The Wall Street Journal has a nice, long profile of Irving Azoff, CEO of Ticketmaster and Front Line Management, the management company Ticketmaster bought last fall.
The story makes the “merger of equals” between Live Nation and Ticketmaster, which seemed so far-fetched when it was announced, seem inevitable.
Turns out Live Nation bid for a controlling stake in Front Line in 2007.
Live Nation was trying to do one deal that would give it access to a bunch of artists instead of a bunch of little deals.
The WSJ argues that this set Live Nation and Ticketmaster on a collision course to merger, since each company wanted both the ticketing business and the artist management side of things:
Ticketmaster had been getting hurt by Web sites that resell tickets, like eBay Inc.’s StubHub. Basically, scalpers and others were finding ways to sell tickets at much higher prices than Ticketmaster itself could.
Ticketmaster’s attempts to fight back — such as the acquisition, last year, of StubHub rival TicketsNow — only stirred up trouble. Just this month, fans reacted with outrage when their attempts to buy $95 Bruce Springsteen tickets from Ticketmaster led them to a TicketsNow page with resellers offering seats at up to five times face value…
Live Nation has its own set of headaches. The company has long operated on razor-thin profit margins, thanks to standard concert-booking deals that pay artists 90% or more of the box-office gross…
By this year, the two companies were squarely on a collision course, headed either for a brutal war or a merger. Live Nation stopped doing business with Ticketmaster and instead launched a rival ticket-selling service. That hit Ticketmaster on the bottom line: As recently as 2007, Live Nation generated 17% of Ticketmaster’s overall revenue.
For more about Azoff’s legendary career and tidbits like his surprisingly short height, click here.
Indeed, as music-news Web site Coolfer astutely noted after the deal was announced, the merger was really just based on economics.
In the absence of a recession, neither company would be as prone to do this merger. But the willingness to tough it out is not what it used to be. The value of Live Nation’s multi-million, multi-rights deals has declined since those deals were signed (granted, Madonna’s recent tour did well). Ticketmaster is looking at both the loss of Live Nation’s business and a tough live event market for the next year or two (at least).
Now that the economy is tanking, the two companies have less incentive to compete against one another. The better option is to join forces.
Shareholders for both companies — and especially executives with ownership — look years into the future, see the troubles facing nearly all entertainment companies, and see a merger as one way to create some return on investment.