Is Ticketmaster a Criminal Conspiracy?

Summary

The video script discusses the controversial practices of Live Nation, a company that dominates the live entertainment industry, after its merger with Ticketmaster. It highlights allegations of anti-competitive behavior, secret rebates, and financial manipulation based on leaked documents and expert analysis. The video argues that these practices not only extract profits but also exert control over the industry, creating a climate of fear and potentially warranting a breakup of the company to foster fair business practices.

Takeaways

• 📢 The Live Nation and Ticketmaster merger in 2010 was controversial and allowed by the Obama administration's antitrust division despite concerns over market power.
• 🤨 There are allegations that Live Nation, as a dominant player in the live entertainment industry, may be operating like a criminal conspiracy based on new documents.
• 📚 Matt Stoller, the author of the transcript, is an antitrust policy analyst who questions the practices of Live Nation and its impact on the entertainment industry.
• 💼 Live Nation has been under investigation by the Biden administration's antitrust division, which is a departure from the Obama administration's stance.
• 📈 Dan Wall, Live Nation's hired antitrust lawyer, publicly defended the company, arguing that high ticket prices are due to supply and demand, not monopolistic practices.
• 🎟️ Live Nation reportedly charges lower commissions compared to other online marketplaces, but still faces criticism for its business practices and high consumer prices.
• 💰 Live Nation's CEO, Michael Rapino, earned a significant amount in 2022, raising questions about the company's claims of not being highly profitable.
• 📃 Congressman Bill Pascrell released documents from a court case that shed light on Live Nation's financial operations and the potential for anti-competitive behavior.
• 🕵️ The documents suggest that Live Nation may have engaged in fraudulent practices, including secret side deals with vendors to inflate costs and siphon profits.
• 🚨 Live Nation's control over the live entertainment industry is seen as a threat to cultural and industry power dynamics, potentially stifling competition and innovation.
• 🛑 The video transcript calls for the breakup of Live Nation and a reevaluation of business practices that rely on hidden fees and kickbacks, advocating for a more transparent and fair industry.

Q & A

What was the controversial deal in 2010 in the live entertainment industry?

In 2010, Live Nation, the leading concert promoter, acquired Ticketmaster, which had a monopoly over ticketing software and was a major player in artist management. This deal was controversial due to concerns about monopolistic practices and market power concentration.

How did the Obama administration's antitrust division handle the Live Nation-Ticketmaster merger?

The Obama administration's antitrust division allowed the Live Nation-Ticketmaster merger to go forward despite concerns about market power. The division seemed to be proud of this decision, which later led to investigations under the Biden administration.

What role did Dan Wall play in defending Live Nation?

Dan Wall, an old antitrust lawyer, was hired by Live Nation to represent them against potential monopolization charges. He publicly defended Live Nation as part of a PR campaign, arguing that high ticket prices were due to supply and demand, not Live Nation's pricing strategies.

What was revealed by the documents released by Congressman Bill Pascrell?

The documents released by Congressman Bill Pascrell, based on Live Nation's own financial data from a 2019 litigation, revealed that Live Nation had secret side deals with vendors to inflate costs. This led to profits being funneled back to Live Nation through secret rebates, which were not disclosed to artists or co-promoters, ultimately resulting in financial ruin for them.

How did Live Nation use its dominance in the industry to affect smaller firms like Juice Entertainment?

Live Nation used its dominance in artist promotion, ticketing software, and other lines of business to coerce performers into not signing with Juice Entertainment for a concert. Live Nation also threatened to withhold its ticketing services from the venue if it allowed Juice to be a partner, demonstrating its market power and ability to thwart competition.

What was the outcome of the New Jersey State Fair concert dispute between Live Nation and Juice Entertainment?

Juice Entertainment, unable to reach a deal with Live Nation, was fired from the concert. Live Nation then took over the production. When the smaller firm sued Live Nation for coercion and monopolistic practices, the case revealed Live Nation's alleged secret financial tactics, including inflating costs and receiving undisclosed rebates.

What did the expert report on Live Nation's operations reveal about their accounting practices?

The expert report revealed that Live Nation had secret side deals with vendors to inflate costs, which would then be funneled back to Live Nation through rebates. This led to a lack of profits for co-promoters and artists, despite the events making money. The report also suggested that Live Nation kept two sets of books, showing losses in public statements while internally recognizing profits.

How does Live Nation's alleged business model impact the broader live event industry?

Live Nation's alleged business model creates a climate of fear in the industry, where cooperation with Live Nation's dishonest practices is rewarded with hidden revenue, while non-cooperation can lead to being worked against or being excluded from events. This model consolidates power and control over the live event industry, stifling competition and fair business practices.

