3/07/2009

Is the Live Nation-Ticketmaster merger anti-competitive?




“Vertical integration on steroids” is how Jerry Mickelson, chairman of Chicago-based Jam Productions, characterized the plan to merge the nation’s largest concert promoter and ticketing agency. “This merger is much larger than just the ticketing business,” he warned. It could “monopolize the entire music industry,” because the two entities manage or have business agreements covering all music-related revenue streams with hundreds of major artists. (Chicago Tribune)

The new company will form a firewall to separate ticketing and promotion, Live Nation Chief Executive Officer Michael Rapino, who would be CEO of the combined organization, told lawmakers last week. “We would absolutely make sure that both divisions are separately run,” Rapino told a Senate subcommittee on Feb. 24. (BloombergSenator Chuck Schumer (D-NY) made no secret of his opposition to the deal, dismissing it as "monopolistic behavior plain and simple".
Ticketmaster investors will receive 1.384 shares of Live Nation for each held. The value of the deal, $216 million at yesterday’s close, has dropped 48 percent since the deal was announced February 10th. Live concert promoter Anschultz Entertainment Group (AEG) has resigned to terminate their agreement with Ticketmaster if the deal is approved by regulators, according to a letter AEG sent to the SEC on February 6th, four days before the deal was announced.
I first read of the proposed merger between Live Nation and Ticketmaster, the world's largest concert promoter and top ticket seller respectively, in a cover story on Ticketmaster CEO Irving Azoff in an edition of the Weekend Wall Street Journal from early February.  I had heard of the man but knew little about his story, which I admit to be very impressive.  The piece was biased, and understandably so considering it was a feature on Azoff's career and life, so there was no critical analysis of the merger or details of the terms. I finished reading with no opinion of how the deal would affect the music industry.

In Monday's Financial Times, the editorial board concludes that the deal "...would work against the fans in the longer term, no matter what innovations were on offer initially".  After reading the FT's compelling argument against the deal I began to think about the implications for the music business of the merger's success.  After reading Jerry Mickelson's full statement before Congress (see below) it became clear what the larger implications of the merger would be for the independent live music business- eradication.

Hopefully Chuckie Schumer has the last word...
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