This is about money, not music.<\/p>\n
If you want to point fingers, look to the long gone Robert Sillerman, not Michael Rapino or Barry Diller.\u00c2\u00a0 They’re just dealing with the aftermath of what Mr. X wrought.<\/p>\n
Sillerman rolled up the concert promotion companies and then laid them off on Clear Channel.\u00c2\u00a0 A brilliant financial exercise. You overpay for an asset, create a near-monopoly and then convince an outsider that what you’ve established is not only valuable, it has synergies with the core company.\u00c2\u00a0 This is Gladwell’s rule in reverse.\u00c2\u00a0 Without 10,000 hours of expertise in the field, Clear Channel ignorantly purchased SFX.\u00c2\u00a0 And ultimately had to take a huge loss and spun it off.<\/p>\n
Where Michael Rapino was left with a company with profit margins so thin, the "Wall Street Journal" dubbed it "a river of nickels".<\/p>\n
Rapino tried to change the economics of the business.\u00c2\u00a0 To have acts and promoters share in the upside.\u00c2\u00a0 But he could not achieve this.\u00c2\u00a0 One could say he too was lacking his 10,000 hours.\u00c2\u00a0 How was he to compete with managers and agents with dozens of years of experience?\u00c2\u00a0 An agent at the Concert Industry Consortium last weekend told me that he had sympathy for Live Nation.\u00c2\u00a0 To be fair, revenues should be split 60\/40 in favor of the act, with a minimal guarantee and a split of the bar revenue.\u00c2\u00a0 But if this were done, he’d be out of a job, there’d be no need for his services.\u00c2\u00a0 So, we end up with a public company, Live Nation, that can’t make any money.\u00c2\u00a0 Except on ticketing.<\/p>\n
That’s where the profit is for promoters.\u00c2\u00a0 Essentially all the profit.\u00c2\u00a0 Live Nation could not continue to share this revenue with Ticketmaster.\u00c2\u00a0 In order to make the stock go up, Live Nation had to establish its own ticketing entity.\u00c2\u00a0 The fact that it doesn’t work well is irrelevant.\u00c2\u00a0 Where else are you going to go?\u00c2\u00a0 The scalper?\u00c2\u00a0 Oh, Ticketmaster owns its own.\u00c2\u00a0 And it does resell its own tickets on TicketsNow.\u00c2\u00a0 Yes, acts are scalping their own tickets despite Ticketmaster’s denial.\u00c2\u00a0 So, the consumer gets screwed. What else is new?<\/p>\n
But when Ticketmaster is scalping its own tickets, it is guaranteeing the spread to the act.\u00c2\u00a0 Yes, the vaunted act.\u00c2\u00a0 The greed starts there.\u00c2\u00a0 If you want to blame anyone, blame the act.\u00c2\u00a0 That’s why the fees are so high.\u00c2\u00a0 Because of the kickback to the act.\u00c2\u00a0 And the need for profit by the promoter, after it’s been forced to pay so much for talent.<\/p>\n
So you’ve got two companies whose stock prices are mired in the depths.\u00c2\u00a0 Live Nation can only make money in tickets, even though it can’t issue tickets for a huge quantity of its concerts because Ticketmaster still controls those rights, and Ticketmaster is losing a certain portion of revenue to Live Nation.\u00c2\u00a0 And now with Ticketmaster having been spun off, analysts can do the math, and see that the ticketing organization’s dominance will be eroded and that company’s stock dives.<\/p>\n
Ergo, a merger.<\/p>\n
It’s just that simple.<\/p>\n
True, there’s an effect on the music business, maybe even music itself, but that’s not what the titans are worried about here. They’re worried about their profit margins, their stock prices.\u00c2\u00a0 Combining the two gives them a shot at rising on the market.\u00c2\u00a0 And, as a result, the stock employees own rises and compensation packages are enlarged.\u00c2\u00a0 Rocket science?\u00c2\u00a0 No.<\/p>\n
Antitrust violation?<\/p>\n