What is the significance of Live Nation's CEO, Michael Rapino's $139 million earnings in 2022?

Michael Rapino's substantial earnings in 2022 contradict the narrative that Live Nation is not a highly profitable business, as argued by Dan Wall. It suggests that the company is indeed generating significant revenue, which is inconsistent with the claims of poor financial performance.

What is the argument for breaking up Live Nation and addressing similar business practices in the economy?

The argument for breaking up Live Nation is to prevent the concentration of power and the negative impact on competition and fair business practices. Addressing similar practices across the economy can help promote a more equitable and transparent business environment, reducing the influence of dominant middlemen firms and encouraging healthier market dynamics.

How does the behavior of Live Nation, as described in the script, compare to other dominant firms in various industries?

The behavior of Live Nation is consistent with the behavior of other dominant middlemen firms in various industries, such as pharmacy benefit managers, Amazon, big banks during the financial crisis, and the advertising technology industry. These firms use fees, kickbacks, and complex business structures to extract profits in ways that are hard to see, creating a climate of fear and inefficiency in their respective markets.

Outlines

00:00

🕵️‍♂️ The Controversial Merger of Live Nation and Ticket Master

This paragraph discusses the contentious acquisition of Ticket Master by Live Nation in 2010, which led to Live Nation gaining significant control over the live entertainment industry. The merger was controversial due to Ticket Master's existing monopoly over ticketing software and its influence in artist management. Despite public outcry and historical issues with market power, the Obama administration's antitrust division allowed the merger to proceed. The paragraph also introduces the Biden administration's antitrust division, which has been investigating Live Nation Ticket Master for potential monopolization. Live Nation's response to these investigations includes hiring a former antitrust lawyer, Dan Wall, who publicly defended the company by arguing that Live Nation's charges are a result of supply and demand and not excessive pricing.

05:01

💸 Live Nation's Financial Practices Under Scrutiny

The paragraph delves into Live Nation's financial practices, which are under scrutiny due to allegations of anti-competitive behavior. It describes a specific case involving a concert at the New Jersey State Fair in 2011, where Live Nation allegedly used its market dominance to coerce performers and threaten the venue. The situation led to a lawsuit, and the subsequent expert report revealed Live Nation's practice of secret side deals with vendors to inflate costs, which would then be rebated back to Live Nation, effectively defrauding co-promoters and artists. The report suggests that Live Nation maintains two sets of books to hide the true profitability of events and to extract revenue through rebates rather than ticket sales, which is a practice that is inefficient, immoral, and creates a climate of fear in the industry.

10:03

🚨 The Broader Implications of Live Nation's Business Model

This paragraph explores the broader implications of Live Nation's business practices on the entertainment industry and the economy as a whole. It compares Live Nation's alleged behavior to that of other dominant middlemen firms in various sectors, highlighting a pattern of using fees, kickbacks, and complex financial arrangements to extract profits in ways that are difficult to detect. The paragraph argues that such practices are not only harmful to individual businesses and consumers but also contribute to a culture of fear and dishonesty within industries. It calls for Live Nation to be broken up and for a shift away from these extractive and secretive business practices, emphasizing the need for greater transparency and fairness in the economy.

Keywords

💡Live Nation

Live Nation is a leading concert promoter and venue operator in the live entertainment industry. In the video, it is discussed as a company with significant market power, which has been involved in a controversial acquisition of Ticketmaster, another major player in the industry. The speaker questions whether Live Nation's practices constitute a criminal conspiracy due to their dominant position and alleged manipulation of the market.

💡Ticketmaster

Ticketmaster is a major ticketing company that has a significant presence in the live entertainment industry. It is known for its monopolistic control over ticketing software and artist management. In the context of the video, Ticketmaster's merger with Live Nation is highlighted as a controversial deal that has potentially led to anticompetitive practices.

💡Antitrust

Antitrust laws are designed to promote competition and prevent the formation of monopolies or other anticompetitive practices in the marketplace. In the video, the term is used to describe the legal framework that governs the behavior of companies like Live Nation and Ticketmaster, and the government's role in ensuring that these companies do not engage in anticompetitive behavior.

💡Monopoly

A monopoly refers to a situation where a single company or entity has exclusive control over a product or service in the market, allowing it to set prices and other terms without competition. In the video, the term is used to describe Live Nation's position in the live entertainment industry, suggesting that their control over both concert promotion and ticketing could constitute a monopoly.

