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Ticketmaster, Live Nation vie to fill power vacuum left by labels

When Live Nation, the world's biggest concert promoter, announced that it would begin selling its own tickets starting in January, it seemed like the beginning of the end for Ticketmaster. Instead, the move has triggered a war that is reshaping the entire music industry, with the two companies battling for a piece of every dollar fans spend on music, from concerts and merchandise to albums and digital downloads. "It's a seismic shift, in terms of what's occurring with the retail of tickets," says Jim Guerinot, manager of Nine Inch Nails and Gwen Stefani. "But it's far bigger than that. It's going to develop into a seismic shift in the selling of music."

From 2000 to 2007, CD sales plunged 36 percent, forcing record labels to lay off thousands. But concert revenues soared, from $1.7 billion to $3.9 billion — shifting power to touring artists, their managers and concert promoters. Live Nation CEO Michael Rapino used this clout to entice Madonna, Jay-Z and Nickelback to drop their labels and sign multimillion-dollar deals with Live Nation for touring, albums and merchandise.

At the same time, Rapino made the move to jettison Ticketmaster, whose technology and infrastructure Live Nation had relied on to sell 24 million tickets a year. The benefits Live Nation will accrue by selling tickets from its own Website are clear: The company can eliminate Ticketmaster's much-derided service charges, and make its site a one-stop music shop for artists it works with — selling tickets, albums, merchandise and more. "We took ticketing in-house to be able to say to the artist, 'We're now the pipeline to help you take whatever product you want to the fans,'" says Nathan Hubbard, CEO of Live Nation's new ticketing division.

Ticketmaster, faced with the loss of 17 percent of its business, made a dramatic move: On October 23rd, the company announced that it had purchased a controlling interest in Irving Azoff's Front Line Management — which represents nearly 200 major acts, including top touring artists from the Eagles and Jimmy Buffett to Christina Aguilera and Guns n' Roses — and installed Azoff as CEO of the combined company. "That was a sophisticated move," says Jonny Podell, an agent who represents Peter Gabriel and the Allman Brothers Band. "Whichever side gets Azoff has a lot of juice. He's going to come in like, 'You want to play my act, Ticketmaster's going to sell the tickets.' Azoff has this one line, 'Game's on!' He likes this shit."

Not surprisingly, selling tickets is just one business the newly christened Ticketmaster Entertainment Inc. plans to pursue. Azoff suggests that Ticketmaster could use its Website, from which some 141 million fans bought tickets last year, to sell digital downloads, CDs and merchandise. The company will also sell tickets in new ways; it recently announced a plan for fans to buy tickets directly from their BlackBerrys by the end of this year. "I have a blank canvas and a lot of paint," Azoff tells Rolling Stone. "We're not going to only sell tickets — we're going to market artists' careers."

With Live Nation and Ticketmaster each wielding increasing power over every aspect of the music industry, the first big change that fans are likely to notice will be a cutback on service charges. "The current model is broken — pretending a ticket is $75 when the fan understands the ticket is $100," Live Nation's Hubbard says. "Now there are no rules. For those artists who want to try something new and different, we're ready to try it."

The first to execute Live Nation's post-service-charge vision, though, was Ticketmaster's Azoff. In early November, he announced his biggest client, the Eagles, would tour in early 2009 with no service charges whatsoever. Although Ticketmaster owned a minority stake in Azoff's company before buying it, he criticizes the service-charge system as well. "If I'm a consumer and I add up the add-ons and it's $18.50, I'd go, 'I fucking hate Ticketmaster,' " he says. "Out of $18.50 in service charges, the building might have been getting more money than the act knew about."

Service charges are unlikely to disappear completely. "Most of the arenas where the real A-plus acts play have long-term contracts with Ticketmaster," says Randy Phillips, CEO of Live Nation's top competitor, AEG Live. "Even on a Live Nation tour, those acts are still subject to Ticketmaster deals."

Many in the business interpreted Live Nation's move as a declaration of war, but Azoff and Rapino have publicly adopted a conciliatory tone. Says Azoff, "We've done lots of business with Live Nation and will continue to do lots of business with Live Nation."

Both Live Nation and Ticketmaster stocks have taken a beating during the recent financial crisis. Although Live Nation's revenues climbed in the third quarter, Wall Street analysts have said they doubt the company will sell as many tickets in 2009 as it has in recent years. And Ticketmaster recently reported concert-ticket sales have dropped seven percent since July.

"What I'm seeing out on the road is that there's price resistance," says Weezer tour manager Stuart Ross, whose band dropped some seats to $10 on its fall tour. Does that mean most prices will go down? Not likely: A recent Live Nation report notes that revenue increased in part due to "higher ticket prices." "In a competitive world, artists usually make out very well," says Peter Katsis, senior vice president of music for the Firm, which manages Korn and Jane's Addiction. "I just don't know if it's going to translate to an advantage for consumers."

By STEVE KNOPPER

©Copyright 2008 Rolling Stone

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