Not in the Bush White House.\u00c2\u00a0 In Obamaworld?\u00c2\u00a0 Well, he limited compensation today, but that was only if you work at a bank, and you’ve taken federal bailout funds.\u00c2\u00a0 The concert industry keeps touting higher grosses, they’re not in line for a bailout anytime soon.\u00c2\u00a0 The fact that we’re not growing any superstars?\u00c2\u00a0 The Wall Streeters are just as stupid as Clear Channel, they just don’t get this, they don’t see that at some point the Rolling Stones and the Eagles just won’t be able to do it anymore, and then what?<\/p>\n
But in order for a merger to be prevented, there must be a barrier to entry by third parties.\u00c2\u00a0 Ticketmaster already controlled all that ticketing, Live Nation just carved out a part of it.\u00c2\u00a0 There’s no significant change if they merge.\u00c2\u00a0 As for competing in the promotion sphere, AEG does quite well, thank you.\u00c2\u00a0 (Actually, the "New York Times" is reporting that Ticketmaster might still merge with AEG, instead of Live Nation…)\u00c2\u00a0 So, despite the cries from fans and the little people who will lose power and influence in the industry, a cold analysis of antitrust problems would seem to indicate this merger passes muster.\u00c2\u00a0 Because you don’t analyze antitrust violations on emotions, but the law.\u00c2\u00a0 And the law doesn’t appear to exclude a merger.<\/p>\n
And then you have the acts.\u00c2\u00a0 Live Nation’s relationships with artists are the legacy of a failed strategy concocted by Michael Cohl.\u00c2\u00a0 Who was doing the Sillerman act.\u00c2\u00a0 Gussy up enough assets and sell to an ignorant third party.\u00c2\u00a0 But what happens first, a sale or an empty wallet?\u00c2\u00a0 Cohl was all in, he wanted to bet the farm, if you’ve tied up all the acts, someone will want to buy you. But Rapino got nervous and Cohl is gone and Live Nation has very few act relationships.\u00c2\u00a0 But Ticketmaster has tons.\u00c2\u00a0 They bought Irving Azoff’s Front Line.\u00c2\u00a0 Where does this leave Irving and the acts?<\/p>\n
It appears this isn’t Irving’s deal.\u00c2\u00a0 This is Barry’s deal.\u00c2\u00a0 He wants to save one of his core assets.\u00c2\u00a0 The acts are gravy, another enticement for Live Nation.\u00c2\u00a0 And Live Nation will do well by the acts.\u00c2\u00a0 Rapino is dying to sell merch, monetize the fan transaction, artist relationships will help.<\/p>\n
The loser?\u00c2\u00a0 The labels.\u00c2\u00a0 They’re toast.\u00c2\u00a0 They’ve given up fifty percent of sales through sheer ignorance.\u00c2\u00a0 And rather than try to solve this problem, they’re insisting new talent sign 360 deals.\u00c2\u00a0 But why would anybody make such a deal, when the label has no infrastructure with regard to touring and merchandising?\u00c2\u00a0 A label can break a Top Forty record, but the consistently successful touring acts are not those with recent radio hits.\u00c2\u00a0 Lady GaGa can’t sell out an arena, she’d be lucky to sell out the House of Blues.\u00c2\u00a0 And we can state with near certainty, almost no one will want to see her five years from now.\u00c2\u00a0 Labels don’t sign career artists, they sign easily exploitable "talent", they want their money now.\u00c2\u00a0 But forgoing the long term view, they’ve backed themselves into a corner.<\/p>\n
Furthermore, Live Nation\/Ticketmaster does not need recorded music sales to survive.\u00c2\u00a0 The Ticketmaster\/Front Line artists are pure management clients, there’s not even guaranteed payments.\u00c2\u00a0 But the Live Nation\/Ticketmaster juggernaut is where most of the artists’ revenues\/profits lie, they’re in the right place.<\/p>\n
