shared by the venues or just taken out of her side of the profits.

In any case, it’s probably more beneficial for both consumer and artist to use the discount on her site.

Her complete statement:

LUCINDA WILLIAMS OFFERS RELIEF TO FANS FROM HIGH TICKET FEES DURING TIGHT ECONOMIC TIMES

Nashville, TN Three-time Grammy Award-winner Lucinda Williams knows how tough it is out there during the current economic climate. She also knows that the fees attached to her concert tickets (and most others) are making things even tougher for fans. Since Williams cannot control these fees, she wanted to do something to offer some kind of relief to her fans.

“I cannot, in good conscience, sit back and watch my fans get blatantly gouged.” says Williams. “As an attempt to offset these fees, we are going to offer a standing credit at our merchandise table to everyone attending our upcoming US shows in 2009.”

Each fan who attends a Lucinda Williams show in 2009 will receive a credit on merchandise sold at the concerts. The credit will be applied at the merchandise table at each venue. The discount will be approximately $7 on clothing and $5 on CDs. This credit will also be extended to her online store at lucindawilliams.com from April 1 to July 31 to accommodate those who may have attended shows prior to this announcement.

Williams adds, “I understand that this may only be a small gesture and in no way solves the problem long term, but I feel that it is important to try and do something to make it a little easier during this time.”

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TicketNews reports that the NY senator is planning to introduce a bill that would … well, I’m not sure exactly what it would do:

New York Sen. Charles Schumer, a vocal opponent to the proposed merger of Ticketmaster and Live Nation, said he is planning to introduce a bill this week that would prohibit all sales of tickets on the secondary market until two days after the tickets initially went on sale to the public.

That seems to mean what it says—that scalpers couldn’t sell tickets for two days after they go on sale. Later in the story, though, we get this:

Supposedly, brokers would not be allowed to purchase tickets until two days after they went on sale, but how that would be monitored was not yet explained. However, his proposal would require brokers to register nationally with the Federal Trade Commission to help eliminate fraud.

The story says the bill would also outlaw presales, where scalped tickets are offered before the real ones even go on sale. It also says that Ticketmaster and Live Nation said they would support the bill.

Anything that messes with scalpers is a good thing,  but it’s hard to see how this would affect scalping at all, which is probably why the companies are OK with it.

The issue isn’t when the tickets are resold.  The issue is the corruption of the process of putting tickets into the hands of the public. If you allow scalping, it sets in motion a variety of efforts by the scalpers to amass the best seats.

This involves everything from paying off insiders for tickets or setting up computer programs to buy the tix automatically many times faster than humans can.

Hard to see what Shumer’s bill would do to stop that.

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From a Reuters story on the prospects for the merger, republished on the Billboard site:

Live Nation board member Ariel Emanuel is a powerful Hollywood manager who is also brother of Rahm Emanuel, the White House Chief of Staff. Ariel Emanuel was also a major Hollywood fund-raiser for Obama’s election campaign.

Julius Genachowski, nominated by Obama earlier this month to be the new chairman of the Federal Communications Commission, was on Ticketmaster’s board until March 10.

___________

Previously in Hitsville:

A new Ticketmaster Phish screwup
An economist on scalping
Live Nation’s NYC parking fee three-card monte
Ticketmaster’s definition of the word ’scalping’
Bono, noted Live Nation employee, ducks merger questions from DeRo!
The Corgan meltdown—It gets worse
Ticketmaster, Live Nation, and the ’secondary market’
The best article yet on the Ticketmaster/Live Nation debate
Hillary Rosen—She’s baaaack!
Ticketmaster servce fees: Where the money goes
Live-blogging the House hearings on the Ticketmaster/Live Nation Merger
“Re”-selling tickets that don’t yet exist
Liveblogging the Senate’s Ticketmaster/Live Nation Merger hearings
Seal & Van Halen in Azoff’s corner!
Updated! 26 questions that should be asked at the Ticketmaster/Live Nation merger hearings tomorrow Ticketmaster shareholders sue to stop merger
How Live Nation does business
Will the Live Nation/Ticketmaster merger mean higher concert prices?
Another suit against Ticketmaster
Constantly updated: The Ticketmaster-Live-Nation unholy-matrimony news round-up!
Five arguments against the Live Nation/Ticketmaster merger
Irving Azoff kicks it old school
The music industry’s Putin
Bad merger coverage
WWBD (What would Bono do?)
Billboard’s analysis of the Ticketmaster/Live Nation merger
Springsteen and Landau bash Ticketmaster and Live Nation!
P.S. on Ticketmaster: A case study, starring Bruce Springsteen
Why the potential Live Nation-Ticketmaster merger is a very bad idea
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

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[Please send me any stories I’ve missed and I will post.]

The WSJ goes after artists who scalp their own tickets today:

Less than a minute after tickets for last August’s Neil Diamond concerts at New York’s Madison Square Garden went on sale, more than 100 seats were available for hundreds of dollars more than their normal face value on premium-ticket site TicketExchange.com. The seller? Neil Diamond.

Ticket reselling — also known as scalping — is an estimated $3 billion-a-year business in which professional brokers buy seats with the hope of flipping them to the public at a hefty markup.

In the case of the Neil Diamond concerts, however, the source of the higher-priced tickets was the singer, working with Ticketmaster Entertainment Inc., which owns TicketExchange, and concert promoter AEG Live. Ticketmaster’s former and current chief executives, one of whom is Mr. Diamond’s personal manager*, have acknowledged the arrangement, as has a person familiar with AEG Live, which is owned by Denver-based Anschutz Corp.

The writer, Ethan Smith, who has not heretofore impressed us with his coverage, redeems himself here, detailing a system that bills itself as “fan to fan” sales but is really limited to artists’ scalping their own tickets. He even names names:

Virtually every major concert tour today involves some official tickets that are priced and sold as if they were offered for resale by fans or brokers, but that are set aside by the artists and promoters, according to a number of people involved in the sales.

That includes recent tours by Bon Jovi, Celine Dion and Van Halen, and a current tour starring Billy Joel and Elton John. Spokesmen for Bon Jovi and Ms. Dion had no comment. A spokesman for Van Halen said that the band could not be reached. A booking agent for Messrs. Joel and John did not respond to requests for comment.

* Azoff!

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The CEO of Livestub.com, a ticket reselling site, op-eds in Billboard today against the merger. Michael Hershfield, noting that traditional tour income was hitting a wall, continues:

On the re-sale side of the ticket business, however, revenues have exploded. Traditionally, almost all the ticket inventory across the secondary sites belongs to brokers, often with the same tickets showing up on multiple sites simultaneously. Despite the crucial role brokers play in the industry, and the fact that it was on their backs that the biggest secondary marketplaces succeeded, primary sale participants greedily eyed their profits.

The actual secondary marketplace operators had already carved out their pound of flesh with the 25%-30% in fees added to purchases (and the original motivator for launching LiveStub), and now these “primary” players wanted their piece of the secondary ticket pie. They realized that the real money was to be had in the secondary marketplaces.

I don’t agree with the idea that brokers are crucial. (Hitsville’s position is that selling tickets above their purchase price should be illegal, but that artists should be able to charge what the market will bear.)

