The Ticketmaster-Live Nation antitrust saga has come to a bittersweet end. Earlier this week the Justice Department finally approved the merger between the two firms, just shy of one year after it was announced.
While a number antitrust experts had speculated that the Justice Department might seek an injunction to block the deal outright, the DoJ ultimately opted to approve the deal while subjecting Ticketmaster-Live Nation to several conditions that are supposed to promote competition in the events marketplace. Under the terms of the consent decree, the combined firm will be required to license its ticketing software to competitor Anschutz Entertainment Group and divest Paciolan, a ticketing subsidiary of Ticketmaster. Ticketmaster-Live Nation also faces ten years of monitoring by antitrust officials to “prevent anticompetitive bundling of services.”
Ticketmaster has long been a controversial firm among concertgoers, frequently drawing consumers’ ire for charging hefty “convenience” fees and offering customer service that’s not exactly stellar. But it’s important to remember that today’s entertainment market is more fragmented than ever, and consumers have a huge array of choices for listening to music and viewing live events. Even YouTube is getting into the business of airing live events. The video site has broadcast several live events already, including U2’s Rose Bowl performance in October 2009, and is eyeing the pay-per-view live streaming market as well.
So it’s not hard to see why consolidation is taking place in the event ticketing and promotion markets. Economists have demonstrated that vertical integration, done properly, often results in sizable efficiencies, translating into overall welfare gains for consumers. Together, Ticketmaster and Live Nation are in a stronger position than before to offer value to event venues and promote concerts and shows. And as much we all hate service fees, in industries characterized by high fixed costs and declining marginal unit costs – like ticketing – big per-unit “markups” are often necessary to induce businesses to compete and innovate. While Ticketmaster may not be the most innovative company in the world, the firm faces an uncertain future as its contracts with venues come up for renewal. If Ticketmaster really is harming concertgoers – and by the way, there’s no clear evidence that it is – it will be disciplined not only by concert lovers, but by venues and artists as well. Derailing a potentially efficient business arrangement simply because it might not work out, whether in the event ticketing market or the cable television market, results in harm to consumers.
Interestingly, Susan Crawford, a law professor and former White House Special Assistant for Science, Technology, and Innovation Policy, tweeted yesterday, “Notice [the] unbundling conditions on [the] Ticketmaster merger.” It’s curious that Crawford chose the term ‘unbundling,’ which typically refers to essential facilities regulation whereby government forces utilities to share their last-mile facilities with competitors. Crawford happens to be a staunch advocate of local loop unbundling, which requires incumbent telecom providers to share their local facilities with competitive carriers at “just and reasonable” prices – as determined by regulators, of course. (The 1996 Telecom Act imposed local loop unbundling rules in the U.S., although subsequent FCC rulings relaxed unbundling requirements to a significant extent.)
Despite the seeming similarities between the Ticketmaster conditions and unbundling regulations, the two rules are rooted in distinct regulatory frameworks. Ticketmaster is only required to share a peripheral element of its business, ticketing software, with a single rival for ten years. But U.S. telecom firms governed by local loop unbundling rules must sell a core element of their business, last-mile access, to all comers, at rates that regulators deem reasonable. Ticketmaster acquired its market share by competing in the free market and, to a lesser extent, by acquiring smaller firms. Telecom incumbents have significant market share in no small part thanks to nationwide infrastructure established long ago by the long-dissolved Ma Bell monopoly. Moreover, forced unbundling of essential facilities is a network regulation, rather an antitrust regulation. U.S. antitrust laws are deeply flawed, but thanks in large part to the courts, at least antitrust regulation is fundamentally rooted in actual economics and aims to maximize consumer welfare. The FCC, on the other hand, assesses policies using the “public interest” standard, an ambiguous, arbitrary framework that incorporates economics only when convenient.
The legitimacy of merger licensing conditions is independent from the legitimacy of local loop unbundling. More to the point, bad antitrust laws are no justification for bad communications laws.