Why The Live Nation-DOJ Lawsuit Missed The Mark

why company breakups rarely work

The U.S. Justice Department has a deep history of monopolistic claims and break-up calls. From Google to ByteDance, Live Nation to Microsoft, and AT&T to Standard Oil. DOJ’s thought process is often the same:

‘These companies are too powerful! Their power hurts the competition. If we weaken their power, it will lead to better outcomes for consumers.’

On the surface, the goal is great. Who doesn’t want lower prices and better products for consumers?

However, the logic implies that high consumer prices are due to the lack of competition. But for several large companies, the reality is often the opposite. The big company built its position because it often offered competitive prices for a better product. Once the economies of scale and scope kicked in, and those company flywheels are in motion, the powerful company can often become the best deal in town for consumers.

After AT&T broke up in 1981, local phone calls became more expensive for consumers. The individual Ma Bells weren’t big enough to subsidize local calls with long-distance calls. When Standard Oil was forced to break up in 1910, the breakup had little effect on consumer prices. Standard Oil’s scale helped reduce kerosene prices across the board. Plus, John D. Rockefeller just re-launched new gas stations with coded names, like Esso, which not-so-coincidentally is the phonetic spelling of S.O., AKA Standard Oil!

In live events, the goal of the DOJ’s lawsuit is to lower ticket prices for consumers. But similar to the above examples, the combination of events promoter and ticketing platforms, like AEG-AXS or Live Nation-Ticketmaster, create economies of scope. But even if exclusive ticketing partnerships were spread equally across AXS, Ticketmaster, and SeatGeek (and events promotion was spread equally across AEG, Live Nation, and others), that won’t change the massive influence of the secondary ticket reseller platforms. Those platforms enable bots and professional retailers who buy up inventory and resell on secondary platforms for higher prices. In 2017, the secondaries accounted for $8 billion, a number that has certainly grown since then.

Artists and their teams set their initial ticket prices on primary ticketing platforms. Many of them keep those tickets as affordable as possible to serve their real fans (not just the rich ones). The best way to lower ticket prices on secondary markets is to cap the resale amount on those markets, which already happens in Australia and other countries. Companies like DICE only allow tickets to be resold at face value. There are solutions! However, the secondary resellers have a strong and active presence on Capitol Hill, which makes regulation easier said than done.

Otherwise, a well-intended lawsuit from the DOJ quickly becomes seen as a means to score political points with the “all my homies hate Ticketmaster” bloc of voters.

when breakups are worth the battle

The types of monopolies that the Justice Department should focus on are ones that lead to higher prices than necessary or underwhelming products that businesses are not incentivized to improve.

It’s the local plumber who can charge an arm and a leg because they’re the only show in town and the consumer will pay anything to get their toilet fixed as soon as possible. Or the decades-long stranglehold that Texas Instruments has had on graphing calculators. Why, in 2024, does a TI-83 Plus, a device released in 1999, still cost nearly $90?! Or the insurance and cable companies that have their local markets on lock and can offer less than stellar service because there’s no alternative?

At the size of Apple, Google, Live Nation, and Meta, the calls to break them up ignore their scale and scope that allows them to serve consumers. Sure, these companies may not play nice with other competitors, and that may be worth digging into in certain cases (like Apple and Epic Games), but a stronger case needs to be made that it leads to worse outcomes for consumers.

The live concert business isn’t perfect. There are ways to improve it that will lead to a better experience—start to finish—for consumers. Now’s the perfect time to make those changes. But lawsuits that miss the mark are how these businesses are run is how we get face-palm-worthy sound bites like, “Senator, we run ads.”

Chartmetric Stat of the Week - Lizzo

An artist's ability to generate streams is not always correlated with an artist's ability to sell concert tickets. One great example is Lizzo. As of August 11, she has 5.73 million Spotify followers, which is 559th on the platform. But she's part of a much smaller group of contemporary artists who can sell out a nationwide arena tour in the U.S.