But the rest of his argument is interesting; he says that Ticketmaster needs to control the secondary market because that’s the only way to keep the ticket manipulations of the promoters and artists secret:

Theoretically, the only way to make sure this practice wouldn’t be discovered is to actually own a secondary market outright or to have an exclusive, high-level relationship with one. Creating a vertically integrated “walled” system where tickets would go directly into a preferred secondary marketplace and stay there was the ideal way to make more money.

Unfortunately, with the potential merger of Live Nation with Ticketmaster, this scenario is no longer hypothetical. Consumer concerns about a single primary seller of live event tickets should be amplified by the possibility of this entity using the anonymous cover provided by the secondary market to play by different rules and engage in duplicitous behavior with consumers.

———–

The head of AEG, Live Nation’s main competitor, blasts the merger in a chat with Billboard’s Ray Waddell:

[Anschutz Entertainment Group president/CEO Tim] Leiweke pointed out that Live Nation produces two-thirds of concerts held at the country’s top 50 arenas and top 50 amphitheaters, and that Ticketmaster accounts for 94% of the ticketing. “This merger won’t create a new idea on how to sell more tickets,” he said. “It’s all about the bottom line.” Consequently, the consumer will ultimately end up paying more, he predicted.

—————

The Financial Times editorializes against the Live Nation/Ticketmaster merger:

Its dominance in ticket sales would be worrying. Technology makes it easier to enter the market; challengers are emerging. But the merger would deal a blow to competition. Live Nation would presumably stop building up its rival ticketing business.

A greater concern comes from “vertical integration”. A single entity running the entire process – from signing up the talent, to staging of the concerts and selling the tickets – would stifle competition. This would work against the fans in the longer term, no matter what innovations were on offer initially.

So Christine Varney, President Barack Obama’s choice to lead the Justice department’s antitrust division, should take time to unpick the deal and exact strict concessions if it goes ahead at all. This is one of those happy moments for governments when the popular course is also the right policy.

While I agree with the paper’s position, it’s interesting how its knowledge base of the issue, like that of other publications, is weak. For example, nearly fifteen years after Pearl Jam’s futile battle with the company, no competitor has emerged—and the only one that presented any challenge to it … was owned by LN. Secondly, it’s not technology that has prevented others from entering the market; it’s Ticketmaster’s exclusivity deals with venues an artists, which, as we have sen, the fans have to pay for.

__________

Sound off with Dave has testimony of how it certainly seems as if someone’s “re”-selling tickets before they get sold in the first place:

Let’s take one recent high-profile example. Paul McCartney is slated to open the new Joint at the Hard Rock Casino and Hotel in Las Vegas. When tickets went on sale recently, those who were on Ticketmaster.com at 12:00 PST were completely shut out of the sale. Not a single ticket was there to be had. I tried, for one ticket, at the top of the hour.
[…]
However, you could find tickets for sale at TicketsNow immediately following the sale. There wasn’t even enough time to process an order, then go to TicketsNow to post your newly purchased tickets for sale. But, there they were, albeit at a much higher ticket price.

—-

From the yKvz blog, news that some challengers to Ticketmaster are trying to figure out a way to break the stranglehold the company has on venues via its creative kickback scheme. Their plan? Buy them off:

With the proposed $2.5 billion merger between TicketMaster and Live Nation looming large, many venue owners and promoters are up in arms, deeming the deal anti-competitive and monopolistic (they may be right - the deal is being examined for possible anti-trust violations). Now ShowClix, a TicketMaster competitor that launched in early 2007, is launching the Fair Ticketing Fund, setting aside up to $5 million to entice venues and promoters away from the pending Live Nation Entertainment goliath. Other ticket vendors are also beginning to offer similar deals, including TicketBiscuit, which launched a $10 million fund last week.

Emphasis added. Wouldn’t it be nice if venues contracted with ticketing vendors based on how cheaply and efficiently they could get tickets to fans?

—————-

This Bloomberg story speculates that LN’s largest shareholder would oppose the merger with Ticketmaster. It seems that it was just a shot at Barry Diller and that the investor, Read more

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To hear Hitsville tell the story, the nation’s music writers are spending all their time writing positive record reviews, a fact some readers find endlessly disputable!

So why is Jim DeRogatis kicking everyone’s ass in covering the Ticketmaster/Live Nation merger?

U2, you will recall, has one of them-there “360 deals” with Live Nation, though in their case excluding recordings, so maybe it’s a “310 deal.” Here DeRogatis gets Bono to at least address the question. And the famously loquacious singer says …

“I haven’t really spent any time thinking about it. I’m just thinking about this [promoting ‘No Line on the Horizon’] …”

There’s more … the inimitable DeRogatis (with whom I once hosted a radio show) stays in Bono’s face.

I don’t remember Bono being asked about this by the Times or Rolling Stone.

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Jim DeRogatis just posted a letter from Smashing Pumpkins leader Billy Corgan supporting the Live Nation-Ticketmaster merger.

Corgan’s been a fairly popular touring artist for some 15 years or more, now, so I don’t want to dismiss his position out of hand.

But on the face of it it sure looks like he’s carrying Live Nation’s and Ticketmaster’s water, right down to parroting the companies’ contention that the touring market is “broken”:

The ’system’ that was once the modern record business, essentially ushered in with the meteoric rise of the Beatles, is now helplessly broken. And by almost every account available cannot be repaired. Personally I would add to that a healthy ‘good riddance,’ as the old system far too often took advantage of the artists as pawns while the power brokers colluded behind the scenes to control the existing markets. This control often saw the sacrificing of great careers to maintain that control. Look no further than the major record labels’ intense fight to slow down the progress of Internet technologies that more readily brought music and video to the consumer because they couldn’t completely control it. This disastrous decision on their part has destroyed the economic base of the recording industry. It is now a shadow of its former self.

Note, too, that Corgan is talking about the recorded music industry here. The crazy thing is that the reason Azoff and Co. have been saying the touring industry is broken is that it’s broken for them, in that by their lights artists have too much power in the process.

Why Corgan is helping them out of a position they got themselves into is a mystery.

Corgan has been a punching bag for a lot of people for a long time, particularly some other artists and critics in Chicago during his impressive rise. His band never spoke to me artistically, but I personally always sort of admired his determination. The first time he appeared on 120 Minutes, as I recall, he took some tough shots at the scene that sometimes scorned him. I liked the idea of his punching back the first chance he got; it was a very Chicago thing to do. I barely wrote about him, but he was always courteous, even co-hosting our radio show one week when DeRo was out of town.

All that said, he really seems to be taking leave of his senses.

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The Daily Swarm links to a post from Bob Lefsetz about how Live Nation is supposedly handing so-called secondary market sales, or what you or I would call “scalping.” Lefsetz:

I had a long conversation with a promoter who told me that with regard to a show he was promoting, Ticketmaster was guaranteeing the secondary market for the act.

Let me explain this to you. A certain number of tickets are pulled from the manifest and ultimately sold on TicketsNow. Ticketmaster guarantees a certain gross payment to the act for these tickets, far in excess of the usual payment per ticket.

