Bob Lefsetz is right the Live Nation ticketmaster merge is all about money $$ and screw the fan

This is about money, not music.

If you want to point fingers, look to the long gone Robert Sillerman, not Michael Rapino or Barry Diller. They're just dealing with the aftermath of what Mr. X wrought.

Sillerman rolled up the concert promotion companies and then laid them off on Clear Channel. A brilliant financial exercise. You overpay for an asset, create a near-monopoly and then convince an outsider that what you've established is not only valuable, it has synergies with the core company.
This is Gladwell's rule in reverse. Without 10,000 hours of expertise in the field, Clear Channel ignorantly purchased SFX. And ultimately had to take a huge loss and spun it off.

Where Michael Rapino was left with a company with profit margins so thin, the "Wall Street Journal" dubbed it "a river of nickels".

Rapino tried to change the economics of the business. To have acts and promoters share in the upside. But he could not achieve this. One could say he too was lacking his 10,000 hours. How was he to compete with managers and agents with dozens of years of experience? An agent at the Concert Industry Consortium last weekend told me that he had sympathy for Live Nation. To be fair, revenues should be split 60/40 in favor of the act, with a minimal guarantee and a split of the bar revenue. But if this were done, he'd be out of a job, there'd be no need for his services. So, we end up with a public company, Live Nation, that can't make any money.
Except on ticketing.

That's where the profit is for promoters. Essentially all the profit. Live Nation could not continue to share this revenue with Ticketmaster. In order to make the stock go up, Live Nation had to establish its own ticketing entity. The fact that it doesn't work well is irrelevant. Where else are you going to go? The scalper? Oh, Ticketmaster owns its own. And it does resell its own tickets on TicketsNow. Yes, acts are scalping their own tickets despite Ticketmaster's denial. So, the consumer gets screwed. What else is new?

But when Ticketmaster is scalping its own tickets, it is guaranteeing the spread to the act. Yes, the vaunted act. The greed starts there. If you want to blame anyone, blame the act. That's why the fees are so high.
Because of the kickback to the act. And the need for profit by the promoter, after it's been forced to pay so much for talent.

So you've got two companies whose stock prices are mired in the depths.
Live Nation can only make money in tickets, even though it can't issue tickets for a huge quantity of its concerts because Ticketmaster still controls those rights, and Ticketmaster is losing a certain portion of revenue to Live Nation. And now with Ticketmaster having been spun off, analysts can do the math, and see that the ticketing organization's dominance will be eroded and that company's stock dives.

Ergo, a merger.

It's just that simple.

True, there's an effect on the music business, maybe even music itself, but that's not what the titans are worried about here. They're worried about their profit margins, their stock prices. Combining the two gives them a shot at rising on the market. And, as a result, the stock employees own rises and compensation packages are enlarged. Rocket science? No.

Antitrust violation?

Not in the Bush White House. In Obamaworld? Well, he limited compensation today, but that was only if you work at a bank, and you've taken federal bailout funds. The concert industry keeps touting higher grosses, they're not in line for a bailout anytime soon. The fact that we're not growing any superstars? The Wall Streeters are just as stupid as Clear Channel, they just don't get this, they don't see that at some point the Rolling Stones and the Eagles just won't be able to do it anymore, and then what?

But in order for a merger to be prevented, there must be a barrier to entry by third parties. Ticketmaster already controlled all that ticketing, Live Nation just carved out a part of it. There's no significant change if they merge. As for competing in the promotion sphere, AEG does quite well, thank you. (Actually, the "New York Times" is reporting that Ticketmaster might still merge with AEG, instead of Live Nation...) So, despite the cries from fans and the little people who will lose power and influence in the industry, a cold analysis of antitrust problems would seem to indicate this merger passes muster. Because you don't analyze antitrust violations on emotions, but the law. And the law doesn't appear to exclude a merger.

And then you have the acts. Live Nation's relationships with artists are the legacy of a failed strategy concocted by Michael Cohl. Who was doing the Sillerman act. Gussy up enough assets and sell to an ignorant third party. But what happens first, a sale or an empty wallet? Cohl was all in, he wanted to bet the farm, if you've tied up all the acts, someone will want to buy you. But Rapino got nervous and Cohl is gone and Live Nation has very few act relationships. But Ticketmaster has tons. They bought Irving Azoff's Front Line. Where does this leave Irving and the acts?

It appears this isn't Irving's deal. This is Barry's deal. He wants to save one of his core assets. The acts are gravy, another enticement for Live Nation. And Live Nation will do well by the acts. Rapino is dying to sell merch, monetize the fan transaction, artist relationships will help.

The loser? The labels. They're toast. They've given up fifty percent of sales through sheer ignorance. And rather than try to solve this problem, they're insisting new talent sign 360 deals. But why would anybody make such a deal, when the label has no infrastructure with regard to touring and merchandising? A label can break a Top Forty record, but the consistently successful touring acts are not those with recent radio hits. Lady GaGa can't sell out an arena, she'd be lucky to sell out the House of Blues. And we can state with near certainty, almost no one will want to see her five years from now. Labels don't sign career artists, they sign easily exploitable "talent", they want their money now. But forgoing the long term view, they've backed themselves into a corner.

Furthermore, Live Nation/Ticketmaster does not need recorded music sales to survive. The Ticketmaster/Front Line artists are pure management clients, there's not even guaranteed payments. But the Live Nation/Ticketmaster juggernaut is where most of the artists' revenues/profits lie, they're in the right place.

Which begs the question of why you'd want to be at a competitor? CAA has the most relationships, they can get you in a movie, they can broker a corporate relationship, but the Agency Group and Paradigm and William Morris survive. But, unfortunately, Front Line dominates in a way that CAA never did, Azoff has built a monolith even Michael Ovitz can envy. But, it is a renegade business, and management is about personal attention, it oftentimes doesn't pay to be with a behemoth.

But Live Nation/Ticketmaster doesn't mind. Because you're still going to come to them for your tour. After all, you want that guaranteed money.

And Wall Street is now enticed by so many assets being under one roof.
Management, concert promotion, ticketing...

And the fan is screwed. Consolidation has not helped the fan one bit.
Label consolidation reduced the variety of music. Promoter consolidation drove the price of concert tickets sky high. Music itself may be free, but going to the show is a once a year event. And after you've seen the dinosaurs, do you really need to go every year?

These are the problems facing Live Nation/Ticketmaster. Rapino says the average Live Nation customer goes to a show fewer than two times a year.
Can he lower prices to build the business? If you believe so, you also think he can single-handedly break new acts to stadium level and broker Mideast peace.

It's all about the Benjamins. And Rapino wants to keep his job. And the acts want that guaranteed money. And the public is at home playing wii, which is reasonably priced and delivers more cluck for the buck.

The music business' problems run deep. But their roots are so far in the past and those in charge are so into making money that change is almost impossible to achieve. We need new acts, who are primarily focused on music, not money, who appeal to broad swaths of the public. Instead, everybody wants to get paid and it's almost impossible to get noticed. What you're lamenting left the building long ago. It's calculated high finance today. This deal is just evidence of it.