Ticketmaster and Livenation Merger Hearings Reveal a Hell of a Secret: Bands Get a Cut of Service Fees

The service charge. Is there any more ridiculous and utterly transparent lie in American commerce?

It's like telling us that a toaster is $20, but then, at the register, saying that the heating coils inside cost an extra $15. Why not follow the lead of every other non-seedy business in the world: Do the math in your head and get back to us when you come up with how much the thing costs.

One of the lesser-reported revelations of late February's Senate Judiciary Committee's hearings on the proposed merger of the two corporate behemoths of the concert business, Ticketmaster and LiveNation, came during a conversation with Ticketmaster CEO Irving Azoff about service fees. The bespectacled power broker, whose Front Line Management has tended to the careers of everyone from The Eagles, Guns N' Roses and REO Speedwagon to Christina Aguilera and Morrissey, was made CEO of Ticketmaster last year, after Front Line was acquired by the ticketing company.

Enduring a stern grilling by Utah Republican Orrin Hatch and New York Democrat Charles Schumer, Azoff, seated next to LiveNation kingpin Michael Rapino, uttered a statement only a few outlets, including Nashville industry blog Coolfer, reported: "I would also like to get on the record that when people hear what Ticketmaster's service charge is, Ticketmaster was set up as a system where they took the heat for everybody. Ticketmaster gets a minority percentage of that service charge. In that service charge are the credit-card fees, the rebates to the buildings, rebates sometimes to artists, sometimes rebates to promoters."

This statement reveals a new truth behind the foggy nature of the fees, usually $12 to $15, and suggests that, in addition to providing the service of selling tickets, Ticketmaster also offered itself up to certain clients as a kind of protection service. Worried about being perceived as greedy to your fans and/or customers? Sign on with us, and we'll be the bad guy.

This service is apparently only available for the choicest, most high-profile clients. Though Azoff didn't name names, longtime Chicago booking agent Tom Windish, whose clients include Animal Collective, Z-Trip, Sea Wolf, No Age and dozens of others, says cuts of the service fee haven't been offered to any of his clients. "The venue gets a kickback, for sure," he says, "but I've never had a band get any kickback from Ticketmaster surcharges. I've never even heard of that—but I don't work with bands on an arena level."

Azoff also stressed in the Senate hearings that Ticketmaster does not control what tickets go on sale and what tickets don't. Various parties throughout the business, he explained, receive batches of tickets, and these are generally the ones that end up on the secondary market of auction and scalping sites.

Which, granted, isn't all that surprising. It's easy to imagine, say, Van Halen negotiating for a cut of the secondary-market action by securing big chunks of tickets that their people can pass on to brokers (and even easier to imagine the heated negotiations between Azoff as Van Halen's manager and Azoff the CEO of Ticketmaster—surely he will drive himself a hard bargain). But what is surprising is that by acknowledging the protection, Ticketmaster has pulled back the curtain on the practice and is basically saying that it'll no longer serve as a punching bag.

Indeed, in a mid-January conference call, Ticketmaster chairman Barry Diller for the first time in the company's history declined to take heat for the rising ticket prices (up 400 percent in the past decade): "Ticketmaster does not set prices," Diller said. "LiveNation does not set ticket prices. Artists set ticket prices."

Azoff echoed Diller's line during the hearings: "The only person in the business with a monopoly is the artist," he said, which in his highflying world means The Eagles, U2 and Guns N' Roses, not Crystal Antlers, Emily Wells and other small-venue artists who are only privy to the downside of Ticketmaster's service charge. Is it any wonder that a growing number of marquee names, including Jay-Z, U2 and Van Halen, have come out in support of the merger?

"Ticket prices need to come down, like, right this instant," says one L.A. promoter, who declined to be named because of relationships with both Ticketmaster and LiveNation. "And everyone is involved who does business making a dollar off concerts—band, promoter, agent, manager, venue, ticketing company. Everyone involved has to look at it responsibly." The promoter adds that a recent survey indicated that the average American goes to a mere two concerts a year: "That's because it's a bad experience. If it was a better experience, they'd go to 15. The money experience, the parking experience, the cost-of-beer experience—it should be easier to go to shows for people who want to go to more of them. But it has spun out of control.

"Pearl Jam was on to the right thing, just a little ahead of their time," he continues, referencing the band's valiant but fruitless effort to circumvent Ticketmaster's domain in the early 1990s. "But what was sad was that they were almost alone. When they went to go have that fight, they looked back and there were no bands behind them."

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