Tuesday, April 7, 2009

Will potential Live Nation/Ticketmaster merger change live concerts, as we know them? Answer: YES

By Omar Afra

Full Disclosure: Free Press Houston sells advertising to Live Nation. They may or may not get upset about this and discontinue their purchases. I hope not. We need the bucks. We will sell our souls in any direction but will not squash our editorial.


“Twenty-one dollars for 2 drinks?!” I yelled with utter contempt to the bartender at the then newly opened House of Blues. I had ordered 2 Greyhounds-- a simple mixture of grapefruit juice and what was probably McCormick’s vodka. That’s a profit margin of more than 1200%. What topsy-turvy business plan in the world required such an overzealous mark up? I had to ask myself if the masters of this event and Live Nation, the owners of House of Blues, were making enough at the door to make this a worthwhile venture. And therein lies what is and what will be one of the most paradigm shifting events in the concert industry. Live Nation is in the works to merge with ticket retailing leviathan Ticketmaster.

For all intents and purposes let’s just call Live Nation by its rightful name: Clear Channel. ‘Live Nation’ is merely the veneer of Clear Channel from where it spun off, the media giant that hustles everything from radio, to billboards, to concerts. Live Nation already dominates the landscape of the concert industry. The behemoth now acts as a record label, concert promoter, and often, agent for bands. Big Ticket names like U2, Jay Z, and Madonna have inked deals for touring, albums, and merchandise. They own medium size venues like House of Blues all they way up to big-ticket stadiums. So how does one company get such a lock down on a single industry? It goes like this: Live Nation outbids all of it’s competitors for band guarantees even if it means taking a loss on that particular revenue stream. This way they can force out competition and make every last nickel on all the peripheral sources of income that come with a concert. That’s where my Greyhound comes in. After paying exorbitant guarantees to bands, the company has got to make money somewhere, right? So things like parking, snacks, drinks, and merchandise are marked up to the point of disbelief. To top it off, they often have in their contracts a 60% ownership to all merchandising. Now, in an era in which bands are making the lion’s share of revenue on live shows and merchandise because people don’t purchase albums anymore, this hurts both the band and the consumer. But you have to play the devil’s advocate and ask if a bigger, badder Live Nation equals efficiencies in the concert industry. Does a singular entity controlling all of concertdom mean cheaper more streamlined purchases? Not at all if this merger with Ticketmaster makes it way through congressional approval.

So what exactly does a merger between the world’s largest concert promoter and the world’s largest ticket retailer mean for concertgoers? Higher ticket prices, yes, but that is just the tip of the iceberg. As anyone knows, Ticketmaster makes it’s money from charging ‘processing’ and ‘convenience’ fees on every ticket it sells. This fee ranges from $5 to $50. Yet Ticketmaster has recently engaged in such an unscrupulous practice that it is making enemies of the very artists it sells tickets for. Let’s examine the case of Bruce Springsteen. The Boss, being the nice folksy guy that he is, booked his last tour with the hope that a general admission ticket can get you anywhere if you buy it on time. You know the story: You sleep and the rain and camp out in line for your favorite band in order to get the best seats possible. This is an American practice that has been hallowed throughout the ages and is a rite of passage for young music enthusiasts. Well, here is how Ticketmaster has rolled with Springsteen and many other artists in recent days: When you are online to purchase a ticket, and do so in a timely manner to get the good ones, upon selecting primo seats that are still available, Ticketmaster redirects you to a third party retailer (SCALPER) who charges double, maybe triple of face value. Now we have dealt with scalpers for decades but the insult here is that Ticketmaster owns the online scalpers. You got it, they are scalping their own products. They shut out any act or venue that doesn't use them by signing exclusivity agreements with over half the acts and venues. This virtual monopoly is growing and with Live Nation's help it will know no bounds.

