Tuesday, February 24, 2009

An Article that needs to be read

Hitsville is live-blogging the hearings here.

Irving Azoff, the supermanager and CEO of Ticketmaster, and Michael Rapino, for now capo di tutti capi of Live Nation, will be in attendance.

tmaster-logo.png Following, a few issues the senators should address; any I missed?

(Hitsville’s complete coverage of the merger is here.)

1) A few questions about Ticketmaster. A typical $100 rock show might carry with it a collection of service fees reaching $20 or $30 or more. Where does the money go? How much, typically, goes back to the artist? How much to the promoter? How much to the venues? If you can’t generalize, give me specifics from one or two recent tours.

2) Now, aside from routing back specific fees from specific shows to a venue, how much a year does Ticketmaster spend arranging long-term deals with venues? How are they generally configured? Is it a lump sum, or an annual fee? Are there other considerations? What is a typical payment to, say, a basketball arena?

3) Now, don’t these long-term deals restrict competition? In other words, aren’t you in effect forcing people to pay money for fees, which you then use to tie up venues, which prevents competitors entering the business and helping to lower those fees?

4) By which I mean, far from letting you merge with an even more powerful company, shouldn’t we break up the monopoly you already seem to be guarding so jealously?

5) How much does it cost to actually sell a concert ticket? By which I mean, leaving aside the payments to venues, promoters and artists, what is your company’s net cost per ticket sold? Give me an estimate: Cost of the ticketing system, add on the personnel on the phones, divide by number of tickets you sold last year.

6) I note at venues that the folks at the gate now have electronic readers that scan the tickets. Are those proprietary? By which I mean, if I’m a competitor to you, will those scanners work with my tickets? Who owns the scanners? The venue or Ticketmaster?

7) How much a year, total, does your company pay back to artists, promoters and venues? Hard to estimate? You’re the CEO of Ticketmaster, right? You collect x number of dollars, right? And you know what your revenue is. The difference would be how much you pay back to artists, promoters and venues, right? Give me a rough estimate.

8 ) Mr. Azoff, you’re traditionally the biggest manager in the music industry, and you now run the biggest ticket-selling operation, which kicks back a lot of its fees to the artists. Whose interests do you put first?

9) Another question for you, Mr. Azoff; you’re now the “executive chairman” of this new company, which controls some 150 major venues and hence a large part of the United States concert promotion industry. You’re going to be cutting tour deals with some of the artists you represent, won’t you? Won’t you be at war with yourself? Who will win? In a recent interview in the Wall Street Journal, you said, “The artist’s interests always come first.” Now, if I’m a Live Nation shareholder, doesn’t that disqualify you from looking after the best interests of the company?

10) That’s all well and good to say you run a “decentralized operation.” In Fredric Dannen’s book “Hit Men,” you’re described as “one of the most despised men in the record business.” It says here your “tantrums were extraordinary.” That doesn’t sound like someone who runs a decentralized operation. So please tell me again, whose interests comes first? You are legally bound to look after your shareholders, aren’t you? If I’m one of your artists, how do I reconcile that with my own interests? And given your, ah, colorful reputation, if I challenge your decisions, don’t I now risk offending the most powerful tour promoter in the country? If I leave your company’s management stable, don’t I risk finding it difficult to tour?

11) And just you personally, Mr. Azoff, what are you personal income streams? When the Eagles tour, do you get a percentage of the tour income or does it go solely to Front Line? If the group gets a kickback—excuse me, “part of the service fees returned,” from Ticketmaster, do you get a percentage of that? Does Front Line?

12) With the merger, isn’t your company essentially going to be routing those fees back to itself?

13) Now, you personally aside, let’s talk about your former management company, Front Line. What are your top 20 acts—the ones that have grossed the most from live performances? It’s hard to remember? Again, forgive me for quoting “Hit Men” again, but one person quoted there saying “He had total retention on every level.” Another is quoted as saying “Irving is as fast mentally as it gets.”

14) How many of your artists were in Billboard’s top ten concert tours last year? The year before that? Now much did the last Eagles tour gross? The last Jimmy Buffett tour? The last Neil Diamond tour?

15) Mr. Azoff, how do the artists you manage handle their tour merchandise? On a typical tour, what is the average per person expenditure for T shirts and the like? It varies? How about on the last Eagles tour, the last Jimmy Buffett tour, and the last Neil Diamond tour?

16) Does your company handle tour merchandise for your acts? How many of them? How many of your biggest acts? What is the typical “cut” your company takes? In other words, you probably advance an artist a set amount of money against the merchandise sales for an upcoming tour. How much does the artist get back from, say, a typical T-shirt sale at a concert? And forgive me for getting so granular, but do you or does Front Line get a percentage of that from the artists, as their manager, as well? Is there a conflict of interest there? I mean, as their manager, do you recommend to them that they use your merchandising company?

17) Now, forgive me, but as I understand it, the venues typically take a cut of the merchandise sales at a typical concert as well. Is that true? If Live Nation is managing the venue, what is the typical percentage the venue gets from the merchandise sales at a concert? It varies? How about at the last Eagles tour, the last Jimmy Buffet tour, and the last Neil Diamond tour?

18) Finally, on merchandise, break it down for me. A T-shirt might cost $30, these days, at a concert. After the merger, what dollar amount of that $30 will Live Nation, as tour promoter, venue manager, merchandise company and artists manager, get?

19) OK, let’s go back to Ticketmaster. Mr. Rapino, you’re the head of Live Nation, which recently cut a deal with a company to compete with Ticketmaster. I understand you will be dismantling that agreement. In what way did Live Nation and Ticketmaster just agree not to compete in the industry of ticket sales?

20) You have been known for the so-called “360 deals” with artists like Jay-Z, U2, and Madonna. Front Line Management is the biggest artist management agency, and it’s now controlled by Ticketmaster. In what way did Live Nation and Ticketmaster just agree not to compete in the industry of artists management?

21) Tell me how your resale operation works. It’s called TicketsNow, right? You are selling a ticket, for, say $100. You collect another $20 per ticket from your Ticketmaster arm. That’s $120. Now, in theory, anyone who buys one of those tickets can thereupon put it up to scalp—I’m sorry, “re-sell”—on TicketsNow. How do you make money from that service? What is the typical fee? Where does that money go? Does any of it go back to the artist?

22) Sometimes, I notice, tickets are going for an awful lot of money there … hundreds of dollars. Do you, your company, or anyone associated with any part of your company put up for sale there tickets that have not yet been sold through the normal channels? In other words, do you ever scalp your own tickets?

23) I mean, let’s imagine what could happen. The Eagles are a big band. A ticket in the front row I notice, might cost $200 when the tickets go on sale, but could easily be sold for several times that, correct?

24) Do artists sell tickets through Tickets Now? How does that process work? If the Eagles, say, are playing a concert here in DC at the Verizon Center down the street, as part of the tour deal does the band get some segment of the tickets for itself? Are they allowed to resell them on Tickets Now? Mr. Azoff, as the biggest artists manager in the business, have you or anyone at your management company facilitated such dealings?

25) Who is in charge of the merged company? Releases have said that Mr. Azoff is the “executive chairman” of the new operation. What does that mean? Which of you reports to the other?

26) Mr. Azoff, as you know from your long years as an artist manager, the record labels make it routinely difficult to get full information on the number of CDs they are selling, and most artists lawyers will tell you that underpayment of royalties is common. Most, in fact, say it’s de rigueur. As the record industry shifts to a model in which a company like Live Nation will be the conduit of an artist’s income, do you support regulations that will make your company handle that money more transparently?

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