Associated Press
Friday, October 12, 2007

NEW YORK -- Madonna's deal to abandon Warner Music for concert promoter Live Nation signals more than just a tectonic shift in the music distribution business: It shows how far Live Nation is willing to go to break the hammerlock Barry Diller's Ticketmaster has on online concert ticket sales.

The core benefit to Live Nation of the $120 million recording and touring contract with the pop superstar is the opportunity to tap into concert, recording, merchandising and other lucrative revenue streams. But don't discount the role that lowly ticket fees play.

Ticket buyers may be annoyed by the $5 or more in fees tacked on to every ticket ordered online or over the phone, but they've proven to be a gold mine for Ticketmaster. Ticketmaster's revenues jumped 14 percent to $1.1 billion in 2006 and generated almost a 25 percent operating profit margin. Live Nation, whose 160 venues include House of Blues and Fillmore locations, Nissan Pavilion in Northern Virginia, Nikon at Jones Beach in New York and London's Wembley Arena, currently is Ticketmaster's largest single generator of ticketing fees. But Live Nation has signaled it wants to bring the fee revenue in-house when its Ticketmaster contract expires in 2008 for most of its locations. Live Nation chief executive Michael Rapino has made no secret of his desire to use the company's relationships with artists to get into related businesses. He had talked about selling T-shirts, parking passes, VIP party passes, secondary tickets and DVDs as well as broadcasting shows live. And gaining direct access to fans through ticket sales is seen as crucial.

The possibility of having Live Nation as a competitor drew a bring-it-on response from Diller.

"We've invested hundreds of millions of dollars in our infrastructure. Let someone else make these investments and get into ticketing," Diller said at a New York conference in September. "It'll be good for us and interesting for them."