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Correspondent
Concerts are the largest and most profitable revenue stream in the flagging music business and now its two most powerful players are facing a roadblock to their plan to combine.
As the Department of Justice scrutinizes Ticketmaster [TKTM
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] and LiveNation's [LYV
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] proposed merger here in the US overseas the UK's main antitrust regulator already decided it has some problems with the combination of the ticketing giant and the world's largest concert promoter. This morning Britain's Competition Commission provisionally ruled against the planned merger, saying it "will limit the development of competition in the market for live music ticket retailing."
Britain's Commission has a specific complaint: it's looking to protect CTS Eventim AG (XETRA: EVD.DE), a German ticketing company, and the second largest in the world after Ticketmaster. Before the merger announcement CTS signed a deal with Live Nation to partner on live music and events in the UK. Now the concern is that Live Nation, when partnered with Ticketmaster, would have every reason to keep this new player out of the UK market. The regulators certainly aren't determined to block the merger, and they offer up some potential solutions, like insisting that Live Nation use a retailer other than Ticketmaster (i.e. CTS) to handle some of its events in the UK, or that the two companies sell some of their British businesses.
This isn't as bad as it seems.
Miller Tabak analyst David Joyce points out that Live Nation and Ticketmaster entered this deal knowing that they would have to sell some of their assets, and the Commission's suggestions play right into expectations. Joyce also points out that LiveNation was going to have to pay a royalty to CTS for using its ticketing platform, so pushing Live Nation to work with CTS doesn't add any extra costs to the equation. Bottom line: nothing in this complaint is unexpected, and there’s nothing here that can't be dealt with to get the merger approved.
As the Commission finalizes its report before November 24 and the Department of Justice completes its review, the two companies are defending their merger as a much-needed shot of energy in the struggling music business. Ticketmaster rightly points out in a statement that the live music business is the driving force in the industry now that the record business has been taken down by piracy and digital distribution revenues haven't compensated for the difference. The statement reads: "We believe this merger will build a more efficient and effective company moving forward and that working together we will be able to help achieve needed change that will strengthen a flagging music industry."
Ticketmaster and Live Nation are acutely aware of concertgoers’ complaints about its service, and regularly announce services and deals to give music fans easier, cheaper access to concert tickets. Last week Ticketmaster launched "NFL Ticket Exchange," with a new way to validate ticket barcodes, to enable a secondary market for football tickets. Live Nation continues to promote "All-In" no-fee prices. My point being, the companies get the problems and they know they have to make consumers happy, especially if they're going to convince the D.O.J. to let them be the only way for consumers to get to a major concert.
I can't help but think of Sirius and XM Satellite Radio and the battle they waged with regulators to get their merger approved. They had to convince Washington that there was so much other competition out there for consumers' attention and entertainment dollars, from terrestrial radio, to iTunes [AAPL
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], to Internet radio, that it wouldn't matter if there were only one satellite radio provider. They turned out to be right, having a monopoly hasn't insulated Sirius XM [SIRI
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] - take a look at its stock hovering around 54 cents. The live concert space is different than the radio business, or is it? These days as Sony [SNE
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] starts putting more music events into movie theaters, will the concert companies be able to argue that they face more competition for entertainment dollars than ever? We'll see what the DOJ says.
Questions? Comments?
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