Update: Breaking Down The DOJ Lawsuit

This submit has now been up to date with extra evaluation…

By Dan Wall, Government Vice President, Company and Regulatory Affairs, Reside Nation Leisure, Inc

• This lawsuit towards Reside Nation and Ticketmaster received’t cut back ticket costs or service charges.

• There’s extra competitors than ever within the reside occasions market – which is why Ticketmaster’s market share has declined since 2010.

• Internet income present Reside Nation and Ticketmaster don’t wield monopoly energy.

• This lawsuit distracts from actual options that might lower costs and shield followers – like letting artists cap resale costs.

The Division of Justice and a gaggle of State Attorneys Basic have now filed the much-anticipated antitrust go well with towards Reside Nation and Ticketmaster.  This follows intense political stress on DOJ to file a lawsuit, and a long-term lobbying marketing campaign from rivals attempting to restrict competitors and ticket brokers in search of authorities safety for his or her enterprise mannequin of scooping up live performance tickets and jacking up the value.

The grievance—and much more so the press convention asserting it—try to painting Reside Nation and Ticketmaster as the reason for fan frustration with the reside leisure business.  Regardless of admitting that “[t]he face values of tickets are sometimes set or authorized by artists,” it blames live performance promoters and ticketing corporations—neither of which management ticket costs—for prime ticket costs.  It ignores every part that’s really liable for larger ticket costs, from rising manufacturing prices, to artist recognition, to 24/7 on-line ticket scalping that reveals the general public’s willingness to pay excess of major ticket costs.  It blames Reside Nation and Ticketmaster for prime service costs—and simply the truth that there are charges—however ignores that Ticketmaster retains solely a modest portion of these charges. The truth is, major ticketing is among the least costly digital distributions within the financial system.

In mild of those knowledge, Assistant Legal professional Basic Kanter’s dodge of a reporter’s query about how a lot Ticketmaster contributes to charges was telling.

It’s also absurd to say that Reside Nation and Ticketmaster wield monopoly energy.  The defining function of a monopolist is monopoly income derived from monopoly pricing.  Reside Nation by no means matches the profile.  Service costs on Ticketmaster aren’t any larger than on SeatGeek, AXS, or different major ticketing websites, and are continuously decrease.  The truth is, when Ticketmaster loses a venue to SeatGeek, service costs often go up considerably.  And even accounting for sponsorship, an promoting enterprise that helps preserve ticket costs down, Reside Nation’s total web revenue margin is on the low finish of worthwhile S&P 500 corporations.

The trendlines verify Reside Nation’s lack of market energy.  Yearly, competitors within the business drives Reside Nation to earn decrease take charges from each live performance promotion and ticketing.  The corporate is worthwhile and rising as a result of it helps develop the business, not as a result of it has market energy that squeezes extra revenue from much less output.

Within the weeks main as much as at present, we met a number of instances with the DOJ entrance workplace. It was evident in our discussions that they simply didn’t wish to imagine the numbers.  The information conflicted an excessive amount of with their preordained narrative that Reside Nation belongs within the ranks of the opposite “tech monopolists” they’ve focused.

At backside, we’re one other casualty of this Administration’s resolution to show over antitrust enforcement to a populist urge that merely rejects how antitrust legislation works.  Some name this “Anti-Monopoly”, however in actuality it’s simply anti-business.  A central tenet of this worldview is that antitrust ought to goal corporations which have grown massive sufficient that in some nebulous manner they “dominate” markets—even when they attained their measurement by success within the market, not practices that hurt customers, which is the precise focus of antitrust legal guidelines. Some of the jaw-dropping components of at present’s grievance is the assertion that there are “limitations to entry”  as a result of “artists naturally choose to work with a promoter who’s profitable in selling many high-demand reveals at widespread venues”—particularly, Reside Nation.  That could be a supreme expression of competitors on the deserves, successful by being higher.  However to this group it’s anticompetitive.

