LN, TM Get Washington Grill

The proposed merger of Live Nation and Ticketmaster, dubbed “vertical integration on steroids” by Jam Productions’ Jerry Mickelson, came to Washington, D.C., Wednesday as the U.S. Senate Judiciary’s antitrust subcommittee spent more than 90 minutes taking testimony from industry leaders on both sides of the fence.

The committee put Live Nation CEO Michael Rapino and Ticketmaster Entertainment chief Irving Azoff on the target range, with Chuck Schumer (D-NY) in particular landing rhetorical hits on both, and with IMP’s Seth Hurwitz and Mickelson passing ammunition.

Rapino and Azoff were first to take the floor with introductory statements, following sometimes bloviating speeches from senators on subjects ranging from their first concerts to the elimination of college football’s BCS system.

Rapino cited an “irreparably broken music industry” as a reason for proposing the merger, saying the “business model is obsolete as an eight-track tape” and acknowledging the need to create value for shareholders.

“Our stock has declined by nearly two-thirds. Our real estate holdings have been gutted. Our hard work is not producing the rewards it should. We face the very real possibility that if we don’t find a solution, we could ultimately be bought by a foreign-owned entertainment conglomerate like the majority of the major record labels.”

Rapino told the panel that more than 40 percent of all concert tickets go unsold, and scalpers are to the concert industry what illegal downloaders are to the recording biz.

Azoff told the committee his history of loyalty to his artists and their fans, and explained his job will be to continue benefiting them as well as shareholders.

“I’ve been an agent, a personal manager, a concert promoter, a movie producer, an independent record label owner, a merchandiser, a music publisher, a record company CEO and, at times, a babysitter and a bail bondsman. I’m a founding member of the Recording Artists’ Coalition and staunch supporter of artists’ rights,” Azoff said.

“In 2005, I returned to my first love – the management of artists – at Front Line Management. While I’m honored to be here, if I wasn’t doing this right now, I’d be in the Rayburn Building with the musicFIRST coalition and all the artists who are seeking congressional support for the performance rights bill.”

He also raised the specter of the recent Bruce Springsteen ticketing snafu, blaming the problem on a computer “glitch,” which seemed to rankle the senators. Schumer was already loaded for bear on that subject, even addressing it in his opening remarks.

Schumer took aim first, blasting Ticketmaster for the Springsteen onsale fiasco and calling for the company to, at the very least, sell off its TicketsNow division.

In sharp questioning about TM’s acquisition of TicketsNow, Schumer elicited a somewhat surprising admission from Azoff that had he been with TM at the time, he would not have made the deal.

“I don’t think there should be a secondary market at all,” Azoff said. “I think it should be illegal. I’ve spoken with senior members of the company, members of the board, about why they even bought it.”

Hurwitz was the first to bring up what is likely the biggest concern for competing promoters when he said the merger would make it possible for the combined company to have access to his confidential sales and contract data. He took a swipe at Live Nation for following a “model of control” started by Robert Sillerman’s rollup of SFX.

“When is enough control too much? You can’t blame Live Nation any more than you can blame a shark for eating people,” Hurwitz said. “I’ve never had a problem with Ticketmaster that I couldn’t work out. But If this merger goes through, my biggest competitor will have access to all my ticket counts, onsale dates, contracts and history.”

Mickelson was even more emphatic, saying that in some cases his new rival would be able to financially profit from fees on Jam’s shows, as well as obtain data while not sharing theirs with him.

“If this merger is allowed, this entity will have the power to suppress competition and become a rival to not only promoters but venue managers, agents, merchandisers, apparel companies, licensees and sponsorships. It is vertical integration on steroids and … the poster child to show why this country needs antitrust laws.”

Under questioning by chairman Herb Kohl (D-Wis.), Rapino surprisingly concurred with his independent promoter rivals that data integrity is a legitimate concern.

“I would agree that is a concern on their part,” Rapino said. “We would make sure both divisions are separately run.” He stammered a bit when Kohl asked Rapino if he were willing to put up a “firewall” between companies to protect data.

“In theory, yes,” Rapino responded. “In terms of the data, the concert division should have no information about what Seth or Jam do.”

It wasn’t clear if Hurwitz or Mickelson bought that, but they did not buy his claim that Live Nation has a market share of only 38 percent, as Rapino testified.

“That’s not true,” Mickelson said, holding up a sheaf of paper and citing Pollstar box office statistics. “If he’s talking 38 percent, he may be including small clubs, but they control outdoor amphitheatres. They own 90 percent of the amphitheatres, and all the House of Blues and control other theatres. We won’t be able to compete.

“When you look at Ticketmaster, they have control of 90 percent of the Top 100 buildings. With 80-90 percent of the major arenas, can other ticketing businesses enter? I don’t think so. What could happen is Ticketmaster/Live Nation could say, ‘If you want my concerts, you have to use my tickets. If you don’t use my tickets, you can’t have my artist.’ That’s a huge concern.”

Sens. Kohl and Schumer grilled Rapino and Azoff about their motives for proposing the merger, and seemed unconvinced that they’d adequately answered them.

David Balto, a senior fellow from the Center for American Progress think tank in Washington, D.C., was also a witness before the Senate committee. He roughed up the corporate execs, calling the proposed company “monopolistic” and accusing Rapino and Azoff of concealing true motives for the merger proposal.

Balto had some harsh words for Rapino’s explanation that artist guarantees and therefore ticket prices are bid upward because of competition rather than the lack of it.

“Where Rapino suggests competition is bad, it’s a bedrock principle that competition is never bad; it’s always good.”


Testimony of Irving Azoff here:

Testimony of Michael Rapino here:

Testimony of Jerry Mickelson here:

Testimony of Seth Hurwitz here:

Testimony of David Balto here: