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Pricing concert tickets understates inflation: Ticketmaster, LiveNation

The relationship between Mr. Rapino and artists is complicated. On the one hand, he must be deferential and accommodating, because without a regular caravan of acts, he has nothing but empty seats and red ink. At the same time, some artists are exasperating, though Mr. Rapino is far too diplomatic to say so.

Instead, he'll simply note that artists -- at least the famous ones -- are in a position these days to define their own destiny. And without question, that destiny includes higher ticket prices. The average price of a ticket to one of the top 100 tours soared to $62.57 last year from $25.81 in 1996, according to Pollstar, far outpacing inflation. The interesting question is why.

Mr. Rapino's theory is that musicians are just benefiting from the same trends that have enriched other superstars, like athletes and actors.

"The ticket was underpriced 40 years ago," he says.

Rival promoters see another culprit in high ticket prices: Live Nation. The company, they say, represents a consolidation of regional promoters that didn't just coincide with rising ticket prices but also helped cause them. Ticket prices, in this telling, have gone up because the largest promoter has been paying whatever-it-takes sums to get bands in the door -- both to drive out competitors and to bring in desperately needed revenue to cover fixed overhead costs and to fill up seats. The company's biggest outlays include "360 deals" with Jay-Z, Madonna, U2 and others, giving the company a stake in tours, recording and merchandise profits in exchange for nine-figure paydays. Jay-Z's deal was reportedly worth more than $150 million.

"Look at what has happened to ticket prices, and the price of everything else at a concert, over the last 10 years, right when consolidation was happening," says John Scher, who books shows in Madison Square Garden, at Radio City Music Hall and elsewhere in New York. "I talk to college kids all the time and they tell me that going to a show at an arena or an amphitheater is just beyond what they can afford. And it's because Live Nation has been paying the acts these outrageous sums, which is just alienating the fan base."

Mr. Rapino denies overpaying for bands, and says that the price of tickets often triples when they're sold by scalpers, which suggests that they were actually underpriced.

Then again, when Mr. Rapino was describing the parlous condition of the concert business in front of Congress last year, he noted that 40 percent of concert tickets go unsold, a statistic that he offered as a symptom of an industry in distress but that might just be evidence that Live Nation and its rivals don't know how to price and sell their products. Today, as high as ticket prices are, Live Nation earns none of its profit from ticket revenue. The artists get nearly all of that. Live Nation's earnings come from stuff sold on site, like beer, parking and advertising.

On this particular afternoon, he has just come from a meeting with Dave Stewart, best known as the male half of the Eurythmics. Before Mr. Stewart leaves, he drops by Mr. Rapino's office to say goodbye.

What was he doing there?

"When the Internet came about," Mr. Stewart replies, "the artist realized, well hang on, you can't steal a ticket for a seat, so we started to lean more toward, I don't really want a record deal, I want to be aligned with somebody who can help me sell tickets. But then I want a company that can use that music and that seat to get ancillary revenues" -- from things like food, beverages and sponsorships -- "to help me survive."

Mr. Rapino nods through all this. "He said it better than I can," he says, sounding awed.


Potentially, these changes are revolutionary. For years, neither promoter nor ticketer has considered fans as the first priority. Ticketmaster's most important clients are venue owners. The promoter, of course, worries foremost about the artist. If you've ever attended a concert and felt treated like an afterthought, now you know why.

But as Live Nation Entertainment tries to create this fan-friendly concert experience and improve its margins, it has tough trends to fight. The number of new bands with arena-packing power is dwindling. The company has made few inroads in hip-hop and rap. We live in a world of downloadable singles, but albums and artists' repertoires are what traditionally sell big tours.

They're Calling Almost Everyone's Tune
Published: April 23, 2010
Live Nation Entertainment, the combination of Live Nation and Ticketmaster, is a colossus unlike anything the industry has ever seen.


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