The Crescendo on Concert Prices

Enjoy the $3 tickets for Owl City; tickets elsewhere will now become even more expensive.

For the past year, the Department of Justice and the Federal Trade Commission have been deliberating on the merger between Ticketmaster and Live Nation Entertainment. Ticketmaster already controls roughly 80 percent of all concert ticket sales - imagine if we add data from other events like sports or theater. This merger would give Ticketmaster a virtual monopoly on all aspects of music concerts and festivals.

Live Nation exclusively owns or operates 139 of the nation’s largest venues and promotes nearly 150 top musical artists. Since record sales are about half of what they were in 2000 and the vast majority of online music is stolen (according to The New Yorker), artists rely on performances as their primary stream of revenue. Live Nation and the very few other promoters gain little from actual ticket sales; on average, 90 percent of ticket sales go to the artist. Revenue for Live Nation primarily comes from ancillary services of a concert - namely parking, concessions and merchandise.

So when combined, Ticketmaster and Live Nation form a behemoth conglomeration that controls all aspects of the concert experience. A single authoritarian corporation providing the consumer with the performer, the venue, the parking, the food and drinks, the T-shirts, the posters, everything. Ticketmaster provides the last piece of the puzzle for Live Nation: Ticket sales.

The actions of Ticketmaster are what economists and businessmen call “vertical integration.” This is the process in which companies, consumers and suppliers will consolidate into a few or single entity, therefore controlling all aspects of an industry. This is a style of business that Ticketmaster has truly embraced. Before deciding to merge with Live Nation, Ticketmaster acquired Front Line Management - a promoting group that works with over 200 artists.

We should not be so comfortable with these business practices. As a Feb. 8 New York Times editorial points out, there are “perils that arise from the emergence of a company that will operate on every level of its business.”

Though this case of vertical integration doesn’t perfectly match the textbook definition of monopoly, the effects on the consumer are the same - exorbitant prices. There are crucial examples in other industries where anti-competitive business practices have strangled a market and led to increases in price.

In a similar antitrust case, the Supreme Court will review a case involving the National Football League; American sports leagues have always proved fickle for antitrust regulators. After the NFL licensed Reebok to make all team-branded clothing, “The Economist” reports that the price of team jerseys promptly rose 40 percent and, team hats rose 50 percent.

Rival merchandiser to Reebok, American Needle filed an antitrust suit because they were getting squeezed out of their market. The NFL contends that they’re not a single entity but instead 32 separate clubs acting as one. Though licensing merchandise itself may not be an act of monopolization, the NFL has asked the Supreme Court to expand the ruling of previous courts to allow them to vertically integrate all aspects of their business.

The NFL scenario is one of many instances where anti-competitive behavior resulted in unnecessary price hikes. Our markets are rife with non-competitive business practices. For example, the health insurance industry is notorious for overwhelming market shares. To their credit, Republicans have been very critical of anti-competitive health insurance practices, arguing for legislation that would allow companies to sell insurance across state lines. According to the Center for American Progress, Blue Cross Blue Shield controls 83 percent of the market share in Alabama; the next largest competitor has only five percent. Maine, Rhode Island and Hawaii have companies that control over 78 percent of their respective market shares.

The price of health care is so extortionate that, according to a 2007 study by the “American Journal of Medicine,” nearly 70 percent of those who filed for medical bankruptcy were paying off insurance premiums.

In both of these cases - the NFL and health care - we can almost surely expect the result to be similar with the Ticketmaster and Live Nation consolidation.

The Federal Trade Commission and the Department of Justice are setting a dangerous precedent by allowing Ticketmaster and Live Nation to merge - even if they are just vertically integrating. Understandably, they do not have an easy decision to make, and the arguments in favor of vertical integration are strong ones. Though vertical integration can be seen as monopolistic behavior - like this writer contends - many proponents argue that it makes businesses more efficient and it keeps costs down. The result, they claim, will be lower prices for the consumer. I would only point to the two previous cases where, clearly, this result did not happen.

Besides, it is not the place of the government to protect the business practices of corporations; instead, government must protect the interests and general welfare of its people - we the consumers. Rising ticket prices, and the slew of fees that come with buying them through Ticketmaster, will ultimately make music more exclusive. This exclusivity will only perpetuate the existing problem of music piracy, as consumers will feel the pressure to find the music they enjoy as cheap as possible.

In its already desperate and fragile health, the music industry, specifically the realm of live performance, has taken a huge blow. Congress should challenge these anticompetitive practices of Ticketmaster and Live Nation to preserve the sanctity of music for the fans - as I hope it would in all cases of noncompetition in all industries.