Ticket Masters – Part 3: The Ticketmaster’s Challenge: The Grateful Dead, Pearl Jam and String Cheese Incident

“Ticket Masters. The Rise of the Concert Industry and How the Public Got Scalped” by Dean Budnick and Josh Baron is one the first books that highlight the emergence of the modern concert industry by telling the story of the rise of its main players: Ticketmaster and Live Nation. It gives a deep insight into the processes within the network of concert promoters, ticketing firms and artist agencies and how this network has evolved over the decades.

Ticketmaster had a more or less monopolistic position in the ticketing market after the purchase of its main competitor Ticketron. In part 3 the conflicts between Ticketmaster and bands such as The Grateful Dead, Pearl Jam and String Cheese Incident over the right to sell tickets are highlighted.

 

 

After the acquisition of Ticketron in 1991, Ticketmaster enjoyed a monopolistic position on the U.S. ticketing market. The main market entry barrier was based on the exclusive contracts with the venues and promoters. In chapter 4 “A Bunch of Wholly Freaks” (pp. 91-113) the authors tell the story how Grateful Dead Ticketing Service (GDTS), which had been established in 1983 as a result of supporting the band’s fanbase with a ticketing mail order service, challenged Ticketmaster, after Ticketmaster had denied to accept a 50:50 split in Grateful Dead’s ticket inventory. Instead Ticketmaster demanded 90% of the ticket inventory, which was unacceptable for GDTS. Eventually GDTS succeeded, but it was a sole victory over the monopolist.

In other cases, Ticketmaster used its market power either to drive competitors out of the market or to purchase their assets. Until the purchase of the main competitor in 1991, Ticketmaster had also acquired Ticket World USA (1985), Capital Automated Ticketing (1989), Dayton’s Ticketing (1989) and SEATS (1990) (p. 134).

However, Ticketmaster more often was blamed for all too high ticket prices because of increasing service fees. Especially bands, who wanted to keep the ticket prices low for their fans, became uncomfortable with Ticketmaster’s price policy. Grunge band Pearl Jam became the spearhead of critic and they actively by-passed Ticketmaster by selling tickets for their shows by mail order service. The conflict heatened up in 1994, when Pearl Jam canceled a tour (p. 122). The band blamed the cancelation of the tour on Ticketmasters price poliy and therefore was approached by the U.S. Department of Justice, which had still an eye on Ticketmaster after the Ticketron acquisition. Eventually the investigation culminated in a Congressial hearing in summer1994, inwhich Pearl Jam band members testified against Ticketmaster.

In chapter 4 “Rumble in the Jungle” (pp. 114-153) the congressional hearings and the Department of Justice’s antitrust investigation are highlighted in great detail. Ticketmaster critics, in essence the band mates of Pearl Jam and some influential music managers, highlighted Ticketmaster monopoly position in the concert ticketing market and testified that it would be nearly impossible to organize a big tour beside Ticketmaster, since all the large venues would be bounded by exclusive contracts. On the other hand Ticketmaster CEO Fred Rosen testified that there would be sufficient competition in the ticketing market. He, thus, cited a study commissoned by Ticketmaster coming to the conclusion that 1.5 billion tickets sold for live events per year, only 51 million were sold by Ticketmaster (p. 136). However, this was the broadest definition of the ticketing market possible, including also museums, amusement parks, state parks, and county fairs. In contrast, Budnick and Baron cite Pollstar – a well respected trade publication for the concert business – that in 1994 Ticketmaster had exclusice contracts with 63.2 percent of the concert venues and handled ticketing for part of the remaining non-exclusive live venues in the U.S. (p. 136).

Althought the Justice Department had a very critical approach to Ticketmaster, the officers were not able to find sufficient evidence to file an antitrust complaint (p. 147). Thus, they announced the closing of the antitrust investigation on July 5^th, 1995. From a business outsider’s perspective this seems to be unreasonable. However, two main factors led to the investigation’s closing: (1) the venues were not forced by Ticketmaster to contract on an exclusive basis, but preferred exclusive and long-term contracts in order to get substantial advance payments, which could be used for different ends; (2) it was a tricky task to define the “relevant market”. Since Ticketmaster was not only constraint to the live music market, but did also ticketing for sports and other entertainment events, a limitation to the live music market would not hold up in court. In fact, rock music was only a small proportion of the company’s business conducted with arenas and theatres (p. 149). Despite the public expectation that Ticketmaster should be sued for antitrust reasons, the investigations led to nothing substantial – from the Department of Justice’s perspective.

