    [House Hearing, 111 Congress]
    [From the U.S. Government Publishing Office]

              COMPETITION IN THE TICKETING AND PROMOTION INDUSTRY

    =======================================================================

                                    HEARING

                                   BEFORE THE

                           SUBCOMMITTEE ON COURTS AND
                               COMPETITION POLICY

                                     OF THE

                           COMMITTEE ON THE JUDICIARY
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED ELEVENTH CONGRESS

                                 FIRST SESSION

                                   __________

                               FEBRUARY 26, 2009

                                   __________

                               Serial No. 111-62

                                   __________

             Printed for the use of the Committee on the Judiciary

          Available via the World Wide Web: http://judiciary.house.gov

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                           COMMITTEE ON THE JUDICIARY

                     JOHN CONYERS, Jr., Michigan, Chairman
    HOWARD L. BERMAN, California         LAMAR SMITH, Texas
    RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr.,
    JERROLD NADLER, New York                 Wisconsin
    ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
    MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
    ZOE LOFGREN, California              BOB GOODLATTE, Virginia
    SHEILA JACKSON LEE, Texas            DANIEL E. LUNGREN, California
    MAXINE WATERS, California            DARRELL E. ISSA, California
    WILLIAM D. DELAHUNT, Massachusetts   J. RANDY FORBES, Virginia
    ROBERT WEXLER, Florida               STEVE KING, Iowa
    STEVE COHEN, Tennessee               TRENT FRANKS, Arizona
    HENRY C. ``HANK'' JOHNSON, Jr.,      LOUIE GOHMERT, Texas
      Georgia                            JIM JORDAN, Ohio
    PEDRO PIERLUISI, Puerto Rico         TED POE, Texas
    LUIS V. GUTIERREZ, Illinois          JASON CHAFFETZ, Utah
    BRAD SHERMAN, California             TOM ROONEY, Florida
    TAMMY BALDWIN, Wisconsin             GREGG HARPER, Mississippi
    CHARLES A. GONZALEZ, Texas
    ANTHONY D. WEINER, New York
    ADAM B. SCHIFF, California
    LINDA T. SANCHEZ, California
    DEBBIE WASSERMAN SCHULTZ, Florida
    DANIEL MAFFEI, New York
    [Vacant]

                Perry Apelbaum, Staff Director and Chief Counsel
          Sean McLaughlin, Minority Chief of Staff and General Counsel
                                     ------

                 Subcommittee on Courts and Competition Policy

               HENRY C. ``HANK'' JOHNSON, Jr., Georgia, Chairman

    JOHN CONYERS, Jr., Michigan          HOWARD COBLE, North Carolina
    RICK BOUCHER, Virginia               JASON CHAFFETZ, Utah
    ROBERT WEXLER, Florida               BOB GOODLATTE, Virginia
    CHARLES A. GONZALEZ, Texas           F. JAMES SENSENBRENNER, Jr.,
    SHEILA JACKSON LEE, Texas            Wisconsin
    MELVIN L. WATT, North Carolina       DARRELL ISSA, California
    BRAD SHERMAN, California             GREGG HARPER, Mississippi
    [Vacant]

                        Christal Sheppard, Chief Counsel

                        Blaine Merritt, Minority Counsel

                                C O N T E N T S

                                  ----------

                               FEBRUARY 26, 2009

                                                                       Page

                               OPENING STATEMENTS

    The Honorable Henry C. ``Hank'' Johnson, Jr., a Representative in
      Congress from the State of Georgia, and Chairman, Subcommittee
      on Courts and Competition Policy...............................     1
    The Honorable Howard Coble, a Representative in Congress from the
      State of North Carolina, and Ranking Member, Subcommittee on
      Courts and Competition Policy..................................     3
    The Honorable Lamar Smith, a Representative in Congress from the
      State of Texas, and Ranking Member, Committee on the Judiciary.     4

                                   WITNESSES

    The Honorable Bill Pascrell, Jr., a Representative in Congress
      from the State of New Jersey
      Oral Testimony.................................................     5
      Prepared Statement.............................................     8
    Mr. Michael Rapino, President & Chief Executive Officer, Live
      Nation Worldwide, Incorporated, Beverly Hills, CA
      Oral Testimony.................................................    12
      Prepared Statement.............................................    14
    Mr. Irving Azoff, Chief Executive Officer, Ticketmaster
      Entertainment, Incorporated, West Hollywood, CA
      Oral Testimony.................................................    21
      Prepared Statement.............................................    23
    Mr. Robert W. Doyle, Jr., Partner, Doyle, Barlow & Mazard, PLLC,
      Washington, DC
      Oral Testimony.................................................    29
      Prepared Statement.............................................    31
    Mr. Peter A. Luukko, President & Chief Operating Officer,
      Comcast-Spectacor, Philadelphia, PA
      Oral Testimony.................................................    57
      Prepared Statement.............................................    60
    Mr. Luke Froeb, William C. and Margaret W. Oehmig Associate
      Professor of Management, Owen Graduate School of Management,
      Vanderbilt University, Nashville, TN
      Oral Testimony.................................................    63
      Prepared Statement.............................................    64
    Mr. Ed Mierzwinski, Consumer Program Director, U.S. PIRG, the
      Federation of Public Interest Research Groups, Washington, DC
      Oral Testimony.................................................    74
      Prepared Statement.............................................    76

                                    APPENDIX

    Material Submitted for the Hearing Record........................   101

              COMPETITION IN THE TICKETING AND PROMOTION INDUSTRY

                                  ----------

                          THURSDAY, FEBRUARY 26, 2009

                  House of Representatives,
                     Subcommittee on Courts and
                                     Competition Policy
                                    Committee on the Judiciary,
                                                        Washington, DC.

        The Subcommittee met, pursuant to notice, at 10:07 a.m., in
    room 2141, Rayburn House Office Building, the Honorable Henry
    C. ``Hank'' Johnson, Jr. (Chairman of the Subcommittee)
    presiding.
        Present: Representatives Johnson, Sherman, Coble,
    Sensenbrenner, Goodlatte, and Issa.
        Staff Present: (Majority) Christal Sheppard, Chief Counsel;
    Elisabeth Stein, Counsel; Anant Raut, Counsel; Rosalind
    Jackson, Professional Staff Member; (Minority) Sean McLaughlin,
    Chief of Staff and General Counsel; and Stewart Jeffries,
    Counsel.
        Mr. Johnson. This hearing of the Committee on the
    Judiciary, Subcommittee on Courts and Competition Policy, will
    now come to order.
        Without objection, the Chair will be authorized to declare
    a recess of the hearing. I will start by saying that there has
    been a request by Congressman Pascrell that after he testifies,
    he would like to come and sit on the podium with us. I have
    spoken to my colleagues on the other side of the aisle, and
    they have no objection to that provided, that you don't ask any
    questions. So you are welcome to sit up here.
        Mr. Pascrell. Thank you.
        Mr. Johnson. I now recognize myself for about 5 minutes. I
    would like to make an opening statement.
        The reality in these tough economic times is that
    businesses are hurting. The entertainment business is affected
    by this economic downturn in the same way as other companies.
    TicketMaster, which owns the ticketing rights to 80 percent of
    the major venues in the United States, and Live Nation, which
    controls over 150 venues in addition to being the biggest
    concert promoter in the United States, have argued that a
    merger is necessary for the companies to survive in the
    changing entertainment environment.
        While it is important to examine the effects of the merger
    between Live Nation and TicketMaster on the live entertainment
    industry, there may very well be reasons to support such a
    venture.
        Prior to this proposed merger, the companies simultaneously
    occupied different positions in the supply chain and were
    competitors. Until December of 2008, Live Nation was a client
    of TicketMaster, generating 17 percent of TicketMaster's
    overall revenue. Live Nation elected not to renew its contract
    with TicketMaster, choosing instead to enter the primary
    ticketing market and compete directly against TicketMaster.
        Live Nation also competed against TicketMaster for a
    controlling stake in Front Line, which is an artist management
    company, which TicketMaster ultimately won.
        In the primary ticket market, too much control over live
    entertainment might result in significantly higher ticket
    prices for consumers. The combined company would have vertical
    integration of every element of the live music business, that
    being artist management, promotion, venue and primary
    ticketing.
        Both companies have stated that this merger will not raise
    ticket prices because the artists sets the ticket price. This
    statement has, in my opinion, limited believability, and I am
    sure that we will hear more about that when we hear testimony.
        It is one thing to claim that artists such as Bruce
    Springsteen or Barbra Streisand have the star power to exert
    control over ticket prices, but artists without that clout are
    not in a position to negotiate the price of their tickets.
        TicketMaster and Live Nation argue that artists support the
    merger because artists will benefit, and they offered letters
    from a number of artists who support this merger. I could not
    help but notice that at least four of those five artists are
    currently managed by Live Nation or TicketMaster, yet we do not
    have an artist on the witness panel, despite our monumental
    efforts to procure someone.
        Our understanding is that those artists we reached out to
    were reluctant to speak against the merger, presumably for fear
    of repercussions.
        It is also troubling that a combined Live Nation and
    TicketMaster might have significant control over the secondary
    ticket market. Live Nation might have been a competitor of
    TicketMaster's ticket reseller TicketsNow.
        Recently, TicketMaster tickets for a Bruce Springsteen
    concert were available on TicketsNow with a considerable markup
    from the face value. When fans complained about the bait and
    switch, Springsteen stated, quote, ``The one thing that would
    make the current ticket situation even worse for the fan than
    it is now would be for TicketMaster and Live Nation coming up
    with a single system, thereby returning us to a near-monopoly
    situation in music ticketing.''
        Three days ago TicketMaster reached a settlement with the
    New Jersey attorney general, Anne Milgram, where TicketMaster
    agreed not to allow tickets to be sold on TicketsNow.com until
    the initial sale begins on its primary site. Only yesterday it
    was reported that TicketsNow began selling tickets to Leonard
    Cohen concerts before the tickets went on sale. I was
    astonished to learn that tickets with a face value of $99 to
    $250 were being sold on TicketsNow.com for between $568 and
    $856 plus a service charge ranging from $85 to $128 per ticket.
        There is a risk that ticket prices will increase and
    consumers will be harmed by this merger. The Department of
    Justice has opened an investigation into this matter, and today
    we have a balanced panel because we want to understand how this
    merger will affect consumers.
        We are not here to gang up on a U.S. business that is doing
    its best to weather hard economic times. I thank TicketMaster
    and Live Nation for being here today, and I look forward to
    your candid testimony.
        I am now going to recognize my colleague, Mr. Coble, the
    distinguished Ranking Member of the Subcommittee for his
    opening remarks.
        Mr. Coble. Thank you, Mr. Chairman, and thank you for
    calling this hearing of the Courts and Competitive Policy
    Subcommittee.
        Until very recently, as you know, Mr. Chairman, antitrust
    has been a full Committee issue; and I believe this is the
    first Subcommittee hearing on antitrust matters in at least 8
    years, and I am pleased that we have such an interesting first
    topic.
        Bill, it is good to have you with us. And I will say to
    some of the witnesses who came by my office yesterday, because
    of conflicting hearings, I was not able to be with you, but I
    hope my staff extended a cordial greeting to you. I have heard
    no complaints, so I assume they did.
        Today's hearing gives us the opportunity to examine the
    proposed merger of Live Nation and TicketMaster, a combination
    that would create one of the world's largest entertainment
    companies. The combined company would own a segment of every
    aspect of the live music distribution chain from artist
    management to ticketing and practically everything in between.
        The Senate Judiciary Committee, Mr. Chairman, conducted a
    hearing on this very issue earlier this week, and it appears
    from their comments that several of the Senators had real
    concerns about this proposed merger. One of their main concerns
    arises from the relationship that TicketMaster has with its
    wholly owned subsidiary, TicketsNow.com, which is a secondary
    ticket retailer.
        Recently, hundreds of fans seeking Bruce Springsteen
    tickets on TicketMaster.com, I am told, were redirected to
    TicketsNow.com for tickets at a significantly higher price than
    face value. Furthermore, I am advised that there were still
    tickets available for face value on the main TicketMaster Web
    site.
        In addition, TicketMaster's CEO, Mr. Azoff, who is
    testifying today, was recently quoted in the Wall Street
    Journal as saying that artists' agents frequently leverage
    their value of their start clients to extract better deals from
    venues and concert promoters. With a stable of artists that
    includes--and, Mr. Chairman, I will stipulate that I am not the
    most hip guy on Capitol Hill, so I may mispronounce some of
    these names--The Eagles, Jimmy Buffett, Neil Diamond, Van
    Halen, Fleetwood Mac, Christina Aguilera, Aerosmith, Miley
    Cyrus, Madonna, Jay-Z, U-2 and Shakira.
        A combined Live Nation-TicketMaster would have a lot of
    leverage, and that is only one aspect of this business. I
    noticed, Mr. Chairman, conspicuously absent from that list of
    artists are some of my favorites--Earl Scruggs, Lyle Lovett,
    the late Grandpa Jones, the late Buck Owens--but as I say, I am
    not the most hip guy around.
        All of that leads me to be concerned about how this deal
    with affect the average customer. With its wealth of resources
    in terms of artists managed, venues controlled and tickets
    sold, the combined TicketMaster-Live Nation will have a lot of
    sway, it seems to me, over the little guy. After all, in these
    troubled economic times we cannot ask customers to pay more for
    a TicketMaster ``convenience charge,'' a charge that many
    customers would probably indicate is not convenient.
        This Subcommittee, with the support of the current and
    former Chairman, have spent enormous resources to improve and
    secure the future of the American entertainment industry, which
    is indeed significant. It provides billions, billions, in
    positive revenue to our economy. At the same time, this
    entertainment must remain affordable and accessible for the
    industry to continue to flourish.
        As I implied earlier, I am a devout bluegrass and old time
    country fan, and while this may be only a fraction of the
    events affected by this merger, thousands of my constituents
    back home, Mr. Chairman, are skeptical; and I am sure they are
    watching or will follow this hearing closely as to how this
    matter will affect them.
        That said, the burden today, it seems to me, is on
    TicketMaster and Live Nation to demonstrate how their proposed
    merger will benefit fans and the industry alike.
        I thank our witnesses who have agreed to participate in
    today's hearing, and I look forward to hearing the testimony.
        I yield back.
        Mr. Johnson. I thank the gentleman for his statement.
        I now recognize Representative Smith, who would like to
    make an opening statement, an honorable Member from Texas.
        Mr. Smith. Mr. Chairman, I appreciate your calling this
    hearing on competition in the ticketing and promotion industry.
        Vigorous, unimpeded competition sustains our economy and
    keeps it strong. It leads to innovative products that better
    our lives and keep prices low.
        The Judiciary Committee has a long history of oversight to
    ensure that American markets retain healthy competition. This
    hearing is evidence of the Committee's continued interest in
    considering mergers of large companies that can affect American
    consumers.
        Today's hearing gives us the opportunity to examine the
    proposed merger of Live Nation and TicketMaster, a combination
    that would create one of the world's largest entertainment
    companies. The combined company would own significant assets in
    the artist management, venue management, concert promotion,
    ticketing and marketing aspects of live entertainment. In
    short, the new company will have a hand in everything from
    signing up artists, to deciding what venues those artists will
    play, to the price of the ticket that consumers must pay.
        The question that the Department of Justice must answer in
    reviewing this merger is whether the proposed transaction will
    lessen competition and thereby harm consumers.
        On the other hand, this merger is not typical of the
    mergers that this Committee usually reviews. Normally, we look
    at mergers between head-to-head competitors such as Delta and
    Northwest and XM-Sirius.
        While there is an element of that in this merger, the more
    compelling and harder-to-answer question is whether a
    vertically integrated company that has a hand in every stage of
    live entertainment from artist to concert goer will reduce
    choices and raise prices for live entertainment. This is
    particularly relevant given that one of the parties,
    TicketMaster, has recently been the subject of scrutiny because
    of a mistake that directed hundreds of customers for Bruce
    Springsteen tickets to a TicketMaster-owned ticket reseller
    that was charging significantly higher prices. The Boss was
    upset, his fans were upset; and I can't say that I blame them.
        Under these circumstances, it is harder to believe
    TicketMaster when it says, Trust us that ticket prices can come
    down under this merger.
        Finally, while some artists, such as Bruce Springsteen,
    have expressed public displeasure with this deal, none was
    willing to testify today. Conversely, numerous artists have
    written the Committee to say that the deal will lead to better
    options for artists and consumers alike.
        I would like to thank all of our witnesses for appearing
    here today, and I look forward to hearing the views of the
    witnesses on this subject.
        I yield back.
        Mr. Johnson. Thank you, Congressman Smith.
        Without objection, other Members' opening statements will
    be included in the record.
        I am now pleased to introduce the witnesses for today's
    hearing. We have two panels, and I will now introduce the first
    panel which consists of the distinguished gentlemen from New
    Jersey, Representative Bill Pascrell, Jr. He is in his seventh
    term as the Congressman for the Eighth District of New Jersey.
    Throughout his distinguished career in public service, first as
    a member of the New Jersey General Assembly and later as Mayor
    of Paterson, New Jersey, Representative Pascrell has earned
    numerous accolades, including a humanitarian award from the New
    Jersey State Firemen's Mutual Benevolent Association, as well
    as special recognition from the Brain Injury Association of
    America.
        Welcome, Congressman Pascrell.

