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Today, the government, led by Antitrust Assistant Attorney General Jonathan Kanter and 30 state attorneys general, filed a suit asking for Live Nation/Ticketmaster to be broken apart. They sought a jury trial, meaning they want this case heard by citizens, against a deeply unpopular company. The consequences of this suit are fascinating, and even in the few hours since it’s been filed, we’re seeing reverberations in the world of politics and antitrust law.
Let’s start with something extremely simple. Everyone hates Ticketmaster. Take Jim Cramer, the CNBC host who never met a monopoly he didn’t like. Cramer on TV said that the Biden administration was right to seek to break up Ticketmaster, and that he only thought it was a good stock because “it’s the best gouger in the world.”
Or take his colleague, Becky Quick who discussed the case with anti-monopolist Tim Wu. “Tim, a lot of times I spar with you,” she said. “I don’t think you’re going to get as much pushback on this issue.” Even opponents inadvertently conceded the strength of the case, with Republican Senator Tom Tillis arguing that Biden was just pandering to voters with a popular lawsuit against a hated company.
Everyone knows it’s a popular case. Merrick Garland himself led off the press conference, with his deputy Lisa Monaco also trying to grab some of the spotlight from Jonathan Kanter. Liberal states like California and conservative states like Arkansas joined. Conservative Republican Utah Senator Mike Lee, who is the head Republican on the Antitrust Subcommittee, tweeted, “Good news.”
Aside from the fact that everyone has hated this corporation for years, what is the actual case against Live Nation? The argument is that the corporation violated Federal and state laws against monopolization, unlawful tying, and/or exclusive dealing in multiple markets, from primary ticketing services to concert and artist promotion to venue management. And they are seeking a divestment of Ticketmaster, an end to its unfair contracts and anti-competitive practices.
According to the Department of Justice’s complaint, Live Nation has built a ‘Flywheel,’ dominating a bunch of different parts of the live entertainment industry through a bunch of different coercive techniques, such as threats, exclusive contracts, and acquisitions. It then uses its power to harm certain artists, and to impose a ‘Ticketmaster Tax’ via fees on consumers. Here’s the Live Nation CEO explaining the strategy:
At the core is our flywheel. It’s the concert business . . . It’s the lower margin part of our business. But in order to get into these three high margin businesses and be competitive, we have to have that scale [in concerts] . . . [Our] leadership position [in concerts] drives the three high margin businesses that are driving our true cash flow and EBITDA.
Live Nation has four lines of business. The first is ticketing, through Ticketmaster, where it arranges for the sale of tickets and charges fees to consumers, which it splits with those who put on the show. The second is concert promotion, which means financing and running shows and music festivals. The third is advertising and sponsorship for shows. And the fourth is owning and running venues, like arenas and amphitheaters. It has monopoly power in ticketing, and significant power in concert promotion and in certain regions for venues.
Ticketing software isn’t that hard, so Live Nation has to force it on the industry. The basis of the firm’s power is its exclusive Ticketmaster contracts with major venues, which cover “more than 75% of concert ticket sales to major concert venues.” Ticketmaster often also controls secondary sales as well. In other countries, ticketing is ‘open,’ which means multiple ticketing companies can sell them, which means fees and prices are much lower.
To protect its ticketing revenue, the company threatens venues it doesn’t own by diverting shows to other places if they don’t sign with Ticketmaster, it moves “concerts on Live Nation-promoted tours to other venues,” and it strategically buys rival promoters and venues to starve potential competitors. Here’s the CEO, again, making it clear:
We can’t say to a Ticketmaster venue that says they want to use a different ticketing platform, “If you do that, we won’t put shows in your building.” … [But] we have to put the show where we make the most economics, and maybe that venue [that wants to use a different ticketing platform] won’t be the best economic place anymore because we don’t hold the revenue.
Like most monopolies, Live Nation is also running a cartel in certain lines of business where it induces would-be rivals to play ball. So for instance, the private equity owned Oak View Group, which is run by Irving Azoff, owns or runs 200 venues nationwide, and could have competed with Live Nation. But it instead operates as a “self-described ‘pimp’ and ‘hammer’ for Live Nation”
In 2016, for example, after learning that Oak View Group offered to promote an artist Live Nation had previously promoted, Live Nation’s CEO immediately emailed Oak View Group, warning that such competition would only lead to artists demanding more compensation. He wrote: “whats up? We have done his [touring] and vegas[.] Let’s make sure we don’t let [the artist agency] now start playing us off.” Oak View Group’s CEO backed down: “Our guys got a bit ahead. All know we don’t promote and we only do tours with Live Nation.” Oak View Group’s other co-founder followed up: “Growing pains,” later noting that Oak View Group’s executives “should never discuss comp [for artists],” and Oak View Group’s talent buyers would work for Live Nation.
