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Concert Giant Sees Cutting Prices as Ticket to Success

Live Nation blames high entry fees for turning off fans. But Ticketmaster poses a big obstacle.

September 26, 2006|Charles Duhigg | Times Staff Writer

The nation's largest concert firm and the industry's ticketing powerhouse may be headed for a behind-the-curtain tussle.

At issue: control over the spiraling cost of show admissions that are turning off many music fans.

On one side is Live Nation Inc. Chief Executive Michael Rapino, who has vowed to drive down prices that last year soared to an average of $57 per ticket for the most popular shows. On the other side is Ticketmaster, which dominates music ticket sales through its thousands of outlets and Internet sites.

"Seventy percent of people didn't go to a concert last year, and even the average concert fan only attends about two shows a year," Rapino said. "We can grow this industry by lowering prices."

So far, Wall Street is showing faith in Rapino's strategy. In the nine months since its spinoff from radio giant Clear Channel Communications Inc., Live Nation's stock has doubled.

But to make good on his promise, Rapino must wrest power from Ticketmaster, a near-monopoly that built its empire locking up exclusive rights to sell admissions to major concerts and other live events. Last year, Ticketmaster reaped nearly $1 billion in fees and surcharges. Rapino began renegotiations with the company this month.

For some fans, those charges are boosting already expensive ticket prices by one-third or more. Los Angeles rock fan Eugene Kang bought six passes last month to see the Killers at the Wiltern LG theater, forking over $210 for the tickets and $90 more in fees, he said.

Ticketmaster, based in West Hollywood, has exclusive rights through 2008 to sell tickets to most of the 29,000 events Live Nation produces every year. If Rapino doesn't cut a new deal, Live Nation could rely on its in-house online ticketing system, the third-largest in America.

Ticketmaster executives wouldn't comment on the company's relationship with Beverly Hills-based Live Nation, but the stakes for the ticketing company are high. Owned by Barry Diller's IAC/InterActiveCorp., Ticketmaster stands to lose more than $130 million a year -- or about 14% of its revenue -- if it doesn't sign a new deal, analysts say.

"It would be a huge deal if Live Nation left Ticketmaster," said Safa Rashtchy, an analyst with Piper Jaffray & Co. "If it happened, it could be the beginning of something very concerning to IAC's investors."

In addition to having more input on prices, Rapino wants greater control over the wealth of information Ticketmaster collects about fans' likes and dislikes. He envisions expanding innovative marketing programs that, for example, identify who might fork over $100 for a vintage T-shirt. Live Nation is already starting to mine its own database to create targeted ads for upcoming concerts, and potentially to sell products such as cellphone ring tones and DVDs.

Ticketmaster shares the data it collects on Live Nation's customers with the company, but also uses that data to advertise shows sponsored by other promoters. Some Live Nation insiders hope that keeping the company's data secret will permit better marketing.

"When a fan buys a ticket, we learn an enormous amount about them: What bands they like, where they live, how much they are willing to spend," Rapino said. "Someday, a fan will be sitting in a bar and his cellphone will text message 'Sonic Youth are playing tonight. Do you want to go?' He'll buy his ticket over the phone and walk to the concert."

Rapino, 40, has been shaking up Live Nation since taking over last year before it separated from Clear Channel and became an independent, publicly traded company.

Rapino attended his first concert at age 15, taking a bus for 16 hours from his hometown of Thunder Bay, Canada, to a Robert Plant show. He began promoting concerts in college, eventually becoming director of marketing and entertainment for Canadian brewer Labatt.

He left to co-found a concert company that was later acquired by Robert F.X. Sillerman, who was building SFX Entertainment Inc., once the world's largest concert company. Sillerman sold to Clear Channel in 2000.

Rapino rose quickly at Clear Channel, eventually heading European concert operations. When the concert division was spun off and it needed a CEO, Clear Channel President Randall Mays chose Rapino, who promised to focus on consumer service.

That plan is central to Rapino's initiatives, such as building a website to solicit consumer complaints. When a London customer complained about a bungled refund for a performance of "The Rat Pack," Rapino personally e-mailed an apology and offered extra tickets.

He also has tried to create an identity for the company by putting Live Nation's name on millions of posters and television ads.

"We want people to know that Live Nation can serve all their live-music needs," Rapino said. "If we're going to be the ones who have a relationship with the consumer, then we have a responsibility to be the ones accountable if things go bad."

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