The brand new considering can be waging struggle on vertical integration, usually and notably within the case of so-called “dominant platform corporations.”  There isn’t any authorized foundation for objecting to vertical integration on such grounds.  Antitrust legislation views vertical integration as procompetitive in most circumstances.  Because the main antitrust treatise states, “vertical integration is ubiquitous and … [in] the nice majority of circumstances no anticompetitive penalties might be connected to it.”  And, critically, Reside Nation can supply and has provided followers, artists, venues and the remainder of the reside leisure ecosystem higher costs and higher providers than they might obtain if these complementary companies had been separated.  Ticketmaster particularly is a much better, extra artist- and fan-focused enterprise below Reside Nation’s possession than it ever was as a standalone firm. The grievance is completely devoid of any response to that inescapable truth—as a result of DOJ has no reply for it.

The Obama Administration noticed issues in another way.  It allowed Reside Nation and Ticketmaster to merge, and in defending that place acknowledged that there was no authorized foundation for difficult the vertical points of the merger—particularly, permitting a big live performance promoter to mix with a big ticketing firm.  In a single submitting, it stated that it had “decided that it couldn’t show that the vertical integration ensuing from the merger would considerably hurt competitors within the live performance promotion market.”  There isn’t any factual foundation for concluding in any other case at present.

Assistant Legal professional Basic Kanter’s protection of in search of a breakup at at present’s press convention supplied no reasoning to help a breakup.  First, he has his antitrust legislation improper, as a result of the DOJ has way more energy to problem a merger, which is illegal whether it is possible to be anticompetitive, than below the monopoly commonplace which requires proof of precise anticompetitive results.  So the DOJ can’t shrug off the truth that it allowed Reside Nation and Ticketmaster to merge as a result of, because it admitted, it couldn’t show even a chance of anticompetitive results.  And even on this grievance, DOJ doesn’t contend the merger was illegal.  It’s simply pandering to the gang with a request for reduction that, for my part, it can’t presumably hope to attain below these circumstances.

It’s also necessary that the “different conduct” on this grievance is both precisely what the Obama DOJ addressed within the 2010 Consent Decree or has nothing to do with vertical integration.   It’s, as a substitute, a seize bag of disconnected alleged practices that might by no means justify the sort structural reduction DOJ seeks.

Oak View Group

The grievance makes two principal claims regarding Reside Nation’s relationship with the Oak View Group (“OVG”), a venue administration firm.  The primary qualifies as disingenuous, in that it’s premised on the concept that OVG was a severe potential rival to Reside Nation in live performance promotion.  OVG owns and manages venues.  It has by no means been a live performance promoter, nor aspired to be one—which is exactly the purpose being made within the e-mail DOJ quotes.  DOJ’s declare is predicated on two incidents during which Reside Nation and OVG had been discussing what to do when an OVG venue needed to e book an occasional present itself on a darkish night time.  To painting that as an settlement to not compete in live performance promotion is farcical—notably when the grievance defines the related promotions market as a marketplace for regional or nationwide excursions, and explicitly disavows the suggestion that “self-supply” of reveals from venue homeowners is a part of that market.

Regardless, OVG’s conduct as a venue operator is absolutely in line with each main enviornment and stadium within the nation—they should have an in home booker who helps fill in any other case darkish nights, however they’ve no real interest in systematically taking up the danger of ensures that could possibly be within the tens of millions of {dollars} for a present or tens of tens of millions of {dollars} for a tour.

DOJ additionally claims it was anticompetitive for Ticketmaster to compete for and win a ticketing contract OVG provided.  The speculation is that the contract gave Ticketmaster an unfair benefit in securing the enterprise of unbiased venues that had been managed by OVG as a result of it creates monetary incentives for OVG to “advocate for” Ticketmaster.  However there’s nothing remotely anticompetitive about that.  Business preparations that contain incentive or advertising funds are frequent all through this business (and lots of others).  Venue administration corporations like OVG and ASM are ready to advocate for quite a lot of service suppliers, together with however under no circumstances restricted to ticketing corporations.  So there’s competitors for the enterprise alternatives at each the venues they personal, which they management, and the venues they handle, which they don’t management however can probably affect.  Ticketmaster competed and received the contract on the deserves as a result of OVG decided it was the most effective ticketing system accessible.

