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Friday, March 6, 2009

Deal To Rock Music Industry
As Originally Posted in The Wall Street Journal

ticketmaster and live nation merger The potential merger between Ticketmaster Entertainment Inc. and Live Nation Inc. could upset the balance in a music industry in which many companies are just scraping by.

The new firm, to be called Live Nation Ticketmaster, would create an entity the industry never has contended with before: a company capable of dominating some of the most lucrative parts of the business, from ticketing, to concert promotion, to artist management. Smaller competitors would face an immediate disadvantage as they tried to negotiate deals or sign new talent.

That said, Ticketmaster and Live Nation haven't been raking in profits, either. And while a merger would pressure competitors, there is no guarantee that a deal would produce positive results for the deal makers. Terms of the pact haven't been ironed out but are expected to be announced next week.

'Every Move They Make'

"I think it shows just how much trouble Live Nation is in and how desperate they are," said Gregg Perloff, chief executive of Another Planet Entertainment LLC, an independent concert promoter for Northern California. He called the Ticketmaster tie-up the latest in a series of efforts by Live Nation to boost profit, from striking costly deals with high-profile artists like Madonna and Jay-Z, to launching its own ticketing system earlier this year. "Every move they make is not working," he added. Live Nation declined to comment.

News of the proposed deal gave a lift to both companies' stocks, but left them well below their prices when the companies were spun off. Shares in Live Nation, the likely buyer in the all-stock deal, rose 4.6% Wednesday. Live Nation's spinoff price in 2005 was $11.50. Ticketmaster shares rose 82 cents, or 13%, to $6.96, well shy of its spinoff price of $14.50 last summer. Wednesday's trading put Ticketmaster's market value at $398 million and Live Nation's at $406 million.

The proposed deal is piquing the interest of antitrust watchdogs. "It's premature to pass judgment, but it's not premature to say this might be quite dangerous and needs to be looked at closely by the government," said Bert Foer, president of the American Antitrust Institute, a Washington-based nonprofit group that advocates for aggressive antitrust enforcement. "It will be an interesting test of the Obama administration as to how aggressively it's going to look at mergers."

Ticketmaster didn't respond to a request for comment. The U.S. District Court in Los Angeles ruled in 2003 that Ticketmaster didn't violate the Sherman Antitrust Act, a decision that was upheld by the Ninth U.S. Circuit Court of Appeals.

Losing a Partner

Rival concert promoter AEG Live, a division of Anschutz Corp., had held on-and-off talks with Ticketmaster since last year, when the two companies got close to a tie-up of their own. Losing a potential strategic partner could add to AEG's challenges as economic conditions worsen. An AEG spokesman declined to comment.

It's unclear how much of a threat a deal would pose to major record labels. That's because Live Nation and Ticketmaster have focused on established -- that is, pricey -- stars.

Live Nation, for example, has struck multimillion-dollar "360 deals" with such big acts as Shakira and Nickelback. Such deals include a broad range of rights, such as concert promotion and recorded-music sales -- traditionally the turf of record labels.

But the labels don't believe 360 deals are worth the kind of massive advances Live Nation has paid. Instead, labels such as Warner Music Group Corp. and Sony Corp.'s Sony Music Entertainment, mostly have struck 360 deals with inexpensive, unproven artists.

Meanwhile, the new affiliation with Ticketmaster -- and its recently appointed CEO, veteran talent manager Irving Azoff -- is unlikely to increase the pace at which Live Nation strikes 360 deals. Despite Mr. Azoff's reputation for driving hard bargains on his clients' behalf, none of them is among the artists involved in Live Nation's 360 deals. People familiar with Mr. Azoff's thinking have said he doesn't believe in such deals.