Government Intervention in the Live Music

Ticket Market: A Comprehensive Analysis of

Ticketmaster's Role in the Live Music Event

Industry

Background
Ticket sales for live music events navigate a complex interplay between market

forces and powerful players. This analysis examines how price mechanisms

shaped by supply and demand ideally dictate ticket prices. However, the

dominance of companies like Ticketmaster disrupts this equilibrium, potentially

leading to inflated service fees and distorted pricing. Concerns also surround

resource allocation, with practices favoring resellers over genuine fans. The

essay acknowledges the potential benefits of free-market principles but argues

for a measured government role. Scrutiny of mergers like Ticketmaster-

LiveNation is crucial to prevent anti-competitive behavior and safeguard

consumer interests. While regulations carry the risk of stifling innovation,

targeted measures like capping service fees or mandating transparent allocation

practices offer a path to balance. Ultimately, fostering fair competition and

protecting consumers through targeted regulations is essential to ensure the live

music scene remains accessible and thrives.

Introduction

Understanding the Market

The live music industry operates within a market economy (McConnell et al.,

2020), where prices are determined by the interaction of supply and

demand. On the supply side, promoters, venues, and artists incur costs

associated with organizing events, including renting venues, hiring security,

and paying artists. The supply curve depicts the relationship between ticket

price and the quantity of tickets supplied by sellers (McConnell et al., 2020).

Generally, as the price rises, promoters are incentivized to offer more tickets

(up to venue capacity).

On the demand side, fans determine how much they are willing to pay for

tickets based on their preferences and disposable income. The demand curve

reflects this relationship, with higher prices typically leading to a decrease in

the quantity of tickets demanded (McConnell et al., 2020). The equilibrium

point, where the supply and demand curves intersect, establishes the

market price for tickets.

The price mechanism serves as a cornerstone in capitalist economies, where

it facilitates the allocation of scarce resources through the interaction of

supply and demand (McAuley, 2008). However, when a single entity, such as

Ticketmaster, attains a monopolistic position, questions arise regarding the

equitable and efficient distribution of resources. Monopoly power can lead to

distorted pricing, potentially causing consumers to bear unfair costs and

reducing allocative efficiency (McAuley, 2008).

Price Mechanism and Resource Allocation
In the live music event sector, the price mechanism ideally sets ticket prices

based on consumer preferences and the scarcity of available seats (Besanko

& Sherman, 2009). This core principle of economics dictates that prices act

as signals, guiding resource allocation based on both consumer demand and

production costs (Friedman, 2008). However, when a single entity, such as

Ticketmaster, attains a monopolistic position, questions arise regarding the

equitable and efficient distribution of resources. Monopoly power can lead to

distorted pricing, potentially causing consumers to bear unfair costs and

reducing allocative efficiency (Hoekstra & Priest, 2009). Yet, Ticketmaster's

extensive market share allows it to exert considerable influence over pricing

decisions. The high service fees reflect a market distortion where consumers

may not be benefiting from the natural balance of supply and demand, as

seen in more competitive markets.

Monopoly Power and Its Implications

The post-merger Ticketmaster-LiveNation conglomerate holds a vertically

integrated position across multiple stages of the live music ecosystem

(Singer, 2019). This vertical integration can exacerbate monopoly tendencies,

limiting consumer choice (Evans & Scherer, 1990) and possibly stifling

innovation in ticketing technology and services (Aghion & Tirole, 1997). The

secondary resale market controlled by the company further complicates the

picture, potentially leading to artificial constraints on ticket availability and

higher-than-optimal prices, practices which may be facilitated by scalping

(Hovenkamp, 2017).

Government Intervention and Market Regulation

While proponents of laissez-faire capitalism advocate for minimal

government interference (Kahn, 2017), instances such as Ticketmaster's

market dominance call for an evaluation of the necessity for antitrust

regulations and other forms of intervention. Competition authorities must

consider whether the public interest would be better served by breaking up

monopolies or regulating them to ensure fairer pricing practices and to

promote entry into the market by competitors (Kahn, 2017).