So obviously the Justice Department sees the danger of monopolization and barrier of entry of any potential competitors. Ahhh, but TicketMaster has tread this ground before as it attracted the ire of antitrust regulators throughout the 90s for its domination of ticket sales. ( Remember Eddie Vedder’s gripes? Me neither.) “From an antitrust perspective, I do think it's going to get an extensive and thorough investigation by one of the two antitrust agencies — maybe more likely the Justice Department than the FTC, because the Justice Department did a monopoly investigation of Ticketmaster in the 90s," said Marc Schildkraut, a former assistant director of the Federal Trade Commission's Bureau of Competition. Neither company is likely to be pleased that the Justice Department, and not the Federal Trade Commission, has chosen to look into this. But frankly, the two companies have recruited a lot of top-dollar lobbying muscle to help them sell the proposed mega-merger on Capitol Hill, in addition to a list of impressive and well-connected names on the companies' boards of directors. Ticketmaster has retained former Rep. Mel Levine's (D-Calif.) lobbying firm, Gibson, Dunn & Crutcher. More importantly, Live Nation's board members include director Ari Emanuel, brother of President Obama's chief of staff, Rahm Emanuel, and Ticketmaster's board boasts director Julius Genachowski, a Harvard classmate of the President and a co-leader of the transition team's policy work group on technology, innovation and government. Laughably, Live Nation CEO Michael Rapino has been prancing around capitol Hill saying how much his company is hurting in these “tough economic times.” Really? That stands in contrast to his speech at his shareholder’s meeting where he talked up the state of the company:

“Our competitive advantage lies in our global concert platform that spans multiple cities throughout 19 countries, staffed by the most experienced promoters and marketing personnel in the business, selling directly to over 40 million fans, servicing 1,000 artists annually through our 16,000 concerts...”

But let’s spit some real talk and run through an itemized list of potential list of expenses if you and a friend want to see your favorite band if a Live Nation-Ticketmaster merger makes it though the halls of the best government money can buy (numbers based on Live Nation- Ticketmaster data):

65.00 x 2 to see ‘Artist X’ (130.00)
10.30 x 2 for ‘Convenience Charge’
2.00 x 2 ‘Building Facility Charge’
10.00 Parking
42.00 for 4 Greyhounds (Well Vodka)
50.00 for 2 T-Shirts
=
256.60

And that’s all assuming you get the ‘cheap seats’ and not the scalped ones via Ticketmaster's very own third party rip off. So there you have it. Live music has made it’s way into Super Bowl pricing brackets. And if this merger goes through, most shows will be as such because this Goliath will have managed to force out all the competition. But this formula not only applies to big box shows. This will have a similar effect on small and medium size venues. Understand, Live Nation often outright owns or has contracts with your favorite medium size venue such as House of Blues. They are managing to slowly force out venues that have no affiliation with them. Well, the insult to injury is that if this merger succeeds, bands that have a contract with Ticketmaster will no longer be playing at the independent venues. So most importantly, the final victim is the art form itself. Medium size venues are often the breeding grounds for great artists who are on the precipice of wide acclaim yet have not crossed the threshold. It is in the gritty, independent venues where they hone their song craft, learn to play before larger crowds, and develop following beyond their local dive. Additionally, gone will be the days when your favorite local band opens for your favorite touring band. That phenomenon will be a relic of the past as Live Nation never merges such bands. So the effect of this goes well beyond your pocket book and cuts to the core of our appreciation of music itself. Would bands like Nirvana, TV On The Radio, or At The Drive In, who rose out of 600 capacity venues, be able to rise up in such conditions. I am afraid to say no but it is a likely outcome. A forward march towards musical homogenization would ensue and Live Nation-Ticketmaster has no problem with that. Oh and BTW, word on the street is that House of Blues lost half a million bux in the last few months, had to lay off quite a few staff members, and is gonna raise drink prices. 20 dollar Greyhounds anyone?

I implore you to contact your State Senator and/or the Department of Justice and voice your feelings on this issue. Here is the info:

Department of Justice:
202-514-2558
[email protected]

U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001

Texas State Senators:
Cornyn, John - (R - TX) (202) 224-2934

Hutchison, Kay Bailey - (R - TX) (202) 224-5922



What it means: At the time this chart was done by Live Nation, approximately 2007, they merely controlled the three black arrows in the middle. If the merger with Ticketmaster goes through, it will control every aspect of the business between the artist and the fan, except for the booking agent.

However, given that Ticktemaster/Live Nation also would manage artists -- like Madonna, depicted here long before she signed her 360 deal with Live Nation -- the booking agent would become extinct soon enough. Why would the company, in its role as manager, want to hire an agent to negotiate with the company, in its role as promoter and ticket-seller?

Friday, April 3, 2009

99 Problems: Your Children Don’t Need the Grand Parkway

by Jay Blazek Crossley



If you look at a map of migratory bird routes for the Western Hemisphere, they usually show a series of lines that reach out across North America and converge at a point just before making the leap over the Gulf of Mexico to then spread out across Central and south America. That point of convergence is the coastal prairies of Texas, including the once great Katy Prairie, most of the Western side of the growing metropolis of Houston starting at about Loop 610 and stretching out westward.