Also the complaint by Ticketmaster’s competitor Tickets.com in 2003 led to nothing. Tickets.com tried to highligh Ticketmaster’s monopoly position in the market. In court a Tickets.com’s expert analysed that Ticketmaster contracted 31 of 41 of the large arenas, which covered 75% of the tickets sold, on an exclusive basis. In addition, in 25 of the regional areas, Ticketmaster’s market share was about 90% (p. 148). However, the court ruled similar to the Justice Department eight years ago by arguing that the venues and promoters willingly entered into long-term and exclusive contracts with Ticketmaster.

However, at the same time the ticketing giant was successfully challenged by a Colorado-based rock band with the funny name String Cheese Incident. Chapter 9 “A Quiet Victory” (pp. 251-271) is devoted to the band’s conflict with Ticketmaster on the same issue than Grateful Dead and Pearl Jams decades ago. The conflict was routed in the fact that String Cheese Incident commissioned the small firm SCI Ticketing to sell its tickets with a very low service charge. All the tickets, thus, were sold online at the same price. However, SCI Ticketing ran on TicketWeb platform, which was bought for $35.2 million by Ticketmaster in June 2000 (p. 252-253).  In May 2002, Ticketmaster instructed its exclusive venues and promoters that it would no longer allow them to provide direct artist-to-fan ticketing except to “legitimate” fan clubs. “Legitimate” fan clubs were defined by an annual fan’s contribution of at least $15, by the restriction to buy only four tickets per person, by the prohibition to resell tickets and by a “meaningful” interaction between fans and the band (p. 260). These requirements did not fit to String Cheese Incident’s practices. Therefore, the band avoided to play in Ticketmaster-operated venues, which proved a very tricky task, since most of the venues and promoters were exclusively bound to Ticketmaster.

When the reknowed e-commerce and antitrust lawyer, Neil Glazer, heard about String Cheese Incident’s ticketing predicament, he took particular interest in the case. He approached the band’s management and ticketing firm and suggested to sue Ticketmaster for abusing its monopoly power by defining barriers such as “legitimate” fan club rules (p. 261). A silent backer provided financial support and SCI Ticketing filed a civil lawsuit on August 3, 2003. In the lawsuit Glazer argued that Ticketmaster had exclusive agreements with 89% of the top fifty arenas, 88% of the top fifty amphitheatres, 70% of the top theaters and 75% of the top clubs, which clearly indicates a monopoly in the concert industry. The lawsuit, therefore, charged Ticketmaster for monopolizing and abusing its monopoly power in the sense of the Sherman Antitrust Act (pp. 263-264).

Ticketmaster responded as usual with denying all it was charged for and with a counter-lawsuit against SCI Ticketing alleging the firm for interfering with contracts and relationships in which Ticketmaster made great investments (p.265). However, Ticketmaster also feared negative publicity, after New York Times and Rolling Stone had covered the story. Quietly they offered the band to sell half of its ticket inventory directly to the fans and the other half over Ticketmaster’s channels – similar to the Grateful Dead’s deal. In addition, SCI Ticketing was allowed to resume sales for other clients than String Cheese Incident at least of 10% of the ticket inventory. In return, SCI Ticketing and band’s management would have to agree not to communicate the terms of settlement to the public (p. 266-267). Since Ticketmaster meet all the demands of the band and its ticketing company the case was settled outside the court. Although the lawsuit went away quietly, Ticketmaster had realized that it had to improve its relationship to artists and their management. Thus, the lawsuit led to the decision to invest in Irving Azoff’s Front Line Management in 2004 (p. 271). This was the first step to a complete reshape of the concert industry by joining the forces of the world’s largest ticketing company, the world’s largest concert promotion firm and one of the largest artist management agency. The result was Live Nation. However, this story will be told in part 6 “The Begin of a New Era – the Ticketmaster-Live Nation Merger”

 

Part 4 summarizes the emergence of online ticketing services and the launch of resell tickets platform on the Internet, which brought ticket scalping to a new level.

Budnick Dean and Josh Baron, 2011, Ticketmasters. The Rise of the Concert Industry and How the Public Got Scalped. New York: ECW Press. ISBN 978-1-55022-949-3, EUR 18.99.

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