If true, the idea shows a new level of sleaziness in this merger. Now, Azoff and Rapino were fairly honest about their vision of what they called “new flexibility” in pricing post-merger. That’s promoterspeak for a variant on auction pricing, where they could basically sell better seats at astronomical prices, a longtime industry desideratum.

I’m not sure though if I understand the process as described here. (And note that it seems to be part of the band’s deal with Ticketmaster, not Live Nation.) If TM is going to be kicking back some of the service fees to the band anyway, they cut a deal for a certain percentage and then, one would think, the company can sell the tickets how they see fit, right?

But maybe not. As Lefsetz says:

Does Ticketmaster pull tickets from the original on sale and sell them on TicketsNow, bypassing the traditional 10 A.M. free-for-all feeding frenzy?  I don’t know the answer to this.  But I suspect not.  Because Ticketmaster is a public company and the additional revenue would have to show up somewhere in the accounting.  In any event, I’ve got no confirmation/independent corroboration stating this occurs.

What I suspect might be happening is that this is just a twist of the process by which, in the tour contract, the promoter gives the acts a chunk of the seats. Here’s how Azoff described the process under questioning at the Congressional hearings last week:

Azoff:  Inventory control is not a perfect science.

Rep. Sherman: If there’s ten thousand seats in the area, are you selling 10,000 tickets?

Azoff: Never. On average we might see 80 or 85 percent of the seats.

Rep. Sherman: Are those the good ones or the bad ones you’re not getting?

Azoff: The vast majority of the best seats in the house.

This could just be Ticketmaster saying, “Hey, you know those seats you’re getting from the promoter? [Casually] Want us to handle scalping them for you? Let’s see, the nominal price is $100, we’re talking 1000 of the best seats in the house, you can probably get $400 each, we’ll give you $350 grand to save you the hassle. Win-win all around!”

Note that in Lefsetz’s scenario, he has TM pulling tickets before the sale. This is a more baroque (and even shadier) scenario, where in essence TM is saying, “Pssst—Hey, let’s scalp some of the tickets we’re selling for you and not tell the promoter.”

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Paul Resnikoff, the publisher of Digital Music News, takes a look at the sad state of the RIAA, post layoffs. The group, he noted, used to be fast with the press release, or to demand a retraction. Now, not so much:

But somehow, at some point in the recent past, that started to change.  Not the accuracy or competency component, but the vigorous execution aspect.  Perhaps the continued erosion of the crown jewel album - year after year - is having a deflating effect.  Or, years of drubbing by an unsympathetic media, one that slowly recognized the futility of suing teenagers, screaming at ISPs, threatening universities, and trudging through expensive litigation challenges.

After varying reports last week*, it seems as if the group has dropped 25 or 30 employees, or at least a quarter of its work force. It’s turned away from its mass-lawsuit strategy, and is left with trying to scam some sort of a tax out of ISPs. That’s an approach that has not been laughed out of the political sphere overseas, but seems unlikely here.

The cutbacks may provoke further changes …

That will probably put pressure on top-heavy, million-dollar-plus salaries for the top guns.  Perhaps that has already changed - tax forms obtained by Digital Music News for 2005 and 2006 revealed annual compensation packages exceeding $1.5 million for both Mitch Bainwol and Cary Sherman, though later filings remain under wraps.  At those price tags, a vigorous attack and mission-friendly attitude is definitely part of the pay grade.  Hilary Rosen only criticized her organization after she left, after the big paychecks were over and a need to achieve some distance emerged.**

The RIAA is a private industry group and lord knows the industry can do what it likes with its (ever-shrinking) money. But I guess $1.5 million is the going price for being told what you want to hear.

* Note that the vision of apocalypse cited by Hypebot has not materialized.

** Rosen has a new tarnished client: The Ticketmaster/Live Nation merger.

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The story apparently started here, seemingly confirming word of 30 positions being eliminated, with a more apocalyptic version supplied by Hypebot, based on a source who says:

“It is about 90-100+ people across the US and global offices - anti-piracy, coordinated IFPI/BPI etc - trust me it’s a bloodbath…

The acronyms refer to overseas industry groups.  The phrase “trust me” doesn’t instill confidence, but the source goes on to say an announcement will be made this week, and supplies this further detail:

DC offices are getting closed except for one part of one floor on Conn. Ave., just for the address.

I don’t remember the DC office as having more than one floor, but for all I know they have an underground bunker. We’ll apparently see this week.

The organization is spinning the cutbacks as “tough economic times,” but since the record industry has been facing the toughest times of all going on for seven or eight years now, it seems more like the record industry is finally giving up on this destructive, vicious, counterproductive and stupid organization, whose anti file-sharing jihad has fruitlessly done its best to ruin the lives of people guilty of little else than liking music and distracted the industry from taking steps to deal with the changes in its business model.

I feel bad for the people are losing their jobs, but one can only hope that the larger number is the correct one, with corresponding decline in the group’s ability to harass music fans.

Meanwhile, as noted earlier, the group’s most despicable creation has reared back into view, working on—what else?—the Live Nation/Ticketmaster merger.

update:  Greg Sandoval at Cnet has more details; he says the group has only 104 employees, making the 90 to 100 number pretty unlikely.

p.s. For the record, it’s worth saying that I acknowledge that, leaving aside the legal issues, file-sharing skirts some moral rough ground. Here’s the way I rationalize my opposition to a group that says file-sharing is stealing and that they are protecting their business:

1. It was obvious immediately to smart people and soon after that to dumb ones that the nature of digital information and the internet made it impossible to stop or even decrease file-sharing
2. It this context, the group didn’t even spend its time going after commercial or large-scale sharing set-ups; it sued tens of thousands of ordinary people, often though sleazy legal means, and kept at it even when it became clear that file-sharing would nonetheless grow astronomically.
3. This is a larger issue that deserves more exposition, but it’s basically true to say that the vast majority of artists don’t make money from CD sales. And, as is often noted, the industry had gotten cozy selling $15 CDs to people who really just wanted one or two songs. The suits were designed to protect a parasitical business model that put the record industry between artists and fans.  The RIAA essentially does business like the Sopranos:  They didn’t want file-sharers muscling in on the operation. It’s their job to rip off artists.

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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.

4 comments

Hitsville live-blogged the Ticketmaster/Live Nation hearings earlier today; here’s the result, put into easier reading order:

_______

Our witnesses today, according to the subcommittee website:

Michael Rapino
President & CEO
Live Nation Worldwide, Inc.
Beverly Hills, CA

Irving Azoff
CEO
Ticketmaster Entertainment, Inc.
West Hollywood, CA

Robert W. Doyle, Jr.
Partner
Doyle, Barlow & Mazard, PLLC
Washington, DC

Peter A. Luukko
President & COO
Comcast-Spectacor
Philadelphia, PA

Luke Froeb
William C. and Margaret W. Oehmig Associate Professor of Management, Owen Graduate School of Management
Vanderbilt University
Nashville, TN

Ed Mierzwinski
Consumer Program Director
U.S. PIRG, the Federation of Public Interest Research Groups
Washington, DC

________

Hitsville is excited. The company leaked early on that big stars like Don Henley, U2 and Jay-Z would be coming out in favor of the merger. Maybe Don Henley, no stranger to the public political arena, will be a surprise guest!

___________

The House link for the webcast seems to be here. I’m checking with C-Span to see if there will be a feed there.

