Report: Live Nation At Odds With Ticketmaster Over Prices
September 26, 2006 at 10:34 AM (PT)
According a report in the L.A. TIMES, concert firm LIVE NATION and ticketing behemoth TICKETMASTER may be gearing up to butt heads over rising ticket prices. In the article, LIVE NATION CEO MICHAEL RAPINO details his desire to lower ticket costs, which last year averaged $57 per ticket for the most popular shows.
"Seventy percent of people didn't go to a concert last year, and even the average concert fan only attends about two shows a year," RAPINO told the L.A TIMES. "We can grow this industry by lowering prices."
We can grow this industry by lowering prices
The core of the cost-inflation issue appears to be TICKETMASTER's much-derided practice of collecting fees and surcharges from fans on all ticket purchases. These fees, which garnered TICKETMASTER nearly $1 billion in additional revenue last year, can boost already-expensive ticket prices nearly one-third.
Interestingly enough, industry insiders note that LIVE NATION pockets about 50% of the fees TICKETMASTER collects. These same unnamed insiders, who tell L.A. TIMES that if RAPINO really wanted to lower ticketing costs he could rebate those funds back to concertgoers, believe that LIVE NATION's real goal is to keep the other 50% of the fees collected for their events.
Indeed, sources close to TICKETMASTER wonder whether LIVE NATION, whose contract with TICKETMASTER expires in two years, may be using RAPINO's bluster as a negotiating tactic rather than being concerned with actual consumer relief. Those sources note that other concert companies have made similar public complaints about TICKETMASTER, only to re-sign deals with the company once they receive the terms and upfront payments they demanded.
Regardless of LIVE NATION's reasons, RAPINO's words come at an interesting time for the ticketing industry, which has seen the lion's share of consumer activity shift from store purchases to the internet.
"You don't need thousands of storefronts anymore because most tickets are bought through the Internet now," commented LARRY MAGID, a LIVE NATION executive who operates ELECTRIC FACTORY, a PHILADELPHIA venue. "There is an impression that TICKETMASTER has gotten too comfortable and arrogant. You have to be more responsive to fans nowadays."
"The history of the ticketing business was about barriers to entry, which kept TICKETMASTER protected," RAPINO said. "That has changed."
If RAPINO doesn't ink a new deal with TICKETMASTER, LIVE NATION could rely on its in-house online ticketing system, the third-largest in AMERICA. According to the article, TICKETMASTER stands to lose more than $130 million a year -- or about 14% of its revenue -- if it doesn't cut a new deal.
"It would be a huge deal if LIVE NATION left TICKETMASTER," said SAFA RASHTCHY, an analyst with PIPER JAFFRAY & CO. "If it happened, it could be the beginning of something very concerning to [TICKETMASTER parent company] IAC's investors."