Rock 'n' roll returns to Capitol Hill today, but this time it's not over record labeling.
Instead, the House Government Operations subcommittee will convene to hear testimony about how the $1-billion concert industry operates in the United States.
The hearing follows a complaint filed by the best-selling band in the U.S., Pearl Jam, against Ticketmaster, the largest ticket company in the business.
The band alleges that the Los Angeles-based firm exercises a national monopoly over ticket distribution and used its influence with promoters to boycott Pearl Jam's planned low-priced tour this summer. The complaint, filed May 6, triggered a Justice Department civil investigation into possible anti-competitive practices in the ticket distribution industry.
Pearl Jam's unprecedented action has turned up the heat on the longtime simmering debate over ticket prices, and the Seattle rock group has received words of support from some of the nation's biggest concert draws. Among them: Garth Brooks, Neil Young, R.E.M., the Grateful Dead and Aerosmith, whose manager is scheduled to testify today.
"This thing has been building up for a long time," says Stone Gossard, Pearl Jam guitarist and co-founder, who will speak first at today's hearing. "And deep down, it's really not about money. It's about music. It's about fairness. It's about a band who believes good intentions can translate into sound business practices and a giant corporation that's completely out of touch."
A Ticketmaster spokesman dismisses Pearl Jam's move as a "brilliant marketing ploy" to sell records and says that the firm "operates fully within the parameters of all applicable laws." Ticketmaster's practices were reviewed in 1991 when the U.S. Justice Department's antitrust division allowed the firm to buy certain assets from a competitor.
But Pearl Jam's move has sent shock waves through the country, all the way from the streets of Seattle to the White House.
President Bill Clinton--who invited Pearl Jam to the White House in April while the band was on the East Coast during its spring tour--is keeping tabs on the controversy.
"The White House is impressed by Pearl Jam's commitment to its fans," says George Stephanopoulos, senior adviser to the President for policy and strategy. "We want to make it very clear that we can't judge the merits of the band's allegations against Ticketmaster or prejudge the Justice Department action in any way. But that said, we think the goal of making concert ticket prices affordable is a laudable one. It's something we believe in."
And the entire record industry is watching from the sidelines, anxious for the outcome of what one insider has called a "holy war." The stakes are high and the fight will surely provide a rare look inside the lucrative concert industry.
But how did a rock band, a ticket firm and even the U.S. President become involved in a matter that has led to today's session on Capitol Hill? The following, based on interviews with dozens of key participants on both sides, is a step-by-step account of how the biggest-drawing band in America arrived at the door of the Justice Department.
It was Labor Day, 1992, when Pearl Jam celebrated its ascent to superstar status by throwing a free "thank you" concert for 30,000 hometown Seattle fans. It also was the band's first blowup with Ticketmaster.
The quintet was angered when the ticket firm requested a $1 service fee for each free pass it distributed. The band went around the firm and gave away tickets on its own.
Shortly after the episode, Pearl Jam began making a conscious effort to reduce ticket and T-shirt prices for its 1993 tour--its first as a headliner.
Rather than take on Ticketmaster last year, however, Pearl Jam allowed its fans to be charged service fees ranging from $3 to $6 per ticket on its 40-date cross-country trek. Instead, the band instructed its representatives to focus on persuading venue owners to accept smaller commissions on Pearl Jam merchandise so that T-shirts could be sold for $18--about 25% less than most acts charge.
"We swore when we formed this band that if we ever got successful we would make sure we did something to keep our concert prices down," Gossard says. "But we decided to take it one step at a time."
Pearl Jam also lowered the face price of each ticket to $18--despite opposition from some promoters who encouraged the group to charge almost three times that amount. The band--which has sold nearly 11 million albums since 1992--turned down more than $2 million last year in potential tour and merchandise profits as a result of its low-price policies, promoters say.
While fans applauded Pearl Jam's efforts, the band's unorthodox tactics were perceived in the industry as a direct affront to the profit base of a powerful clique of promoters, venue owners and concessionaires affiliated with Ticketmaster.
"The minute they became a headliner, this band refused to compromise with anybody," says one promoter, who requested anonymity because he--like others interviewed--did not want to alienate either the popular American rock band or the ticket giant.
"Unlike a lot of other acts, Pearl Jam is not greedy. But they could care less about the middlemen in this business and anytime you disagree with them during a negotiation, they just tell you, 'Hey, man, it's either my way or the highway.' "
Pearl Jam locked horns again with Ticketmaster in early November, approximately one hour before tickets were scheduled to go on sale for the tour's final shows in Seattle.
The dispute this time stemmed from a disagreement over a charitable contribution.
The band's manager, Kelly Curtis, says he negotiated a deal on Oct. 29 with Ticketmaster in which the firm's Seattle representative agreed to donate $20,000 of the show's service fees to a local program for impoverished children. Pearl Jam had also pledged $20,000 to the same charity, from the concert proceeds, Curtis says.
