WASHINGTON, DC – Today, U.S. Senator Herb Kohl sent the following letter to Assistant Attorney General Christine Varney of the US Department of Justice Antitrust Division. Kohl raises serious competition concerns and recommends the Antitrust Division approve the merger only if it determines that the deal is unlikely to lead to higher prices for consumers or cause substantial harm to competition in the concert ticketing and promotion markets.

July 27, 2009

Dear Assistant Attorney General Varney: 

I am writing to you about the proposed merger between Ticketmaster and Live Nation, which is now under review at the Justice Department. Our Subcommittee on Antitrust, Competition Policy and Consumer Rights held a hearing on the proposed merger earlier this year and I write to summarize the findings of our investigation into this matter. In brief, I believe this proposed merger presents serious competition concerns which should be reviewed carefully by the Antitrust Division, and that the Justice Department should approve this deal only if it finds that it likely will not substantially reduce competition in the concert ticketing and promotion markets. [1]            

This merger, if consummated, would combine two entertainment powerhouses and will transform the concert business. Ticketmaster is the nation's dominant primary ticket seller, selling in 2008 nearly 142 million tickets in the amount of over $ 8.9 billion for thousands of venues – including more than 80 of the 100 largest venues. Some industry experts estimate that Ticketmaster controls 70 to 80 percent of all concert ticket sales in the primary market. In the last year, it has acquired its own artist management company, Front Line Management, and a company that sells tickets on the secondary market, TicketsNow.com, which is the second largest in the industry.               

Live Nation is the nation's largest concert promoter. It owns or promotes concerts at 47 large amphitheaters, 11 smaller "House of Blues," 46 clubs and theaters, and 30 music festivals all across the country. It also manages dozens of marquee artists and owns an artist merchandise company. At the beginning of this year, it launched its own primary ticket selling business which has the potential to compete with Ticketmaster. In addition to ticketing for its own venues, Live Nation signed an agreement with SMG, a large venue manager, to provide ticketing services for all 216 of its venues starting in late 2009. Another growing aspect of Live Nation's business includes long-term, multi-faceted contracts with major artists that cover activities ranging from concert promotion and tours to merchandise sales (known as "360° contracts").            

Based on our investigation and testimony at our hearing, it is clear that this merger raises serious competitive concerns warranting thorough scrutiny. First, the merger presents a significant "horizontal" overlap in the primary concert ticket market. In January 2009, Live Nation launched a direct competitor to Ticketmaster's ticketing business. At the end of 2008, Live Nation terminated its previously existing ten year agreement by which Ticketmaster had an exclusive right to sell tickets at all Live Nation promoted concerts, preferring instead to start a ticketing business to compete with Ticketmaster (and as a result sold 5.8 million tickets in the first four months of 2009). If the merger occurs, this direct competition will be lost. Given Ticketmaster's already high market share, the impact of the loss of serious competition from such a large and well financed company as Live Nation is an issue that the Justice Department should carefully weigh when considering whether this merger is acceptable under the antitrust laws. This potential loss of direct competition in the ticketing business is particularly relevant to the issue of whether this merger is likely to harm consumers by, among other things, leading to higher ticket prices.           

Second, this merger raises several "vertical" competition issues. The deal will create an enormous, vertically integrated entertainment giant, which will control everything from artist management, concert promotion, concert venues, and merchandise sales to primary and secondary market ticket sales. The combined entities would be a company of unparalleled size and scope without equal in the market. The strength of this combination will make it very difficult for serious new national competitors to emerge or existing companies to compete in any of the sectors of the concert business controlled by Live Nation and Ticketmaster. For example, rather than the dozens of Live Nation owned concert venues being open to competition for ticketing, these venues can now be expected to solely utilize Ticketmaster's ticketing services. Being locked out of these concert halls is likely to make it difficult for any new significant ticketing service to emerge after the merger. [2] Likewise, independent concert promoters may find it very difficult to attract artists who could otherwise use the vertically integrated Live Nation/Ticketmaster for its range of services. This could, over the long run, cause a substantial decline in the number and viability of independent concert promoters. In addition, independent concert halls will likely be under strong pressure to use Ticketmaster's ticketing services if these venues wish to get booking from the leading acts promoted by Live Nation. Artists will also come under strong pressure to utilize the combined Live Nation/Ticketmaster given its control of so many venues, concert halls, the dominant ticketing service, and other ancillary businesses such as merchandise sales. This will in turn make it more difficult for smaller competitors or new entrants to gain a competitive foothold to offer better services for lower prices.                

Another serious concern created by this merger is that when independent promoters book artists at venues ticketed by the combined entity, they will have to reveal a treasure trove of competitive information about their ticket sales to their largest competitor for concert promotion. After the merger, when independent promoters book concerts at Live Nation owned or operated venues, or at the many other venues which utilize Ticketmaster's ticketing services, they will be forced to disclose this confidential information to their biggest competitor. Live Nation/ Ticketmaster will automatically have valuable information about independent promoters' business, such as customer email addresses, demographics of concertgoers, and pricing of tickets, which they can use to directly compete for concert promotion business. Indeed, at our hearing, Live Nation's CEO Michael Rapino acknowledged that the potential for information sharing was a valid concern arising out of this merger. [3]           

Finally, this merger may also have a negative impact on the secondary ticket market. While the secondary market has been at times the subject of consumer complaints, the existence of a fair and vibrant secondary market nonetheless has the potential for substantial consumer benefit. The secondary ticket market can work to the advantage of consumers by offering them both a place to sell unwanted tickets and to purchase tickets to sold out events. Ticketmaster's acquisition of TicketsNow.com last year, in combination with this transaction, may give the combined Live Nation/Ticketmaster the ability to effectively choke off the secondary market. Live Nation owned venues will now have an incentive to prefer their own captive secondary market seller rather than allowing the operation of a true free secondary ticketing market. Indeed, at our hearing Ticketmaster CEO Irving Azoff testified that he intends to continue his efforts to implement "paperless" ticketing, which may have the effect of eliminating the secondary ticket market, particularly if implemented at Live Nation venues after the merger.           

At our hearing, consumer witnesses testified that the problems arising from the Bruce Springsteen concerts in New York and New Jersey in February – where consumers seeking to buy tickets on Ticketmaster.com were diverted to TicketsNow.com where tickets were offered at prices at least two or three times higher than face value – could be a warning sign of things to come should this merger be consummated.[4] Critics of this merger argue that a combined Live Nation/Ticketmaster would have even a greater ability to manipulate the secondary ticketing market to the detriment of consumers.           

The merging parties primarily justify this deal on efficiency grounds, arguing that this merger will rationalize the market and create efficiencies which will ultimately serve consumers and lower the costs of promoting concerts. I urge you to examine these claims carefully, whether these efficiencies will truly lead to cost savings, and whether any purported costs savings are likely to be passed on to consumers. Given the size and scope of Live Nation today, and its development of an in-house ticketing business, there is a substantial question as to whether it needs to combine with Ticketmaster in order to gain meaningful efficiencies.           

I therefore urge the Justice Department to carefully scrutinize each of these issues under the antitrust laws, and only approve the merger should it determine that the transaction is unlikely to lead to higher prices for consumers, and is unlikely to cause any substantial lessening of competition in any aspect of the concert business. Given the already high market share possessed by Ticketmaster in the ticketing business and consumer complaints of high ticketing fees, special care must be taken to ensure that this merger does not create undue barriers to entry for competitors in the ticketing marketplace. Ensuring a vibrant and competitive ticketing and concert promotion marketplace should be a top priority for the Justice Department as it considers this deal.                  

Thank you for your attention to this matter.            

Sincerely,    

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