The Live Nation and Ticketmastermerger must benefit music fans

The $2.3bn (£1.6bn) merger of the world’s largest concert promoter, Live Nation, and ticketing giant Ticketmaster has the potential to reshape the music industry. But experts warn it will fail unless the new company offers added value and more choice for fans.

A source close to Live Nation confirms to Marketing Week that the new company will be able to provide special offers to give consumers more options at variable prices. He says: “The combined marketers will be able to work like companies such as Seatwave and really push out promotional deals like premium seats, consumer hospitality and so on.”

Jupiter Research director Mark Mulligan says that unless this occurs, the merger will not be a success. He argues: “Concert prices have doubled in the last decade, and consumers need relief in this credit crunch. The sort of pricing [Ticketmaster] has at the moment is not sustainable in these difficult times. However, the death of the CD and the move into downloads and gigs may work in its favour.”

Bad vibrations
Jon Cohen, chief executive of Ticketmaster’s rival Seatwave, remains unconvinced that the tie-up is positive for music lovers. He warns: “I cannot see how this is good for consumers. I think 12 months from now we’ll be looking at higher prices.”

US rock star Bruce Springsteen has also come out against the deal, saying it will “make the current ticket situation even worse for the fan… returning us to a near monopoly situation in music ticketing”.

Springsteen has good reason to be concerned. Ticketmaster already has an 80% share of music ticketing in the US and made $1.42bn (£977m) in the past 12 months. Live Nation, meanwhile, reported revenues of $4.43bn (£3bn) for the same period.

As a result of the potential for the new business to take such a large share of the market, the merger must pass regulatory scrutiny over anti-trust concerns.

The combined company will control the rights to some of the world’s largest concert venues, including Wembley Arena, the Ticketmaster sales platform and the Front Line artist management division, which looks after superstars Madonna, U2 and Jay-Z.

The two companies say that by eliminating duplication in their ticketing, marketing, data centres and back-office functions, they will save a total of $40m (£27.5m) a year.

Anthony Ackenhoff, chief executive of music sponsorship agency Frukt, agrees that merging the two strands of the companies will result in a business “able to fully control the value chain to make more money”.

Ticketmaster Entertainment’s chairman, Barry Diller, states: “Being able to put Live Nation and Ticketmaster into an equal partnership will allow the companies to get through this difficult period and to expand live entertainment options to audiences throughout the world.”

The source close to Live Nation adds that the merger would allow the company to have more opportunities to market its famous artists. He reveals: “Merging the two entities will enable it to offer fans the best opportunities to see live performances by these artists, and the exclusivity they will have will mean wider scope for partnerships with big-name brands.”

The Live Nation Front Line division currently manages 360 artists worldwide and profits from having them tour across different territories worldwide.

But the relationship between Live Nation and Ticketmaster has not always run smoothly. Last year, Live Nation ended its relationship with Ticketmaster and launched its own ticketing operations for its artists.

Marcus Sparks, a freelance music industry consultant, says that the relationship between the two companies is born of necessity and the potential for new business opportunities.

“Records simply don’t make money any more. Tickets and merchandise do,” he reveals. “Ticketmaster and Live Nation’s merger, despite previous tensions, will change the path music takes and put the focus on concerts and merchandise – any way they can think of to ensure a gig is profitable.”

Making a case
The combined business will have to convince the US Justice Department that its might would not monopolise the music industry, but other brands are already taking steps to broaden their own portfolios.

Retailer HMV announced last month that it was moving into the live music business via a joint venture with venue operator Mama Group, which will sees three famous venues rebranded with HMV’s name, and tickets sold in its stores.

Should the deal go ahead, it is clear that much work will need to be done to put new management strategies in place and convince consumers to spend their limited cash on live music. For now, though, in the words of their client U2, “it’s a beautiful day” for Live Nation and Ticketmaster.