Which begs the question of why you’d want to be at a competitor?\u00c2\u00a0 CAA has the most relationships, they can get you in a movie, they can broker a corporate relationship, but the Agency Group and Paradigm and William Morris survive.\u00c2\u00a0 But, unfortunately, Front Line dominates in a way that CAA never did, Azoff has built a monolith even Michael Ovitz can envy.\u00c2\u00a0 But, it is a renegade business, and management is about personal attention, it oftentimes doesn’t pay to be with a behemoth.<\/p>\n
But Live Nation\/Ticketmaster doesn’t mind.\u00c2\u00a0 Because you’re still going to come to them for your tour.\u00c2\u00a0 After all, you want that guaranteed money.<\/p>\n
And Wall Street is now enticed by so many assets being under one roof.\u00c2\u00a0 Management, concert promotion, ticketing…<\/p>\n
And the fan is screwed.\u00c2\u00a0 Consolidation has not helped the fan one bit.\u00c2\u00a0 Label consolidation reduced the variety of music. Promoter consolidation drove the price of concert tickets sky high.\u00c2\u00a0 Music itself may be free, but going to the show is a once a year event.\u00c2\u00a0 And after you’ve seen the dinosaurs, do you really need to go every year?<\/p>\n
These are the problems facing Live Nation\/Ticketmaster.\u00c2\u00a0 Rapino says the average Live Nation customer goes to a show fewer than two times a year.\u00c2\u00a0 Can he lower prices to build the business?\u00c2\u00a0 If you believe so, you also think he can single-handedly break new acts to stadium level and broker Mideast peace.<\/p>\n
It’s all about the Benjamins.\u00c2\u00a0 And Rapino wants to keep his job.\u00c2\u00a0 And the acts want that guaranteed money.\u00c2\u00a0 And the public is at home playing wii, which is reasonably priced and delivers more cluck for the buck.<\/p>\n
The music business’ problems run deep.\u00c2\u00a0 But their roots are so far in the past and those in charge are so into making money that change is almost impossible to achieve.\u00c2\u00a0 We need new acts, who are primarily focused on music, not money, who appeal to broad swaths of the public.\u00c2\u00a0 Instead, everybody wants to get paid and it’s almost impossible to get noticed.\u00c2\u00a0 What you’re lamenting left the building long ago.\u00c2\u00a0 It’s calculated high finance today.\u00c2\u00a0 This deal is just evidence of it.<\/p>\n
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This is about money, not music. If you want to point fingers, look to the long gone Robert Sillerman, not Michael Rapino or Barry Diller.\u00c2\u00a0 They’re just dealing with the aftermath of what Mr. X wrought. Sillerman rolled up the concert promotion companies and then laid them off on Clear Channel.\u00c2\u00a0 A brilliant financial exercise. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[2],"tags":[],"class_list":["post-1649","post","type-post","status-publish","format-standard","hentry","category-music-business"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p96vPs-qB","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/lefsetz.com\/wordpress\/wp-json\/wp\/v2\/posts\/1649","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lefsetz.com\/wordpress\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lefsetz.com\/wordpress\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lefsetz.com\/wordpress\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/lefsetz.com\/wordpress\/wp-json\/wp\/v2\/comments?post=1649"}],"version-history":[{"count":1,"href":"https:\/\/lefsetz.com\/wordpress\/wp-json\/wp\/v2\/posts\/1649\/revisions"}],"predecessor-version":[{"id":1650,"href":"https:\/\/lefsetz.com\/wordpress\/wp-json\/wp\/v2\/posts\/1649\/revisions\/1650"}],"wp:attachment":[{"href":"https:\/\/lefsetz.com\/wordpress\/wp-json\/wp\/v2\/media?parent=1649"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lefsetz.com\/wordpress\/wp-json\/wp\/v2\/categories?post=1649"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lefsetz.com\/wordpress\/wp-json\/wp\/v2\/tags?post=1649"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}