DeRogatis is blogging here.
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Bill Pascrell, Jr, a rep. from NJ, is going to testify as well, and then sit on the committee, but won’t ask questions. I assume he just wants to get his face out there on the side of Boss fans everywhere, but I could be wrong.
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The Chair is Hank Johnson, from Georgia. He doesn’t sound well-disposed to the merger. He is mocking the companies list of artists who are supporting the merger. He says the subcommittee made “monumental” efforts to get artists at the hearing, as one assumes they would!

He’s quoting Springsteen saying the merger would make a bad situation worse.
$500 and $800 Cohen tickets on sale on TicketsNow, with additional $100+ fees, he says, before the tizx went on sale officially.
_________

The ranking member (highest Repub.) is Howard Coble, from South Carolina. “I am not the hippest member on Capitol Hill, he says. He lists TM’s big artists, apologizing for mispronouncing Christina Aguilera’s name. He likes Earl Scruggs and Lyle Lovett.

He’s suspicious. “A lot of sway over the little guy.” He mocks the “convenience charge.” “A lot o consumers would say it’s not convenient.   He says the burden is on the companies to demonstrate the deal isn’t bad for consumers.
Read more

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Hilary Rosen will forever be remembered as the hackiest flack of them all–shilling for the record industry during the Great Napster war of 200-2003 as head of the RIAA, demonizing file-sharing and generally taking the most extreme position possible on behalf of an industry that combined avariciousness and stupidity in a way that wouldn’t be seen again until the housing loan debacle that sparked the current financial meltdown.

Rosen was there on the front lines as the industry accomplished the neat trick of holstering up, pulling out its guns, sticking its head in the sand and firing wildly … managing only to shoot itself in the foot. She  was no Jack Valenti: In the years since, as we’ve seen, sales have declined 45 percent, the labels are facing extinction, and it couldn’t have happened to a nicer group of people.

Anyway, since her disastrous years with the RIAA, Rosen has tried to rehabilitate her image by letting it be known that she was a voice inside the organization for accommodation and trying to position herself as a liberal commentator on the cable news networks. Most recently, she’s been calling herself “political director” of the Huffington Post, whatever that means.

And now … she shows her true colors, and will be a “strategy adviser” in DC for the Live Nation/Ticketmaster merger. I just saw my friend Jim DeRogatis talking about it on his blog, but it seems it was first reported by the NY Post. (More detail on her lobbying firm in this WashPo story.)

Is there anything worse than a corporate Democrat? (Wasn’t it one of the South Park boys who said, “I don’t like conservatives, but I really fucking hate liberals”?) Having spent years whispering into the ear of the RIAA as it embarked on its calamitous, destructive and pointless legal war on file-sharing, Rosen’s now going to be brushing lint off the labels of the creepy monopolists as they look innocently into the cameras and skulking around Washington to sneak the merger through a new Democratic administration.

The new Live Nation is shaping up into a real rogues gallery; hard to find the comparison, but it’s a little like Enron merging with Blackwater and bringing on Dick Cheney to run things and Baghdad Bob to lobby Congress.

2 comments

Please refresh for updates …..

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Things were just getting interesting. Froeb made the point that, in effect, the artist should have control of the whole process and get the true value of the tickets. (That’s Hitsville’s position to, along with a ban on scalping.)

But all of a sudden Sherman said time was up. The hearing’s over. Ended with a bang.

___________

Hard to believe Rapino is happy with these admissions. Avoff: “They go to building holds, sponsor holds, band holds, record company holds. They go out the door multiple places.”

Now we get to the true craziness.

Sherman: Why are you not selling tix for their true value?

Azoff: They are worried about the press. I always say, “That’s the guy who’s getting in for free!”

Hey! He’s talking about me!

Avoff makes a pitch for “dynamic pricing”—that’s auctioning.

__________

Sherman is asking by far the best questions. Now he’s pinning Azoff down on where tickets to a concert go. “Inventory control is not a perfect science,” Azoff says.

That’s an extraordinary euphemism, give Azoff’s replies immediately following:

Sherman: If there’s ten thousand seats in the area, are you selling 10,000 tickets?

Azoff: Never. On average we might see 80 or 85 percent of the seats.

Sherman: Are those the good ones or the bad ones you’re not getting?

Azoff: The vast majority of the best seats in the house.

This is the first time to my knowledge this has been publicly acknowledged by a major person in the music business. It’s the headline of the day.

__________

Sherman jumps on Rapino for saying that the average ticket price of $50 is a deal. Not in San Fernando Valley it’s not, Sherman says.

Here again, he’s picking and choosing his figures. He’s mentioned the 7000 club shows Live Nation puts on; that far outweighs the number of arena shows. Think what the avg. ticket price of them are. $200 and $300 top ticket prices at major shows are common now.

Sherman hones in on Rapino on ticketing fees, finally, making him explain where the fees go. “So when I think I’m paying Azoff I’m paying you?” he asks. “You’re also paying the venue and the artist,” Rapino replies.

It has long been an irritant to me that most people writing about Ticketmaster don’t say where the fees go. Now there’s no excuse. The head of LN and TM have testified before Congress saying that Ticketmaster service fees are kicked back to the venues and artists.

Sherman finally sums up the issue: “So what I think is the Ticketmaster service charge is really a disguised portion of the price. They are forcing Azoff to pretend like he’s charging a lot when it’s really coming back to you.”

_________

Rapino is also playing up the idea that new artists aren’t being created—and that the merger might help that. But of course, the industry has become increasingly consolidated over the last 15 years, which coincides with the alleged dearth of new artists.

He also says he doesn’t hear complaints from consumers about high ticket prices.  Very hard to believe.

He and Azoff also hitting another common refrain: That artists have to charge high ticket prices to cover the costs of their elaborate productions. This is more legerdemain: I don’t care how much the Police, or Madonna, or Neil Diamond, or the Stones, or Pink Floyd spend on their sets. They gross hundreds of millions of dollars on those tours.

As LN keeps testifying, the artists take essentially all of the gate, and then there’s merchandise, tour sponsorships, their kickback from ticketing fees, and the like. The cost of the sets aren’t zero, of course, and it’s expensive to take large entourages on the road. But it’s a pittance compared to the money they are making.

Azoff is referring to “problems of the secondary ticketing process.” He means that he’s not getting that money. That’s what the “problem” is.

__________

Sherman asks Azoff if many of his artists have empty seats in the room. Both Azoff and Rapino play this up big time; Rapino repeats his number that “40 percent of seats go unsold.”

Again, the congressman doesn’t have enough knowledge of the business to say, “Jesus, why is your board keeping you on as head of this company if you don’t know how to place artists in the the right venues? All of your bookers must be entirely incompetent, particularly because, since many shows do sell out, that means many, many other shows have more than 40 percent of the venue unsold.”

I have to confess I don’t understand this figure. I’ve spent a lot of time at concerts, and I’ve always thought the problem is booking acts into too-small venues so sellouts are more likely. Either the industry has changed of late or Rapino is conflating attendance at a broader spectrum of events than he’s letting on—I don’t know, Broadway roadshows or monster truck shows or something. I’d be happy to be proven wrong, but I can’t believe attendance at mid-sized-theater-and-above rock shows is anywhere near that figure.

