MICAH LOEWINGER This is On the Media, I'm Micah Loewinger sitting in for Brooke Gladstone. This week, Beyoncé announced her upcoming world tour. And, well...

 

NEWS CLIP I love some Queen B, but here we go again. Presale tickets are underway on Ticketmaster. Another chance for the online entertainment box office to redeem itself following several past ticket sale fiascos.

 

MICAH LOEWINGER The most notable of those fiascos, the one that led to a congressional hearing, happened last November.

 

NEWS CLIP Ticketmaster essentially broke down during the pre-sale for Taylor Swift. Tickets leading to a major meltdown from Swifties heard across the Internet.

 

MICAH LOEWINGER Last month, senators convened to hear testimony from a Top Live Nation executive, that’s Ticketmaster's parent company, and from competitors in ticketing and concert promotion, antitrust experts and a musician — a significant step forward in what could turn into a consequential antitrust case.

 

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 LOEWINGER The senators and their comments drew inspiration from Swiftian lyrics.

 

SENATOR You have to have competition. You can't have too much consolidation, something that, unfortunately for this country, as a ode to Taylor Swift, I will say we know all too well.

 

SENATOR Ticketmaster ought to look in the mirror and say, I'm the problem. It's me.

 

SENATOR A purchaser of a ticket being able to sell it to someone else. I think it's a nightmare dressed like a daydream.

 

MICAH LOEWINGER That last voice was Mike Lee, the Republican from Utah. This hearing was a rare bipartisan affair, perhaps because Ticketmaster seems so unpopular right now, or because no politician wants to be seen as squaring off with Taylor Swift.

 

MOE TKACIK They came armed with the lyrics, but none of them, however, used the great lyric "Did you hear my covert narcissism? I disguised as altruism like some kind of congressman.”

 

MICAH LOEWINGER Maybe that wouldn't have served their interests, but it would have been topical.

 

MOE TKACIK Would have been self-defeating.

 

MICAH LOEWINGER Moe Tkacik and Krista Brown, are 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.

 

KRISTA BROWN In the eighties, he kind of 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. And instead, Fred Rosen made fans pay for what was essentially a kickback to the venue for exclusivity.

 

MICAH LOEWINGER They invented the service fee, which is basically offsetting that big principal amount of cash, the initial buy off, and they were spreading it over ticket sales that way. Is that the idea?

 

KRISTA BROWN Exactly.

 

MOE TKACIK And 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-nineties, there were some estimates that they were getting as big as $5 million. Similarly with the big rock promoters and the rock promoters often sort of controlled the venues where 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 LOEWINGER Is it legal?

 

MOE TKACIK 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. And by the early nineties, 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. But certainly in the 1980s, Ticketmaster was often accused of illegally predatorily pricing its services.

 

MICAH LOEWINGER And then in 1991, Ticketmaster bought Ticketron from giving Ticketmaster 90% of the market. Meaning, if you were a touring musician in the nineties, you were likely working with Ticketmaster whether you wanted to or not. And Pearl Jam, the legendary grunge band from Seattle, did not want to work with Ticketmaster.

 

KRISTA BROWN Yeah, they didn't want to work with Ticketmaster because they were, as you said, this grunge band that was kind of 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, and that just felt wrong to them. They wanted to keep their $20 per ticket and Ticketmaster very quickly said, We're not going to allow you to do that. That's not a) 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. And so Pearl Jam retaliated with what little they could by, creating a tour that avoided Ticketmaster completely.

 

MICAH LOEWINGER And that basically entailed going to out of the way towns and venues and kind of just rethinking the concept of a rock tour altogether.

 

KRISTA BROWN Completely.

 

MICAH LOEWINGER Did it work?

 

KRISTA BROWN No, unfortunately, it really didn't.

 

MOE TKACIK 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. It is our unilateral decision. So they sort of reached an impasse. And Pearl Jam saw from some of the factors that the North American Concert Promoters Association, that it wasn't just Ticketmaster that they were trying to negotiate with. It was this whole sort of ecosystem that Ticketmaster anchored, but the rules were enforced by this concert promoter. So they realized that there was this bigger machine that was against them and that just sort of 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'n'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.

 

MOE TKACIK They played this one show in Salt Lake City, and I forget what the venue was.

 

MICAH LOEWINGER It was on the Wolf mountain ski slope. They had to get real creative with their bookings.

 

MOE TKACIK 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 entreating 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. And 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 ten shows of its 15 day 12 city tour because of, quote, 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 LOEWINGER 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 bassist Jeff Ament were at the House of Representatives to begin 3 hours of testimony about Ticketmaster.

 

MOE TKACIK 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.

 

NEWS CLIP I want you to know, I think you're just darling, guys.

 

NEWS CLIP Others with a musical bent identified or tried to. I was trying to learn Black and Alive, [LAUGHS] and I'm still working on it.

 

MOE TKACIK So those were the most memorable, like snippets from the hearing, best 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.

 

AEROSMITH MANAGER 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 on that train. That's the problem that Aerosmith and I have with Ticketmaster.

 

MOE TKACIK There was a rock historian named Dave Marsh, who really explains the whole structure of how the industry worked. R.E.M.'s manager showed up, so there was a lot of really interesting testimony, but it was sort of seen as a big media spectacle at the time.

 

MICAH LOEWINGER 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 BROWN 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 these were sources that would have had a lot of useful information, kind of in a retaliatory sense of how powerful Ticketmaster was. So at the time, there were reports of a lot of confusion around why it was dropped.

 

MICAH LOEWINGER So as Ticketmaster 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. So how did SFX build its parallel dominance in the concert promotion business?

 

KRISTA BROWN Robert Silverman was a young man from the Bronx and he had historically been in the business of rolling up radio channels.

 

MOE TKACIK So Silverman 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 kinds of promoters virtually overnight. Between 1996 and 1998, it was like a bomb went off.

 

KRISTA BROWN 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 Ticketmaster did. And actually the two of them had exclusivity. So Ticketmaster had an exclusive arrangement with SFX from the early nineties. So they were again working in tandem despite the fact that they would not merge for another 20 years.

 

MICAH LOEWINGER And 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 they get approved?

 

MOE TKACIK I think that a lot of it honestly had to do with the fact that it was 2009 in 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. So 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 LOEWINGER After the Senate hearing on Ticketmaster, are you more hopeful? I mean, do you feel that the winds are changing or will this public reckoning just vanish overnight like it did with Pearl Jam?

 

MOE TKACIK There's a hugely different antitrust landscape. The questions that the congressmen 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 sort of superficial. They were trying to get autographs for their kids. There was that whole vibe to it, and that was very different. We have a really renewed bipartisan conviction that antitrust laws are something that should be enforced again. And you saw that on display at this hearing.

 

MICAH LOEWINGER Krista, why do you think this renewed scrutiny of Ticketmaster matters so much like what's on the line here?

 

KRISTA BROWN That's a good question. I think ultimately, you know, 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 LOEWINGER Because young people, people who may not pay a lot of attention to politics in the news, they like music.

 

KRISTA BROWN 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 LOEWINGER Krista, Moe, thanks so much.

 

KRISTA BROWN Thanks for having us.

 

MOE TKACIK Thank you.

 

MICAH LOEWINGER Krista Brown and Mo Tkacik coauthored the piece “Ticketmaster's Dark History in The American Prospect" last month.

 

Coming up when trust busting came to Hollywood. This is On the Media.

 

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