Advertisement

COMPANY TOWN : Concert Business Awaits the Word on Ticketing Issue : News analysis: Justice Department will reveal results of its inquiry into alleged anti-competitive practices.

Share
TIMES STAFF WRITER

Nerves are on edge in the $1-billion concert business as the Justice Department prepares to unveil the results of a yearlong inquiry into allegations of anti-competitive ticket distribution practices.

In an effort to dissuade the antitrust division from changing current ticketing arrangements, a new group calling itself the Arena Auditorium & Coliseum Coalition has come out in support of Los Angeles-based Ticketmaster. It argues that the exclusive ticketing contracts that many venue operators have with Ticketmaster are beneficial to the venues and ultimately to consumers.

Ticketmaster has been on the defensive since last May, when the Seattle rock band Pearl Jam filed a memorandum with the Justice Department accusing the company of exercising a monopoly over ticket distribution. Pearl Jam, one of the country’s top rock bands, specifically criticized Ticketmaster for paying a portion of each fee it collects to the owners of major venues and promotion firms to maintain exclusive contracts that typically run from three to five years.

Advertisement

*

If the government decides to prohibit the exclusive contracts, which sources say have become a focus of the investigation, venue owners say it would radically change the way business is conducted on the concert circuit and deprive the industry of millions of dollars in income.

The venues also contend that because the arrangements are entered into freely by venue owners, the Justice Department would be infringing on their rights to challenge such agreements.

The coalition, made up of about a dozen venues and including such Ticketmaster clients as the Great Western Forum in Inglewood and the Irvine Meadows Amphitheatre, was formed early this year and retained the Phoenix law firm of Brown & Bain to plead its case to the Justice Department.

Brown & Bain attorney Bob Allen, who met with antitrust officials in March and has contacted them several times since, said the firm was brought in specifically to inform investigators about the crucial role exclusive contracts play in the concert business.

“Abolishing exclusive contracts would be extremely detrimental not only for venues, but for the communities that they serve,” Allen said in a phone interview from Phoenix. “It would drastically alter the live entertainment business as we know it.”

Maura Brueger, executive director of Seattle-based Consumers Against Unfair Ticketing, which was formed recently to seek reform in the concert ticketing business, said venues with exclusive contracts have reason to be concerned.

Advertisement

“Is it any surprise that the companies who benefit financially from Ticketmaster’s dominant position are the ones panicking at the thought of government reform?” Brueger asked. “. . . They have unfairly increased their profits at the expense of consumers for too long--and the government is finally hip to it.”

Ticketmaster sources have criticized Brueger’s organization for being tied to Pearl Jam. The coalition operates from a Seattle building owned by a public affairs group that often works with Pearl Jam.

The debate over tickets has been heating up for years as fans have complained about increasing prices charged by artists, venue owners, promoters and ticket service companies.

Venue owners and promoters blame artists--not Ticketmaster--for escalating concert prices. Because many major artists working the live circuit these days command such a big slice of concert profits, building owners and promoters say they have been forced to devise new revenue streams to generate capital.

According to building owners, the bulk of their revenue is currently derived from parking fees and exclusive merchandising agreements governing refreshment and souvenir sales. Venues such as Irvine Meadows and the Universal Amphitheatre also glean supplementary funds by tacking on a $3 “facility” fee to ticket transactions conducted at the box office.

In addition, many venues that sign exclusive contracts with Ticketmaster are guaranteed hundreds of thousands of dollars in annual income based on a percentage of each service fee collected. Some building owners also have been paid large advances by Ticketmaster for their share of future service fee revenues.

Advertisement

Farming out ticket distribution to Ticketmaster has helped some venue operators pare their budgets, decrease dependency on taxpayer subsidies and minimize box-office labor costs, the venue operators contend. Ticketmaster also improves the venues’ efficiency by providing computer ticketing equipment at no charge to the building owners.

Concert-goers, however, complain that the profit-sharing plans offer facilities little incentive to allow purchase of tickets outside of the Ticketmaster system. Some buildings open their box offices only on the day of the concert, for example, long after most events are sold out.

Ticketmaster has became a lightning rod for criticism in the ticket industry because the company has come to dominate the business in many parts of the country.

During the past decade, under the direction of CEO Fredric D. Rosen, Ticketmaster aggressively marketed the exclusive ticket distribution arrangements, essentially revolutionizing the industry. In the course of doing so, the company has been a fierce competitor, acquiring some ticketing companies and being accused of driving others out of the business.

Rosen has defended the company’s business practices and contended that it has merely competed in a free market with vigor and ingenuity.

Before Ticketmaster introduced its profit-sharing concept into the distribution business, service fees for tickets to rock shows typically cost $1 or less. Although it is unlikely that government intervention could return fees to that level, many believe that competition among new ticket software companies could result in lower service charges.

Advertisement

“I think that a move to prohibit exclusive agreements would be healthy for the business,” said John Scher, chairman of the New York-based concert promotion firm Metropolitan Entertainment. “My guess is that competition can only improve service and lower charges.”

*

In recent weeks, the Justice Department has conducted a slew of interviews with talent managers, promoters, venue owners and ticket software firms. Investigators served some of those individuals with “civil investigative demands”--the equivalent of a subpoena--requiring them to turn over documents considered pertinent to the case.

Ticketmaster Senior Vice President Ned S. Goldstein expressed some of the company’s concerns regarding government intervention in a recent memorandum sent to the company’s clients and obtained by The Times.

“We frankly cannot understand what makes the [Justice Department] staff believe that it is a good idea to engage in social engineering on the live entertainment business, rather than leaving the participants in that business to sort out their relationships in accordance with their perceptions of what is in their best interest and the forces of the free market.”

Brueger, the consumer critic of the ticketing industry, suggested that the venue operators hired Brown & Bain, the Arizona law firm, because several of its former partners now occupy top posts in the antitrust division, including Assistant Atty. Gen. Anne K. Bingaman.

Allen scoffed at the criticism. “I take umbrage at that,” he said. “Our firm has worked in the antitrust field for 30 years, and I think that is a very untoward suggestion.”

Advertisement
Advertisement