Live Nation, US DOJ antitrust showdown will put ticket prices center stage

3 June 2024
By Chris May

Live Nation and Ticketmaster are defending against a US Department of Justice-led federal monopolization lawsuit seeking to break up the companies by claiming that high ticket prices aren’t an antitrust problem. 
 
Both sides acknowledge that hundreds of contracts are involved in putting on a single concert, but divergent narratives about the driving forces behind those deals and their impacts on competition in the live event industry are already a focal point in the case.

Live Nation claims ticket scalpers, performing artists and venue managers are the key players who shape the price of admission to live events at venues across the country. The company “will seek to prove that its piece of the pie is modest, and even if you cut it further, fan ticket prices aren’t going to change much,” former FTC Chairman William Kovacic told MLex.

Veteran antitrust litigator and Live Nation representative Dan Wall has also pointed to Ticketmaster’s 5 percent “take rate” and Live Nation’s 1.4 percent net profit margin in FY2024 to distance the companies from dominant Big Tech firms accused of cashing in from monopolistic abuses of market power.

The DOJ and a bipartisan multistate coalition allege in their lawsuit that Live Nation picks the pockets of artists, venues and promoters alike through the “Ticketmaster Tax,” a combination of inflated fees and revenues arising from a convoluted and anticompetitive web of agreements — “all at the expense of fans”.

Backing those claims are allegations of a laundry list of charges that can be tacked on to the face-value ticket price paid by fans, including those where Live Nation pays itself through double-dipping and one-sided negotiations backed by the threat of retaliation.

Believable numbers

“In the weeks leading up to today, we met several times with the DOJ front office. It was evident in our discussions that they just did not want to believe the numbers,” Wall, Live Nation's executive vice president for corporate and regulatory affairs, said in a statement shortly after the lawsuit was announced.

One number representing “the antithesis of market power” is Live Nation’s 2023 Adjusted Operating Income margin of 1.7 percent, according to Wall.

Operating margins are metrics relied on by investors to measure the profitability of a business and compare that profitability across competitors or other industries.

Two numbers Wall didn’t address are Live Nation’s 2023 operating margins of roughly 37 percent for its $2.9 billion ticketing business and 61 percent for its $1.1 billion sponsorship and advertising business.

Live Nation didn’t respond to requests for comment.

The DOJ and states claim those profits are plowed back into Live Nation’s “flywheel,” the low-margin concert promotion operations that give the company control over the content that feeds its high-margin businesses — including a "massive data trove".

“Live Nation’s ‘take rate’—the sum of the various cuts of fees and payments it takes through contracts across the concert industry — as the dominant intermediary is higher than it would be in a marketplace without Live Nation’s anticompetitive scheme,” the complaint said.

One way the DOJ and states can back up that claim is by spending millions of dollars on economists and other experts to model the way fans paid higher ticket prices because of Live Nation’s alleged kickbacks, bullying and exclusive contracts.

“The government will ask for all of the Live Nation-Ticketmaster’s pricing data, and they will have economists do massive regression analyses to show that prices were higher than they would be but-for the restraint,” attorney and antitrust law professor Jeffery Cross told MLex.

Such “but-for” analyses aren’t the only way to show antitrust harms linked to anticompetitive conduct, however.

For example, it doesn’t take a PhD economist to identify a problem with the alleged existence of communications between the top executive of Live Nation and the CEO of one of the company’s self-described “Biggest Competitor Threats,” where the latter says, “I never want to be competitors.”

While Big Tech companies are currently in hot water about ostensible antitrust compliance efforts that resulted in sanctions for spoliation, Live Nation’s attorneys have a different challenge: explaining internal documents from that same potential rival allegedly describing itself as Live Nation’s “pimp” and “hammer.”

As in any complex case with plenty of facts to choose from, a key question for both parties will be what evidence they put front and center, attorney Bradley Justus told MLex.

“Is it better if you try to drive this case toward a primarily expert-driven situation, or is it better if you focus on what the non-expert facts are,” Justus said.

The value of some facts will also depend on how they can be linked to others.

For example, the DOJ acknowledges that Live Nation pursues “break-even or even unprofitable exclusive promotion contracts on a standalone basis” with artists.  

Those non-existent margins could be an indication that fans are ultimately getting a good deal — unless the government plaintiffs can establish that such conduct is aimed at weakening rivals or locking in artist contracts that enable supracompetitive returns for Live Nation’s ticketing and advertising businesses.

Scalpers

One potential wrinkle in narratives from Live Nation and the DOJ about ticket prices is the industry built around solving the problem of a “sold out” concert — the so-called secondary ticketing services market.

Even if Live Nation’s Wall is correct when he argues that artists capping resale prices would save fans money, his company must also address allegations that the company is reaping financial rewards by keeping those prices high.

The DOJ and states’ complaint points to “Ticketmaster’s rapid increase in secondary market share” since 2019, but doesn’t include specific antitrust claims linked to markets for secondary ticket sales.

A private putative class action filed against Live Nation shortly after the government suit, however, has built its case around allegations that the company has profited by inflating ticket prices through the suppression of competition among ticket resellers.

Ticket buyers on secondary exchanges inherit the costs of supracompetitive face-value tickets due to “exclusive agreements with venues higher up the distribution chain for tickets to live concerts and events,” the lawsuit alleges.

The companies’ attempts to deflect blame for high ticket prices toward resale brokers will also be complicated by allegations that Live Nation directs Ticketmaster to set aside tickets for those same brokers through “ticket holds” and “ticket banks” on the condition that they are resold through the company’s platform.

The private plaintiffs contrast that alleged carrot with not a stick, but a “sword” — conditional licensing agreements that Ticketmaster can use to cut off broker access to its platform when they don’t play ball.

By allocating primary tickets for brokers who agree to resell those tickets only through Ticketmaster’s secondary ticket platform, the company’s conditional license functions as “the sword Ticketmaster wields against ticket brokers,” the complaint said.

Dynamic pricing

The DOJ, states and Live Nation appear to agree on one thing: the more control the company has over ticket prices, the more money it makes.

In a February earnings call with investors, Live Nation CEO Michael Rapino called expansion of Ticketmaster’s dynamic pricing services “a multiyear opportunity to continue to grow our top line/bottom line.”

Those services involve an in-house team “who wakes up every day working with artists, agents” and managers to be “a lot smarter” about ticket pricing, Rapino said.

“For tickets that are dynamically priced by Ticketmaster, whether as bulk or at the seat level, consumers often pay much higher face values,” the DOJ and states’ complaint said. Part of that is a result of higher fees, including an “inside fee” from promoters that amounts to a “double dip” by Ticketmaster, according to the complaint.

“And typically, it is Ticketmaster’s own pricing team that adjusts the face value of tickets based on demand for a particular show,” the complaint said.

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