Minutes before tickets went on sale, however, Curtis says another band official was informed by Ticketmaster chairman Fredric D. Rosen in a telephone call that his company's donation was unauthorized and a $1 surcharge must be added.
Furious, Curtis now says that the band ordered Rosen to cancel the concert. After an hour of heated discussion with the band's agent, Curtis says Rosen consented to donate about $14,000 to the charity, and the show went on sale. Other sources close to the event confirm the band's account.
"The last-minute nature of that episode was a real eye-opener for us," says Curtis. "Most people we deal with don't do business that way--especially when it involves raising money for a good cause."
Rosen declined to be interviewed for this story, but high-level sources at his company denied that Ticketmaster reneged on the contribution. The dispute that afternoon, they say, erupted after the band demanded--at the last second--to increase service fees by an additional 50 cents in order for Ticketmaster to put up its $20,000 share.
"When Pearl Jam needed to raise money for their charity they didn't seem to have any difficulty with raising the service fee to accomplish it," says Ticketmaster spokesman Larry Solters. "It kind of makes you wonder what this whole dispute is about."
In the end, Ticketmaster donated $14,000 and the service charge was not raised.
Pearl Jam clashed again with Ticketmaster on March 1 of this year, just before the band embarked on a 24-date spring tour. Its agent informed promoters the band would play concerts this summer only at venues that charged $18 per ticket and no more than $1.80 in service fees. Ticketmaster typically collects $4 to $8 per ticket in fees for rock and pop concerts.
The quintet also required that the amount of the service charge be printed clearly on the ticket--a practice that Ticketmaster has adamantly opposed in the past.
In addition, Pearl Jam refused to permit inclusion of paid advertisements on the back of the ticket, squelching another source of revenue for Ticketmaster, which sells that space to corporate sponsors and does not share the proceeds with artists.
Pearl Jam's demands flew in the face of industry practices instituted for the most part by Ticketmaster, which has dominated the market since 1991 when it bought certain assets from Ticketron, its primary competitor.
Within a week, Curtis says, Pearl Jam had come to the realization that it would never be able to prevent fans from being charged what the band considered excessive service fees if they continued to book shows on the mainstream concert circuit.
Their reasoning: "A percentage of Ticketmaster's service charges is often kicked back by Ticketmaster to promoters and venues, giving them a vested interest in keeping service fees high," according to the band's memorandum to the U.S. Justice Department.
Ticketmaster gives a portion of its service fees to many of the nation's major promoters and arena owners in exchange for exclusive ticket distribution contracts, many of which were signed during Ticketmaster's rise to prominence in the late '80s. Retail stores that operate as Ticketmaster outlets also receive rebates, as do some artist managers.
Pearl Jam's dilemma, insiders say, was that Ticketmaster's expenses often exceed the cap that the band sought to impose. For instance, a $1.80 fee wouldn't be enough at most mainstream Southern California venues, according to sources, because Ticketmaster pays at least an estimated $1.50 of each concert service fee to local building owners, promoters and retailers. Additionally, Ticketmaster maintains its own costs often exceed $2 per transaction.
Ticketmaster spokesman Solters says these arrangements are legal and were reviewed by the U.S. Justice Department in 1991 following the Ticketron purchase.
"The question you ought to be asking is what gives Pearl Jam the right to dictate and fix prices in a free market?" Solters says.
Tensions between the two camps increased during the band's spring tour. According to Pearl Jam's memo, Ticketmaster had pledged to list its $3.75 service charge separately on the face of each $18 ticket, starting with the band's March 13 concert in Chicago.
But barely an hour before tickets were to go on sale, Rosen telephoned the venue and reneged on the deal, the memo says. Curtis responded by canceling the show.
After heated telephone discussions between Rosen and Pearl Jam's representatives, Ticketmaster relented to the band's demands, the memo says, and the show went on.
Ticketmaster denies that any argument took place. The misunderstanding, the firm says, stemmed from a misrepresentation of the deal to the band by one of Pearl Jam's own associates.
Tempers flared again less than a week later when the band circumvented Ticketmaster by selling tickets through a newspaper lottery to a March 19 show in Detroit, Curtis says. The tickets were $18 each with a $1.75 fee going to the promoter, Nederlander. (Fans were also charged a $1.50 "facility fee" by the venue, the Masonic Temple.)
According to the memo, Pearl Jam was "informed" that Ticketmaster "threatened the promoter of the concert with a lawsuit for breaching its exclusive agreement," and even temporarily shut off its ticket machine at the venue. But Nederlander refused to back down, sources say. Ticketmaster agreed to accept a portion of the promoter's $1.75 service fee.
Sources at Nederlander say no legal threats were issued but heated arguments occurred with Ticketmaster. Ticketmaster sources deny that any dispute took place, saying it reached "an agreement" with the promoter.