    TESTIMONY OF THE HONORABLE BILL PASCRELL, JR., A REPRESENTATIVE
                IN CONGRESS FROM THE STATE OF NEW JERSEY

        Mr. Pascrell. Mr. Chairman, I want to thank you and I want
    to thank our Ranking Member, Mr. Coble, my neighbor, and
    Members of the Committee for this critical hearing and allowing
    me to testify before the Subcommittee about the proposed merger
    between TicketMaster and Live Nation.
        My attention was brought to this issue by the botched sale
    on February 2 of tickets to two Bruce Springsteen shows in New
    Jersey. To be clear, fans trying to buy tickets on
    TicketMaster.com were met with error messages and a link to
    purchase more expensive tickets on a secondary resale site,
    TicketsNow, which TicketMaster happens to own.
        Mr. Chairman, let me say that I was moved to act on this
    issue by the appeal of over 1,000 average Americans who felt
    they got a rotten deal and just wanted to know the truth, which
    is why I wrote to the Federal Trade Commission and the Justice
    Department calling for an investigation.
        But when I read yesterday in Roll Call that a Live Nation
    source said that this whole issue was just a distraction and
    not a legal issue, well, I have to admit I went from cerebral
    to visceral. To even imply that the Senate committee and the
    House committee are irrelevant to the task of examining this
    merger, first of all, is wrong and, second of all, we should
    all think about what our responsibilities are.
        The heart of this issue is the average American out there,
    the person who works longer and longer hours for less and less,
    the person who scrimps and saves for months to maybe buy a
    couple of tickets to their favorite sporting event or a concert
    only to be gouged at every turn.
        That same Live Nation source went on to say that ``This
    whole 'flap' was a bit of a surprise, but is not really related
    to the deal. There is nothing that a merger with Live Nation
    will do that changes that scenario, just what happens when you
    have bad public relations at the wrong time.''
        I don't know if there are bad public relations at the right
    time.
        Mr. Chairman, I am sorry about the debacle on February 2,
    and it shouldn't have been a surprise to the parties involved,
    and it has everything to do with the merger we are talking
    about today. This isn't just a little bad PR, this is quite
    simply a bad deal for the American people.
        Listen to Bruce Springsteen himself, who said, ``The one
    thing that would make the current ticket situation even worse
    for the fan than it is now would be TicketMaster and Live
    Nation coming up with a single system, thereby returning us to
    a near-monopoly situation in music ticketing. If you, like us,
    oppose the idea, make it known to your Representatives.''
        That is what Bruce Springsteen had to say.
        Let me tell you, Mr. Chairman, they have indeed made their
    feelings known. Now TicketMaster wants us to believe that by
    merging with promoting juggernaut Live Nation, they will be
    able to offer lower prices and better service to consumers.
    That is what you are going to hear today.
        You don't have to have a Ph.D. in economics to see this for
    what it is. This is a naked attempt to dominate the concert
    marketplace, to stifle competition and prevent any competitors
    from entering the market in the future.
        The combined corporation would control nearly every aspect
    of the live music business--you referred to this in your
    opening comments, Mr. Chairman--the artist management, the
    record sales, the promotion, the licensing, the venue control,
    the marketing, the ticket sales and the resales all of the way
    down to the hot dogs and beer.
        Try to take your family to a baseball game or a football
    game. Pretty soon you won't be able to wash your hands at a
    concert without this new company making a profit. Independent
    promoters, artists and the fans will have no choice but to do
    business with this behemoth and pay whatever they charge. It
    will be the only game in town, and that is the epitome of a
    monopoly.
        For years, TicketMaster has been able to get away with its
    arbitrary and overpriced service and convenience fees by
    cornering the market for ticket sales through anticompetitive
    exclusivity arrangements with venues. Today, you have to pay a
    fee just to print your tickets out at your home. That is greed,
    plain and simple.
        And what did TicketMaster do when the first significant
    competitor to them in the primary ticketing industry finally
    emerged, they didn't choose to out-compete them, they sought to
    gobble them up in order to preserve their market dominance.
    This is the very essence of anticompetitive behavior, and this
    Committee and the Department of Justice must reject it.
        The President is on the side of the people, Mr. Chairman.
    In 1962, Robert Kennedy, his Justice Department refused to
    allow MCA, Music Corporation of America, and Decca Records to
    merge because it would have put a talent agency and a movie
    studio under the same corporate roof.
        The merger we are discussing today would similarly put the
    managers of talent, the operators of venues and ticket sales
    together and allow them to exclude outside artists, allow them
    to exclude venues and allow them to exclude promoters from
    their business.
        The issue of a primary ticket reseller owning a secondary
    ticket dealer raises many significant questions in and of
    itself. TicketMaster has admitted that it earns more gross
    profits off a sale on its secondary site than its primary one.
    Everyone, from the scalpers to the hackers--and by the way, in
    the United States, scalping is legal in most States; we need to
    take a look at this--brokers and TicketMaster itself, makes a
    little extra cash under this perverse system of incentives; and
    the fans are left sitting outside in the cold.
        Senator Schumer and I agree, TicketMaster should
    immediately sell TicketsNow and end this obvious conflict of
    interest. I will soon be proposing Federal legislation to ban
    the use of automated ticketing programs and rein in the
    secondary ticket market. Real music and sports fans deserve the
    right to see their favorite bands and their teams without a
    greedy middleman cutting the line and exploiting their passion
    for profit. I hope that is clear.
        We live in a period of tough economic times. Oftentimes
    live entertainment is a way to escape for a few moments or a
    few hours. For years fans have scraped together some cash to
    buy a ticket to their favorite band or sports team, but
    anticompetitive behaviors have driven these costs to
    astronomical heights, pricing many fans out of the market.
        The question we should be asking in any merger is this:
    When this deal is approved and all of the scrutiny and press
    attention dies down, as it certainly will, do we really believe
    that this new corporate Goliath will do what is in the best
    interest of consumers and the marketplace?
        I think the actions of TicketMaster and I think the actions
    of Live Nation make it clear that the answer is a definitive
    ``no.''
        I thank you for allowing me to come here and testify today.
    I hope the rest of the hearing is revealing.
        Thank you, Mr. Chairman.
        [The prepared statement of Mr. Pascrell follows:]
           Prepared Statement of the Honorable Bill Pascrell, Jr., a
            Representative in Congress from the State of New Jersey
                                  introduction
        I want to thank Subcommittee Chairman Johnson and Ranking Member
    Coble for inviting me here today to testify about the proposed merger
    between TicketMaster, the country's largest primary ticketing company,
    and Live Nation, our country's largest concert promoter and operator of
    over 150 venues. I have grave concerns that this merger will have far
    reaching negative consequences for artists, fans, promoters, and the
    music industry as a whole. I believe that it violates both horizontal
    and vertical anti-trust principles, and will undoubtedly lead to higher
    ticket prices for the average consumer. I applaud the Subcommittee for
    taking a careful look at this merger. I fear that if this merger is
    approved we will lose any semblance of competition in the live music
    industry.
                                   testimony
        As a Member of Congress, my number one priority is to represent my
    constituents and to defend their interests. I was troubled when I was
    contacted by many constituents and read press reports regarding the
    initial sale of tickets to two Bruce Springsteen shows in New Jersey,
    in which fans trying to buy tickets on TicketMaster.com were met with
    error messages and links to purchase the tickets on TicketsNow.com, a
    TicketMaster subsidiary, for two, three, or four times the original
    price. Something was not right, and I'm glad that TicketMaster has
    since acknowledged that. I am pleased with many of the concessions they
    were forced to make, although they still maintain cause of the problems
    so many fans had was simply the glitch with their technology. I've
    written to the FTC to request a full investigation of what occurred on
    February 2nd to make sure we get to the bottom of this.
        However, the problems with TicketMaster's business practices go far
    beyond a simple one time glitch. The fact is that without this glitch,
    we would never have uncovered the insidious relationship between
    TicketMaster and TicketsNow to begin with. It has brought to light the
    many consumer complaints and problems with TicketMaster that for years
    we have shut our eyes to, but the fans have known about all along. For
    years they have been dealing with unjustified and arbitrary ``service''
    and ``convenience'' fees, including a fee to print your tickets in your
    own home, and rising base ticket prices that have far outpaced the rate
    of inflation. And they have finally had enough. I was moved to act by
    the thousands of messages my office has received regarding not only the
    botched Bruce Springsteen sale, but issues with TicketMaster going back
    years. Yes, TicketMaster has apologized for their recent actions, but
    how sincere is this? Is it just a coincidence that these apologies and
    concessions occur at the moment they are seeking this merger? I urge
    this committee to consider how this proposed corporate conglomerate
    will behave when they are not under our watchful gaze. Do we really
    believe they will have the best interest of the consumer in mind? The
    nature of the complaints my office has received and their actions
    suggest that once this merger has been approved and we aren't looking,
    it will be back to business as usual at TicketMaster/Live Nation.
        As we saw with the initial ticket on sale to the Bruce Springsteen
    concerts at the beginning of this month, TicketMaster's current
    monopolization of the primary ticket market and questionable business
    practices often lead to the consumer being taken for a ride. Now
    TicketMaster wants us to believe that by merging with Live Nation it
    will be able to offer lower priced tickets to consumers. Now, I don't
    have a PhD in economics, but I'm not stupid either, and neither are the
    American people. They see this for what it is: a naked attempt to
    dominate the concert marketplace.
        This merger will combine TicketMaster, which owns the ticketing
    rights to 80 percent of the major venues in this country, with Live
    Nation, which in addition to being the biggest concert promoter in the
    world, also controls over 150 venues. This combined company would be a
    juggernaut. It would have control over every aspect of the live music
    business: artist management, record sales, promotion, licensing, venue
    control, parking, ticket sales and resales, all the way down to the hot
    dogs and beer. Pretty soon, you won't be able to wash your hands at a
    concert without this new company making a profit. This level of
    vertical control will be unprecedented in the music industry and
    recalls the trusts of the gilded age that controlled every step along
    the production process for oil or steel. Independent promoters, who
    don't get squeezed out of business, artists and fans will have no
    choice but to do business with this behemoth and pay whatever they
    charge. It will be the only game in town--and that, I must say, is the
    epitome of a monopoly.
        It didn't have to be like this. Live Nation, which until recently
    had sold tickets through TicketMaster, was poised to enter the primary
    ticket sales market and finally provide some much needed competition in
    the ticketing industry. Competition, after all, is what capitalism is
    all about. This new and significant challenge to TicketMaster's
    dominance was sure to cause ticket prices to fall. But what happened?
    After only one month of real competition in the ticketing industry,
    this merger between the country's two largest primary ticket agents was
    announced. Now, the combined company will maintain its stranglehold on
    the primary ticket market and the ability to raise prices at will not
    because they offer a better service, but because they were able to buy
    out their only competition. This is anti-competitive behavior distilled
    to its purest form, and must be rejected by this committee and the
    Department of Justice.
        Combining Live Nation and TicketMaster would obviously
    significantly dilute competition in the live music industry and
    violates both vertical and horizontal models of anti-trust law. It
    would create no benefit for the consumer, and as history, economic
    theory, and common sense dictate, would not lower the cost of tickets.
    TicketMaster already has a monopoly on primary ticket sales in this
    country. Live Nation has a monopoly on this country's amphitheaters and
    many other venues in addition to promoting a vast majority of the top
    concerts in this country each year. Two wrongs don't make a right and
    combining two monopolies cannot possibly be a good deal for consumers.
        While rejecting this merger is imperative, I would urge this
    committee to further consider federal review of consolidation within
    the music industry as a whole. I believe that both TicketMaster and
    Live Nation may already be violating federal anti-trust laws. The
    Department of Justice has let these companies get too big, and I urge
    this committee and the new Administration to take a fresh look at their
    business practices.
        Precedent is on the side of the people. In the 1960s, MCA (the
    Music Corporation of America) entered a merger with New York-based
    Decca Records. MCA at the time included in its business portfolio a
    successful talent agency, while Decca at the time owned a controlling
    stake in Universal Pictures. In order to acquire Universal, the
    Department of Justice led by Attorney General Robert F. Kennedy, forced
    MCA to dissolve its talent agency. The Department of Justice felt that
    one company owning both the movie studio and a talent agency would
    violate anti-trust laws.\1\ The TicketMaster-Live Nation merger before
    us today would violate the same anti-trust principles by putting
    control of top talent as well as the production of their shows under
    one company's roof.
    ---------------------------------------------------------------------------
        \1\ See McDougal, Dennis. The Last Mogul: Lew Wasserman, MCA, and
    the Hidden History of Hollywood. Da Capo Press, 2001. 299-302.
    ---------------------------------------------------------------------------
        If this merger is allowed to proceed, problems like those that fans
    experienced trying to buy Bruce Springsteen tickets will become more
    and more commonplace. The issue of a primary ticket reseller owning a
    secondary ticket market raises many significant questions in of itself.
    TicketMaster's business practice in this arena appears to contradict
    its tough public rhetoric on ticket scalpers. In reality, TicketMaster
    has little financial incentive to reign in brokers and hackers who may
    be using computer software to either cut the line or purchase mass
    quantities of tickets. After all, TicketMaster has admitted it earns a
    larger gross profit on a ticket sold on their secondary market site
    than on their primary market one. Everyone, from scalpers and hackers
    to brokers and TicketMaster itself, makes a little extra cash under
    this perverse system of incentives, and the fans are left sitting
    outside in the cold. I agree with what Senator Schumer said at
    Tuesday's hearing in the Senate Judiciary Committee. TicketMaster
    should immediately sell TicketsNow and end this obvious conflict of
    interest.
        Additionally, I will soon be proposing federal legislation to ban
    the use of these automated ticket purchasing programs and take
    additional steps to reign in the secondary ticket market, and I hope to
    work with this committee on this important initiative. The real fans
    deserve the right to see their favorite bands without a greedy
    middleman cutting the line and exploiting their passion for profit.
        We are all well aware of the tough economic times this country and
    its citizens are faced with. This economy is scary. For many Americans,
    going to sleep every night means wondering if they will have a job to
    wake up to in the morning. Will I be able to afford a trip to the
    hospital bill if something happens? Will my house be foreclosed on
    tomorrow? For many, live music and entertainment is a way to escape all
    of this, if at least for a few hours.
        However, over the past several decades, anti-competitive behaviors
    by companies such as TicketMaster and Live Nation have priced so many
    of these average fans out of the market. The last thing that the
    American people deserve in these tough economic times is to be
    continually price gouged by a corporate conglomerate more concerned
    with profits and the price of its stock then the experience of the
    fans.
        Live Nation and TicketMaster has assembled a strong team of
    expensive lobbyists, law firms and publicists to push for their goal of
    merger. There is no comparable group on the other side of the issue to
    pay for lobbyists, to pay for attorneys, no one to fight for the
    average Joe. My friends, it is the job of those of us in the Congress
    to represent the people and fight for what is in their best interest.
    It is time for the Congress to ensure that the concert industry returns
    to a business model that puts the fans, artists and music first.
    Rejecting this merger will be a significant first step in that
    direction.
        Thank you.
                                   __________