💡Contribution Margin

Contribution margin is a financial metric that represents the difference between the revenue generated from the sale of a product or service and the variable costs directly associated with producing that product or service. It is used to measure the profitability of individual products or services. In the video, the term is used to describe a financial figure that Live Nation allegedly manipulated to hide the true profitability of their events.

💡Rebates

Rebates are partial refunds given to buyers as an incentive to purchase a product or service. In the context of the video, rebates are used to describe a mechanism by which Live Nation allegedly manipulates financial transactions with vendors and venues to inflate costs, which are then secretly rebated back to Live Nation, creating a hidden profit stream.

💡Market Power

Market power refers to the ability of a firm or entity to control the price and other terms of a product or service in a market, often due to a lack of competition. In the video, market power is discussed in relation to Live Nation's dominance in the live entertainment industry and how this power may have been used to engage in anticompetitive practices.

💡Financial Engineering

Financial engineering involves the use of complex mathematical models and strategies to create financial instruments and structures that can manage risk or enhance investment returns. In the video, it is used to describe the alleged tactics of Live Nation to manipulate financial data and transactions to hide profits and maintain the appearance of low margins, thus obscuring their true financial health and market power.

💡Secret Side Deals

Secret side deals refer to undisclosed agreements made between parties that can give an unfair advantage or result in unethical outcomes. In the video, these deals are alleged to be part of Live Nation's strategy to inflate costs with vendors and venues, which are then secretly rebated back to the company, creating a hidden profit stream that is not shared with artists or co-promoters.

💡Two Sets of Books

The term 'two sets of books' refers to the practice of maintaining separate and potentially conflicting records of financial transactions, often used to deceive or mislead stakeholders. In the video, it is suggested that Live Nation may have kept two sets of books to hide the true profitability of their events and to present a misleading financial picture to the public and regulatory authorities.

Highlights

Live Nation, the nation's leading concert promoter, bought Ticket Master in 2010, which controlled most of the ticketing software and was a major player in artist management.

The merger between Live Nation and Ticket Master was controversial and was allowed by the government's antitrust division under Obama.

The Biden Ant-Trust division has been investigating Live Nation Ticket Master for years.

Live Nation hired an old antitrust lawyer, Dan Wall, to represent them against potential monopolization charges.

Dan Wall defended Live Nation by arguing that high ticket prices are due to supply and demand, not because of Live Nation's charges.

Live Nation's CEO, Michael Rapino, made $139 million in 2022, raising questions about the company's profitability.

New documents released by Congressman Bill Pascrell suggest that Live Nation's operations may not be as they seem.

Live Nation allegedly coerced performers into not signing with Juice Entertainment and threatened to withhold its ticketing services.

Live Nation and Juice Entertainment had disagreements over the production of a concert, leading to Live Nation demanding to co-produce the show.

Live Nation offered a deal to Juice that would have saddled the firm and artists with costs while Live Nation took the profits.

Live Nation had secret side deals with vendors to inflate costs, which would then be funneled back to Live Nation through secret rebates.

Juice Entertainment's lawyer claimed that Live Nation essentially defrauded everyone involved in the concert production.

Live Nation kept two sets of books, posting large losses in profit and loss statements while events actually made money.

The expert report found that Live Nation's behavior is consistent with other dominant middlemen firms in various industries.

The report suggests that Live Nation's practices could lead to the company's breakup and a reevaluation of similar business practices across the economy.