Threatening Silver Lake

This declare reveals not solely a disregard for the information, but in addition deep hypocrisy.  The present DOJ and FTC have been vocal critics of personal fairness corporations making a number of investments in the identical business due to aggressive “entanglements.”  So was Reside Nation CEO Michael Rapino when, after it had already made an funding in OVG, Silver Lake Companions determined to spend money on the Australian reside leisure firm, TEG.  Rapino’s grievance was essentially the identical because the DOJ/FTC concern with personal fairness rollups:  it created a battle between OVG, which had turn into a detailed companion to Reside Nation, and TEG.  So, in December 2021 when a TEG worker wrote to say that it didn’t intend to compete with Reside Nation within the U.S., Rapino replied to Silver Lake’s administration that he didn’t care about TEG, however nonetheless had an issue with Silver Lake’s resolution to make a number of conflicting investments within the business.

There isn’t any fact that this temporary trade had something to do with Silver Lake’s resolution to promote its stake in TEG.

Unique Contracting

The go well with challenges unique ticketing contracts between venues and ticketing corporations.  That could be a observe that has been prevalent within the major ticketing enterprise for many years.  The truth is, DOJ investigated it within the Clinton Administration and selected to not problem it as a result of their investigation revealed that venues—the customers of major ticketing providers—most well-liked it.

That’s nonetheless how venues see it, and for good motive.  Main ticketing methods embody rather more than what a fan experiences when shopping for a ticket on-line.  They’re advanced venue field workplace administration methods, and every is exclusive.  Only a few live performance venues wish to have multiple as a result of they see it as not well worth the added prices and complexity.  So, the choice for practically all live performance venues will not be whether or not to have two or extra ticketing providers suppliers, however somewhat which one supplier to decide on. And since that’s how a venue seems to be on the world, it’s no shock that they—the venues—wish to undertake the contracting construction and create the bidding dynamics that may get them the very best deal from their most desired supplier.  Aggressive bidding for unique rights is the confirmed manner for venues to create bidding stress and maximize the worth of their ticketing rights.  In different phrases, exclusivity is a product of competitors for venues, not an anticompetitive observe.

Serial Promoter Acquisitions

One other a part of the Grievance asserts that Reside Nation has violated the legislation by buying, in serial vogue, various different live performance promoters.  The speculation is evidently that competitors has been thwarted as a result of, however for these acquisitions, the promoters would have acted as vital opponents to Reside Nation’s personal live performance promotion enterprise.

That premise is factually incorrect. In the course of the time interval at challenge (roughly the final ten years or so), Reside Nation has by no means acquired any U.S. promoter that might plausibly be seen as a significant potential competitor within the alleged nationwide touring market.  Take a look at the instance Legal professional Basic Garland raised:  Reside Nation’s 2016 acquisition of AC Leisure in Knoxville, Tennessee.  This was an acquisition of 1 promoter, who was in his 60s and trying to retire.  He approached Reside Nation trying to discover a good, long-term residence for his workers.  Reside Nation didn’t have a Knoxville workplace, so for $15 million it made the deal. Severely?  The DOJ is difficult that?

The truth is, most of our M&A exercise within the U.S. has been focused at discrete areas during which we successfully had no significant presence in any respect—most notably selling festivals, somewhat than commonplace reveals or excursions—or seizing alternatives to increase into new geographies. A variety of these offers, like AC Leisure, have been with promoters who had been on the cusp of retiring and had been on the lookout for a substitute for winding down the enterprise. The notion that these acquisitions someway materially altered the aggressive panorama in any manner that might be problematic is wholly untenable.

Amps

The Grievance has quite a lot of allegations round Reside Nation’s conduct with respect to amphitheaters it operates. Most surprisingly, the DOJ has alleged that it’s anticompetitive tying for Reside Nation to solely e book its personal amps.  That’s legally specious.  First, if that’s tying, then it’s pervasive throughout the business.  Numerous promoters solely e book venues they personal or function.  However it’s not tying, legally; DOJ’s tying verbiage is an effort to avoid the bedrock antitrust precept that no enterprise, even a monopolist, has an obligation to cope with opponents.  The Supreme Court docket has repeatedly affirmed this precept, and the slim exceptions to it don’t apply to this case.  Reside Nation—and each different vertically-integrated promoter/venue proprietor—has an almost unqualified proper to not cope with rivals.

