Rafi Mohammed

Stop Blaming Ticketmaster for High Prices

Posted on January 30th, 2023 (0 Comments)

While most of the blogs that I post on my site are links to my work on other sites, I’m starting to post ideas of interest. As always, thank you for reading!

A growing chorus of politicians including Senator Amy Klobuchar (D-MN) and Representative Alexandria Ocasio-Cortez (D-NY) is pushing to investigate entertainment conglomerate Live Nation for antitrust concerns. Their claim is that higher competition will lead to lower prices for consumers, in particular the fees charged by its Ticketmaster subsidiary. This populist sentiment is disconnected with who really controls and benefits from increasingly higher ticket prices.

If Live Nation is a monopolist, it certainly is not reaping outsized profits. For the first three quarters of 2022 – a record-breaking year for the live music industry – its net profit margin was 4.7%.

One lightning rod is the “convenience” fees that Ticketmaster levies to issue tickets. I recently purchased a concert ticket with a face value of $349.50, only to have Ticketmaster tack on an inescapable $86.75 convenience fee. This resulted in a total cost of $436.25.

Live Nation merged with Ticketmaster in 2010. At the time, Live Nation focused on managing venues and promoting entertainment events while Ticketmaster operated a ticket distribution platform. Critics claim that increasing competition in the task that Ticketmaster undertakes will yield reduced convenience fees. Surely if a Microsoft-like company entered the market, it would be a savior to consumers, right? Wrong.

What many do not realize is that pricing at Live Nation is a shell game. Remember my $436.25 concert ticket? The price could have just as easily been structured as a $436 face value for the ticket and a 25-cent Ticketmaster fee. What does Live Nation care? The money all goes into the same pot no matter how the final price is structured. Exorbitant convenience fees help to take the heat off of entertainers for their high prices. Ticketmaster has done an Oscar-worthy job of playing the bad cop. Any reduction in convenience charges can be transferred to a higher ticket face value.   

Increased competition in the concert promotion part of the business could actually increase prices. Consider if a well-funded competitor aggressively competed against Live Nation to promote events. To secure the rights to host, say, a Rolling Stones concert, many entities would be vigorously bidding. This will result in higher performance fees being paid to entertainers which will ultimately be passed on to consumers in the form of loftier prices. In a similar vein, it is this type of competition for employees that is leading to wage inflation today.

The real culprits for high ticket prices are the artists themselves. Fans were outraged to discover that ticket prices for Bruce Springsteen’s upcoming tour reached as high as $5,000. Reflexively, they wagged their fingers at Ticketmaster and its ability to dynamically set market prices. Reportedly with a laugh, Mr. Springsteen admitted that it was his decision to set prices in the same manner as his peers do [employ dynamic pricing] and further justified his stance by opining that the entertainers, not ticket brokers, should reap the upside of market prices.

A lifestyle filled with private jets, mansions, and extravagant parties is a costly one. It is time for politicians and consumers to realize that entertainers are responsible for their “what the market will bear” ticket prices, not an evil corporate monopolist.

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