Ticketmaster-Live Nation Merger Approved, With Conditions

By Daniel Indiviglio

Back in October, I wrote a few posts about the pending Ticketmaster-Live Nation merger, then under review. Britain seemed concerned with the union. So did the U.S. Justice Department. But its worries have been alleviated with some relatively weak concessions on the part of Ticketmaster. Consequently, the DOJ has pushed the merger through. I think this is a disappointing result and shows that the Obama administration's Justice Department won't be as strict as some thought.

Here are the conditions of the merger, via Reuters:

The U.S. Justice Department required Ticketmaster to license its primary ticketing software to a competitor, sell off one ticketing unit, and agree to be barred from retaliating against venue owners who use a competing ticket service.



And here's what one analyst from S&P thinks:

"The conditions seem to be relatively benign," said Tuna Amobi, equity analyst at Standard & Poor's. "There are no major divestitures required. I don't know that is going to create the kind of even, competitive field that was intended."



I agree. Recall, that this merger gives the new mammoth an approximately 80% control of the ticket market for concert ticketing and promotion. So it needs to spin off a division called Paciolan. According to a Reuters article about Ticketmaster's acquisition of the company back in 2008, here's what Paciolan does:

Privately held Paciolan serves 190 clients in North America, including college and professional sports teams, performing arts groups and museums.



So if the worry is for concert ticket sales and promotion, then how will selling Paciolan help? From what I understand, its business specializes in several aspects of ticketing, but not the kind of concerts or venues that Live Nation specializes in. So even without Paciolan, the new firm would easily have the concert ticketing and promotion market utterly cornered.

The software licensing requirement is also amusing. So let me get this straight: Ticketmaster will license its software -- meaning its competitors who use it have to pay the firm a fee. So it will profit from it, at worst. That doesn't sound too bad to me.

And I certainly hope they aren't talking about Ticketmaster's online ticket purchase system, because I don't know why anyone would want to obtain that software anyway -- the system is absolutely horrendous. One of the reasons I find this merger so troubling is because it makes for a world where it's less likely that some software innovation will occur to make for an easier and more effective ticketing process. With virtual monopoly control, Ticketmaster has no need to improve its operations, and the barrier is too high for competitors to have much impact on innovation.

As for the retaliation constraint, first it's hard to monitor. There are ways to subtly stick it to a venue without it being clear, outright retaliation. But more importantly, I don't think Ticketmaster has to really worry about venues using other services -- it will completely dominate the market already. This isn't a level playing field, where there are several big firms competing for business. This is like a town having eight Wal-marts and two mom and pop retailers. Wal-mart would hardly be concerned with its competitors: their days are clearly numbered.

At any rate, this development is very disappointing. It should make for a less competitive ticketing market where consumers are forced to pay whatever prices/fees Ticketmaster/LiveNation pleases for concerts. Not to mention how awful Ticketmaster's customer service will continue to be with no significant competitor out there to offer a favorable alternative.

This article available online at:

http://www.theatlantic.com/business/archive/2010/01/ticketmaster-live-nation-merger-approved-with-conditions/34226/