Ticketmaster Tried to Cobble Together Anti-Live Nation Coalition

You might have seen in the WSJ today that before the Live Nation merger proposal, Ticketmaster developed a strategy to defeat Live Nation by buying up major ticket brokers around the country.

So many different organizations were supposedly involved in these discussions, including not just the broker companies, but also AEG and Madison Square Garden, that it’s not shocking the plan fell apart because the group in the end was unable to overcome its trust issues with each other.

Here’s a key tidbit:

“Before Tickemaster Entertainment Inc., the nation’s leading ticket seller, and Live Nation Inc. decided to merge, Ticketmaster pursued a strategy to thwart the concert promoter’s plan to enter the ticket-selling business, according to several people familiar with the matter. Spearheaded by Irving Azoff, Ticketmaster’s current chief executive, the effort sought to combine several of the nation’s biggest ticket scalpers with Ticketmaster and other major concert-industry players…

“The goal of the initiative, codenamed “Project Showtime,” was to capture a piece of the sky-high prices charged by scalpers, which can exceed a ticket’s face value by hundreds, or even thousands, of dollars. They could then compete against Live Nation’s nascent ticketing business by offering to share the scalpers’ revenue with entertainers and venues…

“After months of talks, the initiative against Live Nation — which back then was in effect positioning itself as a competitor of both Ticketmaster and the brokers — fell apart amid mutual distrust, according to people familiar with the matter. Neither side was confident it would get accurate accounting from the other.”

It’s easy to forget that before the proposed merger back in February, Ticketmaster and Live Nation were fighting a pretty bloody war of attrition, matching each other move for move in terms of products, new business ventures and generally preparing to compete on every front.

With an ever-increasing likelihood that the merger will be permitted (at least from an outside vantage point, it appears that that’s the case), this story is helpful for pointing out that both TM and Live Nation still are looking at the secondary market as one of the most promising places to increase revenue.

But remember that the secondary market exists partly because people want to have liquidity for tickets they’ve bought (I sold some tickets I couldn’t use just the other day rather than avoid losing out altogether), but also, and I would say mostly, because of underpricing in the primary market.

The obvious solution if you control the tickets, the building and the act is to raise the price to the level that the secondary market would be getting.

So this rather complex coalition it was trying to build seemed to be based on getting the same results financially without raising ticket prices in the primary market, in effect pushing those price increases into the secondary market.  Presumably, people have higher tolerance for high prices there because it’s expected or because culturally, they already see brokers as overcharging.

Or perhaps because they feel brokers are providing a valuable service in sourcing good tickets.

Will the combined company try to achieve the same effect?  The knee jerk reaction is to say yes, but with TM divesting itself (if it can) of Ticketsnow.com, it would appear to be going in the other direction.

It wouldn’t surprise me therefore to see the combined company again reaching out to brokers in a similar way, replacing years of antagonism with a kind of negotiated peace treaty.  Could the recent blocking of brokers from the Ticketmaster site be the first step in that strategy?  In other words, if you as a broker are not a friend, you’re an enemy and therefore unable to access the system.

It’s tough to say, but it’s certainly interesting to follow.