AEG Considering New Ticketing Partner

As I said back in March, the potential Live Nation-Ticketmaster merger has an interesting effect on AEG:

” To Live Nation, they’re competitors in the sense that AEG Live is in the concert business, but of course, Live Nation is also a customer of its venues.  They’re a customer of Ticketmaster for ticketing in all their buildings too.

So if there’s a combined TM-LN, what does that mean for AEG?  They’re now a customer of their competitor, who is also their customer.

Yes, I think I got that right:  they’re a customer of TM’s ticket service, but they’re also a competitor to Live Nation, which is, by bringing its shows into AEG’s buildings, a customer of AEG.

Put differently, AEG would be a customer, a vendor and a competitor to this new TM-LN entity.”

But apparently, the threat of AEG leaving Ticketmaster as a ticketing service is as real as ever, according to this new article in Bloomberg today.

Tidbit:

“AEG is reviewing systems by Cleveland-based Veritix Inc., Major League Baseball’s Tickets.com and others, according to two people with knowledge of the discussions. The company also may build its own for $30 million or more, one of the people said.

Before proceeding, AEG is waiting to see whether the U.S. Justice Department approves the Ticketmaster-Live Nation merger, said the people, who sought anonymity because deliberations are private. The organizer of Michael Jackson’s comeback tour, AEG is Ticketmaster’s largest music client. Its plans may alter the ticketing landscape and affect regulators’ view of the deal.”

I’m of the view that at least Tickets.com if not also Veritix and something like Eventim are capable of delivering on the high volume needs of somebody like AEG.

And since this is not a negotiating tactic that’s being used against TM and Live Nation, it’s important to stop and ask what it is.

First, let’s stop and say that this is highly credible.  This isn’t an idle threat or something that’s too costly to follow through on.  In fact, depending on how they do it, it could be a very profitable move for AEG.  Not only that, but Live Nation, with less in-house expertise on this subject and a less seasoned partner than somebody like Tickets.com, did this same cut-over from TM a year ago.

Given that it’s not an idle threat or a superficial negotiating tactic, what else can we say about it?  The possibility of AEG dropping TM-LN actually supports the likelihood of a merger happening because it blunts the anti-trust argument when somebody like AEG can switch.

Is it conceivable that the DOJ would conditionally approve the merger if AEG were to drop the TM-LN service or, put differently, if TM were to give up AEG as a client?

It seems far-fetched, but I’m not prepared to dismiss the possibility.  If that’s the case, couldn’t the DOJ simply make a list of customers for TM and ask them to withdraw from their business?

Yes, it seems very meddling, but from a distance, it appears the government is in a meddling mood.

Since AEG operates widely in the UK, this could also be a remedy that was applied in the UK to similar effect, and it could give both governments the language they need to be able to coordinate a settlement.

Now, if AEG starts its own ticketing service, it’s a little different.  In that case, I believe that both governments back off and approve the merger with just a few face-saving conditions because AEG would have demonstrated that viable competition exists without any action on the part of TM.

But I really doubt that would happen.  There are too many good reasons to take an existing, right off the shelf system like Tickets.com and too few reasons to mess around with a new ticketing system.  AEG’s core business is real estate and the marketing of assets like concerts and sports teams.  Ticketing would be a retrograde step for them, especially when the organizations competing for their business are highly motivated to make them a financially sweet deal.

My prediction: AEG indicates to the government that it will remove TM as ticketing provider when the merger is approved; this makes it easier for the government to approve the merger, which happens later this year; AEG eventually replaces TM with Tickets.com.

But what do I know?