Anticipated merger between Ticketmaster Entertainment Inc. and Live Nation Inc.

Affected market: Live music venues; live music promotions; ticket agency services

No. ME/4079/09

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, third party views, assessment and decision.

The OFT's decision on reference under section 33(1) given on 11 June 2009. Full text of decision published 23 June 2009.

Please note that the square brackets indicate figures or text which have been deleted or replaced in ranges at the request of the parties or third parties for reasons of commercial confidentiality.

PARTIES

Ticketmaster Entertainment, Inc. (Ticketmaster) was founded in 1976 and has its headquarters in West Hollywood, California. It operates in twenty countries providing ticket sales, ticket resale services, marketing and distribution through (a) www.ticketmaster.com and other websites and (b) approximately 6,700 retail outlets and 19 call centres in the US and internationally. In the UK, Ticketmaster provides ticketing services to arenas, stadiums, professional sports clubs, performing art venues, museums and theatres. In October 2008, Ticketmaster acquired a majority interest in Front Line Management Group (Front Line), an artist management company that began its operations in January 2005. Ticketmaster provides management services via Front Line, based in the US, to approximately 200 music recording artists in exchange for a commission on the earnings of these artists. In the UK, Front Line does not have business operations, however a few of the artists it manages are based in the UK and some of them periodically perform in the UK. Ticketmaster's UK turnover in the year to 31 December 2008 was [ ].

Live Nation, Inc. (Live Nation) is part of the Live Nation group, which is headquartered in Los Angeles, California. It operates live music and theatrical venues in the US and Europe, and promotes and produces live entertainment events throughout the world. In the UK, Live Nation has interests in the ownership and/or operation of live music and theatrical venues, the promotion of live music events in Live Nation owned/operated venues and in rented third party venues, and the promotion of live music festivals. In addition, Live Nation provides music agency services in the UK, via its subsidiaries International Talent Booking Limited (ITB) and Sensible Events Limited, which operate entirely independently. The OFT understands that Live Nation also has '360 degree' contracts  with a select number of artists including Madonna. Live Nation's UK turnover in the year to 31 December 2008 was [ ].

TRANSACTION

Ticketmaster and Live Nation have signed an agreement to form Live Nation Entertainment. Under the terms of the agreement, Live Nation and Ticketmaster will each own approximately 50 per cent of the combined entity.  

The parties notified the transaction to the Office of Fair Trading (OFT) on 31 March 2009. The administrative deadline for the OFT to decide whether to refer the merger to the Competition Commission (CC) is 5 June 2009.

JURISDICTION

As a result of this transaction Ticketmaster and Live Nation will cease to be distinct. The UK turnover of Ticketmaster (the smaller of the two enterprises) exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is satisfied. The OFT therefore believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.

THIRD PARTY VIEWS

The OFT received comments and views about the merger from a large number of third parties, agents, promoters, venue operators and ticket agents. The large majority of the third parties who contacted the OFT expressed a high degree of concern regarding the potential for the merger to reduce competition in the UK live music industry. The concerns raised by third parties during the OFT's investigation covered a relatively broad range of issues. 

First, a concern was raised regarding the impact of the merger on the ticketing agency market in the UK. In particular, it was put to the OFT that the merger may be expected to give rise to a substantial lessening of competition in the relevant market, as it removes Live Nation as the most credible 'sponsor' of a new entrant as a ticket agent in the UK. This concern has been dealt with above.

Second, a number of competitors expressed the view that the merger would allow the new entity to foreclose rival promoters to access Ticketmaster services. Moreover, many third parties argued that the merged entity will have access to business-critical information, allowing it to have an unfair advantage to its competitors in promotion and therefore the ability to outbid them in future live music events. These concerns have been dealt with above. 

Third, third parties argued that the merged entity will be able, by foreclosing ticket agents to Live Nation tickets, to achieve higher margins on the secondary market, thereby encouraging it to allocate more tickets through its secondary ticket agency. However, these concerns were largely unsubstantiated and the OFT believes, as analysed previously, that the merger does not create the realistic prospect of a substantial lessening of competition through foreclosure of ticket agents by denying access to Live Nation sales.

