- So I basically spent an entire day trying to buy tickets
to the Taylor Swift Eras tour.
And like millions of other people,
I had a terrible experience doing it.
- How do you (beep) up this badly?
You knew this was coming.
You knew how many people signed up for presale.
- Ticketmaster site wasn't equipped to handle all the demand
and it just kept crashing.
People waited in the pre-sale queue all day
only to get kicked out again.
A few lucky people finally got to the front of the line,
had tickets in their cart,
then got kicked out and had to start all over again.
This happened to me.
If you went through all this, you kinda know
it was like playing the world's worst video game,
and the prize for winning,
was getting to pay outrageous Ticketmaster fees.
Now, the weird thing about this
is that this is far from the first time
that Ticketmaster has failed in this way.
Everyone's unhappy with Ticketmaster,
but it still controls over 70% of the market for ticketing.
In fact, it's had over 80% of the market
for primary ticketing,
that's the first sale of tickets, since 1995.
How did Ticketmaster become the dominant market
leader when it's frustrating
and loaded with exorbitant fees at best?
And utterly incompetent at worst?
The answer, of course is Ronald Reagan.
(ambient music) [Narrator] This is Decoder.
- We've got a special episode today.
We're diving deep on Taylor Swift Ticketmaster
and how a handful of policy changes in the 1980s
led to one firm so thoroughly dominating
the live events business in the United States
that Congress held a hearing in 2023,
because Taylor Swift fans were so upset about antitrust law.
Here's a really simple version.
In 1890, Congress passed the Sherman Antitrust Act.
President Theodore Roosevelt ran around using it
to break up a bunch of monopolies.
In 1914, Congress clarified the Sherman Act
with the Clayton Act.
Which specifically prohibits anti-competitive mergers.
And up until the '80s, this was all working.
The government was pretty aggressive
about breaking up monopolies.
But in 1978, law school professor Robert Bork writes a book
called, "The Antitrust Paradox."
Which essentially says we've been doing antitrust all wrong.
His argument is that big companies often become big,
because they're good at what they do.
And because being so big makes them efficient,
that means people will eventually pay lower prices.
Now, here in 2023, I think we all know
how well that worked out.
But put your mind back in 1978.
This idea is like exciting and fresh.
So Bork says a company shouldn't be broken up
just because it's big.
And antitrust law should actually protect companies
who win in the market and become big,
based on their superior ability.
So Bork proposed a new approach to antitrust law
which he called to the Consumer Welfare Standard.
He said that courts and federal agencies
like the Department of Justice
and the Federal Trade Commission should look out
for the consumer welfare.
Which he mostly measured by prices.
What that means for us is that unless a monopoly causes
an increase in prices, it's okay.
And that's the Bork philosophy.
Let the big businesses get big and stay big
as long as they don't harm consumer welfare.
In 1979, the Supreme Court decides Reiter versus Sonotone.
In that decision, the court officially endorsed Bork's claim
that Congress had actually intended to adopt
the consumer welfare standard when it wrote
the first antitrust law in the 19th century.
Again, the consumer welfare standard is not actually
in these laws.
Bork just managed to convince everyone
that he could, read Teddy Roosevelt's mind,
and this is what old Teddy Bear wanted.
It's kind of incredible.
Anyway, Bork and the Chicago School
are in vogue from the 1980s on.
Really, they're still how we think of antitrust law today.
In 1980, Ronald Reagan is elected President.
Reagan and his team are big fans of Robert Bork
in the Chicago School.
Well, does that matter?
Here's Sandeep Vaheesan, legal director
at the Open Markets Institute.
- President Reagan was really a key figure
in the history of antitrust.
He remade antitrust in some major ways by doing two things.
First, he appointed Chicago School lawyers and economists
to lead the Department of Justice
and Federal Trade Commission,
which are the two main public enforcers
of federal antitrust law.
These officials had a very different view of antitrust
than their predecessors.
- By this point the Supreme Court has already
started adopting Borks ideas.
- They believed antitrust should be exclusively
about consumer welfare, which they described as
low prices, high output.
Second, they adopted a new set of economic assumptions
about different business practices.
For example, mergers and acquisitions were historically seen
as principally a way of concentrating power
in fewer and fewer hands.
And generally not producing any offsetting public benefits.
The Reagan administration flipped that.
They said actually mergers are generally good.
- Side note, Bork actually cast such a spell on Reagan
that Reagan actually nominated him to be
on the Supreme Court.
That nomination failed in part because Borks
videotape rental history was leaked to the press,
which eventually led to a federal law
making your video rental history private.
This is true.
It's also where the term "Borked" comes from. The '80s.
Ticketmaster was started in 1976,
but the modern era of Ticketmaster ticks off in 1982.
That's when the Pritzker family acquires
a dominant stake in Ticketmaster.
They become the dominant shareholders,
and bring in a new CEO named Fred Rosen.
And the company focuses on software
for the computerized ticket business.
- His sales team went around to all of the venues
and said to them, "What would you think
"if we doubled the service fees?"
And they said, "Why would we wanna do that?
"It's gonna discourage people from buying tickets."
And what Ticketmaster said was,
"Well, if we do it, we'll share the revenues
"from this new elevated service fee."
- This fee sharing arrangement
is how Ticketmaster is able to compete
with its main competitor at the time.
A company called Ticketron.
It starts poaching Ticketrons venue clients.
By 1991, Ticketmaster just goes ahead
and acquires Ticketron.
- So when Ticketmaster acquired Ticketron,
they were direct competitors.
They were in the same industry,
and hence that is a form of horizontal integration.
- Did you hear that concept?
When a company buys a direct competitor
that's called horizontal integration.
This is important because later Ticketmaster
is gonna do some vertical integration as well.
But we'll get to that.
- There's immediately, a strong concern about
abuse of market power.
Does this eliminate competition?
And whenever have elimination of competition
that may harm consumers because suddenly
there's not another competitor around
who could lower prices, who could offer better service,
who could offer better quality.
- Okay, so now it's the mid '90s.
In 1995, ticketmaster.com launches.
Throughout the rest of the '90s and early 2000s,
Ticketmaster slowly gains more and more power.
It launches in an increasing number of countries
around the world, and inks partnerships for ticket resale
with the NFL, the NHL, and the NBA.
It even tickets the Olympics.
In 2001, Ticketmaster strikes a deal
with Clear Channel Entertainment, which is now called
Live Nation, to ticket their events.
Clear Channel or Live Nation by this time was becoming
America's largest concert promoter.
That's the marketing for a concert, basically filling seats.
But Live Nation also owns and manages the concert venues.
So it really owns the whole live event pipeline.
And in the 2000s, as music piracy upends the industry,
big artists start signing massive exclusive deals
with Live Nation.
So by 2007, live Nation has a bunch of exclusive deals
with huge artists, ownership of most major venues,
and a lock on the concert promotion business.
So then they did the next natural thing.
They started working on a ticketing business
to compete with Ticketmaster.
So that brings us to 2010.
Now it's time to talk about vertical integration,
which gets even less scrutiny than horizontal integration.
Here's Florian.
- And then the extreme case, of course is
a vertical monopoly where at all points of the value chain,
there's only a single provider.
So that would of course give
that player a tremendous amount of market power.
Because not only are they the only seller,
but they're also the only buyer,
and they're controlling all of the inputs
that are happening along this value chain.
- In 2010, Ticketmaster and Live Nation decide to merge
and form Live Nation Entertainment.
So Ticketmaster, which sells tickets
decides to merge with Live Nation
which owns venues, and puts on and promotes concerts.
A lot of people think this created
an unfair vertical monopoly, and the deal should have
been stopped by the Obama administration.
A handful of states actually sued over
the Ticketmaster/Live Nation deal,
as did the Justice Department.
In order for the deal to go through,
Ticketmaster promised the Department of Justice
it wouldn't do anything anti-competitive.
It's basically just a pinky swear.
It's pretty hard to enforce.
The company was forced to sell one of its holdings
another ticketing company to a rival firm,
and it promised to license its ticketing software
to another rival called a AEG, which is a big promoter
and competitor to Live Nation.
The terms of the Live Nation merger established by the DOJ
lasted until 2019 when they were reviewed.
We talked about that with Dean Budnick
- And in 2019, the government decided
to renew that consent decree,
essentially giving permission to this merger,
and there hadn't been a dramatic change
in terms of market dominance by Ticketmaster
between those two periods of time.
So at least the Department of Justice
has examined this issue twice.
But on two separate occasions,
the government has opted not to step in and do anything.
- So that brings us to today.
Ticketmaster and its parent company,
Live Nation Entertainment,
dominate the market for live concerts.
Live Nation's dominance of ticketing and promotion
has allowed it to shut out competitors.
Jack Groetzinger, the CEO of SeatGeek, talked about this
at the January hearing as well.
He claimed that when venues switched to SeatGeek
or another Ticketmaster competitor for their ticketing,
Live Nation, which controls the artists and their promotion,
stops giving concerts to those venues.
- One case the Live Nation president told the venue
that they would "Go nuclear if they left."
So the threat is real.
It's been documented. It happens.
- With Ticketmasters growing dominance
and lack of meaningful competition, ticket prices
and the fees that accompany them have drastically increased.
Where this gets even deeper is that lots of people
resell their tickets, and Ticketmaster has
a big chunk of that market too.
If you try and use another service like StubHub
to buy a ticket that Ticketmaster originally sold,
you still need to have a Ticketmaster account
and enter their ecosystem.
So now they have your data, even if you didn't want
to interact with them in the first place.
A couple senators at the hearing also had some thoughts
about how to regulate Ticketmaster into working better.
Basically, the government redesigning Ticketmaster
to make it friendlier for consumers.
I guess that's one way to do it.
The other way is to have a more competitive market.
SeatGeek is another primary ticketing site
that has struggled to compete with Ticketmaster.
Ditto for Eventbrite and StubHub.
In our reporting for the story, we also talked
to Russ Tannon, president of Dice.
A venture backed ticketing startup.
Dice has made its tickets non-transferable.
There's a QR code with your ticket
that appears right before the event, to prevent scalping.
But in a functional market, some artists would choose
to use Dice's system that doesn't allow resale.
Some would use SeatGeak.
And some would still use Ticketmaster.
And all of them would compete to build
the fairest system that made fans the happiest.
Without that competition, a lot of the things
that Ticketmaster would have to do to not suck,
requires the company to make decisions
that no publicly traded company with a responsibility
to its shareholders, could reasonably make.
Ticketmaster would have to increase the cost
of app development and servers,
while limiting the profits from all those fees.
And that's just not gonna happen,
unless something makes it happen.
And that means there's only two choices.
We can accept that Ticketmaster is a monopoly
and have a bunch of weirdos in Congress
try to regulate it directly.
Or we can figure out how to inject some more competition
into the market, so Ticketmaster makes better choices
just to stay in the game.
See, what Bork and Reagan didn't think about
when they rewrote antitrust law,
is that when companies get so big, they have no competition
they have no more incentive to be good at what they do.
The new chair of the Federal Trade Commission
is named Lina Khan.
She's written at length about the problem
with Bork's approach.
- [Lina] The current framework in antitrust,
the consumer welfare framework,
really fails to capture
forms of market power and forms of dominance
that should be relevant to antitrust.
And do raise competition concerns.
- And there are other glimmers of hope
under the Biden administration.
- We're seeing some positive signs, I think.
The Department of Justice has made reigning
an employer power a key part of its enforcement program.
They've gone after many managers and firms
for engaging in wage fixing, no hire agreements,
no poach agreements.
- But all that's easier said than done.
Under Commissioner Kahn, the FTC has aggressively
gone after big tech, but it's first attempts
at lawsuits have been busts.
The court keeps knocking them down,
because they're just not agreeing with
Kahn's new version of antitrust.
They're stuck in the consumer welfare standard.
There's another prong of attack going on
over at the Biden Justice Department,
which is investigating Ticketmaster and Live Nation.
Seemingly asking whether Live Nation Entertainment
is a monopoly after all.
Senator Klobuchar nudged the Justice Department
to take action at the hearing.
- I know you, Ms. Bradish talked about this idea
of spinning off companies.
We've all seen that as a remedy
that would most likely be coming
from the Justice Department.
All we can do here is put forward the evidence
and these are sworn testimonies back and forth
under law, so that the Justice Department
can look at this discussion.
(ambient music) - It seems like all this
pressure forced Ticketmaster to at least
do a little better with Beyonce's upcoming tour.
But the underlying problems are all still there.
So we'll see if the Swifties can push
the Department of Justice into breaking up Ticketmaster
and Live Nation. Anything's possible.
We'll see if Congress does anything to update
our antitrust laws.
But in the meantime, the question we should
all be asking ourselves is,
"Do we want to live in the Bork/Reagan world
"of weird regulated monopolies?
"Or do we want these companies to actually compete?"
I should be the King of America.
Let's just go up a little bit more.
- [Crew] There's our random card.
(Nilay laughing)
- Vote Patel.
Hey everybody, this was the short video version
of this episode of Decoder.
That's the podcast I host.
If you want the full episode,
go anywhere you get your podcast and look for Decoder.