        Mr. Johnson. Thank you. I thank the gentleman for his
    statement.
        I will say that back in 1973, when I was in college, I was
    feeling pretty low one day and so I decided to go to a concert
    that was being held at the old Atlanta Fulton County Stadium.
    It was on the lawn out there, and the headliner was George
    Clinton and the Funkadelics. I don't know if Ranking Member
    Coble recalls that group, but I think tickets were somewhere
    between $5 and $10.
        So I went to the concert. It was a wonderful experience. It
    definitely took my mind off of my troubles, and I had a renewed
    sense of vigor to press forward. You mentioned about how
    concerts can positively impact people, particularly during a
    tough economic time as we are in now.
        Mr. Pascrell. Mr. Chairman, if I may.
        Mr. Johnson. Please.
        Mr. Pascrell. There is nothing in what I have said that
    implies that we want the government to control A to Z. That
    doesn't help, either.
        But I think we have a responsibility. I know that Bruce
    Springsteen's song, The Promised Land, has been an inspiration
    to a lot of people. And I don't pretend to be an expert on
    Bruce Springsteen, although I know most of his music and he is
    from New Jersey. But in that song he said, ``Driving all night
    chasing some mirage, some day with a girl I'm going to take
    charge.''
        Folks need to know we do have some control over what is
    happening, that we are not simply at the beck and call of other
    people.
        We want people to make profits. That is what America is all
    about. But the average guy out there is getting stuck every
    day, and particularly when it comes to some entertainment, I
    think we need to take a real good look at this proposed merger,
    and I am sure you are up to it.
        Mr. Johnson. There is no question that this Subcommittee
    has--from the outset of the announcement of the merger, been
    concerned about this issue. We view it very seriously, and that
    is why we are meeting today for this hearing.
        I thank you for your statement. Please feel free to come up
    and have a seat.
        I want to now introduce our second panel. Our second panel
    features Mr. Michael Rapino, President and CEO of Live Nation
    Worldwide. Mr. Rapino began his career in the music business as
    an undergraduate at Lakehead University in Canada, promoting
    Labatt Brewing Company at live music shows. He was the CEO and
    President of Global Music for Clear Channel Music Group and has
    been President and CEO of Live Nation since 2005, when it was
    spun off as a separate company by Clear Channel.
        Welcome, Mr. Rapino.
        Next is Mr. Irving Azoff, CEO of TicketMaster
    Entertainment. From his early days booking bands as an
    undergraduate at the University of Illinois, Mr. Azoff has been
    a fixture in the music business. He has experience as a music
    agent, manager, promoter, publisher, producer and record label
    owner.
        In 1983, Mr. Azoff was named Chairman and CEO of the MCA
    Music Entertainment Group. In 2005, his artist management firm,
    Front Line Entertainment, was acquired by TicketMaster; and in
    addition to serving as CEO of TicketMaster, Mr. Azoff manages
    such recording artists as The Eagles, Christina Aguilera, Van
    Halen and Steely Dan.
        Welcome, Mr. Azoff.
        Also on the panel is Mr. Peter Luukko, President and Chief
    Operating Officer of Comcast-Spectacor, a Philadelphia-based
    sports entertainment firm that owns the NBA Philadelphia 76ers
    and the NHL's Philadelphia Flyers as well as the arenas in
    which they play.
        Beginning with an internship at the New Haven Coliseum, Mr.
    Luukko's sports management career spans two decades. He was the
    2000 recipient of the City of Hope's Tri-State Labor Award. In
    his own words, Mr. Luukko describes himself as a hockey player,
    a hockey coach, and a hockey parent.
        Welcome. Mr. Luukko.
        Next is Mr. Robert Doyle, an antitrust partner in the firm
    Doyle, Barlow & Mazard, PLLC. After receiving degrees in law
    and economics from Temple University, Mr. Doyle spent 20 years
    litigating cases on behalf of the Federal Trade Commission.
        Mr. Doyle served previously as a Deputy Assistant Director
    in the FTC's Bureau of Competition and has been featured on the
    cover of the American Lawyer magazine.
        Welcome, Mr. Doyle.
        Next is Professor Luke Froeb of the Owen Graduate School of
    Management at Vanderbilt University. Mr. Froeb spent 7 years as
    an economist at the Antitrust Division of the Department of
    Justice before becoming Director of the Bureau of Economics at
    the Federal Trade Commission.
        Professor Froeb has published numerous papers concerning
    antitrust policy and economics and was voted outstanding
    professor of Vanderbilt's executive MBA program in 3 separate
    years.
        Welcome, Professor Froeb.
        Our last witness is Ed Mierzwinski, who is a Senior Fellow
    in the consumer program of the National Association of State
    Public Interest Research Groups, known as U.S. PIRG. Mr.
    Mierzwinski has testified on numerous occasions before State
    legislatures and Congress on a wide variety of consumer issues.
    He has appeared as a commentator on the Today Show, Good
    Morning America, Nightline, CNN, Crossfire and NPR's Talk of
    the Nation.
        Mr. Mierzwinski is a recipient of Privacy International's
    Brandeis Award for privacy protections and the Consumer
    Federation of America's Esther Peterson Consumer Service Award.
        Welcome, Mr. Mierzwinski.
        Mr. Johnson. We thank all of you for joining us here today.
    Without objection, your written statements will be made a part
    of the record in their entirety.
        I ask each of you to summarize your testimony in 5 minutes
    or less. There is a timing light at your table. When 1 minute
    remains, the light will switch from green to yellow, and then
    to red when your 5 minutes are up.
        Mr. Rapino, please proceed.

       TESTIMONY OF MICHAEL RAPINO, PRESIDENT & CHIEF EXECUTIVE
    OFFICER, LIVE NATION WORLDWIDE, INCORPORATED, BEVERLY HILLS, CA

        Mr. Rapino. Thank you, Mr. Chairman and Members of the
    Committee, and thank you for the opportunity to speak today and
    address some of the perceptions about Live Nation and this
    merger.
        I want to address this quote that was apparently in some
    paper yesterday. I can assure you that it didn't come from me.
    I wouldn't even know who to call to make that quote. And I can
    assure you that everyone on our team has the utmost respect for
    these hearings, and we appreciate and understand your concerns.
        As a side note, I am fully aware of the power of the Senate
    and the Congress. I am a fellow Canadian who will be sworn in
    as a U.S. citizen in the next 30 days after going through my 6
    months of the process to become a U.S. citizen. So I am very
    proud to become part of this country.
        Let me explain some of the facts regarding Live Nation
    because sometimes the perception of ``big'' isn't always the
    truth.
        We have 17,000 employees that work in local communities
    across America. Last year, our market share was approximately
    35 percent and has declined for 5 years straight. Our market
    cap today is $250 million and we are carrying $700 million in
    debt. Our stock is widely held and owned by many of your
    constituents. We have no large shareholder who controls our
    company.
        We put on 7,000 concerts a year for young artists, and we
    lose $10-20 million on those shows. We operate in a highly
    competitive marketplace. We are in a 4 percent margin business,
    the lowest in the industry. And to give you a comparison,
    record labels operate in the 15 to 20 percent margin business.
        Let me tell you about our competition. Our biggest
    competitor is AEG, a privately held company owned by
    multibillionaire Phil Anschutz, who is the 31st richest man in
    America. AEG promoted five of the top 10 concerts last year; we
    promoted four. AEG is a vertically integrated company in two
    separate categories. They own a movie production company and
    chain of movie theaters; and in live entertainment, they own
    arenas, stadiums, clubs, sports teams, a concert company, music
    merchandise, and are one step away from a ticketing company.
        To put it in perspective, one of those assets, the Staples
    Center, is worth more than our two companies combined.
        In every market we face able and relentless competition
    from AEG and independent promoters. For example, in Washington,
    DC, the local promoter, Seth Hurwitz, has a larger market share
    than Live Nation.
        Some of the facts about our venues: We own 18 venues and
    lease 70 in America. This is a small fraction of the thousands
    of venues across America that are staging music. In every city
    and town, there are buildings and stiff competition from the
    new casinos to fairs, festivals and arenas.
        When we fired TicketMaster, we found it very easy to find
    other competing ticketing companies for our venues. We had a
    lineup of companies willing and able to ticket our venues. We
    narrowed it down to four, and we ended up choosing a company
    from Germany--we are not actually a ticketing company, the CTS
    company is the ticketing company--and we found it to be a very
    competitive marketplace.
        Let me tell you about the concert business. The artist pays
    us a fee to handle their show. We guarantee them an amount of
    dollars, and they pay us a fee from the concert promotion
    profits, somewhere in the 5 to 15 percent range. The artist and
    their business team set the basic prices and financial needs of
    the tour. From a small band to a large band, an artist has a
    running operating cost that he needs to cover on the road. He
    then works backwards and sets ticket prices to help cover his
    expenses.
        An average ticket price for a concert is only $50. Front
    row may cost you up to $150. That is still well below the price
    of a ringside boxing match seat, courtside at a basketball
    game, rink level seats at a hockey game or seats on Broadway.
        Fans go to an average of only two concerts a year
    historically. It is not a necessity. It is a form of
    entertainment, and it is still much cheaper than an average
    dinner in Washington.
        When polled and fans were asked, ``why did you not go to
    the show?'' Their top reasons were: They did not know about the
    show--50 percent said they didn't know; they didn't like the
    band; and they couldn't get good seats.
        In our business we have a saying: If the front row was 8
    miles long, we would have a lot of happy fans. If you are in
    the front row of a show, you love the system. If you are in the
    back row of the arena, you are not that happy. And if you are
    one of the thousands that didn't get into the show, it is our
    fault.
        The Live Nation business model: We make money two ways,
    from artist revenue and ancillary revenue. Our model is based
    on putting fans in seats. The more fans that walk in the door,
    the more money we make. We make very little money from the
    ticket; on average, $4 out of a $100 concert ticket goes to us.
    We make $12 to $15 on peanuts, popcorn, parking, ticket rebates
    and all of the ancillary revenue created to fund the business.
        Mr. Johnson. Mr. Rapino, your time has expired. Please sum
    up.
        Mr. Rapino. I apologize.
        This merger, we believe, is going to be a good step forward
    for an industry that needs change. We don't have all of the
    answers. We are not miraculously going to change a 30-year
    history, but we believe change is needed, and technology
    advances are needed.
        We agree that scalping has to be addressed, from outlawed,
    and stopped. We would like to reduce service fees and we would
    like to create a better model for the artist that helps the
    fan.
        Mr. Johnson. Thank you, Mr. Rapino.
        [The prepared statement of Mr. Rapino follows:]
                      Prepared Statement of Michael Rapino

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                                   __________
        Mr. Johnson. Mr. Azoff, it is time for your testimony now.

          TESTIMONY OF IRVING AZOFF, CHIEF EXECUTIVE OFFICER,
     TicketMaster ENTERTAINMENT, INCORPORATED, WEST HOLLYWOOD, CA*
    ---------------------------------------------------------------------------

        *Subsequent to delivering this testimony, Mr. Azoff learned that as
    to a de minimis number of tickets sold in very narrowly defined cases
    (constituting less than four one-hundredths of one percent of the
    tickets that TicketMaster sells), TicketMaster sets ticket prices.
    ---------------------------------------------------------------------------
        Mr. Azoff. First, I would like to thank Chairman Johnson
    and the Subcommittee Members for this opportunity to speak
    about this proposed merger.
        I came to TicketMaster 4 months ago when it acquired a
    majority interest in Front Line Management; I became CEO of
    TicketMaster Entertainment. While I have spent my 43-year
    career serving artists, TicketMaster has dedicated itself for
    30 years to reaching fans of live entertainment. We have
    roughly 6,700 employees, who have worked extremely hard to
    bring us the success we have seen as a company.
        I have come to realize in my short time with the company
    that TicketMaster is a lightning rod for many issues beyond its
    control. As the only point of contact with fans, TicketMaster
    hears nearly every gripe about--just about everything that goes
    wrong. People don't like ticket prices, they blame TicketMaster
    even though we have nothing to do with setting ticket prices.
        If a show sells out, they get mad at TicketMaster even
    though all we do is sell all the tickets that our clients give
    us to sell.
        If they get a bad seat, they blame TicketMaster even though
    we don't control which seats go on sale.
        If somebody gets hurt in a mosh pit, they try to sue us. We
    take so much heat for what we do, you would think that we were
    the IRS.
        That is not to say that we always get it right. We don't.
    No one does. As hard as we try to serve clients and ticket
    buyers, technology is not perfect.
        I fully understand the frustration and anger created by the
    problems we experienced in the recent Bruce Springsteen on-
    sale. I will explain in detail.
        On February 2, tickets for three Bruce Springsteen concerts
    went on sale at 9 a.m. Because of Mr. Springsteen's popularity,
    there were many more fans trying to buy tickets through
    TicketMaster.com than there were tickets available. As a
    result, many requests could not be filled.
        In August 2008, TicketMaster modified its payment
    processing software in the U.S. to support certain credit card
    antifraud programs. On the morning of February 2, on the
    TicketMaster server covering sales for New Jersey, the extreme
    load caused by the Boss's concert on sale revealed a limitation
    in the software implementation. While the code that was added
    to implement this program passed all internal tests, it
    ultimately was unable to handle the extreme conditions of the
    heavy volume. Starting at approximately 9:08, this caused
    certain consumer transactions to freeze for an extended period
    to be aborted while processing payments. It also caused certain
    consumers to see routine maintenance error pages on the Web
    site while attempting to reserve tickets.
        No consumers were directed to TicketsNow or given the
    option to link to TicketsNow from the error page. TicketMaster
    identified the software problem at approximately 9:45. In both
    cases, fans involved had to return to start over at the
    TicketMaster.com site to start another search.
        The problem was corrected at approximately 1:25 p.m. when a
    software patch was installed on the affected ticket inventory
    systems. That unlocked the frozen transactions and eliminated
    the routine maintenance error pages. In addition, TicketMaster
    sent out a ticket alert e-mail to certain registered users that
    inadvertently and mistakenly listed the on-sale time as 10 a.m.
    rather than 9 a.m.
        Consistent with our policy at the time, other ticket
    purchasing options for the event were unable to fulfill a
    specific ticket request on TicketMaster.com. Fans who were
    unable to secure tickets in response to their search were given
    three choices: Search again using different parameters, come
    back later, or voluntarily click on a link to see inventory
    available on TicketsNow. Some consumers who chose to link to
    TicketsNow and then completed a purchase, however, complained
    they were confused and believed they were instead purchasing
    tickets from the initial on-sale from TicketMaster.com.
        While we believe the messaging on the site was clear when
    consumers chose to switch to TicketsNow, we immediately offered
    to issue refunds for the difference between the purchase price
    and the face value of the ticket. Also, to address the concerns
    we received from consumers, we have removed all links to
    TicketsNow from our TicketMaster Web site in all States.
        We are in a service business, and like any other service
    business, if we don't serve our clients, we lose the business.
        We are proud of our success and the number of our satisfied
    customers who rely daily on our ticketing system. Some claim we
    have a large share of the ticketing service market. We don't
    measure or keep track of such things. What we do is we strive
    to do the best job we can and keep up with the many competitors
    who are offering alternatives to our clients.
        All of our venue agreements come up for renewal constantly.
    We have lost major arenas to competitors in Philadelphia,
    Houston, Cleveland and Denver. If that is not competition, I
    don't know what is.
        Others will most certainly leave if this merger is
    consummated. In fact, AEG has notified us by letter that they
    believe they have the right to terminate our agreement in
    connection with this merger. I will supply a letter to the
    Committee. Thank you very much.
        [The prepared statement of Mr. Azoff follows:]
                       Prepared Statement of Irving Azoff

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                                   __________
        Mr. Johnson. Mr. Doyle.

      TESTIMONY OF ROBERT W. DOYLE, JR., PARTNER, DOYLE, BARLOW &
                      MAZARD, PLLC, WASHINGTON, DC

        Mr. Doyle. Thank you, Mr. Chairman and the Subcommittee,
    for this opportunity to present my views on this proposed
    merger. I do not represent anybody here. I am appearing at the
    invitation of the Committee to express my views on the
    transaction.
        I have four basic views on the proposed merger:
        I believe that the merger will eliminate competition in the
    primary ticket services market;
        I believe it will reduce competition in the secondary
    ticket services market;
        It will reduce competition in the management of top tier
    artists; and
        Fourthly, it will reduce competition in the concert
    promotion industry.
        In the interest of time, I am going to focus my summary on
    the competitive effects of this merger in the primary ticket
    services market.
        This merger will eliminate the only viable competitor
    available to go head to head with TicketMaster in the primary
    ticketing services market. Now let me put this in a little bit
    of context. We have to go back to September of 2008.
        On September 11, 2008, Live Nation announced that it was
    entering the ticketing business. That same day they also
    announced that they had taken away from TicketMaster its
    largest customer, SMG Entertainment. TicketMaster immediately
    responded to that press release put out by Live Nation.
        Their press release indicated that in the short term Live
    Nation's entry didn't impact them very significantly because
    SMG was tied up in a long-term contract through 2010, and
    during the interim period, TicketMaster would take every step
    possible to convince SMG to stay with them until the expiration
    of their contract.
        The following month, after TicketMaster saw Live Nation
    entering its market, what did TicketMaster do? It announced its
    acquisition of Front Line. Now, that could be a retaliatory
    response, it could be a defensive response, but within a short
    period of time after Live Nation begins competing with or
    announces that it is going to compete with TicketMaster,
    TicketMaster announces that it is going to get into the talent
    management business, a business obviously that Live Nation was
    in.
        So you have these two large competing firms going head to
    head with each other, and within a short period of time Live
    Nation in January of 2009 began ticketing some of its own
    venues. So not only did it announce it was getting into the
    market and taking away a significant competitor from
    TicketMaster, but shortly thereafter, in January, it began
    ticketing some of its events.
        We all stood by. We all saw these two significant
    competitors finally going head to head, and we waited to see
    what kind of a competitive response the market would realize.
        Well, the market didn't get any response at all because the
    companies decided in February to merge. They called a truce.
    There was no point banging each other in the marketplace in
    ticketing on one side of the coin, and on the other in the
    management, the talent management part of the business. So the
    merger eliminates the only viable, integrated, potential
    competitor that could challenge the monopoly position of
    TicketMaster in the marketplace.
        Now, there is another concern that has arisen as a result
    of this transaction, and that is the degree to which a combined
    Live Nation-TicketMaster can impose its will on the venue
    customer in particular. We have done several interviews of
    venues over the course of the last week or so, and the
    indications that we have gotten from the venue segment of the
    industry is that they are concerned that a combined Live
    Nation-TicketMaster will exercise leverage and impose its will
    on the venue in the form of perhaps higher convenience fees, in
    the form of perhaps less services, and in the form of picking
    and dictating to the venue what ticket company to use.
        Now the question is, does that leverage exist, number one;
    and number two, will it be exercised post acquisition by the
    merged firm?
        Let me quickly sum up and say that we don't have to
    speculate whether leverage can be used or not used. In
    Saturday's Wall Street Journal, over the weekend, there was a
    front page article on TicketMaster; and Mr. Azoff was quoted
    extensively in the article. I would direct your attention to my
    Exhibit 4 where I have copied the article.
        In the article the question was put to Mr. Azoff about
    leverage, and the best way to summarize here is to read his
    comment: ``Mr. Azoff isn't shy about using his gold-plated
    roster as leverage when negotiating with concert promoters. 'It
    is done with a wink,' he said. There is never a conversation
    that says if you don't extend this rent deal to Journey and The
    Eagles, I'm not going to let Jimmy Buffett play your
    building.'"
        That is an acknowledgment by Mr. Azoff that he has the
    market power to impose his conditions on the venue which would
    extend, in my opinion, to selecting the ticket company, post
    acquisition, to the exclusion of other competitors in that
    marketplace.
        Thank you.
        [The prepared statement of Mr. Doyle follows:]
                   Prepared Statement of Robert W. Doyle, Jr.

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                                   EXHIBIT 1

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                                   EXHIBIT 2

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                                   EXHIBIT 3

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                                   EXHIBIT 4

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                                   __________

        Mr. Johnson. Mr. Luukko.

       TESTIMONY OF PETER A. LUUKKO, PRESIDENT & CHIEF OPERATING
              OFFICER, COMCAST-SPECTACOR, PHILADELPHIA, PA

        Mr. Luukko. Thank you, Mr. Chairman.
        I have spent my entire career in the sports management and
    facilities management industries, and I have done business with
    both TicketMaster and Live Nation for many years.
        Since 2005, I have been the President and Chief Operating
    Officer of Comcast-Spectacor, a Philadelphia-based sports and
    entertainment firm which includes the Philadelphia Flyers
    hockey team, the Philadelphia 76ers basketball team, the
    Philadelphia Phantoms hockey team, and two south Philadelphia
    arenas in which the teams play, the Wachovia Center and the
    Wachovia Spectrum.
        In my current position, I am also responsible for oversight
    of Comcast-Spectacor's other business interests which include
    Global Spectrum, a company that manages stadiums and arenas
    throughout the country and Canada; Ovations Food Services, a
    food and concessions company; New Era Tickets, a full-service
    ticketing company which is a competitor of TicketMaster--and
    with all due respect to Mr. Doyle, we do not feel any implied
    leverage whatsoever and, in fact, we see this as an
    opportunity--Flyers Skate Zones, a series of community skating
    and hockey rinks in the Greater Philadelphia region; and Disson
    Skating, the developer and promoter of a series of ice skating
    and music shows performed live and distributed to a national
    television audience.
        Also within the Comcast-Spectacor family of companies is
    Front Row Marketing Services which provides consulting services
    to help develop effective sports and entertainment marketing,
    sponsorship and advertising strategies.
        My duties include serving as the Chairman of Global
    Spectrum, and I am responsible for creating new business
    opportunities for Comcast-Spectacor in the fields of facility
    management, sports ownership and operations, food and
    concessions.
        Prior to joining Comcast-Spectacor and ultimately becoming
    the company's President and COO, I worked in various aspects of
    facility management, event organization and hospitality
    services, including such positions as Vice President of
    Spectacor Management Group's western region and Facility
    Manager for SMG at the Los Angeles Coliseum and Sports Arena.
        Let's talk about vertical integration. In my position at
    SMG, Comcast-Spectacor and Global Spectrum, I have come to
    understand the benefits of having a vertically integrated live
    entertainment business. By being part of a company that owns,
    manages, and/or operates venues and owns several sports teams
    and other content, and provides its own ticketing solution in
    food and beverage services to arenas, stadium and amphitheaters
    throughout the country, we have the ability to cross-promote
    among these different levels in the vertical distribution chain
    and to touch the fan directly at multiple points in his or her
    sports entertainment experience.
        Additionally, because we have more assets in some cities,
    like Philadelphia, we have the ability to create unique
    packages to offer to sponsors and, most importantly, the fan.
    This is where the industry trend is clearly moving, in large
    part because content providers want to have more direct control
    of the connection to their fans.
        We believe that one of the reasons Comcast Spectacor has
    been so successful in its ability to vertically integrate all
    of the resources of its related companies, as well as those
    supplied by its parent company, Comcast Corporation, is to
    create synergistic opportunities to grow our business. We
    provide a unique and excellent opportunity for our teams and
    facilities to utilize the relationship in the Comcast family of
    companies, including Comcast Cable, Comcast SportsNet, the
    Versus Network, E! Entertainment Television, to increase market
    visibility.
        But don't just take my word for it. Look at the other
    competitors, like MLBAM/Tickets.com and Kroenke Sports in
    Denver. They are doing the same thing. This is what is
    happening.
        The merger. I believe that the merger of TicketMaster and
    Live Nation is an exciting combination that has potential to
    reinvigorate the industry at a time when change of direction is
    drastically needed. The economy is distressed right now and, as
    a result, many sports teams and other live entertainment acts
    are struggling to sell event tickets.
        This industry needs some new and fresh ideas, especially
    now, so that we can provide consumers with the much-needed
    leisure activities that keep their spirits up and our economy
    moving in the right direction.
        I think the merger will bring welcome change. If together
    TicketMaster and Live Nation can sell more tickets, and
    therefore provide more content to venues and consumers, this
    will be a huge improvement over the status quo. I also believe
    that this type of strategic combination will encourage other
    competitors, like myself, to be more creative in their
    offerings and to compete more effective overall.
        I certainly don't have any reasons to believe that the
    combination will in any way whatsoever stifle competition.
        Mr. Johnson. Mr. Luukko, your time has expired. If you
    would go ahead and sum up.
        Mr. Luukko. In summary, I think this combination will
    breathe much-needed life to an industry that is hurting. And,
    at the end of the day, change is good. Thank you.
        [The prepared statement of Mr. Luukko follows:]
                       Prepared Statement of Peter Luukko

                                   __________
        Mr. Johnson. Thank you, sir. Mr. Froeb, please begin.

      TESTIMONY OF LUKE FROEB, WILLIAM C. AND MARGARET W. OEHMIG
      ASSOCIATE PROFESSOR OF MANAGEMENT, OWEN GRADUATE SCHOOL OF
            MANAGEMENT, VANDERBILT UNIVERSITY, NASHVILLE, TN

        Mr. Froeb. Mr. Chairman, Ranking Member Coble, Members of
    the Subcommittee, thank you for this opportunity to testify. My
    name is Luke Froeb. I teach management at Vanderbilt
    University, and I was formally a staff economist at the Justice
    Department and chief economist at the Federal Trade Commission.
        In this short oral testimony, I want to highlight what I
    can some of the most interesting and significant issues raised
    by this merger.
        TicketMaster and Live Nation are part of the vertical
    supply chain that delivers live performances to fans. The price
    of this service is the difference or ``wedge'' between what
    consumers pay and what performers receive. The size of this
    wedge is one criterion the Justice Department will use to
    determine whether the merger is anticompetitive or not. This is
    important because a bigger wedge means either the consumers are
    paying more or that performers are receiving less, or both. In
    the first case, one might expect fewer tickets purchased; in
    the second, fewer concerts performed.
        This leads naturally to a second criterion that the
    agencies will use: The expansion of output. More seats or more
    concerts. A merger that increases the size of the wedge and
    reduces industry output would likely to be found
    anticompetitive and vice versa. This merger is complex because,
    as Representative Smith has noted, it raises both horizontal
    and vertical issues. The Department of Justice will analyze the
    extent to which actual and potential horizontal competition is
    lost by this merger and count this as a cost of the merger.
        But, for the most part, TicketMaster and Live Nation occupy
    different positions in the supply chain and perform different
    functions. When firms producing complementary services do
    business with one another, incentive conflicts naturally arise.
    These conflicts can be over what price to charge or how much to
    spend on promotion, as noted by Mr. Rapino.
        A merger among the providers of these services would likely
    reduce the costs of controlling these incentive conflicts and
    could result in levels of price and promotion that would both
    reduce the size of the wedge, as well as increase output.
        But perhaps the biggest potential benefit of this merger is
    innovation. The fragmentation of the supply chain means that
    individual firms may lack the information necessary to innovate
    or the incentive to do so because each receives only a small
    slice of the proverbial pie.
        Innovation is important to the music industry because
    business models are changing rapidly. If this merger gives the
    merged firm enough information to design more effective ways of
    managing the supply chain, and the incentive to do so, it could
    reduce the size of the wedge and increase output. This kind of
    experimentation in innovation is crucial to the health of the
    economy. Its ability to adapt to change is what makes it
    strong.
        Thank you for giving me the opportunity to share my views
    on this timely and important topic.
        Mr. Johnson. Thank you, Professor Froeb.
        [The prepared statement of Mr. Froeb follows:]
                        Prepared Statement of Luke Froeb

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________
        Mr. Johnson. Mr. Mierzwinski.

     TESTIMONY OF ED MIERZWINSKI, CONSUMER PROGRAM DIRECTOR, U.S.
       PIRG, THE FEDERATION OF PUBLIC INTEREST RESEARCH GROUPS,
                             WASHINGTON, DC

        Mr. Mierzwinski. Thank you, Mr. Chairman and Ranking Member
    Coble. I am Ed Mierzwinski, program director and senior fellow
    at the U.S. Public Interest Research Group, which is the
    Federation of State PIRGs.
        Before I begin my testimony, as a point of personal
    privilege, Mr. Chairman, I want to say that the consumer civil
    rights community strongly supports your Arbitration Fairness
    Act as one of the most important pieces of legislation before
    the Congress. We hope we can get it through and signed by the
    President this year. It is an important bill to balance the
    scales between powerful companies with their one-sided
    contracts and individual consumers, small businesses, and small
    farmers. So we appreciate your work on that.
        Mr. Johnson. Yes. Mr. Mierzwinski, you get an extra 5
    minutes.
        Mr. Mierzwinski. Thank you very much, Mr. Chairman. U.S.
    PIRG has long been concerned with the important matter of
    fairness in the ticket industry. We were partners with Pearl
    Jam in their unsuccessful effort 15 years ago or so to convince
    the government to take action against TicketMaster's unfair
    practices at the time.
        And you pointed out in your opening remarks that you were
    disappointed that there were no artists on the panel today. I
    would suggest that based on my understanding of the history of
    what happened back then, Pearl Jam faced enormous competitive
    pressures, had difficulty obtaining venues, and for several
    years was treated with disdain by powerful interests in this
    industry 15 years ago.
        So I would suggest that it is disappointing, but not
    surprising, that other artists are not here the testify. But I
    know a lot of them are concerned.
        It is our view that this merger is bad for consumers, bad
    for artists, and bad for independent promoters. We believe it
    violates the Clayton Act, and we believe that the Justice
    Department should reject the merger. It is a bedrock principle
    of our antitrust laws that merging to avoid competition is
    simply wrong, illegal, and should be defeated.
        I want to make just a couple of quick points. A lot has
    already been said about all of these issues. And I will try to
    summarize very quickly. First, TicketMaster is the dominant
    player in primary ticket sales. We thought a year ago that Live
    Nation would be a competitor. Now Live Nation wants to merge
    with TicketMaster. That is unacceptable on face and that alone
    should be a reason to deny the merger.
        Second, the merger also raises the specter of a vertical
    monopoly, since Live Nation, by all accounts, controls through
    exclusive long-term contracts the market for marquee venue,
    events, and major tours. The combined firm would have
    tremendous market power over artists and venues, as well as
    over consumers.
        We would all have no choice but to accept their terms of
    trade. Higher prices and fewer choices. Certainly bands might
    find an American Legion hall or a county fairground not
    controlled by the combination if they wanted to have a venue.
    But if the firms combine, artists would not be able to
    negotiate. There would be fewer choices in that marketplace.
        We have already heard how big the company would be. I won't
    go through that again. I do want to elaborate further on the
    impact on independent promoters. Seth Hurwitz was mentioned
    further. He owns the local 9:30 Club, and has testified before
    the Senate this week. In his Senate testimony he said, If this
    merger is allowed to happen, my biggest competitor will have
    access to all my sales record, my customer information, sales
    dates for tentative shows, my ticket count. They can control
    which shows are promoted, and much more. This will put all
    independent promoters at an irreparable competitive
    disadvantage.
        To make it clear, if we have this vertical integration,
    independent promoters will face a significant problem. They
    won't be able to get the artist unless they take the ticketing,
    unless they also take the venue control, and the artist
    management. They simply cannot compete on that basis.
        I want to make a couple of quick points about a couple of
    the other issues. TicketMaster and its reseller affiliate,
    TicketsNow, I mean, really, how can the company that owns
    primary ticketing also own legal ticket scalping ticketing. I
    don't think that the proposed solution to the problem that
    occurred with Bruce Springsteen is any kind of a solution. I
    think that issue raises significant unfair and deceptive
    practices, as well as structural problems.
        Second, my testimony goes into detail about our efforts,
    particularly in New York, to fight ticket scalping. We have
    argued very strongly in New York--and I think the Committee
    should look at this--the relationship between taxpayer-built
    venues and these long-term contracts from these companies
    raises serious questions. If taxpayers can't get a ticket a
    fair price, why do taxpayers pay to build these venues?
        Finally, I would be remiss as a consumer advocate if I
    didn't point out that consumers are outraged, absolutely
    outraged, over the unfair convenience fees and handling fees
    that TicketMaster loads on to all of its sales. Nobody else
    that sells anything on the Internet charges convenience fees
    and handling fees. You pay a handling fee as if somebody's
    going to walk up to your house and deliver your ticket, when
    all they do is push a button and deliver it to your e-mail
    account. There are numerous sites on the web,
    TicketMasterSucks.com, and other sites.
        In other circumstances, a consumer could simply say, I will
    get a new cell phone company; I will get satellite instead of
    cable. But in the case, particularly after this merger, the
    consumer can't fight back against TicketMaster. They have got
    to get the tickets through them.
        I appreciate the opportunity to testify before you today. I
    would point out I like all the music that has been discussed,
    from Bruce Springsteen to George Clinton to Doc Watson and Buck
    Owens. And I hope that all artists and all independent
    promoters will be given a fair chance to compete, and that this
    monopoly does not go forward. Thank you.
        Mr. Johnson. Thank you, Mr. Mierzwinski.
        [The prepared statement of Mr. Mierzwinski follows:]
                    Prepared Statement of Edmund Mierzwinski

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________
        Mr. Johnson. I will now recognize myself for 5 minutes for
    purposes of asking questions.
        Mr. Azoff, in the last month alone, two incidents have
    occurred where consumers were directed to a secondary ticketing
    site and forced to pay significantly more for tickets than
    advertised. It has been reported that Live Nation and
    TicketMaster tend to concentrate more efforts on the secondary
    ticket market as a merged company.
        How does the proposed firewall between TicketMaster and
    tickets now prevent TicketMaster from continuing to use the
    secondary ticket market to charge inflated ticket prices to
    consumers?
        Mr. Azoff. First off, we have instituted a policy that
    these two companies will be run totally separately in that you
    will not be able to link directly from TicketMaster to
    TicketsNow. In particular, people are never automatically sent.
    This is a standard industry practice. Major League Baseball,
    Tickets.com both link to StubHub; Veritix links to Flash Seats.
    We are the first one to unlink.
        Secondly, we are the first site now, and it is going to
    take a bit of time because we have to do it manually until we
    get this automated--we will be the only secondary site that
    will not allow pre-listings on the site because what the
    brokers currently do is list tickets before the on-sale, under
    the assumption that they know they will get the seats. It
    confuses consumers into thinking tickets have actually been
    pulled and left.
        I might add that I am new at TicketMaster. Had I been
    there, I would not have purchased TicketsNow. When we talk
    about under the merger that we want to concentrate on secondary
    ticketing, we want to concentrate on a different model. We
    agree that this model is broken, and it needs a solution. As
    the Congressman said, it is legal to scalp in nearly every
    State, but that, and we fully agree, that it is an area that
    needs a lot of work. We think that this merger will give us the
    ability to work hand-in-hand and get it done.
        Mr. Johnson. Thank you.
        Mr. Rapino, you state in your testimony that your stock has
    declined and you are concerned about being bought by a foreign
    company. Yet, your balance sheet appears to be quite healthy,
    with the chance to increase profits with your entry into the
    primary ticketing market. Can you explain in detail the grounds
    on which you believe this merger is necessary for Live Nation
    to survive as a U.S. company?
        Mr. Rapino. Yes. Thank you. We took over 3 years ago from
    what Clear Channel Entertainment was, and it was spun out to
    Live Nation. Our management team was installed then, and we had
    a failing business model, and a horrible name, equal to
    TicketMaster. We renamed the company Live Nation, we fired old
    management, and set off on a journey 3 years ago to build this
    company.
        Three years later, we are proud. We are not laying off
    employees. I think we will have one of the best performances in
    the entertainment business. And we worked hard for 3 years to
    run the company right. No excessive CEO pay or bonuses. We
    rebuilt it.
        A year ago, we had a $20 stock, capital was available, and
    the fight to continue globally seemed very certain. A year
    later, our stock is down to $4, capital is not available. Our
    real estate holdings have been gutted. So it is a tough
    economy.
        We believe that we can continue our model with or without
    TicketMaster. This is not about us going broke and needing a
    solution. This is about excelling in the race to try to solve
    these problems that Peter outlined.
        I absolutely agree that scalping is a huge problem. It is
    about a billion-dollar business that we receive zero dollars
    from. We invest $2 billion a year with artists. We made $160
    million in Ebitda last year, but we had a negative cash flow.
    We didn't actually make a dollar. We spend millions on real
    estate and artist investments. And we realize zero of the
    scalping market.
        We have realized that technology is moving fast, and
    artists want solutions now. And we want to excel in our chance
    to innovate this market. And from outlawing scalping, to
    figuring out how the artist participates in it, we absolutely
    think it needs to be addressed.
        Mr. Johnson. All right. Thank you, Mr. Rapino.
        Back to you, Mr. Azoff. The recent conflict with
    Springsteen is not the first time that TicketMaster has had a
    conflict over the price of TicketMaster tickets. In 1994, Pearl
    Jam canceled its summer tour after the band was unable to
    negotiate a deal with TicketMaster to keep ticket prices below
    $20, or find a way to tour without selling tickets through
    TicketMaster.
        You claim that artists set the price of tickets. However,
    Pearl Jam certainly did not believe so in 1994, and many
    artists have recently opposed your proposed merger with Live
    Nation on the grounds that they will have even less control
    over the price of tickets if the merger were to go through.
        How do you respond to that charge, sir?
        Mr. Azoff. I believe the Pearl Jam, the dispute with old
    TicketMaster was about the service charges. The public believed
    that TicketMaster sets the service charges. The old regime at
    TicketMaster basically set up TicketMaster to take the brunt of
    the criticism. The consumer thinks if there is an $11 service
    charge, that that is what TicketMaster makes. What that service
    charge really contains is all the credit card processing fees,
    which average about 2.9 percent, and there are enormous rebates
    back to the venue.
        The convenience issue really--for Pearl Jam to get the
    service charges down to the level they wanted, required venues
    to agree. TicketMaster can't unilaterally set any service
    charge.
        So, basically, what we believe is there needs to be, in the
    new model of what we accomplish--when you walk into a building,
    you have the rent, the service charge. You can't just isolate
    the service charge. And we think the industry needs a complete
    overhaul on how it does figure out these service charges.
        The first thing I did when I started at TicketMaster was I
    convinced my client, the Eagles, to go to all-in ticket prices.
    So, in virtually every date that they now do, except where a
    building will not allow it, the stated ticket price includes
    all the service charges.
        I think that the public needs truth in advertising from all
    ticket charges, and we think that will go a long way toward
    solving this problem.
        Mr. Johnson. Thank you, Mr. Azoff. I will now recognize the
    Ranking Member, Mr. Coble, for 5 minutes for questioning.
        Mr. Coble. Thank you, Mr. Chairman. Good to have you
    gentlemen with us.
        Mr. Rapino, I am an avid Canadaphile, so good to have you
    as an American citizen here. What was your home province?
        Mr. Rapino. Ontario.
        Mr. Coble. Mr. Rapino, does Live Nation currently compete
    with TicketMaster and, in the absence of the merger, how would
    Live Nation continue to compete with TicketMaster?
        Mr. Rapino. We have been selling tickets for the last 2
    years on our own. We have a system that we use. As of January,
    we had a new ticketing supplier called CTS, who owns the
    ticketing company, and licenses to us. We had planned on by the
    end of this year looking to third parties to compete with
    TicketMaster. As of this year, our stated goal publicly has
    just been to service our own needs.
        And the SMG comment is relevant here. We have the option
    and right to bid on the SMG buildings if we are capable to
    service them by the end of the year. And TicketMaster has a
    full right to convince them that they are still a better
    solution because they are usually city buildings.
        So, as of today, we are not out competing. We are worried
    about servicing our initial needs this summer.
        Mr. Coble. I thank you for that.
        Professor Froeb, you live in a city that would embrace my
    affinity for country and bluegrass. What are the horizontal and
    vertical effects of this proposed merger, Professor?
        Mr. Froeb. It is funny you mention Nashville. A lot of my
    friends are part of this vertical supply chain, and they are
    facing a lot of uncertainty. And if this merger is successful
    and does what it is designed to do, a lot of them are going to
    face a lot more competitive pressure than they did before, and
    that is reducing the size of the wedge between what artists
    receive and what consumers pay and what artists receive. So
    that could be counted as a potential benefit of the merger.
        And the horizontal potential and actual loss in horizontal
    competition probably will be narrowly focused on the ticketing
    services.
        Mr. Coble. I thank you.
        Mr. Azoff, if this merger succeeds, you will control, I am
    told, virtually all aspects of major concerts in the United
    States. Will this improve efficiencies in the music industry,
    A, and will it likely lead to reduced ticket prices?
        Mr. Azoff. I have spoken to many artists. Basically, this
    Committee, as I understand it, was also formerly Intellectual
    Properties. I know that you all are very well versed in that.
        The complete destruction of recorded music earnings to
    artists is one thing that has driven ticket prices up. We fully
    believe that this merger will allow us to get marketing moneys
    back into the business. Currently, $9 billion goes to sports
    marketing and $900 million goes to music. We fully believe by
    selling more seats and bringing in new revenue sources and
    also, in the secondary area, that we will create a pot that is
    bigger for the artists. Every artist I talk to would like to
    charge less money for their tickets, but they have to meet a
    nut to go out on the road, and since there is really no
    contribution, or little contribution from their recorded music
    now, that is the theory under which we think ticket prices will
    go down, not up. And certainly on the major acts, that is for
    sure.
        New artists we think we can bring so many of these new
    marketing opportunities across the board to new artists that
    currently can't get radio airplay. MTV stopped playing videos.
    We are going to try to connect these artists directly to their
    fans. We have got this list of ticket buyers that currently is
    not being utilized, and this is really about music business
    3.0. It is about creating the new model. And under this model,
    we intend to be a Switzerland-type distribution system. We
    don't intend to ask artists to sign over rights the way the old
    recorded music model worked. We intend to get a fair
    distribution fee and let artists control their intellectual
    property and exploit it to the fan. We think it will reduce and
    lower costs across the supply chain.
        Mr. Coble. And you mentioned intellectual prompt. You all
    probably know that is an issue that will be considered by the
    full House Judiciary Committee. Mr. Johnson and I won't have
    that at the Subcommittee level any more. But I thank you for
    that.
        I think my time is about to expire. I yield back.
        Mr. Johnson. Thank you, Representative. We will start with
    questions from Mr. Brad Sherman from California. Five minutes,
    sir.
        Mr. Sherman. Thank you, Mr. Chairman. I know that a vote
    has been called, and I know I have been told that the Chairman
    will not be able to be here between 12 and 1. And I will be
    happy to Chair the hearing during that period, as I think the
    Chairman has requested.
        You hear the bell, but you will not be saved by the bell.
    We will come back after votes.
        I think this hearing is important, not only because it
    affects consumers so much, but it affects the artists and the
    music that we all love.
        We have seen the artists get ripped off in so many ways.
    They don't get a performance right. They listen to their music
    on the radio. They know that the songwriter is getting paid for
    that. So many other people are being paid for that. The radio
    station is being paid for that. The artist is getting nothing.
    They hear their recorded music taken from them by various
    technologies.
        And so they are really relying upon live music to be
    compensated for their work. So many of them are not going to be
    the big superstars, but they may make it for a year or two. And
    this industry has got to pay the piper, which is so important
    if you want to listen to the music.
        Now, we are not experts here in antitrust law. We rely upon
    the Justice Department to do so. I hope the Hart-Scott-Rodino
    process plays itself out. But given how important this is to
    the music we all love, I am glad we are having this hearing.
        Now, being that I am so interested in where the artists
    stand on this, do any of you have letters of support or
    opposition to this merger from artists that you would want to
    put in the record?
        Mr. Rapino. Yes, Congressman. We have letters of support.
        Mr. Sherman. Without objection, I would like them put in
    the record. Do any other witnesses have letters of support or
    opposition from others in the food chain, the venues, or anyone
    else?
        Mr. Johnson. Without objection.
        Mr. Sherman. Without objection, they will be made part of
    the record. Please enter them.
        Now, we have heard from some of the witnesses that AEG is a
    big player. I mean that is an extremely well-financed
    operation. And I guess the implication is that they would want
    to stop using TicketMaster. They would have to use someone
    else.
        The second biggest primary ticket operation in the world,
    as I understand it, is CTS, out of Germany, and I believe they
    have a contract that makes Live Nation their exclusive operator
    partner.
        Mr. Rapino, if this merger goes through, is CTS free from
    their contract with you to then go to anyone else, including
    AEG, and say, We want to be your ticket agent in the United
    States?
        Mr. Rapino. Yes. Part of the contract is clearly stated
    that if we were ever to merge with TicketMaster, they would
    have full rights to leave and pursue another U.S. client.
        Mr. Sherman. Because the testimony here from opponents to
    the merger focused on the primary ticketing business, and
    allowing the number two primary ticketing company to do
    business in the United States freely would, I think, open
    competition in that business.
        Obviously, there is concern about what happened with
    secondary marketing in the Springsteen concert. Mr. Azoff, you
    have testified that you would not have advised TicketMaster to
    buy the secondary marketer. Is it your intention to advise your
    board to sell tickets now and to stay out of secondary--the
    secondary business? I realize you can't sell it unless you get
    a good offer. But is it your advice to your board to be in the
    secondary market, or not to be; or to be in it, and if you
    would want to stay in that business, what is your proposed wall
    between primary and secondary?
        Mr. Azoff. For us to stay in that business, it would have
    to be a different business. Many of our team clients, for the
    purpose of allowing season on ticket holders to exchange seats,
    we do operate Ticket Exchange. If there were some way to make
    Tickets Now a straight, legitimate exchange where the rights
    holders were able to transfer tickets with, I would hope,
    limited fees, et cetera, but----
        Mr. Sherman. I am talking about where you buy the Bruce
    Springsteen ticket for $95 and sell it for $950.
        Mr. Azoff. As it currently exists now, yes. Obviously, with
    all the normal public company approval requirements. I would
    advise my board if we got the right offer. Senator Schumer
    hasn't made the right offer to us yet. I would advise my board
    to consider that. And I certainly would vote to do that.
        We agree with Congressman Pascrell on the whole idea of
    bots, and we also agree with him that the secondary area really
    needs cleaning up. We think this merger gives us a seat at the
    table, along with every government body, to do that.
        Mr. Johnson. All right. At this time--and your time has
    expired, Mr. Sherman.
        Mr. Goodlatte. Mr. Chairman, I am not going to be able to
    come back. I wonder if I might have a couple of minute's worth
    of questions.
        Mr. Johnson. We have got about 4 minutes, 3\1/2\ minutes
    before votes expire on this. I would be inclined to not put the
    Members at risk of missing the vote.
        Mr. Goodlatte. Then I would just ask--I will submit my
    questions for the record--but I would ask the Chairman to make
    sure that the panelists answer the questions in writing for us.
        Mr. Johnson. No doubt.
        Mr. Sherman. If the gentleman from Virginia wants to leave
    me with a written question or two, I would be happy to ask
    them.
        Mr. Goodlatte. That would be great. Thank you.
        Mr. Johnson. We will be in recess for about 25 minutes
    while we go vote. Two votes; one 15-minute and one 5-minute
    vote.
        [Recess.]
        Mr. Sherman. [presiding]. We will come to order. We are
    ready to start a second round. We will start with the senior
    Republican on the Committee, Mr. Coble.
        Mr. Coble. You go ahead, Mr. Chairman. Let me examine what
    I have got waiting here.
        Mr. Sherman. So I will pick one here. It is for Mr. Rapino
    and Azoff.
        Mr. Rapino has testified that if the merger is not
    completed, both companies would be required to lay off
    employees. You have also claimed that a merger would lead to
    $40 million in savings. Do those savings involve laying off
    employees either from your operation or from the TicketMaster
    operation?
        We are in a strange economy where savings are good. But
    when savings lead to layoffs, that concerns some of us. Tell us
    about how employment is going the be affected by this merger.
        Mr. Rapino. On the Live Nation front I actually haven't
    said that if we didn't do the merger, we would lay off
    employees. I have said that we have been a very progressive
    company for the last 3 years and in hiring employees and
    creating jobs. I do believe though, with these economic times,
    my 5-year vision certainly needs to be adjusted, and we
    currently do have a hiring freeze on. And we are just going to
    have to get through this year and see how the business turns
    out.
        We do believe that the efficiencies of the merger created--
    will actually create jobs. This merger will create jobs because
    we will have to staff up on the technology side to better equip
    ourselves to handle the scalping and the needs of today. So, no
    layoffs. Jobs created.
        Mr. Sherman. Mr. Azoff, if this merger doesn't go through,
    what is the effect on jobs in your operation. And, if it does
    go through, what is the effect on jobs?
        Mr. Azoff. Right before I started with the company,
    TicketMaster laid off 10 percent of its workforce. And the
    recent studies that we have done are we can't get the job done