Apparently because of the prospect of using stimulus funds to cover half the cost, Harris County and the Texas Department of Transportation have awarded around $20 million over the last two weeks to consultants who will plan construction of segment E of the Grand Parkway that will drive through the heart of the Katy Prairie. While this will certainly preserve jobs at these firms and their associated contractors, any number of transportation improvements could have produced more jobs, a better city, and less devastation to one of the most diverse eco-regions in the United states, of which the Katy Prairie is but one of at least 10 unique ecosystems in the Houston region.

You may have heard that the suburbs are growing in Houston, that sprawl is the nature of Houston, and that we’re doomed to spread out forever driving by ourselves in an SUV. The funny thing is that you probably picked up the Free Press at a record store, bar, or coffee shop and you probably were standing on your feet at the time. The really funny part is that while every Houstonian is not like you, you represent a much bigger chunk of our population than you think. And the neighborhood you picked up that Free Press in is actually growing faster than the suburbs.

The Woodlands was the most active single development in the Houston region in 2006 building 1,440 new homes. In that same year, 992 apartment units were under construction on Richmond Avenue between Main Street and Kirby. Those homes in the Woodlands are spread out over 24 square miles of land, while this little stretch of Richmond is just one of the many busy avenues across the Houston region with thousands of families walking, driving, and riding transit as part of their complicated lives that are not monolithically auto-dependent.

Not that the Woodlands is a bad place to live. Their plan has been for years to densify the center of the development to make possible the sort of things all of us want close to our homes, such as retail, coffee shops, safe neighborhood schools, and – on the top of our minds these days – jobs. This kind of walkable urbanism has been available for a hundred years in the original transit-oriented suburbs of Houston, such as the Heights and Montrose, and it will be much more difficult to achieve for all of our existing suburbs if the Houston market is spread out across the distant exurbs.

Majorities of Americans are seeking stronger communities and easier access to all the basic activities of life according to several recent studies including one by the National REALTORS Organization. This shift in American sensibilities could not have come at a better time when we are trying to deal with our outrageous consumption habits in the face of a changing global economy and climate.

Montrose and our other dense mixed-use neighborhoods allow lower carbon lifestyle while supporting the nearby urban cores, Downtown, the Medical Center, Greenway, the Uptown – Galleria area, and Greenspoint. These dense cores – which each have more jobs than downtown Miami or San Diego – are hotbeds of our economy where innovation and efficiency will continue to drive our growth throughout this Century.

Growth in Houston has continued unfettered since the Allen brothers decided that the City of Harrisburg was the ideal location for a city due to its location on Buffalo Bayou – a transportation corridor – and then decided to start a city further up stream since Harrisburg was already there. Our leaders have always guided our growth through transportation planning and until the last half century that transportation infrastructure was based mostly on rail.

The Houston style of development that produced the areas of town where a majority of the residents of the City of Houston now live was changed in the second half of the 20th Century. As opposed to making investments to provide better access for Houstonians, transportation infrastructure began to be used to “open up areas for development” so that the combination of cheap oil and government subsidy could make long distance commutes just barely affordable to families choosing to buy a cheaper home further out. Because of our investment in freeways, part of Houston’s growing population made a logical trade off between housing price and living close to other people, jobs, services, and neighborhood schools.

If we build the Grand Parkway today, decades of Houstonians will factor that perversion of the residential land market in the tough economic choices of their lives. Some of them will choose to live on top of what is still today intact Katy Prairie. If we could spend stimulus money for a change on a variety of transportation options, such as improving walkability, accelerating our light rail plans, and laying the ground work for commuter rail down the 45 corridor to Galveston and Clear Lake and out the densifying northwest side of Houston, our children will have quite a different menu of lifestyle choices.

Do we want to invest in infrastructure that draws more people out into the surrounding wilderness and prime agricultural land or do we want to use our transportation money to improve existing Houstonians lives?



Jay Blazek Crossley does Program Development and Research at Houston Tomorrow, an independent nonprofit focused on improving the quality of life for the Houston region. He grew up in Montrose, has a Masters in Public Affairs from the LBJ School at the University of Texas, is in the band Woozyhelmet, and returned to Houston three years ago to help build the city of our future. His opinions do not necessarily represent those of the staff and board of Houston Tomorrow.