Micah Loewinger: Hey, I'm Micah Loewinger with the On the Media midweek podcast. Taylor Swift is still on tour and her fans are still having problems purchasing tickets.
News clip: I put in my code that Ticketmaster had texted me and I see this big red letter saying that my code is invalid, and I'm like, "Why?"
Micah: This has been going on since the launch of the tour at the end of last year.
News clip: Ticketmaster essentially broke down during the presale for Taylor Swift tickets, leading to a major meltdown from Swift's hold across the internet.
Micah: The lawyer representing fans in a lawsuit against Ticketmaster believes she knows why so many fans have been disappointed.
News clip: The merger of Ticketmaster and Live Nation. Since the merger, Ticketmaster has become this monopolistic company that determines ticket prices. They control all of the artists.
Micah: Earlier this year, senators convened to hear testimony from a Live Nation executive, that's Ticketmaster's parent company, and from competitors in ticketing and concert promotion, antitrust experts, and even a musician.
News clip: Senators say the recent merger between Ticketmaster and Live Nation made the company a monopoly, giving them control of 70% of the industry.
News clip: This whole concert ticket system is a mess. It's a monopolistic mess.
Micah: In February, I spoke with Moe Tkacik and Krista Brown, researchers at the American Economic Liberties Project, a left-leaning think tank which is part of a consortium that is pushing for the DOJ to break up the Live Nation monopoly. I spoke to them about an article they co-wrote that appeared in the American Prospect about Ticketmaster's 40-plus-year-history. The story starts with Fred Rosen, CEO of the company from 1982 to 1998, who with one move reinvented the industry.
Moe Tkacik: In the '80s, he flipped the entire ticketing service on its head by paying venues to get exclusivity for long periods of time. Ticketron was a monopoly beforehand and had the majority of the ticketing services for concert venues, but they had venues pay them for the service. Instead, Fred Rosen made fans pay for what was essentially a kickback to the venue for exclusivity.
Micah: They invented the service fee, which is basically offsetting that big principle amount of cash, the initial buy-off, and they were spreading it over ticket sales that way. Is that the idea?
Krista Brown: In addition, they would give these venues a big advance on the service charges they were going to bring in. They started off oftentimes around $500,000. By the mid-'90s, there were some estimates that they were getting as big as $5 million. Similarly, with the big Rock promoters, and the rock promoters often controlled the venues or they had a lot of sway over what the venues would do, Ticketmaster would advance non-recourse loans to help the promoters bid on the most expensive acts. Ticketmaster was almost like a financing company, but it is an anti-competitive strategy.
Micah: Is it legal?
Krista: That's actually not as clear-cut a question as we would probably like it to be. If you sell something below cost such that nobody can compete with you and stay alive, that is illegal or has traditionally been illegal. It's called predatory pricing. The thing is that in the 1980s, courts really started to chip away at the doctrine that had deterred companies from using that strategy.
By the early '90s when the internet entrepreneurs, we're talking Amazon, but we're also talking cosmo.com and pets.com, predatory pricing really became the reigning business model of every company in Silicon Valley for many years, and no one would ever think that something like that was illegal today. Certainly, in the 1980s, Ticketmaster was often accused of illegally predatorily pricing its services.
Micah: Then in 1991, Ticketmaster bought TicketTrump, giving Ticketmaster 90% of the market. Meaning if you were a touring musician in the '90s, you were likely working with Ticketmaster, whether you wanted to or not. Pearl Jam, the legendary grunge band from Seattle, did not want to work with Ticketmaster.
Moe: Yes, they didn't want to work with Ticketmaster because they were, as you said, this grunge band that was anti-consumerism. They really didn't like the idea that their tickets might be unaffordable to some, especially due to this company that they couldn't avoid. That just felt wrong to them. They wanted to keep their $20 per ticket. Ticketmaster very quickly said, "We're not going to allow you to do that. That's, A, not going to work for us."
Probably because they wouldn't have been able to cover the venue payments that were keeping their exclusivity, but also because they didn't want other bands to get away with a similar arrangement. Pearl Jam retaliated with what little they could by creating a tour that avoided Ticketmaster completely.
Micah: That basically entailed going to out-of-the-way towns and venues, and just rethinking the concept of a rock tour altogether.
Micah: Did it work?
Moe: No, unfortunately, it really didn't.
Krista: Pearl Jam were trying to get everybody to take a pay cut, basically. Ticketmaster started using the concert promoters, a group called the North American Concert Promoters Association to basically say, "We're not negotiating this with you. Our service charge is what we decided is, this is our unilateral decision." They reached an impasse and Pearl Jam saw from some of the faxes from the North American Concert Promoters Association, that it wasn't just Ticketmaster that they were trying to negotiate with. It was this whole ecosystem that Ticketmaster anchored, but the rules were enforced by these concert promoters.
They realized that there was this bigger machine that was against them. That just started to manifest itself in many ways, some of which Ticketmaster had no control over whatsoever.
News clip: It was another wild ride this week on the rock and roll roller coaster, that is the Pearl Jam tour. Last Saturday in San Francisco, Eddie Vedder, who'd been hospitalized earlier for a stomach virus, left the stage after seven songs, unable to continue.
Krista: They played this one show in Salt Lake City, and I forget what the venue was.
Micah: It was on the Wolf Mountain Ski Slope. They had to get real creative with their bookings.
Krista: Yes. Apparently, it was extremely, extremely cold in the summer in Salt Lake City and all the fans just wanted to go home. It was a freak weather event. There was a fairground in San Diego where they organized another of their shows that was a non-Ticketmaster venue, but the San Diego Sheriff's Department wrote up a 14-page memo in treating the powers that be in San Diego to cancel the event because it was just too much of a security risk, and the promoters didn't know what they were doing.
It turned out that there was some security consultant who had worked for the concert promoters that had been involved in drafting this memo, and maybe they'd been put up to that. There were all these things that seemed to happen along the way.
News clip: On Sunday, Pearl Jam suddenly canceled the remaining 10 shows of its 15-day 12-city tour because of "continued controversies associated with attempting to schedule and perform at alternate venues." In other words, the difficulty of finding arenas which are not in business with Ticketmaster has become more trouble than it's worth.
Micah: President Bill Clinton's Justice Department was watching this Pearl Jam debacle play out in real-time. The DOJ asked the band to file a complaint, and Congress invited Pearl Jam to testify in a hearing about Ticketmaster in 1994.
News clip: Pearl Jam played Capitol Hill on Thursday as guitarist Stone Gossard and bass's, Jeff Ament, were at the House of Representatives to begin three hours of testimony about Ticketmaster.
Moe: I think that the hearing was most memorable for just being a massive media spectacle. MTV News was a huge deal at the time. Everybody watched it on a daily basis.
News clip: Some house committee members had fun with witnesses, perhaps better known by some of their younger staff members.
Congresswoman: I want you to know, I think you're just darling, guys.
News clip: Others with the musical band identified or tried to.
Congressman: I was trying to learn Black and Alive, and a couple of--
Congressman: --I'm still working on them.
Moe: Those were the most memorable snippets from the hearing that's told to the media. When you go back and read the transcript of the hearing, there are so many memorable moments. Aerosmith's manager showed up and testified, and gave some really fascinating testimony.
Speaker 12: Steven Tyler, Aerosmith's lead singer said to me, "Mussolini may have made the trains run on time, but not everyone could get a seat in that train. That's the problem that Aerosmith and I have with Ticketmaster."
Moe: There was a rock historian named Dave Marsh who really explained the whole structure of how the industry worked. RM's manager showed up, so there was a lot of really interesting testimony, but it was seen as a big media spectacle at the time.
Micah: In 1995, after the hearings, the Department of Justice issued a strange two-sentence press release announcing that they were done with the investigation. What was their explanation? What happened?
Krista: Well, they didn't give an explanation, which is why it was two sentences. It raised a lot of eyebrows. People who had been asked to be interviewed for the investigation, they didn't even do the interview, and sources that would have had a lot of useful information in a retaliatory sense of how powerful Ticket Master was. At the time, there were reports of a lot of confusion around why it was dropped.
Micah: As Ticket Master was coming to dominance within the ticketing industry, there was a similar consolidation within the rock radio and concert promotion business led by a company called SFX, which would later be bought by Clear Channel and renamed Live Nation. How did SFX build its parallel dominance in the concert promotion business?
Krista: Robert Sillerman was a young man from the Bronx, and he had historically been in the business of rolling up radio channels.
Moe: So Sillerman sells out-- sells his radio station Roll Ups to a group that then became Clear Channel and gets into this concert promotion business, and buys something like 20 independent concert promoters virtually overnight. Between 1996 and 1998, it was like a bomb went off.
Krista: There were a lot of local stories around how initially the promoters wanted to remain independent, but within a year or two, would sell out, and SFX gained massive market share at the same time as Ticket Master did. Actually, the two of them had exclusivity. Ticketmaster had an exclusive arrangement with SFX from the early '90s. They were again working in tandem, despite the fact that they would not merge for another 20 years.
Micah: In 2010, Ticketmaster and Live Nation officially merged. How did this deal between these two massive companies, both with a known history of anti-competitive practices, get by regulators at the time? How the hell did it get approved?
Moe: I think that a lot of it honestly had to do with the fact that it was 2009 and the depths of the recession. It was a really desperate time for concerts. People weren't spending as much money on going to see live performances. I don't think that in the grand scheme of things, the Obama administration was in the mood to be rejecting mergers, even though it was clearly anti-competitive and joining two very anti-competitive forces.
Micah: After the Senate hearing on Ticketmaster, are you more hopeful? Do you feel that the winds are changing, or will this public reckoning just vanish overnight, like it did with Pearl Jam?
Moe: There's a hugely different [unintelligible 00:12:37] landscape. The questions that the congressman asked at the original Pearl Jam hearing, the way that the whole ordeal was approached by our public servants, was like it was a sideshow. It was superficial. They were trying to get autographs for their kids. There was that whole vibe to it. That was very different. We have a really renewed, bipartisan conviction that antitrust laws are something that should be enforced again. You saw that on display at this hearing.
Micah: Krista, why do you think this renewed scrutiny of Ticketmaster matters so much? What's on the line here?
Krista: That's a good question. I think ultimately, it's a ticketing service, and this is not the most important story in market dominance out there, but I think it's one that everyone is aware of.
Micah: Because young people who may not pay a lot of attention to politics in the news, they like music.
Krista: Absolutely. It is a swelling movement and so many fans are willing to speak out about it. I think it is the type of suit that would restore the public's faith in our regulatory body.
Micah: Krista, Moe, thanks so much.
Krista: Thanks for having us.
Moe: Thank you.
Micah: Krista Brown and Moe Tkacik co-authored the piece Ticketmasters Dark History for the American prospect.
Stay tuned for this week's show when Brook asks, What's Up With CNN?
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