    with less people, regardless of whether the merger goes through
    or not.
        So we don't anticipate being able to reduce the workforce
    at this time, nor are we looking to. However, we are a public
    company and we have a board. We currently lose money on about,
    we think, 2,600 of our accounts, many of which are nonprofits
    and museums and municipal-owned buildings.
        So, down the road, if we were forced to cut back, it would
    probably be both in the area of accounts and employees. But,
    for sure--I agree with Michael--if the merger is approved, we
    would be adding people.
        Mr. Sherman. And you would be adding people because there
    would just be more music?
        Mr. Rapino. No. We believe that right now we are both
    really understaffed on the technology, research, development,
    and consumer side of the business. So we believe that the
    answer for the future is creating a more accessible storefront.
    And technology has just taken off, as you know.
        On the recording side, they have lost a lot of their
    business to the pirates of the Internet. That is happening
    right now with these professional scalpers and professional
    technology that are just way more advanced than we are.
        So, we would assume we would have to build a much more
    sophisticated consumer storefront. We like to think it as the
    TicketMaster.com of today needs become the Amazon of tomorrow
    for the consumer and fan. A much more convenient and accessible
    place to buy music. With that, we would like to staff up in the
    technology side.
        Mr. Coble. Thank you, Mr. Chairman. Let me put this
    question, Mr. Chairman, jointly to Mr. Luukko, Doyle and
    Professor Froeb. What would you all say are the relevant
    product and geographic markets at issue in this proposed
    merger?
        Mr. Froeb. There are various aspects of the merger. It is a
    tough, fact intensive investigation. And these are the kinds of
    questions that the Justice Department is investigating and
    answering. And the blunt answer is, I don't know. But there is
    certainly the methodology for delineating markets is known.
        You ask, How do these guys compete? If they limited that
    competition, could they raise price by a significant amount. If
    the answer is, yes that is a relevant market for antitrust
    purposes. If the answer is no, they would substitute to various
    other suppliers. Then you have to expand the market and re-ask
    the question.
        In this industry that is so, so complicated--one of the
    things that I heard earlier today was that the merged firm was
    going to spin off the German ticketing part of supplier if that
    turns out to be a relevant market, that it is these two
    ticketing suppliers, then the spinoff would certainly mitigate
    the anticompetitive effects of that merger.
        So the answer is, I don't know. It is a fact-intensive
    investigation that is very, very detailed. And I haven't done
    it.
        Mr. Coble. Anybody else want to weigh in on that?
        Mr. Doyle. Can I weigh in on that? I think the most
    significant antitrust product market here is competition in the
    primary ticket services market. Now, if you look at that
    market--and the geographic market, I would argue, is the United
    States as a whole. But if you look at the ticketing market
    closely, you will see that Tickets.com has always been a
    relatively insignificant player over time, and TicketMaster has
    had a very significant market share over a long period of time.
    That would suggest to me that the market is somewhat
    barricaded. And you don't see significant entry, and you don't
    see any exits from the market.
        But I would argue that the best market for the Department
    of Justice to look at, if they seriously thought about
    challenging this acquisition, would be the primary ticketing
    market, where the overlap is horizontal, and you have got some
    fairly good evidence that Live Nation seriously considered
    entering the market, in fact, did enter the market, took SMG
    away from TicketMaster, and you saw an immediate reaction from
    TicketMaster.
        So, TicketMaster clearly felt threatened by the
    announcement of Live Nation entering the market and, in fact,
    felt threatened in January of this year when it saw Live Nation
    ticketing some of its own venues.
        The primary ticket service market, I think, should be the
    primary focus of the Department of Justice inquiry. Contrary to
    what else has been said, the vertical case, I agree, is
    complicated. But to look at the essence of competition in the
    ticketing market is not complicated. It is a relatively
    straightforward, horizontal analysis. The Department goes
    through this analysis over and over again.
        So, if you focus on that market, I think you will be able
    to define it as a relevant market. And the facts suggest that
    it is in fact a relevant market.
        Mr. Coble. I thank you, gentlemen. Mr. Chairman, that is
    all I have. Thank you.
        Mr. Sherman. Thank you. I will pick up on Mr. Doyle's
    comment, because we all want the benefits of competition for
    consumers.
        Now, I wouldn't care if somebody had 100 percent of the
    market if the potential market entrance were such that the
    monopolist felt they needed to keep prices down and services
    good. So the question is not how much of the market do you
    have, but how much of it could you keep if you started acting
    like a monopolist. I see you nodding in general agreement.
        So I am interested in this primary ticket market, which you
    have identified. And I am aware of a couple of possible
    competitors. The first of these is sitting immediately next to
    you.
        So, let me ask Mr. Luukko, what made you decide to bring
    ticketing service in-house and not to use TicketMaster? Could
    other venues choose to do the same, unless they thought they
    were getting a really good deal from TicketMaster. How
    difficult was it for you to take ticketing inhouse?
        Mr. Luukko. It is very interesting. When we looked at our
    decision to do inhouse ticketing, it wasn't necessarily a knock
    on TicketMaster, Tickets.com, AudienceView, and probably more
    than 100 companies that pursued our ticketing accounting.
    Philly is a big market. It sells a lot of tickets.
        Mr. Sherman. You say 100 different companies.
        Mr. Luukko. When we were going out and getting into the
    ticketing company, we were contacted by so many. We had to
    ferret out even who we would use as our back-house engine.
    There is a lot out there. And I am not an expert in technology,
    but a lot of that has to do with the advent of the Internet and
    the barriers to entry to get into ticketing.
        We found that out as a company in Philadelphia. And,
    really, we looked at it as part of our vertical integration
    program. We own the teams, we own the venues. We are getting
    into the food and beverage business. We own the merchandising
    rights for those teams. And the ticketing was a natural flow in
    our business plan.
        Again, with the advent of the Internet, we could get into
    that business. And we wanted to control the data, we wanted to
    directly control the message to our fans. And at times, which
    was under our control before, but we wanted to have quick,
    direct control of the service charges for a lot of the low end
    offers we make for various specials to our fans.
        So, for us, the barrier to entry--this is not easy to be in
    the ticketing business--but the barriers to entry had lowered,
    and it was really part of our vertical integration plan as a
    company and how we compete in the marketplace.
        Mr. Sherman. So did you develop your own software or were
    you able to get it licensed by someone else?
        Mr. Luukko. We were a licensee, if that's the correct legal
    term, of Packi Owen, a company in southern California.
        Mr. Sherman. Okay. So, then that licensing agreement,
    whatever they did for you, I am sure they would do for any
    other major venue. It is not that they love you so much, they
    wouldn't sell----
        Mr. Luukko. Ironically, they have been purchased by
    TicketMaster since. We are still competing.
        Mr. Sherman. So at least that one--now Tickets.com, I
    realize they are a small competitor, or a smaller competitor,
    but did they make a credible offer to you?
        Mr. Luukko. We had some discussions. We had really made the
    decision through a lot of research to go inhouse. So we were
    approached by many to be our back end.
        Mr. Sherman. If you couldn't get the software from the same
    source, is there other software available to you?
        Mr. Luukko. There is plenty available, including looking at
    the option of the creating the software ourselves. So we had a
    lot of options as we looked into this business.
        Mr. Sherman. One of the things that I am interested in, and
    Mr. Rapino, is helping the artists, because they are not
    getting paid for their music. They make a recording, the radio
    plays it, they don't get anything. I see everybody listening to
    it and I wonder how many of them have paid for the music they
    are listening to.
        And it occurs to me that in addition to selling music, the
    artists can sell the T-shirts, the hats, the this, the that. At
    the present time, when you have--when you are selling tickets
    to the concert, and I go to buy the ticket on line, am I cross-
    marketed? Am I given a chance to buy the T-shirts and the other
    paraphernalia, or is the ticketing system that you currently
    use only selling me tickets?
        Mr. Rapino. It is a good point. It is a key strategy of
    ours. First and foremost, on the artists. There has been
    suggestion that artists have not opposed this because they are
    scared, I think I have heard. If you work with artists in the
    year 2009, you find me an artist that is not one that likes to
    speak up and stand his own ground.
        Mr. Sherman. So you are saying the Boss is the boss.
        Mr. Rapino. He clearly stood up. He had a concern. I
    believe that every other artist I met usually likes to jump on
    these kind of situations if they can so-called go after the big
    company.
        Mr. Sherman. I would point out that even if the artist is
    too shy to come before the lights here, all of us are community
    leaders. Different types of music is popular in our different
    districts. There isn't a Member of Congress that doesn't have
    contacts with artists. And there isn't a single one of us that
    wouldn't take a call from Bruce Springsteen or a shier but
    equally popular artist. If they are afraid to come in public,
    they will certainly tell us in private.
        Mr. Rapino. Absolutely. For the record, we actually did not
    want to bring any artists on our behalf. We actually said to
    all the artists, ``This is not what we want you to do. Go worry
    about making music, and leave this to us.''
        Seventy-six percent of the artists' income now comes from
    the road. Ten years ago, it was from the records. So for 30
    years, the artist made all of his money from the record, and he
    went on tour to sell records. Today, an artist goes on the road
    to pay the bills. Seventy-six percent. So any economic theory
    will tell you if 76 is coming from the road.
        Mr. Sherman. Let me just interject. If somebody creates a
    hit song, 99.99 percent of the listenings of that song are from
    recorded. We all like to spend our whole lives at concerts but,
    as you point out, even the concert-goer only goes to two. And I
    haven't been to a concert since I had hair. That long.
        So the 99.99 percent of the listenings of that song are
    paying only 24 percent of the freight.
        Mr. Rapino. Absolutely.
        Mr. Sherman. So, go on.
        Mr. Rapino. So we work for the artists. It is fundamentally
    that simple. They are the start of the value chain. They can
    decide to hear us or not. That is why we only have 38 percent
    market share. There are a lot of options.
        Number two, you should remember the artist is very
    sophisticated. He has a very good business team. He has a full
    accounting firm, he would have a law firm, and a manager. That
    team is sophisticated. And an agent. And their job is to
    maximize their artist's revenue, find great new ways to develop
    and get their art to the world.
        What we find is we talk to artists daily. We are in their
    dressing room at midnight. The number one concern if you talk
    to an artist that we sense is, for 30 years I had a great
    business partner called the record label. He got my art to the
    fan, and he financed my investment. Who is going to take care
    of me in the future? Who is going to invest in the young band?
    How do I solve this technology maze? It scares me. I want a
    company that can first realize that they work for us. We always
    say at Live Nation, ``Our boss is the artist.''
        Number two, we want to build a platform that I think you
    referred to earlier--I thought that was brilliant. The crux of
    the entertainment problem is it has been fragmented. The pie
    has been built in slices. Any industry you look at in history
    says, at some point some of the slices come together to provide
    a better innovative product.
        We think it is crazy that we have a Web site today that
    sells a concert ticket. So we have the fan to spend $50. But we
    don't have anything else for them.
        Mr. Sherman. The specific answer to my question is right
    now, I buy a ticket, and nobody is selling me an album, nobody
    is selling me a T-shirt.
        Mr. Rapino. A quick point. We look at the average fan and
    you how he has to go to market today. He comes to a Web site to
    buy a ticket and is probably not satisfied. If you put Bruce
    Springsteen in Google now, you will get seven pages of scalpers
    selling tickets.
        So you can't even get a ticket in a simple way. He has got
    to go probably to eBay to find a souvenir T-shirt; he has got
    to go to iTunes or a pirate site to get the music. The reason
    we said Amazon earlier is we want to be able to give the artist
    a platform to reach his fan. And when the wallet is out and he
    wants to buy a T-shirt, a song, another avenue to sell music
    with the ticket, they embrace that model continually when we
    talk to them about it.
        Mr. Sherman. I think my time has more than expired. I see
    the gentleman from California, and recognize him.
        Mr. Issa. I thank the gentleman from California. I am sure
    when you went to that first Beatles concert, you did have a
    full head of hair. I think you should go to another one. I
    think you would be welcome.
        All kidding aside, this Committee deals with very serious
    issues, and all antitrust hearings in this Committee always
    look the same: Two groups are wanting to get together, and it's
    going to potentially affect competition. Yours is no different.
        Mr. Doyle, let me ask one question, because all antitrust
    is comparative, in addition to relative market share and all
    the others. Major league baseball bought Tickets.com. The
    acquisition created a vertically integrated mechanism that
    included, if you will, and I am going to try to convert here,
    the teams, which had the talent; the promoter, which was Major
    League Baseball; the venues, which were the ball barks, were
    either owned or controlled; and then, of course, now the
    tickets.
        Is there an effect that can show us why this sort of a
    merger would cause higher prices based on that model?
        Mr. Doyle. Tickets.com presents an interesting situation.
    It is owned by Major League Baseball, which obviously has a
    deep pocket. If they wanted to expand and put Tickets.com into
    every stadium, it clearly could do it, as I understand it.
        However, it is my understanding that Tickets.com only has
    14 of the Major League Baseball teams. The question is, Why
    aren't they in every team? And I don't know the answer to that.
    But I can sit here and speculate that perhaps it is the
    significant market power of TicketMaster that allows it to get
    some of those baseball teams as well.
        The Major League Baseball model, the Tickets.com model, I
    think is an example of the degree of market power that
    TicketMaster has. Under normal economic--under a normal
    economic rationale, you would expect Tickets.com to be in every
    Major League Baseball stadium. And the question is: Why aren't
    they?
        Mr. Issa. Mr. Azoff, I am going to ask you sort of the
    other side of the same coin, because I am very interested.
    Baseball does have a Congressionally granted monopoly. So, as
    Mr. Doyle said, they can do whatever they want. They do own the
    talent. Even if you want to be a free agent, where are you
    going to go? You ultimately are going to end up within Major
    League Baseball. So it is only a question of where.
        Now, let me just look at the music industry for a moment.
    You don't have long-term binding contracts with the talent, if
    you will--the major stars--do you?
        Mr. Azoff. No, I don't.
        Mr. Issa. After this merge, you still won't.
        Mr. Azoff. Virtually all of them will be free.
        Mr. Issa. On top of that, you are not controlling the whole
    world, so they can tour anywhere that makes the money, right?
        Mr. Azoff. Correct.
        Mr. Issa. So, if I understand correctly, from the
    standpoint of the artist, who ultimately is probably the most
    important part of this, with the possible exception of those of
    us who do go to concerts a little more often, and I will go as
    long as I have hair. So the artist isn't going to be hurt
    because he has a great deal freedom of choice, and ultimately
    you have to attract him, right?
        Mr. Azoff. Yes. I might add, the TicketMaster contracts
    virtually one in four, one in three, come up for renewal every
    year. And I could shed a little bit of light because I recently
    met with one of the Major League Baseball owners.
        TicketMaster has a service called Archtics. In these very
    difficult times, people are not renewing season seats. And we
    have a unique program that allows them to, like, bundle. If you
    want 20 games and we find a person that can do 12 and 10. And
    we are actually putting TicketMaster personnel in their box
    offices.
        So my answer would be, as to why some of them have elected
    to come back to us is, because they get better service, and we
    spend a lot of money on R&D to provide great technology.
        Mr. Issa. I found something interesting when it was said
    earlier if you Google for Bruce Springsteen, or whoever, you
    are going to get all these other wrong sites. And it suddenly
    hit me, Well, you are Googling. So, in the search world we have
    this dominant power. And we have had hearings to talk about
    Google and their market share and so on. Ultimately, if I
    understand, post-merger you won't control Google or Yahoo! from
    a standpoint you cannot guarantee you will always come up
    first. You will still have to compete for that slot, right? Pay
    for it, actually.
        Mr. Azoff. Yes.
        Mr. Issa. So you are not going to control the search