Even if it were 80 percent that would mean many shows were, say, 60 percent full, and again, it would be hard to believe the company’s bookers could continually make those sorts of deals.

__________

Great question to Rapino: You’ve said said you might have to lay off employees if you don’t merger. If you do merge, you’ve claimed $40 million in efficiencies. Will that come from layoffs?

Rapino says, incredibly, that he didn’t say that, but that he might have to lay people off, but that the merger will create jobs. It hard to take that seriously.

________

The subcommittee is taking a twenty-minute break.

_________

Rep. Brad Sherman, from the San Fernando Valley in California, questions next. Can LN’s ticket agent, CTS, go to AEG and compete with TM? Rapino says yes. Sherman, delightedly, says, well, that would open competition! He seems to be on LN’s side.

He asks Azoff if he will ask his board to sell TicketsNow. He says he will, but hedges mightily. He says “the secondary market really needs cleaning up.”

_________

Coble’s next. He asks a clever direct question of Rapino:  Does Live Nation currently compete with TM, and what will they do if they don’t merge?

Rapino doesn’t really answer the question, though the obvious answers are “yes” and “”will continue to compete.” Coble’s not up enough on the subject to follow up.

The Vanderbilt guy again takes the opportunity to spin for the merger.

To Azoff: Will this improve efficiencies in the industry and will it lead to reduced ticket prices?

Azoff responds in a way that contains about 18 angles of disingenuousness—or lies, if you want to call them that. Example: He says, Gee, if we can increase reselling, then the price of tickets will go down. But reselling, which is his word for scalping, is all about selling tickets at greatly increased prices.

He whines that MTV stopped playing videos. Gee, if only there were some forum on, say, a revolutionary international communications network  that could allow fans to see any artist video they want any time.

Azoff says the company will be like Switzerland. Allow me to quote myself:

Azoff says his management company was “decentralized.” Yeah, right. Readers will I hope have noticed that Hitsville has refrained from making reference to the famous sobriquet attached, many years ago, to Azoff—”the poison dwarf”—on the grounds that it’s an ad hominem attack and that it makes fun of his height. But it’s worth noting that Azoff has a longstanding reputation as a major industry motherfucker, and people who get called things like that generally don’t run “decentralized operations.”

… or “Switzerlands.” I won’t say what they do run.

_____________

Azoff refers to the “old Ticketmaster.” Ha! He explains again about the ticket fees. He stresses credit card fees again. He says that the Pearl Jam debacle had to do with venues refusing to accept lowering the fees.

He says he convinced the Eagles to eliminate fees. But of course the band was one of the pioneers of the extra large service fees; around the time Pearl Jam was risking its career to lower a $5 fee (those were the days), the Eagles were pushing the envelope with $20+ fees.

__________

Rapino says they get zero of the scalping market. It reminds me that earlier he said LN makes $4 on every hundred dollars in tickets. Other reports have said the company loses $4 on every hundred. Not sure which is right.

___________

Rapino admits that Clear Channel had a name as bad as Ticketmaster’s. I would like to take some credit for this:

http://www.salon.com/ent/clear_channel/

____________

The chair starts questioning. He says fans are “forced” to pay exorbitant prices. I think this isn’t quite right. Ticket prices aren’t the issue. It’s the deception and screwing along the way that that’s the problems.

Azoff says the system is broken. It’s not. It’s like a pickpocket being caught. “The system is broken!”

_________

Mierzwinski makes a good point: TM has corrupted the ticketing at publicly owned venues. Why should public bodies help fund venues that are ripping fans off? (My restating of his more politic point.)

_________

Next Ed Mierzwinski, from the U.S. Public Interest Research Group. He says the PIRGs were there back when Pearl Jam fought TM. He notes that Pearl Jam’s experience explains why artists aren’t speaking up against the merger today: Disappointing but not surprising artists aren’t here today.

Bad for consumers, artists and independent promoters, he says. Violates the Clayton Act.

1) TM the dominant player in ticket sales; we thought LN would compete; now they want to merge.

2) A vertical monopoly as well; combined firm would have tremendous market power over artists, venues and consumers.

He says sure that artists might find other places to play: Amer. Legion Hall or county fairground, Doesn’t say an important point: Rock tours are v. complicated these days; in most cities, no place to play, realistically, that isn’ta LN venue.

_________

Next up, Luke Froeb, a Vanderbilt prof and a former govt. lawyer. He’s trying to give a detached view of the economics of the industry. He seems to be discounting the horizontal integration aspects.

Innovation is important, he says, and then makes a very strange argument, that the music industry in in the throes of technological change, and that the merger would allow the companies to innovate better. This would be “crucial” to the economy. I hate to sound glib when talking about a guy who obviously has had a great deal of experience in these matters, but this seems to me to be crazily, almost deliberately, disingenuous. Don’t we want companies to compete to give them the incentive to innovate?

This seems to take an upside-down view of the world. Merged and protected, they won’t innovate. They will just exploit their power.

_______

The guy from Comcast, Peter A. Luukko, is up next. He seems to run the company’s sports teams and its venue management arm.  He says he’s in favor of the merger! He’s speaking in favor of vertical integration; he says it provides for creative cross marketing and “synergistic opportunities.”

The sports integration we’ve seen is different; the sport teams is the draw, and it has a right to market itself as it sees fit. Also, there are hundreds of thousands, if not millions, of 76er’s, say, seats available each year. In one town, by contrast, there are only, say, 30K Springsteen seats available in a certain year, creating much more opportunities for abuse.

_________

Next up, a lawyer from DC, I assume an antitrust guy named Robert Doyle. He says merger will eliminate competition in ticketing, reduce competition in reselling, reduce competition in top-tier artist management, and reduce competition in concert promotion industry.

He gives a pretty precise recapitulation of some of the corporate moves the companies were making against each other and points out that they are in effect each eliminating each other’s biggest potential competitor.

He says he’s been doing interviews with venues and says they are afraid of a combined TM/LV.

_________

Azoff says AEG has told TM it feels it can terminate its venue agreements if the merger goes through.

__________

I don’t know if any of the Reps will jump on this, but Azoff just said, “We’re in the service business; if our customers don’t like it they will go somewhere else.” But that’s of course the point. They can’t go anywhere else. 

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He says many requests could not be filled for the Bruce shows. They modded their credit card software and it couldn’t handle the demand, resulting in frozen transactions and error pages.

No consumers were directed to TicketsNow from error pages, he said.

This brings up an interesting, unanswered question from that incident. I’ve read all the complaints and I have to say it’s unclear as to whether it’s actually true fans were “redirected” to the scalping site. I think that they instead all hit a button on the page that took them there, but the button didn’t say, “Hey, we’re taking you to our rapacious scalping site.”

TM also sent a note out saying the tickets went on sale at 10 a.m., though it really started at 9. That note also had a link to TicketsNow, he said and confused consumers who ended up there. He says he’s taking the TicketsNow links off their site.

________

Azoff up next.

He says TM gets the complaints when someone gets hurt in a mosh pit. I think that’s a dumb thing to bring up—LN will definitely be responsible when someone gets hurt in a mosh pit.