The baseless nature of this declare is amplified by the truth that we have now—opposite to what DOJ alleges—allowed artists promoted by others to play our amps, and that, as we instructed DOJ repeatedly, we plan on voluntarily “opening” our amps to artists promoted by others.  The declare, subsequently, will not be solely legally groundless however virtually pointless.

Content material Leveraging and Barclays

For all of DOJ’s rhetoric about in search of “structural treatments” (i.e., a break up of the corporate), the huge bulk of the conduct the Grievance describes has nothing to do with the mixture of a live performance promoter and a ticketing firm residing below one roof. There’s one exception, nevertheless, which is the set of allegations about threatening or retaliatory conduct by Reside Nation, the live performance promoter, if venues change away from Ticketmaster.

That is among the many core conduct regulated by the consent decree that DOJ agreed to in reference to the merger of Reside Nation and Ticketmaster virtually 15 years in the past. I’ve written intimately in regards to the context and background of that settlement elsewhere, and received’t reprise that historical past right here. For current functions, the important thing factor to understand is that for the previous 4 years, a Monitor appointed by DOJ itself has been preserving shut tabs on Ticketmaster’s negotiations with venues and making certain that the corporate will not be utilizing live performance “content material” to drive ticketing offers. Throughout that interval, overlaying 1000’s of such offers, precisely one occasion of potential concern has come to the Monitor’s consideration.  In any other case, the Monitor has praised Reside Nation for its compliance program and an exemplary document of compliance.

The one occasion of a possible violation is in regards to the Barclays Heart in Brooklyn (referenced however not named within the grievance).  What the Grievance alleges about that drama is mostly unfaithful. The brief model of an extended story is that Barclay’s switched from Ticketmaster to SeatGeek. Six months earlier than that occurred, Barclays employed a significant New York legislation agency to threaten us with contract claims and consent decree violations for decreasing Reside Nation present counts ought to Barclays change to SeatGeek. We had been scrupulously cautious about documenting the enterprise the explanation why actually each present within the NY space over the related interval went to the venue it wound up at.  This contemporaneous document unequivocally disproves the rivalry that there was even a single occasion of retaliatory re-routing or something prefer it.  And as has been reported elsewhere, SeatGeek’s expertise and repair had been less than the duty of servicing main onsales, leading to Barclays firing SeatGeek, primarily for trigger.

Extra considerably, although, even when DOJ’s model of the Barclay’s story had been true (which it’s not), violating the consent decree with respect to one venue out of 1000’s wouldn’t quantity to a violation of the antitrust legal guidelines, which famously concern themselves with “competitors, not opponents.”  There’s a motive that is the one instance really recognized within the grievance: regardless of 18 months of investigation, DOJ discovered nothing else. On the finish of the day, nothing about this remoted incident (which DOJ willfully mischaracterizes) or anything on this grievance affords any foundation for DOJ to ignore, undo and upend the deal it made approving the Reside Nation-Ticketmaster merger and its personal statements to a federal decide that complaints about that vertical mixture lacked advantage.

Concluding Ideas

Reside Nation is within the enterprise of bringing the enjoyment of reside leisure to folks and to that finish connecting artists to followers and supporting a productive reside leisure ecosystem. That’s what we do—higher than anybody else—and what we’ll proceed to do as we problem this lawsuit.  Is the ticketing market complicated to customers?  Sure, it actually is.  And we have now been very clear within the halls of Congress and on the DOJ that we favor real reforms that might really assist followers get tickets on the worth the artist has set for them to pay.  Followers wish to see the bands and sports activities groups they love, and it infuriates them that tickets promote out on Ticketmaster and are then accessible by the a whole bunch on secondary on-line websites at double and triple the associated fee.  However the Authorities has chosen to do nothing about this.  As a substitute, it has filed a case which misleads the general public into considering that ticket costs will probably be decrease if one thing is finished about Reside Nation and Ticketmaster.  DOJ will not be serving to customers with their precise issues.  Because of this the federal government has by no means been much less widespread—as a result of they faux they’re fixing your issues when as a substitute they’re pandering to a slim set of political pursuits.

For added information and downloadable graphics please go to: livenationentertainment.com/information