THE LEFSETZ LETTER: Antitrust

Maybe we need to let Ticketmaster and Live Nation merge to pave the
way for what comes next.

What killed the major labels was radio consolidation. With Clear
Channel owning so many stations and populating them with twenty plus
minutes of commercials per hour, people started tuning out.
Conventional wisdom is Bill Clinton screwed up, he never should have
let these mergers take place. But if terrestrial radio hadn't gotten
so bad, would Pandora have flourished? In other words, is it
fruitless to prop up the past? Does it only delay the coming of the
future?


I hate to quote the "Wall Street Journal" editorial page, but today's
lead opinion piece, "The Antitrust Anachronism", caught my eye.


You see Peter Paterno is vehemently antitrust. Peter's not a right
winger, but he is a free-thinker. Most music business attorneys are
not attorneys. Oh, they can make you a deal…but understand the


Bob Lefsetz, Santa Monica-based industry legend, is the author of the e-mail newsletter, "The Lefsetz Letter". Famous for being beholden to no one, and speaking the truth, Lefsetz addresses the issues that are at the core of the music business: downloading, copy protection, pricing and the music itself.

His intense brilliance captivates readers from Steven Tyler to Rick Nielsen to Bryan Adams to Quincy Jones to music business honchos like Michael Rapino, Randy Phillips, Don Ienner, Cliff Burnstein, Irving Azoff and Tom Freston.

Never boring, always entertaining, Mr. Lefsetz's insights are fueled by his stint as an entertainment business attorney, majordomo of Sanctuary Music's American division and consultancies to major labels.

Bob has been a weekly contributor to CelebrityAccess and Encore since 2001, and we plan many more years of partnership with him. While we here at CelebrityAccess and Encore do not necessarily agree with all of Bob's opinions, we are proud to help share them with you.

legal underpinnings? Foresee what will happen in a crisis? Peter
never leaves out the law. And has been very successful being a
maverick. (Yes, there was that stint at Hollywood Records, but unlike
all other attorneys who left practice to run labels, Paterno's been
able to rebuild his legal business after the fact.) So I pay
attention to what Peter has to say. And he's truly gotten this dyed-
in-the-wool leftie thinking…is antitrust good for the people?


The merger the WSJ is speaking about is last week's big deal, between
Microsoft and Yahoo on search. How long will it take the government
to give its stamp of approval? Or withhold it? Months, at least.
Does government ever work at the speed of technology? And diving into
the details, the author of this piece, L. Gordon Crovitz, references
Google's triumph over AltaVista and Excite. I still occasionally use
the former, does the latter still exist? Sure, Microsoft dominates
the office apps market, but when apps move to the cloud, which is
inevitable, will the Redmond company still dominate, will it even be
able to charge? Will the apps be free, but service the key?


I don't know. But I do know that Congress and D.C. regulatory bodies
know little about tech. And almost nothing about the concert business.


Google doesn't search Twitter. Bing has made an attempt. Real-time
searches make spider-crawling results look like last year's baseball
scores. Will Google dominate in real-time search?

If Ticketmaster and Live Nation are prevented from merging will the
public truly benefit?


Those challenging the merger most vehemently, Seth Hurwitz and Jerry
Mickelson, are not newbies, they've been promoting for years. They're
fiercely independent, cut in the cloth of their progenitor, Bill
Graham, but are they truly where the innovation is coming from? Sure,
JAM promotes concerts on baseball fields, and Hurwitz does festivals,
but could the revolution be coming from people much younger, with no
investment in past relationships?

The concert business is not a paragon of health. Live Nation says 40%
of its tickets go unsold. This is the summer of papering. And few
superstars are being developed. This system is not working.


And it's not making the public happy. Hell, that's why there's such
an uproar. Ticketmaster is more hated than North Korea! Is
prevention of this merger going to solve the add-on crisis? Azoff
says that he'll lobby for all-in ticketing when the merger takes
place, and controlling both acts and promotion, he's got a good shot.

But maybe he'll fail.

Live Nation is burdened with debt, and has razor-thin margins.
Ticketmaster is not Apple, rolling in profits with a surging stock
price. So maybe the two companies merge and we get a disaster. Isn't
that good? Doesn't that pave the way for the future?

Or maybe by merging, whatever the result, new opportunities are
created for upstarts. The more the major labels merged, the more
opportunities grew in the indie sphere. The majors want to sell
millions. The indies can make money on fewer sales, having less
overhead. And now you've got no cred if you're on a major, you almost
can't make it in the KCRW world unless you're on an indie.


And maybe the Ticketmaster/Live Nation merger results in the new
Google. Maybe what Irving says is true. That he'll be able to get
all the rights in the hands of the artists, that the artists will make
all the money, not the labels. Is this a bad thing? Certainly not.
Should we stay in a past where you search in AltaVista and rarely get
what you want? Unless you know how to use Boolean logic? So only the
brilliant can get the results they need, the same way only the rich
and connected can get good tickets?


Stopping this merger certainly isn't going to make things better.


Sure, it could make them worse.


But maybe, like with radio consolidation, they've got to get worse to
get better.


Don't have a knee-jerk reaction here. Concerts have become an
overpriced, once a year event. Maybe they're imploding under their
own weight, maybe the public is mad as hell and isn't gonna take it
anymore. Maybe the future is small scale shows by virtual unknowns,
niches on steroids. Will Live Nation be the king in that world? I
wouldn't think so. That would be like Warner telling Wall Street that
it's found the key to success, from now on the company's only going to
sign acts that sell fewer than one hundred thousand copies!



That would make Warner's stock tank. The Wall Street game is about
tonnage. How do we generate more more more from less less less.
Major labels aren't signing more acts, but fewer, in a world where
anybody can make music and distribute it. Are they really going to
rule the future?

Sure, concert promotion involves real estate. But look at the failure
of malls. They raged for decades, now few want to shop there and
they're stumbling.

The past doesn't go on forever. Unless you use all your power to
prevent the future.

The future can be bleak, but only by going through the rough times can
you get to the good.


No one's preventing a ticketing company from establishing a better
service than Ticketmaster. No one's preventing anybody from being a
concert promoter. Sure, Ticketmaster and Live Nation look dominant
now. But the Walkman was eclipsed by the iPod. Samsung rules flat
screen TVs, not Sony. Wii is the gaming superstar, not PlayStation.
Sony's lost its cred. Because it took its eye off the ball. Should
we have prevented its failures? No.
Let this merger go through.

http://online.wsj.com/article/SB10001424052970204313604574326250751120772.html

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