He says he’s going to explain the Springsteen imbroglio in detail.

_________

With a straight face, Rapino says LN found it easy to get into the ticketing business. That’s like saying Haliburton found it easy to get into the Iraq contracting business. The problem is that if you don’t control hundreds of venues across the country, you can’t break into the business.

Front row tix, he says, might cost $150. Is he joking? Most floor seats, sometimes most of all the seats, are higher than that at many shows.

________

Of the witnesses, it will be interesting to hear Peter A. Luukko: he runs all the sports teams and sports venues in Philadelphia. Not sure what his position is going to be.

Rapino’s going to talk first. Let’s see if they learned anything on Tuesday. He’s going to cite some facts: 17,000 employees: 35 percent market share. Market cap $250M; $700M in debt. We have no large shareholder. 7000 concerts for “young artists” where we lose $10M to $20M.

Highly competitive marketplace. 4 percent margin business.  Competitor AEG, owned by a multibillionaire! 31st richest man in America; they promoted five of top ten concerts last year; LN did four. They are the true integrated companies. He says that AEG’s Staple Center is worth more than LN and TM combined. (The companies have lost 70 percent of their value the last few years.)

Not sure right now, but I think Rapino is choosing his words carefully: Top five concerts ($2M to $3 grosses) is different from top five tours ($200M to $200M grosses!).

Rapino says they have “relentless” competition. Own 18, lease 70 venues, he says. A small percentage.

_____

The chairman recalls being down one day and going to a Parliament-Funkadelic concert—he notes that Coble probably wasn’t familiar with them. Pascrell sites Bruce Springsteen’s “Promised Land.”

_______

Smith says he thinks TM should sell TicketsNow. He says he has legislation to ban automatedticket-buying programs, too.

_______

Smith is there to jump on the Springsteen issue. He says he got 1000 complaints about the imbroglio. He’s jumping on a quote he says he saw from a LN source, that the hearings were a “distraction.” He kicks that one around the ring a while.

“This isn’t just live PR—it’s a bad deal for the American people! … You don’t have to have a Ph.D in economics to see it for what it is.”

________

I can’t find a WSJ live-blog of the hearings… please let me know if anyone finds it.

_________

Rep. Lamar Smith, from Texas, zeroes in on the vertical integration issue. He’s not a supporter.

_________

The ranking member (highest Repub.) is Howard Coble, from South Carolina. “I am not the hippest member on Capitol Hill, he says. He lists TM’s big artists, apologizing for mispronouncing Christina Aguilera’s name. He likes Earl Scruggs and Lyle Lovett.

He’s suspicious. “A lot of sway over the little guy.” He mocks the “convenience charge.” “A lot o consumers would say it’s not convenient.   He says the burden is on the companies to demonstrate the deal isn’t bad for onsumers.

______

The Chair is Hank Johnson, from Georgia. He doesn’t sound well-disposed to the merger. He is mocking the companies list of artists who are supporting the merger. He says the subcommittee made “monumental” efforts to get artists at the hearing, as one assumes they would!

He’s quoting Springsteen saying the merger would make a bad situation worse.
$500 and $800 Cohen tickets on sale on TicketsNow, with additional $100+ fees, he says, before the tizx went on sale officially.

_________

Bill Pascrell, Jr, a rep. from NJ, is going to testify as well, and then sit on the committee, but won’t ask questions. I assume he just wants to get his face out there on the side of Boss fans everywhere, but I could be wrong.

___________

The House link for the webcast seems to be here. I’m checking with C-Span to see if there will be a feed there.

DeRogatis is blogging here.

________

Hitsville is excited. The company leaked early on that big stars like Don Henley, U2 and Jay-Z would be coming out in favor of the merger. Maybe Don Henley, no stranger to the public political arena, will be a surprise guest!

_________

Our witnesses today, according to the subcommittee website:

Michael Rapino
President & CEO
Live Nation Worldwide, Inc.
Beverly Hills, CA

Irving Azoff
CEO
Ticketmaster Entertainment, Inc.
West Hollywood, CA

Robert W. Doyle, Jr.
Partner
Doyle, Barlow & Mazard, PLLC
Washington, DC

Peter A. Luukko
President & COO
Comcast-Spectacor
Philadelphia, PA

Luke Froeb
William C. and Margaret W. Oehmig Associate Professor of Management, Owen Graduate School of Management
Vanderbilt University
Nashville, TN

Ed Mierzwinski
Consumer Program Director
U.S. PIRG, the Federation of Public Interest Research Groups
Washington, DC

Hitsville’s coverage of the Senate hearings Tuesday is here.

___________

Previously in Hitsville:
Live-blogging the House hearings on the Ticketmaster/Live Nation Merger
“Re”-selling tickets that don’t yet exist
Liveblogging the Senate’s Ticketmaster/Live Nation Merger hearings
Seal & Van Halen in Azoff’s corner!
Updated! 26 questions that should be asked at the Ticketmaster/Live Nation merger hearings tomorrow Ticketmaster shareholders sue to stop merger
How Live Nation does business
Will the Live Nation/Ticketmaster merger mean higher concert prices?
Another suit against Ticketmaster
Constantly updated: The Ticketmaster-Live-Nation unholy-matrimony news round-up!
Five arguments against the Live Nation/Ticketmaster merger
Irving Azoff kicks it old school
The music industry’s Putin
Bad merger coverage
WWBD (What would Bono do?)
Billboard’s analysis of the Ticketmaster/Live Nation merger
Springsteen and Landau bash Ticketmaster and Live Nation!
P.S. on Ticketmaster: A case study, starring Bruce Springsteen
Why the potential Live Nation-Ticketmaster merger is a very bad idea
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

3 comments

A judiciary subcommittee meets at 10 a.m. EST; schedule and webcast here.

Witness list here; members of the subcommittee here.

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While checking out coverage of the Ticketmaster-Live Nation merger hearing, I noticed a post on RollingStone.com on the proceedings.

You might think Rolling Stone, being a magazine that covers music, might take enough interest in the formation of the most powerful entity the music business has ever seen to tell one of its minions to actually watch the proceedings.

Instead, they just had a writer, Daniel Kreps, rewrite Jim DeRogatis’ coverage from the Chicago Sun-Times.

Now, every blogger links to the work of real reporters, and many quote from it, some too much. And Kreps attributed one fact to the ST high up in his post.

But he didn’t make clear that his entire post was based on someone else’s work. DeRogatis’ story totalled 480 words; the RS one was two-thirds that. The writer didn’t block-quote from the earlier story blogger-style. He just rewrote it, and it looked like it was a real Rolling Stone piece.  There was barely a phrase of the total not either directly taken from the Sun-Times’ piece or blandly rewritten:

DeRogatis:

Rapino cited the benefits of Live Nation shows to local economies, claiming that one two-day event last summer at the Alpine Valley Music Theatre in East Troy, Wisc., pumped $5 million into the area. He did not name the artist.

RS:

Rapino and Ticketmaster’s Irving Azoff told the subcommittee that their concerts would help give an economic boost to cities, citing a two-day event Live Nation hosted in East Troy, Wisconsin that generated $5 million in revenues for the city.