The sale of tickets for live music events operates within a specific market

framework that is shaped by the interplay of price mechanisms, resource

allocation, monopoly power, and the role of government intervention. This

analysis explores how these principles manifest in the context of

Ticketmaster, a company that holds an estimated market share of over 70%

in the sale of tickets for live music events (Singer, 2019).

Price mechanisms play a crucial role in determining the availability and cost

of tickets. The laws of supply and demand govern the pricing dynamics in

this market. As demand for tickets increases, prices tend to rise, reflecting

the scarcity of the resource (McConnell, Brue, & Flynn, 2020). Ticketmaster,

as a dominant player, has significant leverage in setting prices, often

charging service fees that can amount to a substantial portion of the ticket's

original value, sometimes reaching up to 75% (Singer, 2019). This pricing

strategy affects both consumers and event organizers, as it can deter some

fans from attending and may inflate costs for organizers (Singer, 2019).

Resource allocation is another key aspect of the ticket sales market. The

limited number of tickets available for each event requires careful allocation

to maximize revenue and ensure fairness. Ticketmaster, with its extensive

reach and technological capabilities, plays a significant role in managing this

allocation. However, the company's monopoly power has led to concerns

about potential misallocation of resources, such as the allocation of a

disproportionate number of tickets to high-paying customers or resellers,

rather than to fans who intend to attend the event (Singer, 2019).

The role of government intervention in this market is crucial in balancing the

interests of different stakeholders. While the free market principles of price

mechanisms and resource allocation are important, the potential for abuse

of monopoly power by Ticketmaster requires careful scrutiny (Kahn, 2017).

The 2010 merger between Ticketmaster and LiveNation, which controls

numerous live music venues, raised concerns about the potential for anti-

competitive behavior and market dominance (Singer, 2019). The

government's role in regulating such mergers and ensuring fair competition

is essential to prevent market distortions and protect consumer interests

(Kahn, 2017).

In weighing the pros and cons of allowing Ticketmaster to maintain its

market dominance or strengthening government supervision, it is important

to consider the trade-offs involved. On one hand, Ticketmaster's size and

reach enable it to efficiently distribute tickets and provide convenient

services to both fans and event organizers (Singer, 2019). On the other hand,

the company's monopoly power can lead to higher prices, reduced choice for

consumers, and potential misallocation of resources (Singer, 2019).

Enhanced government supervision could help address these concerns by

ensuring fairness and transparency in ticket sales, preventing anti-

competitive behavior, and protecting consumer rights. However, such

intervention also carries the risk of over-regulation and stifling innovation in

the market (Kahn, 2017).

A balanced approach is necessary to strike a compromise between promoting

competition and innovation while safeguarding consumer interests. This

could involve implementing targeted regulations that address specific

concerns raised by Ticketmaster's market dominance, such as capping

service fees or requiring greater transparency in ticket allocation. Such

measures would aim to preserve the efficiency and convenience of

Ticketmaster's services while mitigating the negative impacts of its monopoly

power.

Conclusion

The decision to either tolerate or regulate Ticketmaster's market power hinges

on the balance between preserving the efficiencies of the free market and

preventing market failures due to unchecked monopoly. While the free market

price mechanism is effective in many contexts, evidence suggests that in the

case of live music event ticketing, it might require government oversight to

mitigate the negative effects of monopoly power and ensure a more equitable

and efficient allocation of resources in the industry.

The ticket sales market for live music events is a complex ecosystem that is

shaped by price mechanisms, resource allocation, monopoly power, and

government intervention. The role of Ticketmaster as a dominant player in this

market raises important questions about the balance between market freedom

and the need for regulation. A careful analysis of these principles and their

interactions is crucial for developing policies that promote fair competition,

protect consumer interests, and foster a vibrant and diverse live music scene.