And then there are the serial acquisitions, which the corporation used to starve rivals. In 2017, Live Nation bought United Concerts, a promoter and venue owner in Utah that used a rival ticketing service called SmithsTix. They couldn’t buy SmithsTix, because they would, as the DOJ put it, “require us to go to the DOJ [to notify them as required under the 2010 consent decree that it planned to acquire a primary ticketing company] and that’s something we wouldn’t necessarily want to do.” What the firm did instead was to buy “United Concerts and its venues, and then converted those venues to Ticketmaster. Left ‘with only a few small clients,’ SmithsTix ultimately went out of business.”
These coercive techniques helped Live Nation gain control of several different lines of business, either through direct monopolization or cartel arrangements. Some of these lines of business were low margin, but control of the low margin stuff helped enable Live Nation to maintain monopoly power in the high margin businesses, which is to say sponsorship at shows and ticketing. The DOJ included this graphic with the complaint to make that point:
What makes the existence of this corporation so galling is that it was blessed by Barack Obama in an obviously terrible 2010 merger of Live Nation and Ticketmaster. Here’s the backstory and how it happened:
The Ticketmaster monopoly story goes back to the 1990s. It started with a merger. In 1991, Ticketmaster acquired its main rival in computerized ticketing, Ticketron, which put 90% of the ticketing business in the hands of one firm. This was a milestone. Indeed, Ticketmaster brags about this unlawful merger on its own website.
Three years later, the fees for ticketing had gotten out of hand. So Pearl Jam, then the biggest band in the world, got mad. The band was angry at the high prices and hidden fees the firm charged their fans, and they wanted a straightforward ticket price – $1.80 service fees clearly spelled out on $18 tickets, which was lower than what Ticketmaster sought. But Ticketmaster refused. So the band boycotted what was the then-new Ticketmaster monopoly. They ran a pressure campaign, testifying to Congress, embarking on a lobbying campaign, and pointing to the firm’s acquisitions of rivals and other underhanded tactics in its attempt to control the industry.
Ticketmaster struck back, bribing music venues to only accept Ticketmaster as a booking system, which meant that Pearl Jam couldn’t play at most normal locations. Pearl Jam’s 1995 tour was thus a catastrophe, because they had to play in places like sporting fields which couldn’t hold concerts, so most of their shows were canceled. The cost to Pearl Jam was in the millions, and it devastated the band. This was a remarkable potential moment for antitrust enforcement, with the biggest music act in the world brought to its knees by a ticketing monopoly.
And yet, enforcers did nothing. Under Clinton, Bush, Obama, and Trump, Ticketmaster grew, buying up rivals, becoming more and more powerful. Then, enter the other major powerhouse of the industry, Live Nation, a firm that rolled-up live events until it ultimately became the world’s largest concert promotion company. Live Nation was sick of paying Ticketmaster’s fees, and the two firms had been battling at the bargaining table. Finally Live Nation simply built its own ticketing software and threatened to compete directly with Ticketmaster. Competition would have hit profits for both firms. So instead the two worked out a deal to merge, so the combined entity could have all the fees – and more – to itself.
This new giant of the industry would open the door to an array of opportunities to grab cash. The merger combined the biggest owner of venues, the monopolist of ticketing software, and Front Line Management, a roll-up of artist management firms that came to control most of the biggest names in the business, making Live Nation the most powerful live entertainment firm America had ever seen.
The deal was so outrageously arrogant that the combined firm was to be chaired by Irving Azoff, who – in a New York Times profile – confessed himself a serial liar and talked about how he put pictures of himself giving the middle finger on his own stationary. Initially, people thought Obama, who had talked tough on antitrust on the trail, would block the merger. Not doing so would look weak. If you weren’t going to go after Ticketmaster, the scourge of the 1990s, then would you go after anyone?
But the Obama administration approved the merger, with Antitrust Assistant Attorney General Christine Varney leading negotiations over what concessions Live Nation would have to offer. Immediately after the merger, Live Nation began violating its consent decree with the Antitrust Division, charging outrageous fees, and not stopping the sale of tickets to bots. It suppressed competitors who had developed ways of blocking scalpers, like Songkick. Live Nation acted in such bad faith that the Trump Antitrust Division eventually had to rework the consent decree.
There was even symbolic corruption, with Rahm Emanuel serving as Obama’s chief of staff while his brother Ari Emanuel served on the board of the combined firm. The deal was the touchstone for a terrible Obama antitrust record in his first term, something my organization called to unwind in 2020 as part of the Biden agenda. Events were to prove us right. In 2022, the Taylor Swift ticketing fiasco happened, and more documents have since come to light showing sordid business practices.
The response from Live Nation has been fascinating. The gist of their defense, which Dan Wall (Live Nation’s EVP of Corporate and Regulatory Affairs) put in a blog post, is that Live Nation has low margins and low mark-ups on fees, and therefore it’s not a monopolist. Of course, the whole premise of the flywheel strategy is that it uses its low margin businesses that are the coercive levers to allow it to dominate the high margin ones. (There’s also the possibility of straightforward fraud and money-laundering, but DOJ didn’t allege that.)