DeRogatis:

All of the senators voiced strong skepticism about the merger — including traditional foes Orrin Hatch (R-Utah, and himself an amateur recording artist) and Charles Schumer (D-N.Y., and a Bruce Springsteen fan outraged by Ticketmaster’s handling of the upcoming tour) […] The hearing ended with Chairman Herb Kohl (D-Wisc.) noting that the committee has urged the Justice Department “to examine [the merger] closely” before granting its approval.

RS:

The subcommittee, stacked with senators like Orrin Hatch and Chuck Schumer who were already against the merger, will tell the Department of Justice to “examine the merger closely” before deciding whether to approve it.

It’s not plagiarism; he cited the ST. It’s just lazy, cheap journalism from a place that doesn’t expend enough of its resources on reporting on the industry at the heart of its appeal.

p.s.: DeRogatis, of course, used to be one of the mag’s top music editors. Funny story–ask him to tell you about it.

___________

Previously in Hitsville:
Live-blogging the House hearings on the Ticketmaster/Live Nation Merger
“Re”-selling tickets that don’t yet exist
Liveblogging the Senate’s Ticketmaster/Live Nation Merger hearings
Seal & Van Halen in Azoff’s corner!
Updated! 26 questions that should be asked at the Ticketmaster/Live Nation merger hearings tomorrow Ticketmaster shareholders sue to stop merger
How Live Nation does business
Will the Live Nation/Ticketmaster merger mean higher concert prices?
Another suit against Ticketmaster
Constantly updated: The Ticketmaster-Live-Nation unholy-matrimony news round-up!
Five arguments against the Live Nation/Ticketmaster merger
Irving Azoff kicks it old school
The music industry’s Putin
Bad merger coverage
WWBD (What would Bono do?)
Billboard’s analysis of the Ticketmaster/Live Nation merger
Springsteen and Landau bash Ticketmaster and Live Nation!
P.S. on Ticketmaster: A case study, starring Bruce Springsteen
Why the potential Live Nation-Ticketmaster merger is a very bad idea
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

6 comments

refresh for updates …

And… it’s over. Hitsville’s complete Ticketmaster/Live Nation coverage is here.

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Hurwitz’ final statement: The play here is control.

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Key question: Could a major act, Bruce Springsteen, say, do a big tour without using Live Nation or Ticketmaster?

Michelson says no, on the amphitheater level, he couldn’t; indoor arenas, “I suppose.”

Ticketmaster, however, he notes, would be an impediment on that level.

__________

Mickelson is finally fed up with the LN line, particularly the contention that it only has 38 percent of the business.

His summation is the highpoint of the hearing thus far.

Mickelson quotes Pollstar: In 2000, the company had 150 of top 200 tours. In 2001, after Live Nation combined with SFX, it had 161 of the  top 200 tours.

He’s just getting going: “They dominate the arena level. They control and have all of the outdoor amphitheaters. They own 90 percent of the amphitheater market.” And with House of Blues [an LN subsidiary], they are taking over the lower-level theater business as well.

TM, he says, has contracts with 90 of the top 50 buildings, 80 percent of top 100 arenas.

______

Rapino says he could establish a firewall to stop TM from passing on info to LN. That’s a comical assertion.

Rapino is forced to concede he got out of competing with Ticketmaster. Why would anyone else try to compete?, he is asked.  He dissembles and changes the subject.

He tries to say ticketing  a “low barrier” business to get into.

________

Hurwitz and Mickelson both point out that if the companies merge, he and other indie promoters would have to share all sorts of sensitive information with the behemoth—tickets sold, customer contact info and so forth. And they will make money on every ticket of his they sell, he points out.

Balto is smarter on these issues than anyone else there. “If vertical integration is necessary,” he says, “let them do it on their own. That’s the purpose of the anti-trust laws.”

________

Mickelson smacks Rapino down for saying acts can call around to other promoters. “U2 doesn’t call us. Shakira doesn’t call us. Coldplay doesn’t call us.”

______

In fairness, there is something to Rapino’s point. The problem is that all these other parasitical companies are trying to make a buck on the backs of the artists.

__________

Klobuchar zeroes in how the companies are refraining from competing; the next step, she notes, is figuring out how difficult it will be or a new competitor to emerge. Ticketmaster’s long-term contracts, funded by kickbacks from fees, make that difficult. Balto, channeling Hitsville, says the “technology involved is not rocket science.”

Rapino points out that the true monopoly is the artist. “There is only one Aerosmith.” This is true in the physical but not aesthetic sense. Me, I stopped paying attention to Aerosmith when they hired Diane Warren to write songs for them, but whatever.

______

Klobuchar is now going after Azoff, pressing him to admit that previous mergers haven’t lowered ticket fees. Azoff is now saying Ticketmaster “took the heat” for the big fees, which it got a “minority part” of. Where’d the rest go? “Credit card fees” (!) Then he mentions “rebates” to the venues, “sometimes to the artists, sometimes to the promoters.” Those are actually kickbacks. 

________

A new euphemism for auction sales. “I would hope for a more transparent accurate primary, which wold do away with the need for secondary,” Azoff says. He’s saying he’d like a pure auction sale.

__________

Azoff says the “practice” of routing people to the resale site was “a practice I was going to do away with.” That’s not very credible.

Schumer wants a detailed explanation of how the Springsteen imbroglio happened, but doesn’t want Azoff to waste all of his questioning time. He wants it all in writing. “It’s under oath,” he reminds him.

Schumer wants Azoff to say that he should sell TicketsNow, the scalping site. Azoff is dissembling. He says he was asking around at the company why they got into the biz. The picture of himself as a wide-eyed new employee is kind of amusing.

Schumer doesn’t ask the obvious question: If the new company is losing money on tickets, it’s going to go where it can make more money—and where else but the reselling sites?

Schumer keeps cutting Azoff off, though. What’s his position on Tickets now? “I never would have bought it. I don’t have a position now,” Azoff replies.

Are you open to sell it? “You can make an offer, senator.”

____________

Schumer’s hammering Azoff on how the company patently makes more money reselling a ticket than selling it; Schumer keeps saying it’s $30 vs. $7. Azoff keeps demurring. Schumer says he wants an answer in writing.

As I noted in my list of questions yesterday, this would be a good time to say:

It’s hard to remember? Again, forgive me for quoting “Hit Men” again, but one person quoted there saying “He had total retention on every level.” Another is quoted as saying “Irving is as fast mentally as it gets.”

___________

C-Span is broadcasting the hearing as well, BTW:

http://www.c-span.org/Watch/C-SPAN3_rm.aspx

_________

Now Schumer is going after Azoff on the Springsteen issue.

———

Wow– more interesting facts. Rapino says he makes $14 per person on “ancillary.” Food, parking, merchandise, I guess. He says he loses $80M a year on tickets—or about 4 percent, as he says. That’s in keeping with other reporting I’ve seen.

He blames it all on the 18 wheelers the artists use. That’s bullshit. The artists make hundreds of millions on these tours.

____

Third lie: “Every entertainer I represent would like to charge less for tickets.” (Azoff.)

________

Sobering info about Jam: yearly shows down from 135 to 30.

________

Kohl says, You didn’t address the question at all. “I’m disturbed by your unwillingness to discuss the main reason for the merger.” (He means makes more money.)

