Pearlstein: Live Nation's New Deals

Washington Post columnist Steven Pearlstein was online Wednesday, June 25 at 11:00 a.m. ET to discuss Live Nation's wide-ranging new deals with rock stars like U2 and Madonna in which the concert promoter takes over the marketing and sales for the artists.

Read today's column.

About Pearlstein: Steven Pearlstein writes about business and the economy for The Washington Post. His journalism career includes editing roles at The Post and Inc. magazine. He was founding publisher and editor of The Boston Observer, a monthly journal of liberal opinion. He got his start in journalism reporting for two New Hampshire newspapers -- the Concord Monitor and the Foster's Daily Democrat. Pearlstein has also worked as a television news reporter and a congressional staffer.

Pearlstein was honored with the Pulitzer Prize for commentary for his columns about mounting problems in the financial markets. His award was one of six Pulitzer Prizes won by The Washington Post this year.

Read Pearlstein's latest columns.

____________________

Oviedo, Fla.: How does the Live Nation deal help younger artists break through? Are they better off You Tubin'? Enough already with Madonna....help us see who else there is.

Steven Pearlstein: I'm no expert on this, but one would suspect they don't help much at all. Actually, the 360 model is not a new idea, it was used often with developing artists in the old days, because they didn't have the clout or wherewithal to do the kind of brand development on their own. But the kind of deals I was writing about are focused mainly on the biggest stars. There is, I'm told, a more general trend these days to package a bunch of acts together for live performances, no one of which is huge but together have a pretty good fan base in major cities. I suppose that is another way to help younger artists break in. And, as you point out, the Internet breaks down a lot of barriers to entry for new acts. In that respect, we may be heading into the golden era of live music. The only problem, I am told, is that because of the drop in revenue from CDs, even the big bands are touring more, which crowds out the less well known talent from the existing venues. But you may see a proliferation of venues to respond to that reality, which would be good for everyone, particularly the fans, who will get to see more live music for less money.

_______________________

Securitizing Rockers: A while back David Bowie sold shares of his future earnings to get cash right then. Pretty prescient, especially considering his output of the last couple decades.

Steven Pearlstein: Selling futures. In a way, that's what Madonna and Jay-Z did with Live Music. Now what would really be interesting if Live Music could find a way to resell those futures to other investors, to help provide the up front cash they need. Create limited partnerships for each 360 deal. If they haven't explored that, which I suspect they have, they should.

_______________________

Washington, D.C.: Dear Mr. Pearlstein: Not on today's topic, but can you explain why cameras are so much less expensive (usually around half to 2/3) in the US than in Europe, including the UK? It's not market share--I believe the EU buys more cameras than the US--and for sure it's not the strong dollar. And it's not as if they are made here; almost all of them are made in Asia. They are more expensive in Australia, too.

Steven Pearlstein: I don't know for sure, but the likely reason is that our retail sector and retail distribution networks are a lot more efficient than in Europe, and operate on higher volumes but slimmer margins. That means lower retail prices even with the same wholesale prices. Also, remember that Europe has a big value added tax (sales tax, effectively) that consumers pay. Europeans don't mind it as much because it pays for things like their health system. But for foreigners buying over there, it's a tax without any benefit.

_______________________

Columbia, Md.: I have heard that President Bush is opposed to the bill to help homeowners with their mortgages because that would be a "taxpayer bailout". What, then, are the taxpayer stimulus payments?

Steven Pearlstein: Well, its not so much a taxpayer bailout, given our large budget deficit, as an intergenerational bailout -- our children are bailing us out, without knowing it just yet.

_______________________

Rockville, Md.: Steve:

I wrote my Congress person (Van Hollen) about my fears for the crash of the "oil bubble" and the over investment by pension funds in this speculative venture. Since then we have had Senate hearings on the topic. Is there any connection? Or has everyone seen this danger? I suspect the latter case.

Steven Pearlstein: Much as it would be satisfying to know that your letter sparked the hearings, I suspect it was a chorus of complaints from many parties, including the oil companies and the members of OPEC. The good news is that some curbs on excessive speculation will result, probably through increased regulation (closing of some loopholes, limits on positions and increase in the margin requirements). At some point, the oil bubble (that many people deny, just like they denied the housing bubble) will burst and the prices will go down some, and people will be happy that oil is only $90 a barrel.

_______________________

Richmond, Va.: I am confused about the Republican calls for drilling in ANWR and off our coasts. Are these guys suddenly socialists? They say that opening up the U.S. for this kind of drilling will help bring down the price of oil. Oh really? Are they going to nationalize big oil? Are the oil companies pledging that every drop they extract from American sources will be refined and used exclusively in the U.S.? I figured that since these are public companies that answer to shareholders, their obligation is to sell what they drill for highest dollar.

If speculators are still out there, how does drilling in America really help bring down the price of oil here in the States?

Steven Pearlstein: Look, increasing supply brings down the price in a market where prices are set globally. Doesn't matter where it is sold. Natural gas is a bit different, since those markets are regional. By allowing drilling, it also generates revenue for the Treasury that could be directed toward alternative fuel sources, if Congress were clever.

_______________________

Rockville, Md.: "Our children are bailing us out." I always wonder when I see this: What if they refuse to pay?

