Ticketmaster is a dominant ticket sales and distribution company that has faced a lot of criticism over the years for allegedly anti-competitive practices. As the primary ticket provider for many major venues and artists, Ticketmaster has developed into a near-monopoly in the ticket industry. This article will examine some of the main criticisms against Ticketmaster and evaluate whether they constitute anti-competitive behavior.
What is Ticketmaster?
Ticketmaster is a ticket sales and distribution company that was founded in 1976. It sells tickets for live entertainment events on behalf of clients across music, sports, arts and theater. Ticketmaster has exclusive deals with many major venues and artists to be their primary ticket provider. It sells tickets through its website, ticketmaster.com, as well as through phone and retail outlet sales.
Some key facts about Ticketmaster:
- Has sold more than 500 million tickets worth over $30 billion since it was founded
- Processes around 500 million ticket transactions per year
- Has partnerships with over 500 major stadiums, theater chains, festivals and other entertainment businesses as their official ticketing agent
- Serves clients in 30 countries across the globe
- Merged with Live Nation in 2010 to become part of Live Nation Entertainment, the world’s largest live entertainment company
- Has an estimated 80%-90% market share of the primary market ticketing industry
Criticisms of Ticketmaster
Here are some of the main criticisms that have been leveled at Ticketmaster over anti-competitive practices:
Service fees
Ticketmaster is notorious for adding on large “service” or “convenience” fees to the advertised ticket price. Ticketmaster claims these fees are required to cover their costs in selling and processing the tickets. However, critics argue the fees – which can equal 25%-30% of the ticket price – are excessive and just a way for Ticketmaster to take advantage of its monopolistic position.
No-resale clauses
Ticketmaster requires clients to sign no-resale clauses that prohibit them reselling tickets elsewhere. This restricts competition in the secondary ticket market to Ticketmaster-owned resale sites like TicketsNow. The no-resale clauses have been challenged in legal cases as improperly limiting competition.
Captive clientele
The exclusive deals Ticketmaster has with venues and promoters means events are restricted to being sold through Ticketmaster. Consumers wanting to buy tickets to certain events therefore have no choice but to purchase via Ticketmaster.
Critics argue this “captive clientele” situation allows Ticketmaster to impose high fees and offer poor services without the discipline of competition.
Predatory threats
There have been claims that Ticketmaster threatens venues wishing to use other ticket companies with refusing to carry their events. The implication is that venues are scared to use Ticketmaster competitors for fear of losing business.
Abuse of market power
Ticketmaster’s large share of primary ticket sales, combined with its ownership of major secondary resale markets, has led to accusations it abuses its dominance. Critics argue its monopoly allows Ticketmaster to charge higher fees and offer lower customer service than would exist in a properly competitive market.
Ticketmaster’s defense
Ticketmaster defends itself against charges of anti-competitive conduct in several ways:
- It argues the ticket market is actually competitive because venues have a choice of ticketing provider – they choose Ticketmaster because it offers the best service and global distribution.
- Exclusive deals make economic sense for venues and Ticketmaster to reward investment and maximize reach.
- Fees cover the costs of providing ticketing services and cannot be excessive otherwise venues would not renew deals.
- No-resale clauses protect clients against scalping and help enforce ticket limits.
- Acquisitions expand offerings to consumers and have been cleared by anti-trust regulators.
Assessment under competition law
To determine if Ticketmaster’s conduct is actually anti-competitive and harmful to consumers, we can assess it against standards under competition law. Some key principles:
Market definition
Firstly, the relevant market needs to be defined. This informs market share estimates. Ticketmaster argues it sits within the broader entertainment ticketing market. Critics claim it has a near monopoly on the primary market. Its share of secondary resales is also very high.
Barriers to entry
There seem to be high barriers for new players to enter and compete with Ticketmaster due to:
- Venue exclusivity deals
- High fixed costs to develop technology and systems needed
- Strong brand recognition and loyalty
These barriers inhibit other companies from entering to compete and discipline Ticketmaster’s behavior.
No economic justification
For conduct to be anti-competitive, it must lack reasonable commercial justification. Ticketmaster claims it needs fees and exclusive deals to protect investments and maximize sales. But the level of fees seems disproportionate, suggesting a lack of competitive restraints.
Consumer harm
A key test is whether consumers are harmed from lower innovation, higher prices or lower quality. Critics highlight Ticketmaster’s fees significantly driving up ticket costs. Its monopolistic position could also reduce incentives for product improvement and better customer service.
Conclusions on Ticketmaster’s conduct
Given the above analysis, there are reasonable grounds to argue Ticketmaster engages in anti-competitive practices, including:
- Imposing substantially higher fees than would likely exist in a competitive market
- Tying up venues through exclusive contracts that new entrants struggle to overcome
- Leveraging its market power in primary sales to expand into secondary markets
- Providing lower quality services than it would if properly constrained by competition
There are counter-arguments and justifications Ticketmaster presents in its defense. But overall, it does appear Ticketmaster engages in conduct that harms competition and consumers.
More effective competition law enforcement or pro-competition reforms could potentially help address some of these anti-competitive practices in the ticketing industry.
Sources
Here are some of the sources referenced for facts and analysis in this article: