A couple of weeks ago, the media reported that a jury had found Ticket Master (and Live Nation) guilty of being an illegal monopoly. The media quoted people on the street who said the obvious: “I am looking forward to paying lower prices for concert tickets.” Yet, there is no cartel amongst concert promoters (that I know of) and some reports said that Live Nation increased prices by only USD$1.72 per ticket.
The judge’s 44-page discussion of the case, written before the case was presented to the jury, laid out the debate much more clearly.
The case can seem confusing if you have a weak understanding of market power. Live Nation was not charged because its profits were “too high” or because consumers were being blackmailed into paying high prices. Villains are rarely as obvious as Snidely Whiplash who twirls his mustache while doing evil deeds.
These facts makes the judge’s writing interesting. I could not find any similar discussion, even after I looked for reporting from inside the entertainment industry.
The central issue is one which is debated often: which process encourages producers to offer good value to consumers profitably? Economists tend to prefer markets to be competitive, even if some competitors might suffer from that competition. Unfortunately, “barriers to entry” can block potential competitors in ways which enable existing firms to earn excessive profits.
The simple question is whether Live Nation’s actions were compatible with the competitive solution. The judge’s discussion identifies the legal points which the lawyers should debate in front of a jury, including potential barriers to entry. The job of Live Nation’s lawyers is to explain, if their behaviour is not compatible with that competitive solution, what makes its market so special that a different solution is appropriate.
The judge’s decision makes clear that Live Nation is active in six markets involving three types of “consumers”: artists, venues and fans. The legal question is whether it is taking advantage of its consumers in those markets (p. 3- 4):
- A market for promotion services in which the artists are the consumers;
- A market for venues in which the artists are the consumers;
- A market for concert-booking services in which the venues are the consumers;
- Two markets for primary ticketing services: one in which the venues are the consumers, and one in which the fans are the consumers.
These six markets matter because, while Live Nation may not dominate any one of the markets improperly, the case uses the idea that activities in one market affect market power in other markets.
(FYI: Every case of this type must also define the scope of the market. Live Nation wants to define the market widely, so that it appears to have a small market share, while the government wants to define the market narrowly, so that Live Nation appears to be an 800 pound gorilla terrorizing its competitors. The right answer is not easy to find but lawyers have lots of experience debating this very old question.)
If you want to learn more about this case then I also suggest
- A video by Legal Eagle released about one month before verdict adds a lot of detail on events outside of the courtroom
- A report by the Library of US Congress
After being found guilty, the question becomes “how to fix the problem?” Expecting Live Nation to change its behaviour, just because they were asked nicely, is not incentive-compatible. There are many public policy situations where “fixing a problem” has little or no effect. A persistent change in behaviour starts with new rules to the game.
5 Basic Principles of Economics 
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