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Stuck with fees

A Live Nation-Ticketmaster split probably would not end the hated, expensive service charges.

August 24, 2007

Few things rile concertgoers as much as the service charges they have to pay to buy seats in advance. This resentment spills over most often on Ticketmaster, the largest ticketing outlet and the exclusive seller for about 100,000 events annually in the U.S. More than 3,000 Web pages include the phrase "I hate Ticketmaster," a sentiment fueled by service charges and other add-ons that can raise the cost of admission by 33% or more. This is, after all, the company that charges customers $2.50 for the privilege of printing their own tickets on their own printer with their own ink.

So music fans might have been cheered by reports that Live Nation -- the self-proclaimed largest live-music company in the world -- was likely to end its deal with Ticketmaster and sell seats directly. Live Nation owns more than 160 concert sites, including the House of Blues chain, and is one of the biggest concert promoters. Its size and assets make it uniquely positioned to cut out the middleman and the extra fees.

But don't hold your breath. Live Nation's main deal with Ticketmaster won't expire until the end of 2008. More important, the live-music industry has become addicted to service charges. Ticketmaster profits from them, but so do promoters and concert halls. The practice has become so institutionalized that even online resellers that pay nothing to promoters or venues add 10% service charges to boost profits.

At the heart of the service-charge economy are the deals that promoters and venues strike with acts. Competition for performers is so intense, they can often claim 95% or more of the box-office. To raise their own take, promoters and venues turn to parking fees, concessions and service charges, a portion of which the ticketing agency turns back to them as rebates. If it splits from Ticketmaster, Live Nation will control 100% of the service-charge revenue on shows it promotes at its own clubs and arenas. But the shift could lead performers to demand a cut of the service charges too, potentially driving those fees even higher.

The best hope for concertgoers irritated by having to pay $40 for a $30 ticket is that the economics of the live-music business change fundamentally. That's not likely to happen soon, given the industry's health (particularly in comparison to other parts of the music business). A split between Live Nation and Ticketmaster may provide a different source of tickets, but it's likely to cause the same irritation.

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