Gov't grills Live Nation, Ticketmaster CEOs

Senate committee questions motives of proposed merger

The chief executive officers from Live Nation and Ticketmaster Entertainment were grilled Tuesday in Washington by the U.S. Senate Judiciary's antitrust subcommittee and independent concert promoters, who questioned the motives and potential outcome of the proposed merger of the two live entertainment giants.

The subcommittee on antitrust, competition policy and consumer rights used the 90-minute hearing to discuss how the possible merger could affect ticket prices, the impact it would have on new ticketing businesses wanting to enter the marketplace and how it might expose sales data from rival promoters, among other issues.

The hearing was also filled with heavy opposition from independent promoters JAM Prods. chairman and executive VP Jerry Mickelson and I.M.P. Prods. co-owner Seth Hurwitz, who testified that the merger could have a detrimental impact on companies that would compete with the new Live Nation Entertainment.

"This is vertical integration on steroids," said Mickelson, who served as a witness during the hearing. "If this merger is allowed to proceed, the combined entity will have the ability to suppress or eliminate competition in many segments of the music industry, including rival concert promoters, primary and secondary ticketing companies, artist management firms, talent agencies, venue management companies, record companies, artist merchandise, music apparel and licensing companies, and sponsorship companies."

Sen. Herb Kohl, D-Wis., chaired today's subcommittee. Its members also included Sens. Chuck Schumer, D-N.Y., Orrin Hatch, R-Utah, and Amy Klobuchar, D-Minn.

As expected, Live Nation president/CEO Michael Rapino and Ticketmaster CEO Irving Azoff defended the proposed merger, pointing out that the music business has seen a dramatic shift in recent years with the decline of physical album sales, and that the combined forces of the companies could bring new revenue streams to artists, which could potentially lead acts to lower the prices of their concert tickets.

"Artists don't sit around and say, 'Let's raise prices,'" said Azoff, who also heads up Ticketmaster's Front Line Management, which has a roster of more than 200 acts. "If we're successful in doing this, I for sure think we'll be able to show that ticket prices will go down, because it will create a bigger pot of money for artists from other avenues in their careers."

On that same note, Rapino said the combined companies would not hurt music fans or rival businesses. "This deal would benefit them as we spur competition and innovation," he said. "If we don't make significant changes to the business model and if we don't build new structures, we may be back here in the future for another hearing on the death of the American music industry."

David Balto, a senior fellow at the Center of American Progress, testified that the merger of Live Nation and Ticketmaster Entertainment would not help lower ticket prices. "What compels companies to reduce prices is competition, and both of these firms are dominant firms in the market," he said. "Nothing after this merger is going to force them to lower prices."



Balto also pointed out that the merger would "diminish competition in primary ticket distribution." Similarly, he suggested that Live Nation Entertainment would shut out new companies from entering into the ticketing business. "It would be extraordinarily unlikely if this merger occurs that we'd ever see entry," he said, noting that Ticketmaster has the monopoly on ticketing for the past 10 years.

But Azoff argued that the merger could bring new opportunities for existing ticketing companies. "We've been told and we believe that if this merger were approved, that many of our larger clients would opt out," he said, pointing out that Ticketmaster has about 11,000 clients. "From hearing all the comments that I hear, I think that so many people would be upset about this merger that I'm sure a lot of our clients would leave.

Schumer grilled Azoff about Ticketmaster's secondary ticketing Web site, TicketsNow, which was recently at the center of a controversial ticket on-sale for Bruce Springsteen's upcoming North American tour. Asked by Schumer if Ticketmaster had any intentions of selling off TicketsNow, Azoff drew laughs from the audience, saying, "I wouldn't have bought it. We're a public company. If you'd like to make an offer, senator, we'd love to hear it."

Azoff also noted that Ticketmaster intends to further explore the "all-in" ticket pricing model, as well as the company's paperless ticketing efforts.

Hurwitz, who also co-owns D.C.'s 9:30 Club, expressed his concern over business secrets that could be revealed as a result of the merger. "If this merger is allowed to happen, my biggest competitor will have access to all of my sales records, customer information, on sale dates for tentative shows, my ticket counts and they can control which shows are promoted and much more," the promoter said. "This will put all independent promoters at an irreparable competitive disadvantage."

But Rapino assured the subcommittee that Live Nation Entertainment's concert division "would not have access to the ticketing division data. He added, "the concert division should have no access to anything Seth or any other promoter does in any building or anything in the ticketing business."

Today's hearing on Capitol Hill could be the start of an investigation that could take months or longer. It surprised no one when the proposed merger of Live Nation and Ticketmaster Entertainment triggered an antitrust probe by the U.S. Department of Justice. Following the Feb. 10 announcement of the possible merger, Department of Justice spokesperson Gina Talamona said it would "vigorously enforce antitrust laws and therefore thoroughly investigate the proposed deal."
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