Furthermore, a few competitors stated that the merger will allow the new entity to bundle its complementary services in ticketing and promotion and therefore exclude competitors and extract higher prices. The OFT did not consider necessary to investigate these concerns further, because it has found that the test of reference is met on other grounds.

Other third parties argued that the merged entity may have an increased ability to shift tickets into the secondary market, thereby increasing prices to customers. The OFT considered these issues carefully during its investigation but, overall, considered that the evidence before was not sufficient to warrant concern.

ASSESSMENT

Ticketmaster and Live Nation are proposing to merge to create a new company which will be active in the supply of services in the live music industry, namely in the supply of ticketing agency services, live music promotions and live music venue operations in the UK.

The parties are currently active at different levels of the supply chain in the live music industry. In particular, Ticketmaster is a ticket agent and Live Nation is a promoter and venue operator in the UK. Therefore, there is no horizontal overlap between the parties. 

However, the OFT believes that there is a realistic prospect of a substantial lessening of competition in the ticketing agency market in the UK by the loss of one important competitor in the relevant market, thereby reducing the number of large ticket agents from three to two, given the risk that CTS will exit the UK market as a result of the merger. This arises because:

• absent the merger, CTS enters the market on the back of its preferential rights distribution agreement with Live Nation from [ ]
• it is uncertain whether, given the merger, CTS will in fact enjoy the volumes of sales envisaged under the agreement with Live Nation and therefore it is credible that it will decide to exit the market in the absence of this volume, and
• the OFT believes that CTS remaining in the UK market and enjoying the scale benefits of its contract with Live Nation would result in a higher degree of competition in the primary ticketing market than is presently the case by challenging the current position of the 'big two' (including Ticketmaster).
  

The OFT concluded that there is also a realistic prospect of a substantial lessening of competition based on the counterfactual in which CTS remains in the market but is a less effective competitor to challenge the 'big two' as a result of the loss of the Live Nation volumes.

With respect to the concerns raised in relation to the possibility or otherwise of any upstream or downstream foreclosure issues, the OFT examined whether the transaction confers on the merged entity the ability and incentive to foreclose rival promoters and/or ticket agents to an extent that compromises their ability to compete, such that there is a realistic prospect that a substantial lessening of competition will arise.

The OFT has been unable to rule out the prospect that the merged entity will have the ability to foreclose promoters given its [40-50] per cent share of the tickets sold in the UK, the fact that the volume of tickets it sells ([ ] million) may make it a key trading partner and given that new entry by numerous ticket agents has not impacted on Ticketmaster's margins and market share over time. However, given that the OFT has already concluded that there is a realistic prospect of a substantial lessening of competition in the ticketing agency market from the loss of a new entrant (CTS), it has not had to decide whether the merged party would have an incentive to foreclosure promoters, and can therefore leave open the issue of whether the test for reference is met also in relation to foreclosure of promoters.

With respect to the ability to foreclose ticket agents, the OFT has not found evidence to support the view that Live Nation benefits from market power in promotions and venue management in the UK. Therefore, the OFT concludes that the merged entity does not have the ability to foreclose rival ticket agents from selling tickets for Live Nation promoted events and events in Live Nation's venues. In addition, the OFT believes that there are strong arguments to suggest that, in the event that such ability did exist, the parties may not have the incentive to do so. In particular, the evidence by the parties and third parties, suggests that it is in the promoters' interest to distribute tickets across the entire retail spectrum, thereby minimizing the risk of events not selling out. 

Finally the OFT ruled out any concerns regarding the ability and incentive of the merged entity to achieve higher margins on the secondary ticketing agency market, thereby encouraging it to allocate more tickets through its secondary ticket agency operation. 

The OFT has been unable to conclude that entry will be timely, likely and sufficient to mitigate the potential loss of competition that would arise from the loss of CTS in relation to the primary ticketing agency market. In addition, the OFT was not able to conclude with confidence that agents' buyer power would constrain anti-competitive effects arising from the merger. 

Consequently, the OFT believes that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore be referred to the Competition Commission under section 33(1) of the Act.

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