_________

Azoff opens his mouth … and lies as well. “We are actually complimentary businesses.” “Plenty of competition out there.”

________

Kohl: What’s wrong with competition? You strain our common sense!

Rapino … lies. Says there’s a lot of competition. Cites Chicago—where he’s been trying to put Jam out of business

————

David Balto next. “I have a simple message. TM has kept its monopoly power not through better products and services but exclusionary arrangements to exclude its rivals.” Now, faced with a rival, it’s trying to merge with it.

There’s a competitively unhealthy market, he say. Wha’s needed:  1) Investigate the Springsteen incident 2) Look at past Ticketmaster aquisitions; 3) the key to the monopoly power; TM’s exclusivity agreements.

—————–

Hurwitz is magnificent; he’s giving a short history of the modern concert industry. He points out that Don Henley used to be opposed to Clear Channel! He’s trenchant and persuasive; he points out it’s the promoters’ fault. They tout the higher ticket prices as growth and hide losses as “investment.”

“When do they get told to stop? You can’t blame Live Nation at this point any more than you can blame a shark for eating people.”

He points out that a new ticket service would be an expensive proposition.

A great five minutes. This guy’s a star.

———-

Nice to see Jerry Mickelson; he’s a fighter and has been for decades. Jam has been grimly fighting off Live Nation for years.  “The new company has the ability to strengthen its hold on the entire industry.”

It will “suppress or eliminate competition” in every aspect of the music industry. “Vertical integration on steroids.” “A poster child of why this nation wants and needs antitrust laws.”

———-

Azoff is avoiding the particulars of the Springsteen imbroglio; he says there was a ticket malfunction “combined with the availability” of his reselling operation. I have to say, it hasn’t been established that TM actually *drove* fans to the reseller. It could be they just clicked on the (obfuscatory) button that said tix were available.

He’s the voice of doom as well.

————-

Azoff! He says he saw the Beatles at Comiskey Park. He says he serves artists and their fans. He headed west, he says, with Dan Fogelberg and REO Speedwagon.

———

Amid a litany of woes, he says 40 percent of his seats go unsold. I hope a senator asks him why that doesn’t mean he runs a very inefficient company.

————-

I love music, love artists; saw Prince in Minneapolis, he says. It’s a decentralized business. “Local entrepreneurs.” He’s playing the “we supply countless jobs” card.

The decentralization contention is risible; this used to be called Clear Channel. He’s whining about the company’s stock price. He says he needs to merge, basically, to save the company.

“The record business is broken,” he says.

———–

Now it’s Minn. Sen. Amy Klobuchar namechecks Prince and Bob Dylan; she’s not a fan of the merger eitheMinn. Sen. Amy Klobuchar. She namechecks Prince and Bob Dylan; she’s not a fan of the merger either. Now they are swearing in the witnesses.

Rapino gets five minutes.

————–

Orrin Hatch to speak first– this will be a key sign of how deep the Republicans will be in LN’s pocket. He’s babbling about football now. He rambles on a bit… sounds suspicious of the merger but oesn’t show his hand.

———–

Rapino and Azoff are about to talk.

Apropos of nothing, I just thought about how Azoff said last week the merger would make for a “more level playing field.” I guess he meant “level” in the Carthanginan sense.

—————

Kohl is bashing them hard: “The burden will be on TM& LN”

Schumer is up next. He thanks Kohl. He says he made it clear to Azoff and Rapino in his office that morning he was against the merger.

TM took advantage of its reselling operation to charges many times the tickets’ value, he said. It’s more about “money-making rather than malfunction.” He wants specific answer as to how it happened. He says he doesn’t think the company should be in that business at all.

———–

Herbert Kohl, senator from Wisconsin, is speaking.

Great facts:

LM: Owns or operates 140 venues, 30 music festivals, 305 large arenas; plus deals with U2, Madonna, Jonas Bros.

TM: “nation’s dominant ticket seller”: 280 million tickets, $8.3 billion in ticket sales last year… 77 of the 100 largest venues.

Front Line: 200 artists

Kohl: “One company with a stranglehold on all aspects of the concert business.”

———

It’s underway.

———

They are scheduled to start at 2:30 EST; the live webcast stream seems to be working.

Jim DeRogatis has some good information here.

The witnesses listed include Irving Azoff and Michael Rapino, who have yet-be-be-clarified positions at the top of the new company; Jerry Mickelson, head of Jam Productions, an independent outfit that has been fighting off Live Nation and its predecessors for more than a decade; David A. Balto, a senior fellow at the Center for American Progress in DC; and the just-added Seth Hurwitz, one of the owners of DC’s legendary 9:30 Club. I assume the last three will all speak against the merger, but I don’t know for sure about Hurwitz.

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Remember how some unnamed Live Nation and Ticketmaster officials were telling the WSJ that big big names like Don Henley, Jay-Z and U2 were going to be supporting the big big merger?

That graf dropped out of the paper’s story quickly (and mysterously!), and those three artists have been conspicuously silent—and in Henley’s case, unusually so. Who has Henley muzzled? 

Now comes some big news: Seal, Van Halen and Shakira are behind the merger, Reuters is reporting:

Live Nation Inc’s (LYV.N) planned acquisition of Ticketmaster Entertainment Inc (TKTM.O) has received support from rock stars including Van Halen, Seal and Shakira ahead of a U.S. antitrust hearing on Tuesday.

The companies said they have received supportive letters and emails from these artists, even as others including Bruce Springsteen and Senator Charles Schumer have opposed a combination of the world’s biggest concert promoter and largest ticketing company.

The story includes this tidbit:

Rapino said fans are frustrated with the lack of transparency in ticket sales that lead to scalpers and resellers charging exorbitant prices for the best seats.

But does not include what you think would be the logical next sentence, which I’ll supply:

But critics of the merger say that the heart of the new company’s plan is to have Rapino and Co. collect those exorbitant prices themselves.

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Hitsville is live-blogging the hearings here.

Irving Azoff, the supermanager and CEO of Ticketmaster, and Michael Rapino, for now capo di tutti capi of Live Nation, will be in attendance.

Following, a few issues the senators should address; any I missed?

(Hitsville’s complete coverage of the merger is here.)

1) A few questions about Ticketmaster. A typical $100 rock show might carry with it a collection of service fees reaching $20 or $30 or more. Where does the money go? How much, typically, goes back to the artist? How much to the promoter? How much to the venues? If you can’t generalize, give me specifics from one or two recent tours.

2) Now, aside from routing back specific fees from specific shows to a venue, how much a year does Ticketmaster spend arranging long-term deals with venues? How are they generally configured? Is it a lump sum, or an annual fee? Are there other considerations? What is a typical payment to, say, a basketball arena?

3) Now, don’t these long-term deals restrict competition? In other words, aren’t you in effect forcing people to pay money for fees, which you then use to tie up venues, which prevents competitors entering the business and helping to lower those fees?

4) By which I mean, far from letting you merge with an even more powerful company, shouldn’t we break up the monopoly you already seem to be guarding so jealously?

5)  How much does it cost to actually sell a concert ticket? By which I mean, leaving aside the payments to venues, promoters and artists, what is your company’s net cost per ticket sold? Read more

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