    engines which, in an Internet age, is really the front end of
    the process. So, anyone who wanted to compete, including if
    Major League Baseball decided they were going to flex their
    muscle outside of Major League Baseball and do concerts, at
    least in baseball parks, they could potentially show up first
    on Google's search.
        Mr. Azoff. Makes sense.
        Mr. Issa. I am trying to understand. You have got to pay a
    free and fair price for the entertainers. There are lots of
    venues beyond the ones that you could potentially lock up in a
    contract. There are a lot of places people can be. I was at the
    Consumer Electronics Show and I saw Diana Ross in concert
    inside a large ballroom in a private venue. But there were a
    couple thousand of us having a great time.
        By the way, Brad, that was my last concert I went to. That
    was in January.
        What I am trying to understand is, in this whole circle of
    things, what are the barriers to entry or the competitive
    advantage you have other than adding some size and scale, which
    would be a little bit like Citibank bundling together a number
    of banks, and we know how much good that did them, right?
    Anyone want to comment on Citibank? Anyone want to say that
    this combination is any more powerful than perhaps Citibank or
    Bank of America was in their industries?
        Mr. Rapino. I would just say that typically the output of a
    monopoly is a very high margin. We have a 4 percent margin
    business.
        Mr. Issa. Roughly the same as VISA and MasterCard make off
    of your ticket sales.
        Mr. Rapino. Exactly. So we spend $2 billion to make 4
    percent off of that. TicketMaster would be in the 15 percent
    margin business. So if there was any demonstration of power,
    believe me, the margins would spit out that as a result.
        Mr. Issa. Thank you, Chairman. It helps me understand this
    situation better.
        I yield back.
        Mr. Sherman. Mr. Doyle, there are two possibilities as to
    why TicketMaster has business from major league baseball. One
    idea is that they just provide a better service at a better
    price than major league baseball is willing to provide to the
    teams, and the other is they have some sort of market power.
        How could TicketMaster threaten the Dodgers or the Angels
    in a way that they would say we don't want to do business, and
    then if they have that kind of market power, why don't they
    have the other 14 teams?
        Mr. Doyle. The short answer is, I don't know the answer to
    that question. But let me make this observation.
        If TicketMaster provides a better service, and that service
    is replicated by Tickets.com, why doesn't Tickets.com provide
    that service?
        Mr. Sherman. The real answer is Google, an example brought
    up by my colleague from California: Why does Google have more
    than 50 percent share of the search engine? One theory is that
    they have somebody in my office with a gun to my head saying if
    I use another search engine, I'm dead. Another possibility is
    that they hired more engineers to create better software to do
    a better search to do better computer work, whatever software
    does.
        In my case, it is the latter. I have never been threatened
    by Google that if I searched on Yahoo, I would be hurt. And
    Google does the best job as far as I know. There are probably
    some computer experts here who know better.
        Let me turn to Mr. Luukko.
        So you own venues. You are able to take your ticketing in-
    house. If you don't want to go in-house, are there companies
    that want to provide the ticketing service for you?
        Mr. Luukko. Absolutely. Yes, there are. Tickets.com is one.
    Audience View. There are others. There has never been an issue
    that you couldn't go in your own direction.
        Mr. Sherman. And CTS is the biggest, I believe, in Europe.
    And I am told that if this merger goes through, CTS is then
    free to do business in the United States.
        You are in the business. Is there any reason to think CTS
    is not competent?
        Mr. Luukko. No, not at all.
        Mr. Sherman. Okay. You described how you decided to become
    vertically integrated, and so presumably that helps the teams
    who are the artists in that business.
        Describe how your fans and team revenues have been helped
    by your decision to be vertically integrated.
        Mr. Luukko. It is essential in sports today to survive.
    Owning a team, in itself, is very, very difficult. I will give
    you an example probably that most recently has happened in this
    tough economy is, we own the Philadelphia 76ers. We have some
    unsold seats. We have noticed that the market for the sport is
    very, very price sensitive. So we decide in a short period of
    time that we need to discount certain nights in certain areas
    of our building or create various packages.
        It starts first with our ticketing system. We have
    collected data over the years of people who attend basketball
    games and who may attend our hockey games or family shows. We
    have an e-mail database, we create an offer, and then we blast
    that e-mail database. We also use our synergies by owning
    Comcast SportsNet to promote that offer through the unsold
    inventory that we do have. So we are using the assets of our
    company to create and promote this offer.
        So now we have discounted the seats, but at the same time
    we are putting people into the building and we are getting the
    parking and the food revenue.
        Mr. Sherman. So the key thing to benefit the artists and
    athletes and the teams, you have to know which seat you can
    sell for $200 and sell it for $200, which seat the day before
    the game is going to be unoccupied--and not only unoccupied,
    they are not buying beer or popcorn--and who to send an e-mail
    to, to say you can have that seat for $3.95, but please buy a
    lot of beer?
        Mr. Luukko. Yes. You need to have the ability to--to use a
    sports term, to read and react. You see where the marketplace
    is and see what you have or haven't sold, and then you have to
    react quickly because that game or concert happens on a date
    certain; and then you move forward.
        Mr. Sherman. So you are in effect the promoter of the game
    and the ticketer, and without being vertically integrated, you
    would not be able to exploit those empty seats because an
    independent ticket agent can't just wake up 2 days before the
    concert or the game and say I am going to sell seats for $3.95.
        I guess you could get all of the advantages of vertical
    integration without vertical integration if you had
    instantaneous agreement of all the different parties involved
    in the vertical chain. Good luck in achieving that.
        Mr. Luukko. It is pure efficiency. The team, in essence, is
    similar to the artist and its manager. The team ultimately
    makes that decision, and the other pieces follow.
        Mr. Sherman. So the ticketing operation has the data and
    the capacity to market the discounted tickets, but the promoter
    has the authority, and unless you put those two together, you
    end up with empty seats and unsold popcorn.
        I think athletes are doing pretty well, but you end up with
    a team that can't make the payroll necessary to beat New York.
        Mr. Azoff, is this analogous to the music business? Do you
    have a lot of--we are all familiar with Bruce Springsteen
    selling out every arena within an hour. But do you have a lot
    of clients that have empty seats in the room?
        Mr. Azoff. Virtually every client has empty seats in the
    room, and it is a struggle. Bringing efficiencies, Michael
    spoke about how we want to do it.
        Currently, at TicketMaster, we have a list of names, but we
    don't yet have the ability to share that data with artists. We
    don't have the ability to sell merchandise and sell music. That
    is the real efficiencies in this merger. We are betting that
    despite less market share in the ticketing area, we will be
    able to start this new business that will serve consumers, fans
    and teams.
        Mr. Sherman. So your business plan is that after this
    merger, your share of the market declines, but your ability to
    exploit that market by selling ancillary products increases?
        Mr. Azoff. Yes.
        And as each artist makes more, I think it will lower ticket
    prices.
        Mr. Sherman. Mr. Rapino, you probably know something about
    empty seats.
        Mr. Rapino. There are two fronts. There is the venue and
    the artist. Currently, 40 percent of tickets go unsold. Other
    than Bruce Springsteen and the very, very top, our bread and
    butter is the middle of the road and lower, in terms of the
    7,000 club shows and the arena acts that sell 6,000 seats out
    of 12,000. So the number one thing that an artist wants from us
    as a promoter is to become a better marketer and sell more
    seats.
        I think the sports analogy is a fabulous example because no
    one says, ``Where is the next Kobe Bryant going to come from?''
    But everyone says, ``How is the next Bruce Springsteen going to
    be created?''
        Sports is a very institutionalized industry, from the
    college league up to these four monopolies, from the NBA to the
    NHL, who are vertically integrated from the fullest, from the
    team to the broadcast.
        The reason the music business is in trouble and has been in
    trouble is because it has not been institutionalized. It has
    been fragmented, and there has been no system to help the young
    artist, no system to help sell more tickets and innovate.
        Our model is only one model, and we hope other models are
    generated from this. But we think it is a good example to
    market better, sell more seats, fill more venues because the
    irony is, my competition is the sports leagues. A consumer does
    decide to go to the NBA game or the congressional monopoly-
    granted NBL league, or a concert. That is my concert competitor
    for that disposable income, and it is tough to fight.
        Mr. Sherman. Mr. Coble has graciously allowed me to ask a
    few more questions.
        Mr. Coble. I have to leave shortly for another meeting, but
    I want to express thanks to the panel for being with us today.
    I will be around for a few more minutes.
        Mr. Sherman. Mr. Rapino and Mr. Azoff, your detractors say
    ticket prices have gone up in recent years and that your
    companies are responsible for that.
        Have ticket prices gone up and, if so, why?
        Mr. Rapino. In the concert business, ticket prices have
    gone up 4 percent a year on an annual basis.
        Mr. Sherman. Is that for the whole market? We all focus on
    the top 50 acts.
        Mr. Rapino. In my testimony, the very small percentage of
    top acts get great press about ticket prices. An average ticket
    price for a concert is $50.
        I would again argue, what could you absolutely do in the
    world of entertainment for $50, by comparison?
        Mr. Sherman. A lot of people in the San Fernando Valley can
    go out on the town for $50 or less per person. We live cheaper
    lives.
        Mr. Rapino. What the consumer is telling us, and when we
    poll consumers, is not that the ticket price is too expensive.
    That is not their number one problem with the business. When
    they see a Madonna show, they think it is great value.
        What the artist ticket prices have been driven by, for many
    years now is, the artist continually innovating his show, as
    you would know from the first show 20 years ago with the bad
    light and a mike on stage at the Forum to today where Britney
    Spears would probably have 18 transport trucks and 300 people
    on payroll because the fans want a great show.
        They want the fireworks and the spectacular part of that
    coming to that show, and the cost of production is part of the
    show that the consumers want. So part of the cost is, the cost
    of the show has increased.
        The artist wants to figure out how to pay for the show. And
    no one has to go to a Britney Spears show, but the economics
    still seem to be affordable that these shows do well and the
    consumer has many choices from a $9 ticket to a $100 ticket and
    small clubs to large.
        Mr. Azoff. On the TicketMaster site, we don't set ticket
    prices at all.*
    ---------------------------------------------------------------------------
        *Subsequent to delivering this testimony, Mr. Azoff learned that as
    to a de minimis number of tickets sold in very narrowly defined cases
    (constituting less than four one-hundredths of one percent of the
    tickets that TicketMaster sells), TicketMaster sets ticket prices.
    ---------------------------------------------------------------------------
        Mr. Sherman. Have you seen them go up at least for the A-
    plus events?
        Mr. Azoff. Yes. I believe I have the same figures as
    Michael does.
        On the management side, yes, ticket prices have gone up. It
    is a function of two things. It is a function of the loss of
    income from recorded music and the increased production costs.
        In preparation for these hearings, I sounded out several
    artists, and they all said, If you can show me a way that I can
    make the same money and not lose my production, of course I
    would like to see lower ticket prices.
        And everybody focuses on the problems in the secondary
    ticketing business: Oh, if the guy is paying $1,600 for the
    front row, why can't I charge another $10? That's a problem.
        Mr. Rapino. We do 1,000 concerts at our 50 amphitheaters.
    We will lose $70 million at the door. That means the price of
    the talent versus the ticket price. That is 10 million tickets
    being sold. In theory, if I had any control on those ticket
    prices, you would assume I would charge $7 more a ticket to
    cover my $70 million loss. The artist takes the door, and we
    end up making the money on peanut, popcorn, parking and ticket
    rebates.
        Mr. Sherman. What is a ticket rebate?
        Mr. Rapino. Most of the TicketMaster service fees that
    TicketMaster charges, the $10, $12.
        Mr. Sherman. So when I think I am paying Azoff, I am really
    paying you?
        Mr. Rapino. You are really paying me and you are paying the
    venue, and obviously you are paying the artist in theory
    because the venue promoter needs to make a pot of money to
    cover that $70 million loss at the door.
        Mr. Sherman. So what I think is a TicketMaster service
    charge is really a disguised portion of the price, and the
    people in your business and/or the artists have enough power to
    force Azoff to pretend like he is charging a lot when he is
    really giving part of the money to you?
        Mr. Rapino. Yes.
        Mr. Sherman. So you are a professional bad guy, Mr. Azoff?
        Mr. Azoff. We're used to it.
        Mr. Sherman. I finally want to go to the scalping issue.
    One of the bizarre things is, the scalping business should
    not--if things are priced correctly, there shouldn't be a huge
    industry in buying them and reselling them. But in fact, as I
    understand it, those great front row tickets are still being
    sold for $100 and $200 and they are worth thousands.
        Mr. Azoff, when these big acts have you as their ticket
    agent, do they give you all of the seats or do they hold back
    some to be sold in some other way?
        Mr. Azoff. Inventory control is not a perfect science.
    Everybody in the food chain seems to have access.
        Mr. Sherman. If there are 10,000 seats in the arena and you
    are doing the event, are you selling 10,000 seats or are you
    often selling 7,000?
        Mr. Azoff. Never the former. I would say on an average we
    might see 80 to 85 percent of the seats.
        Mr. Sherman. When you don't get the 15 percent, are those
    the bad or good seats that you are not getting?
        Mr. Azoff. The vast majority, they are the best seats in
    the house. They go to building holds, sponsor holds, band
    holds, record company holds. They go out the door, you know,
    multiple places.
        Mr. Sherman. So if I want to pay $800 for a ticket, I
    probably am getting one of those and you probably never touched
    it?
        Mr. Azoff. I would say that is correct, yes.
        Mr. Sherman. Then there are these companies that try to buy
    from TicketMaster and then resell, or buy from whoever the
    ticket agent is and then resell.
        Why are the artists/promoters having you sell some tickets
    that are worth 1,000 bucks for a 100 so the lucky fan and/or
    scalper ends up with $900 of consumer surplus? Why are you
    sometimes putting on your Web page a $1,000 ticket for a $100
    price?
        Mr. Azoff. The standard line I get when I talk to an artist
    is, you know, they are all worried about the press. If my
    ticket is $300--and I always say that is the guy who is getting
    his tickets for free. They are always worried about bad press,
    especially with the way the Internet flows now.
        If the Eagles were to raise their ticket prices----
        Mr. Sherman. Does the press focus on the average price or
    the cheapest price, or if there are 50 seats being sold for
    $1,000 apiece, does the press focus on those 50 seats?
        Mr. Azoff. Yes. Again, people lead. When Bruce Springsteen
    says I am charging $95, another artist is going to say, Hey, my
    fans are going to think I am a jerk if I charge $150.
        Look, in a perfect world we would all sit down and we would
    convince artists to realize that they ought to charge what they
    are worth.
        Mr. Sherman. At least for the top 1,000 seats or the top
    500 seats in the house. You are not deprived of a chance to see
    the artist if you don't go one of the best 500 seats.
        Mr. Azoff. The focus on this merger will enlighten a lot of
    artists, I hope. The first step at fighting the scalping would
    be for dynamic pricing to finally come into effect.
        Mr. Sherman. Do any of the other witnesses have a comment
    on why we are in this weird situation where the artist feels it
    necessary to sell one of those best 500 seats for a $100 when
    everybody knows it is worth $1,000?
        Mr. Froeb. One of the great ironies of this merger is, in
    theory, if it works the way it is designed to, it should allow
    the artist to grab control of the entire supply chain--
    including scalping--a lot better than they currently have. To
    me, it is part of their image. What creates demand for their
    tickets is their image of being good guys and selling cheap
    tickets.
        Mr. Sherman. Nobody thinks United Airlines is terrible when
    they sell a $250 ticket from L.A. to New York just because
    there are some First Class seats that they are able to get
    $3,000 for. There are many complaints that we have back in
    steerage, but the fact that they were able to squeeze a lot of
    money out of those people on the other side of the curtain has
    never bothered those of us on the plane.
        I don't know why it bothers people who buy tickets, but you
    know your business better than I do.
        I have run out of questions, so thank you very much.
        [Whereupon, at 1:02 p.m., the Subcommittee was adjourned.]

                                A P P E N D I X

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