Ticketmaster has dominated ticket sales for major concert events for two… (Paul Sakuma / Associated…)
Giving its blessing to a deal that could transform the music industry, the Justice Department on Monday approved the controversial merger of the nation's dominant ticket seller and the world's largest concert promoter -- but only after extracting major concessions to address concerns that Ticketmaster and Live Nation would have a stranglehold on ticket sales.
The merger, which was the first major review for Obama administration antitrust regulators, will create a goliath with hands in every pocket of the music business. The newly formed Live Nation Entertainment would have the ability to book concerts, sell tickets and merchandise, and manage artists all under one roof.
But for the $889-million deal to proceed, the two companies agreed to the unusual step of creating a pair of rivals to ensure a competitive market for ticket sales, which has been one of the few bright spots for the ailing music industry.
"This goes beyond what is normally provided for in a settlement by creating two additional competitors who can go up against the behemoth," said Matt Cantor, a law partner at Constantine Cannon who specializes in antitrust issues.
A proposed settlement filed by the Justice Department, along with 17 state attorneys general, spells out measures to resolve concerns about competition.
Under the agreement, Ticketmaster will give Anschutz Entertainment Group access to its technology so that AEG -- which owns and manages nearly 100 venues including Staples Center -- can create its own ticketing service.
"AEG is committed to competing in the ticketing business," Chief Executive Timothy J. Leiweke said.
Ticketmaster would also be required to divest a subsidiary that provides software for venue operators to sell their own tickets. Comcast Corp.'s sporting events division, Comcast Spectacor, has signed a letter of intent to acquire the Irvine-based subsidiary, Paciolan.
Live Nation Entertainment also is prohibited from retaliating against venue owners that defect to competitors.
When it was announced last February, the proposed merger of two concert-industry juggernauts brought immediate protests from consumer groups, smaller competitors and artists including Bruce Springsteen, all of whom worried about Ticketmaster's growing power and its potential to ratchet up prices.
On Monday, some groups representing consumers and smaller competitors reacted guardedly to the Justice Department's recommendation.
"While we appreciate the efforts of the DOJ to extract meaningful concessions from the parties, we remain concerned that these two companies, with a history of anti-consumer behavior, will abide only by the letter and not the spirit of the settlement agreement," said Sally Greenberg, executive director of the National Consumers League.
Proponents of the merger, including its chief architect, Ticketmaster Chief Executive Irving Azoff, say the deal will help revive the music industry by creating a more efficient process to deliver music to fans. Opponents contend that it grants too much control to a single entity and will result in higher ticket prices.
The combination is the first major merger reviewed from start to finish by the Obama administration and was considered a test of how it would respond to a major industry consolidation.
The Justice Department said in legal filings that the merger, as initially proposed, would eliminate competition in the market for ticket sales, creating less pressure on the fees charged and potentially less innovation. No existing player, they said, would have the resources to compete.
"After a rigorous investigation, we concluded that the transaction, as originally proposed, was anti-competitive," Christine Varney, assistant attorney general in charge of the Justice Department's antitrust division, said at a news briefing Monday. "We were prepared to litigate this case, and I told the parties that."
The two companies have spent the last year trying to demonstrate that they're not the Darth Vader of the concert industry.
Last year, for instance, Live Nation and Ticketmaster instituted "no-service-fee Wednesdays" and reduced prices on lawn seats at Live Nation's network of amphitheaters around the country to draw more fans.
Jim Guerinot, the manager of No Doubt and Nine Inch Nails, said he was initially skeptical that the merger would win the Justice Department's approval. But over the last year, he said, the two companies have tried hard to work with artists.
"Since these guys have been, if not married, then living together, I've gotten a tremendous amount of cooperation," Guerinot said
Ticketmaster has dominated ticket sales for major concert events for two decades. In 2008, it sold more than 141 million tickets worth more than $8.9 billion and had a market share of more than 83% for major venues, according to concert-industry tracking publication Pollstar. Its next-biggest competitor's share was just under 4%.