Transcripts

hi I'm Matt Stoler author of Monopoly

focused newsletter big and an antitrust

policy analyst in this big breakdown I'm

going to ask the question is Live Nation

Ticket Master the company that controls

most of the live entertainment industry

in fact a criminal

conspiracy you might think that's a bold

question and it is but some explosive

new documents just came to light that

suggest that well it's a question worth

asking let's dive in in 2010 the live

entertainment industry was in shock when

Live Nation the nation's leading concert

promoter bought Ticket Master which

basically had a monopolis a monopoly

over ticketing software and was a major

player in artist management it was a

very controversial deal and Ticket

Master had already bought out most of

its other competitors and ticketing

software and really upset Pearl Jam in

the 1990s was well-known you know Market

power problem but the government's

antitrust division under Obama allowed

the deal to go forward anyway in fact

seems like they were sort of proud of

doing that

let's take a look at this public picture

that was put on the doj's website so

that publicly released photo shows the

head of the antitrust division Christine

Varney or number two William Kavanaugh

and their adviser Jee kimmelman

announcing that they were allowing that

merger and talking to reporters about it

now the Biden Anti-Trust division is

very different than the Obama antitrust

Division and they have been

investigating Live Nation Ticket Master

The Firm that the Obama Administration

allowed to form they've been

investigating it for years and when

firms be are being investigated they

tend to lawyer up and so that's what

Live Nation did hiring an old antitrust

lawyer named Dan wall to represent them

against potential monopolization charges

that could be coming from the Anti-Trust

division wall defended Live Nation

publicly as part of a PR campaign

earlier last month in a blog post he

wrote that you know you might think that

Live Nation charges a lot for tickets

but that's really just supply and demand

for popular artist the Corporation

itself charges low prices not high ones

he even put up a comparison of

commissions charged by online

marketplaces from twitch to Airbnb to

Uber to show how little Live Nation

charges let's take a look you see Live

Nation charges less than twitch StubHub

Uber Airbnb etc etc concert promotion

wall wrote is not a highly profitable

business even for Live Nation end quote

so look at that commission it's a measly

7% for Live Nation Ticket Master now for

sure Live Nation charges consumers a lot

of money and doesn't pay much to artists

I this was Wall's argument but they

don't he wrote Set the ticket price and

even worse for Live Nation shareholders

at least it's just not a very good

business wall concluded quote The

Narrative that Ticket Master fees are

responsible for high ticket prices makes

no sense according to wall the middleman

giant affects at most 2% of the price of

a ticket for its trouble still all of

that that argument from Dan wall from

from Live Nation Ticket Master feels

weird it sounds like it's not true

considering that Live Nation CEO Michael

rapino made $139 million in 2022 that's

a lot of money for someone in just such

a terrible business well the reason it

sounds like it's not true is because

well it's not true or at least it's not

true according to new documents released

by Congressman Bill pascrell from

litigation in 2019 based on live

nation's own financial data these

documents are from a court case uh

involving a concert at the New Jersey

State Fair in 2011 now I just want to

tell you where these documents came from

because it's kind of funny um we often

think about monopolis as sort of

dominant and and powerful and all

knowing and that litigation has been

going on for 13 years at a certain point

the uh the plaintiff's hired an expert

his name is Richard Barnett he's one of

the top scholars in the business and and

he looked at live nation's confidential

records and he wrote about how the

operation actually works and the

plaintiffs then submitted that report to

the court and the judge unfortunately

ordered it sealed so that no one could

read it saying oh it's got confidential

information or or whatnot and that

should have been that except and here's

where the stupidity of a of a monopolist

comes in Live Nation or someone's on

live on live nation's legal team or Dan

Wall's team or someone like that they

screwed up and they accidentally

uploaded the report to a public court

site Pacer where pasel got his hands on

he just downloaded it

then he sent it out in a press releasee

and that's how we have the documents

okay so what's the case all about that

shows how Live Nation really works well

it starts with a concert when in 2011

the head of the New Jersey state feris

Nam is Al dorso hired a company called

juice entertainment run by two

experienced concert promoters to put on

a concert now Live Nation they they told

Live Nation do you want to do this Live

Nation wasn't interested but as soon as

I got when that juice entertainment was

doing it and started to book acts Live

Nation demanded to C produce the show

and and dorso who was running the the uh

State Fair was just like okay you guys

work it out and he later put it you know

Live Nation they were the the 800 PB

gorilla I said go see if you can work

out a deal that that's what he was

saying to juice now juice and Live

Nation couldn't work out a deal and then

Live Nation managed to get juice fired

how well the smaller firm sued Live

Nation claiming the giant coerced

performers into not signing with juice

to appear at the and threaten to

withhold its ticketing services to The

Venue the state-owned metaland sports

complex if it were not allowed to be a

partner that's from public reporting in

other words Live Nation used dominance

in other lines of business artist

promotion and ticketing software to

thwart arrival which is exactly why the

Obama staffers like Gene kimelman should

have blocked the merger in the first

place but this situation leaves a

question why didn't Jews consent to let

Live Nation Co produce the event I mean

half the profit is still better than no

profit right well the reason is

according to to juice that Live Nation

offered a deal that would have saddled

the firm and an artist with the costs

while Live Nation itself took the