"By this point, we were getting pretty frustrated," Pearl Jam's Gossard says. "There's no doubt that (Ticketmaster) takes more of the total ticket percentage than they deserve. We really just got sick of arguing about it."
By mid-March, Pearl Jam had hired a company to identify available parcels of open land and consulted with several promoters about staging summer concerts in outdoor venues not associated with Ticketmaster. The band's representatives began exploring alternative ticket distribution methods for its tentative 20-date tour--scheduled to kick off in July.
In early April, Curtis says Pearl Jam was told by a promoter, the substance of their complaint to the Justice Department, that Ticketmaster had begun to organize a boycott of the band's alternative tour with the aid of the North American Concert Promoters Assn., a McLean, Va.-based group that represents the nation's largest promoters.
Ticketmaster's Solters denies the firm tried to organize a boycott of the tour. But in two letters obtained by The Times and submitted with Pearl Jam's complaint, Ben Liss, the executive director of the association, advised promoters that if they booked Pearl Jam under the band's conditions, Rosen warned they could face possible lawsuits. (Liss, who was president of Ticketron when that company was acquired by Ticketmaster in 1991, says his attorney advised him not to comment for this story.)
Ticketmaster "views the Pearl Jam issue as an all-or-nothing proposition," Liss wrote in a March 24 letter, adding that Ticketmaster's Rosen "intends to take a very strong stand on this issue to protect Ticketmaster's existing contracts with promoters and facilities and, further, (Ticketmaster) will use all available remedies to protect itself from outside third parties that attempt to interfere with those existing contracts."
As rumors of a boycott spread through the concert industry, Pearl Jam pressed on with its spring tour and performed more than a dozen scheduled dates without incident.
On April 8, Nirvana's Kurt Cobain, who along with Pearl Jam's Eddie Vedder led the Seattle music surge, was found dead of a self-inflicted gunshot blast.
"Kurt died right at the point when Pearl Jam was encountering all these complications with putting together the tour," Curtis says. "Coupled with everything else that was going on, it just about knocked the wind out of the band."
The band's last squabble with Ticketmaster occurred the day before its April 17 show at the Paramount Theatre in the Madison Square Garden complex, where the band again bypassed Ticketmaster.
In mid-April, Pearl Jam's memo says, its management was warned through third parties that they should "watch their backs"--statements, the band claims, that were intended to "threaten and intimidate." In addition, the memo says Ticketmaster suggested it might sue Pearl Jam for "tortiously interfering" with Ticketmaster's exclusive dealing arrangements with promoters--allegations that the firm vehemently denies.
Two major promoters told The Times they attempted to intervene at this point on behalf of Ticketmaster, which eventually put in an unofficial bid to sell tickets to the band's summer shows for an estimated $2.50 service fee--70 cents above Pearl Jam's limit.
But by this time, Curtis says, the band had grown leery of Ticketmaster. Even though a few promoters were willing to work with the band, Pearl Jam worried that Ticketmaster might disrupt the tour by making good on the legal threat spelled out in the letter sent by the concert association to its members.
Concerned about health, safety and comfort issues associated with putting on shows in remote locations, and deeply troubled by Cobain's suicide, Pearl Jam decided to pull the plug.
"What if we had spent two months assembling the show and Ticketmaster threatened the promoter with a lawsuit one hour before we were set to hit the stage?" says Curtis, who estimated that the band could have grossed about $9 million this summer. "What if a show got canceled at the last second and (a fan) got hurt? We just couldn't risk it."
While Pearl Jam felt somewhat defeated in its struggle to lower prices, it did not give up. Before leaving New York, the band had representatives visit an attorney at Sullivan & Cromwell, a law firm noted for its antitrust work. Three weeks later, the band's representatives were sitting in the Washington office of the Justice Department's civil division.
Officials from the Justice Department have since served Ticketmaster with a "civil investigative demand"--the equivalent of a subpoena--ordering the firm to surrender contracts as well as other records pertinent to the probe.
That probe prompted Gary A. Condit (D-Ceres), chairman of the House Government Operations subcommittee, to call today's hearing. Ticketmaster chairman Fredric Rosen will testify, as will members of Pearl Jam and other prominent figures in the music industry.
Ticketmaster's Solters claims Pearl Jam engineered the controversy to promote the band's third album, which is due to be released in two months by Sony Music. Ticketmaster also believes Sony may be using the furor to hasten its entry into the ticket distribution business, Solters says. Sony officials deny both allegations.
"What you have here is a band that refuses to release singles or music videos and has now decided not to go on tour," Solters says. "What better way to generate publicity for a new album than to go after a convenient target and stir up some controversy."
But Gossard maintains that Pearl Jam isn't just acting in its own interest and points to the support being received by the band.
"We're real excited that other artists and managers are coming forward now," he says. "There are some big questions that need to be answered about how tickets are distributed in this country, and we're glad the government is getting involved. People shouldn't have to pay an arm and a leg just to go out and see a concert."