The government is slated to sue Ticketmaster’s parent company.
Buying concert tickets is a drag, as Taylor Swift fans know all too well.
When tickets first went on sale for her highly anticipated Eras Tour in November 2022, fans agonized over hours-long queues and frozen screens before Ticketmaster’s website ultimately crashed. Many failed to procure tickets, which were ultimately sold on the secondary market for as much as $11,000.
Ticketmaster’s failure to adequately prepare for that onslaught of demand by underinvesting in the customer purchase experience might have constituted an abuse of its market power, some economists pointed out. Ticketmaster controls about 70 percent of the market for ticketing and live events and more than 80 percent of major concert primary ticketing.
The Department of Justice opened an investigation of Ticketmaster’s parent company, Live Nation Entertainment, shortly after the Eras tour fiasco. That investigation appears close to its conclusion, and now, the government seems prepared to take the company to court over alleged anticompetitive behavior. The Wall Street Journal reported that the DOJ’s antitrust lawsuit could be filed as early as next month.
The exact contours of the lawsuit are not yet known. But Live Nation Entertainment has come under government scrutiny in the past.
The DOJ allowed Ticketmaster and Live Nation, a venue operator and events promoter, to merge and become Live Nation Entertainment as part of a 2010 settlement. But it required Ticketmaster to undertake measures to improve competition, including divesting from one of its ticketing subsidiaries and licensing its ticketing software. The DOJ also prohibited Live Nation Entertainment from “retaliating against any venue owner that chooses to use another company’s ticketing services or another company’s promotional services.”
In 2019, the DOJ accused the company of violating that requirement and appointed an external monitor to monitor its ongoing compliance.
Critics have argued in the years since, however, that the provisions in the 2010 settlement never actually stimulated competition in the ticketing market and that Live Nation Entertainment should be broken up.
“The Justice Department should have never cleared the [Live Nation-Ticketmaster] merger, because as a vertically integrated monopoly, they have every interest in encouraging prices and fees to go up, and there is no [one] in a position to discipline the industry, either by using an alternative promoter or ticketing agent,” said Tim Wu, a key architect of the Biden administration’s antitrust policies and a professor at Columbia Law.
What are the antitrust concerns surrounding Live Nation Entertainment?
Regardless of how the DOJ frames its lawsuit, it will have to show that Live Nation Entertainment has engaged in anti-competitive behavior that has stifled competition and hurt consumers by excessively raising prices or offering products of inferior quality.
Some experts, like Fiona Scott Morton, a professor at Yale School of Management and former chief economist at the DOJ’s antitrust division, think the government may have a strong case.
“If we’ve got a well-defined market and Ticketmaster has a 70 percent share, it seems very likely that they have market power in the way that we usually mean it in an antitrust context, and they’re going to be able to raise prices or lower quality or otherwise restrict options for consumers to worse terms than they would get in a competitive market,” she said.
At the very least, there is an incestuousness to how Live Nation promoters — employees who organize live events — advise artists on ticket pricing on sites like Ticketmaster and negotiate with venues, including the 78 percent of top arenas nationwide operated by Live Nation. Those venues then give Ticketmaster a cut of the service fees. And that should raise alarm bells, Scott Morton said.
The company has already sought to preempt some of these potential accusations. In a blog post last month, Live Nation Entertainment’s executive vice president of corporate and regulatory affairs, Dan Wall, argued that neither Ticketmaster nor Live Nation is responsible for high ticket prices.
Wall writes that tickets sold on Ticketmaster are “actually priced by artists and teams,” not Ticketmaster itself. But artists’ teams may include Live Nation promoters.
Wall also refutes the idea that service charges, which go to venues and ticketing companies like Ticketmaster, are just a sneaky way for Ticketmaster to raise prices.
Service fees vary by venue and event, but average about 27 percent of the price of a ticket, according to a 2018 Government Accountability Office report. As part of his fight against “junk fees,” President Joe Biden has criticized ticket retailers for failing to disclose these fees upfront. On Ticketmaster, fees are only visible at checkout.
Wall argues that “Ticketmaster does not set service charges, venues do.” But that oversimplifies what is happening behind the scenes.
When negotiating contracts with ticketing companies, venues propose a service fee. Ticketing companies, including Ticketmaster, then structure their bids for the contract — which includes a cut of the service fee — based on that proposed fee. However, the service fee proposed “depends on everybody’s outside option in a bargaining game,” Scott Morton said. And for venues, there are not many outside options in a market where Ticketmaster controls a large majority of ticket sales.
In that sense, venues might want to charge higher service fees so that Ticketmaster, the largest ticket seller by far, will get a bigger cut and therefore bid on a contract.
“Ticketmaster is pointing at the undeniable power of others to obscure its own monopolistic role in facilitating the extraordinary growth in both fees and also, to some extent, ticket prices,” Wu said. Live Nation Entertainment has sought to portray itself “as a passive, almost disinterested player when they have been doing all that they can to encourage the growth of prices and fees and while discouraging competition,” he added.
Wu pointed to Songkick as an example. In the 2010s, the company tried to pioneer a direct sales model from artists to fans, “only to find artists who worked with it facing threats and retaliation from Ticketmaster/LiveNation,” he said.
In his statement, Wall also argues that neither Ticketmaster nor Live Nation are making enough money to suggest that they are abusing their market power. Ticketmaster makes about 5 to 7 percent of the average ticket price from these service fees, which he says is well below other digital distribution platforms like Airbnb and StubHub, and Live Nation is taking in about 2 percent of concert revenues.
But at question is whether Ticketmaster should even be making that much, and whether any antitrust action can make the ticket-buying experience better for consumers. The answers to both remain to be seen.
“This is just trying to use numbers to distract us from what’s really important,” Scott Morton said. “It’s not really so important how big Ticketmaster’s revenues are in comparison to some other arbitrary number — like how much people spend on concerts in America or how much they spend in some other large markets — but rather, what that revenue would be in an environment with more robust competition.”