profits in this purported Arrangement

Live Nation and Juice would have split

the cost of putting on the event like

renting the venue The Sound Stage and so

forth they would have also share profits

from ticket sales with artists and with

each other and that sounds good so far

the problem is what came next it's in

the accounting here's the expert report

Live Nation negotiated third party

expenses like rental cost and with the

venues directly with vendors in exchange

for exclusive Financial gains not

disclosed to their artists or their

agents managers or independent

co-promoters in the form of rebates so

in other words Live Nation had Secret

side deals with vendors to inflate costs

by overpaying those vendors and venues

which meant that any profit from the

event would evaporate it would look like

a loss co-promoters and artists who

share and profits would lose out but and

would be told that the show just wasn't

profitable but the thing is those

vendors those venues who had gotten

extra money by being paid inflated costs

would in turn remit that money back to

Live Nation in the form of secret

rebates in other words juice would pay

the inflated cost that would get

furtively funneled back to Live Nation

along with all the profits from the show

now Live Nation didn't disclose any of

this Revenue diversion with the artists

to whom it had a legal obligation to

whom it with with whom it had contracts

which is why Juice's lawyer said that

the Corporation quote essentially

defrauds every every one involved now

these kinds of secret Kickbacks ensured

what Juice's lawyer called the quote

Financial ruin end quote of co-promoters

now of course Live Nation claimed it was

losing money or not making very much

money on any particular event and it

wasn't but that's because the profit was

coming in through rebates which

according to this expert Barnett went on

to align in the accounting statement

called quote contribution margin end

quote so juices experts found uh so

interestingly Barett even found that

Live Nation kept two sets of books so in

in one case they posted an entry of

$90,000 rent for settlement but only

$755,000 internally for the same item

they routinely put in profit and loss

statements large losses while admitting

that events actually made money so

that's just one event all right that's

one uh State Fair New Jersey how much

was this contribution margin across all

of Live Nation I don't precisely know

and you can throw other things into that

accounting uh line but there are hints

of amounts so in the third quarter of

2021 which is the last time they used

the term contribution margin that I can

find it was

$747 Million probably in the billions

today and that's where CEO Michael

Rino's nine fig payday is probably

coming from Live Nation is generating a

great deal of Revenue but somehow shows

low margins lots of events where they're

not making money but somehow the cash is

coming in now that's just a price hike

right it's a it's a way of extracting

more Revenue but it's also hidden and

hiding the price hikes is important

because monopolization which is about

controlling a market and then extracting

by your pricing power is harder to prove

if you show low margins if you show that

you're not charging very much their

antitrust lawyer Dan wall can just write

poor little Live Nation our business is

terrible yeah and we all know that you

Bill by the hour Dan on your lovely silk

sheets

now let's take a step back and recognize

what we're really looking at it's not

just an extractive scheme this is about

power power over our culture power over

an entire industry basically Live Nation

can present venues or other people in

the business anyone in the business

pretty much with a choice if you

cooperate quietly you'll get extra

hidden revenue and that means

cooperating with with knowing dishonesty

in the business if not well Live Nation

will maybe work with your rival or may

just buy into the market to compete with

you directly may not let artists come to

your

shows at any point too I mean it's not

just the the the blunt instrument at any

point Live Nation can dial up or down

rebates to reward or punish and that's

increasingly true as Live Nation buys

more and more corporations in and around

the live event space with each one

presenting a additional options for fees

and rebates and what is essentially

Financial engineering

okay is this report true I mean why like

you know Live Nation would say oh they

they they got it totally wrong they

didn't disprove it because I don't think

they can but you know the question is

reasonable is the report true we don't

know um it's the expert is well

respected he looked at live nation's

financial

data and it's it is easy to believe the

worst about Live Nation Ticket Master

they have a really bad reputation in the

industry and then among consumers but

the reason I think it's true and I'm I'm

not sure but the reason I buy it is

because this particular story is

consistent with the behavior of a lot of

firms many dominant middlemen firms in

our economy from Pharmacy benefit

managers to Amazon and their

relationship with third party sellers

how they mediate between third party

Sellers and consumers to Big Banks who

securitized mortgages in the financial

crisis to the advertising technology

industry and so on and so forth now they

don't most of them don't use two sets of

books that's kind of like you know

that's a little bit you know above the

I'm not saying everyone's a criminal

conspiracy two sets of books kind of a

red flag um but in

general it's a business model middlemen

who have Market power they use fees and

kickbacks often hidden through a complex

Maze of subsidiaries or or overlapping

lines of business to extract in ways

that are really hard to see it's

inefficient it's immoral and more

importantly it creates a climate of

fear the problem is it's also just the

way that we do business

today fortunately Live Nation is under

investigation and there are a bunch of

companies that are under investigation

but this lesson if this is true and I

think it is but if it's true this is why

Live Nation needs to be broken up and

more broadly why we need to get rid of

these this way of doing business these

secret Kickbacks and rebates throughout

the whole economy thanks for watching

this big breakdown on the breaking

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