But what’s remarkable isn’t the defense on the merits, which is standard. It’s what their ‘legendary’ antitrust attorney, Wall, who came from the big law firm Latham & Watkins, added in terms of personal pique. Wall went off on a harangue against populist antitrust, Biden, and the Antitrust Division itself as part of the defense of Ticketmaster. Here’s what he argued:
In the weeks leading up to today, we met several times with the DOJ front office. It was evident in our discussions that they just did not want to believe the numbers. The data conflicted too much with their preordained narrative that Live Nation belongs in the ranks of the other “tech monopolists” they have targeted.
At bottom, we are another casualty of this Administration’s decision to turn over antitrust enforcement to a populist urge that simply rejects how antitrust law works. Some call this “Anti-Monopoly”, but in reality it is just anti-business.
To Wall, it’s beyond comprehension that antitrust enforcers might not actually believe what businessmen are telling them. And any attempt to address a corporation that everyone hates is simply a “populist urge that simply rejects how antitrust law works.” And in contrast to the crazy lunatics today, Wall says, “The Obama Administration saw things differently.” Wall even cites antitrust scholar Herb Hovenkamp’s treatise that these kinds of corporations are usually lawful, though Hovenkamp himself said the case is solid.
That’s astonishing, to personally attack the Antitrust Division and populists. But it makes sense when you realize who is speaking. Wall is a long-standing antitrust lawyer, considered in the 2000s at the top of the field, but who has fallen in relevance over the last ten years. Being a ‘top’ antitrust attorney in a legal area where there’s no enforcement is an odd position. Wall’s reputation in the antitrust bar was apparently that he’d promise clients he’d get their merger cleared, then he’d bill them for an absurd numbers of hours, and the mergers would have obvious problems later. But it didn’t matter, Wall had so much power in the big law world that criticizing him was risky to fellow antitrust lawyers, who might lose business if they point out his shoddy methods. Wall joining Live Nation as the head lawyer was thus perfectly on brand.
On an intellectual level, Wall’s defense of Live Nation, a deeply hated corporation that is clearly imposing a ‘Ticketmaster Tax’ on all of us, is a serious black mark for the old ‘consumer welfare’ framework. If Live Nation’s business model is lawful under this way of thinking, if people who see Ticketmaster as a monopolist just don’t know “how antitrust law works,” then something clearly has gone wrong with how we interpret the law. On the flip side, it’s a ringing endorsement for the populist way of thinking about antitrust. After all, if the Sherman Act doesn’t apply to Live Nation/Ticketmaster, exactly what does it apply to? And if the ‘consumer welfare’ standard can’t do something about these crazy fees, which are clearly tethered to market power, then what’s the point of the law?
Live Nation’s President Joe Burke went on CNBC to defend his company, and he made the case to Wall Street, saying that the corporation is just not profitable enough to be a monopoly. But as friendly an audience as CNBC is for CEOs, he even got pushback there.
The case is so clearly popular that even the White House press secretary, Karine Jean-Pierre, tweeted it out. (Maybe she heard me…)
At any rate, the point of all of this stuff is what antitrust chief Jonathan Kanter said at the end of the press conference announcing the suit. “Live music,” he said, “should not be restricted to those who can afford to pay the Ticketmaster Tax.”
And I’m guessing that relatively soon, it won’t be.
Thanks for reading! Your tips make this newsletter what it is, so please send me tips on weird monopolies, stories I’ve missed, or other thoughts. And if you liked this issue of BIG, you can sign up here for more issues, a newsletter on how to restore fair commerce, innovation, and democracy. Consider becoming a paying subscriber to support this work, or if you are a paying subscriber, giving a gift subscription to a friend, colleague, or family member. If you really liked it, read my book, Goliath: The 100-Year War Between Monopoly Power and Democracy.
cheers,
Matt Stoller
P.S. A BIG reader wrote me about one of the most evil monopolization/private equity scams, which is the elimination of wheelchair repair services by a corporation called Numotion, which bought up lots of firms in a roll-up. Here’s the email:
Matt,
I love your Substacks on monopolies. I’ve got one for you that I would love your help on exposing in the disability community. I am a T9 T10 paraplegic. and about 8 years ago there were probably six or eight places in Omaha, Nebraska to buy and get wheelchairs fixed. Then Numotion, a big corporation, came in and shut down all the little guys that were better. Getting anything done is now near impossible for two reasons. One, Numotion doesn’t have the staff, and two, the government makes it hard. And I thought monopoly were illegal in the US. Help me please Matt expose this or tell me how to get someone maybe in the government to see how stupid it really is. They’re really makes getting anything done on a wheelchairs hard with only one company to do it. I wish there was more out there but there just isn’t.
Thank you for your help Matt if you look at this, your help would be greatly appreciated anyway!
David Duncan
Omaha, Nebraska
Statnews covered the corporation’s monstrous plot in detail. I’ll be writing about the right to repair movement in future issues, a movement spreading precisely because of corporations like Numotion.
Originally Published: 2024-05-23 19:00:46
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