“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.
In the last part of the summary of Budnick’s and Baron’s book the merger of Ticketmaster and Live Nation as well as the emergence of 360 deals are highlighted.
Since in 2008 the exclusive agreement between Ticketmaster and Live Nation was due to expire, both sides began making strategic moves to improve their bargaining power. Live Nation demonstrated its willingness to bypass Ticketmaster by entering into a licensing deal with the German ticketing company CTS Eventim in summer 2007 and indicated that it would not renew the contract with Ticketmaster. In addition, Live Nation acquired a 50% stake in Michael Cohl’s Grand Entertainment for $123 million in stock and $10 million on cash, the music club chain House of Blues for $350 million and a majority stake in Coran Capshaw’s MusicToday (p. 308).
However, Ticketmaster fought back in buying Irving Azoff’s Front Line Management Group – one the world largest artist agencies. Thus, Ticketmaster outbid Live Nation, which was also interested in entering the artist management business. Since Live Nation lost the Front Line Management deal, it developed a new business model: the concept of the unified rights deal or 360 degree deal, as it is called commonly.
It was Michael Cohl’s initial vision, when he started Concerts Productions International (CPI) in the 1980s in order to own all artists’ rights. When Cohl entered Live Nation he became responsible to work out the first 360 degree deal for Live Nation with Madonna, who had left Warner Music Group before. In October 2007, Live Nation announced a ten-year, $120 million deal with the superstar, which included everything from touring, merchandise, fan clubs, studio albums, sponsorships and branding. Though, it was not Live Nation, which introduced initially the unified rights deal model, but EMI, which signed a $160 million contract with Robbie Williams in 2002 including all income streams from his recordings, publishing activities and performances. However, Michael Cohl is cited in the book that the 360 deal is quite older. “If you go back to the Dick Clark Caravan or the early ‘50s, you’ll find that the record company owned everything. The way I remember it was that they not only owned everything, but eventually they became limited in their scope – they let the merchandise rights go; they let the touring rights go. The old tours were the record company trying to sell records. Nobody thought they were going to make money of any substance from touring.” (p. 310).
Under Michael Cohl’s guidance Live Nation signed further 360 deals: a twelve-years deal with U2 for $100 million in March 2008 (including touring, merchandise, image licensing, website and fan club rights); a ten-years deal with Jay-Z for $150 million in April 2008 (including touring, recordings, publishing, management and record label businesses); a ten-years deal with Shakira for $70 million in July 2008 (including touring, recordings and merchandise); a three-albums and touring deal with Nickelback for assumed $50-70 million (pp. 309-310).
However, the financial market was anything than convinced about the Live Nation’s new business modell, which was incorporated as Artist Nation within the Live Nation’s empire. Between the Madonna and U2-deals, Live Nation’s share price plummeted by 50%. Live Nation’s CEO Michael Rapino became more and more concerned about Michael Cohl’s strategy, when the latter started to sign also then unknown acts such as Zac Brown Band and Paolo Nutini. Since Live Nation did not want to become a record label, it stopped signing new 360 deals and parted with Michael Cohl, who left Live Nation/Artist Nation with a lump sum payment of $4.5 million (pp. 310-311). In fact, Live Nation has not signed another 360 deal as of early 2011 (p. 312).
Beyond the 360 deal troubles, Live Nation was struck by another desaster. CTS Eventim’s ticketing system crashed at the end of January 2009, when the tickets for the Phish reunion tour were put on sale. It became clear, that Live Nation was not able to compete with Ticketmaster and it was not a suprise, when both companies announced a $2.5-billion merger as an all-stock deal on February 10, 2009 (p. 314).
Such a mega-merger that united the world’s largest concert promotion company with the world’s leading ticketing company, which also owned a big artist management agency, was of course an object of antitrust-investigations by the U.S.-Justice Department. In addition, two congressional hearings on the case were held – one before a Senat’s and another before a House of Representative’s subcommittee. The hearings unveiled that both companies controlled a remarkably high market share in their specific markets. Jam Productions cofounder Jerry Mickelson testified that Live Nation controlled 75 amphitheaters, making it impossible for competitors to enter the market successfully. Ticketmaster’s CEO Irving Azoff admitted in the hearings that his company provided ticketing services to 87 of the top 100 concert venues in 2007 and to 84 in 2008 (p. 321). These figures underline the threat of a vertical monopoly in the live entertainment business by combining Ticketmaster and Live Nation. Both companies argued the merger by the bad economic environment, which forced them to join forces. Live Nation’s CEO Michael Rapino pointed out in the hearings that they lose $70 million for their 1,000 concerts in 50 amphitheatres and blamed it to the artists’ managers, who would demand incredible high upfront payments and a 90% stake in the ticket sales (p. 321). Thus, Live Nation had to earn the money back by the ancillaries – food, drinks, parking fee etc. Rapino calculated that his company made an average of $12 to 15 per person from ancillaries, but only an average of $4 per person on every $100 worth of from ticket sales. However, Rapino did not say in the hearings that is was SFX, which aggressively established the high upfront payments and 90% stakes in ticket revenue in order to gain a high market when it entered the concert promotion business in 1996. This was the starting point of an oligopolization process of a prior very fragmented market.
Despite all the hearings and antitrust-investigations, the motives of the merger were not directly addressed according to the book authors. Whatsoever, at the end the Ticketmaster-Live Nation merger was approved by the authorities in January 2010, but with several conditions. Ticketmaster was required to license a copy of it software to the world’s second largest concert promotion company AEG to enable it to launch its own ticketing system. Ticketmaster also had to divest of ticketing company Paciolan, which was acquired in 2008. Ticketmaster and Live Nation were also forbidden to take action against any venue owner who would use another ticketing or promotion service. Finally, firewalls have to protect confidential competitor data from the company’s promotion and management business. It will be a test of time if these conditions will prevent the new live entertainment giant from abusing its market power and if it will provide the basis for a competitive environment in the ticketing and promotion markets. However, the Ticketmaster-Live Nation merger marks the beginning of a new era in the music business at all, in which all activities within the industry become integrated from A&R management, music producing and recording, music sales and distribution to touring, ticketing, merchandising and sponsoring.
In this respect, “Ticketmasters. The Rise of the Concert Industry and How the Public Got Scalped” is a very valuable source to better understand the driving forces not only in the live music market but also in the music business at all.