Steven Pearlstein: Then the government of the U.S. will default on its debts. Probably not in their interest either, which is why they'll pay.

_______________________

Baltimore, Md.: Steven: Interesting that Live Nation seems to be floundering right now, given that Montgomery County has given the company a sweetheart deal to develop a performance venue at the site of the old JC Penney Store in Silver Spring--freezing out local firms such as I.M.P. (930 Club) and the Birchmere in the process. Wonder if your column will cause angst out in Rockville?

Steven Pearlstein: Look, that project out in Silver Spring is $800,000 over ten years. That's $80,000 a year. Not going to make Live Nation rich or Montgomery County poor. As economic development incentives go, its well within the reasonable range. Whether its necessary at all or not, of course, is a point of debate. But attracting quality live music to downtown Silver Spring at this point does make sense from an economic development point of view, and improves the quality of life in the county.

_______________________

Princeton, N.J.: What about speculators and oil prices? I heard an "expert" (Mark Cooper) say that $40 of the price of oil is supply and demand, $40 is OPEC, and the rest is speculation. One of my economist friends said that 135,000,000 Chinese would have had to buy Hummers in the last 6 months to account for the rise. It does seem awfully fast for market forces and one would think all the money in futures would tend to raise the prices.

Steven Pearlstein: Hard to know what the right price is. Theory says that it should equal the price of drilling for the marginal barrel of oil, but theory isn't much of a guide in a market where so much is controlled by governments and a cartel of governments. Also, with futures markets, the price is very forward looking. So I think its fair to say that the right price is certainly north of $50 a barrel.

_______________________

Clifton, Va.: You forget big Dems like Soros have been involved in the oil futures market for at least 18 months to hurt W and the Republicans. It will be interesting to see how the hurricane season effects oil prices. Predictions are for more Atlantic hurricanes. Oil bubble ends about Dec 1st.

Steven Pearlstein: I don't believe in conspiracies.

_______________________

Chicago, Ill.: Hey Steve, why is the media not making the point that the mortgage bill is in effect a Wall-Street bail out package. If they let the market work, and prices fall, it will wipe out all the equity in the financial system. Maybe I am missing it, but shouldn't the press point this out?

Steven Pearlstein: The press is pressing the point, if you read our business section today. But the point is fundamentally wrong. The bill would set up a refinancing mechanism through the FHA, using existing programs, for loans that are in danger of default, where the lender is willing to reduce the principal to a level where the borrower's income is sufficient to cover the payments on a fixed rate mortgage. Obviously, neither the borrower nor the lender will agree to do it if they think they can do better by going to default. And it will require the FHA to take on a bit more risk than normal, because the new borrower is someone who is, by definition, a "known defaulter." But the ultimate cost is likely to be a small one, particularly as compared to the cost of letting the housing market get into an even worse downward spiral and having to push lots of people out of houses that will sit vacant for many months. To call it a Wall Street bailout is a mischaracterization.

_______________________

Washington, D.C.: Do these Live Nation deals mean U2 et al. will play only in Live Nation venues (e.g. the horrendously far-out Nissan Pavilion, rather than the public-transit-accessible Verizon Center)?

Steven Pearlstein: They will favor their own venues, no doubt about that, which means Nissan rather than the Verizon Center if they feel they can make nearly as much money that way. They will be careful not to do this in a way that takes money out of U2's pockets, however, or they will get into a bad legal spat. I'm sure there are arrangements for this spelled out in the contract, since it is the kind of thing lawyers think about.

_______________________

Wilmington, N.C. : Mr. Pearlstein: Last nite on the PBS nightly news program there was a report that a few manufacturers of furniture that want higher quality woods and avoidance of escalating transportation costs are moving production back here to the States. Several other types of companies (battery producers and other heavier products) were mentioned...ie reverse globalization. To your knowledge, how much of this is occurring and what's happening to the folks who used to be employed. Thank you !

Steven Pearlstein: It's happening and will continue to happen, both as a result of the falling dollar (makes imports more expensive) and higher fuel costs (makes bringing in imports more expensive). Obviously, if there aren't any skilled workers left in the US to do the work, that's a barrier, and there may be some examples of that. But in general, some of the old workers are still around and available, if for nothing other than training a new generation of skilled and semi-skilled workers.

_______________________

Mortgage Bailout: Steven: Can you explain why the president would veto the mortgage bailout for individuals, but was silent about the guarantees for JP Morgan to acquire Bear Stearns assets? If I were Obama, I would paint the Republicans as caring about corporations at the expense of the voters who elected them.

Steven Pearlstein: The president didn't get to veto the Bear deal, although the Treasury encouraged the Fed. That was the right thing to do to prevent a meltdown in credit markets. But don't worry about a veto -- he won't do it. It would be politically disastrous.

_______________________

Washington, D.C.: Your answer above that Americans pay VAT on items when in Europe and receive nothing in return. I guess foreigners who visit the U.S. and purchase items do not pay sales tax, everything is exclusive of tax. What is the sales tax used for?

Regarding U.S. retailers being more efficient, that is a matter of opinion. As some who have lived in several countries and now live here, it's amazing how inefficient this country is, but Americans like to feel that they are the best in the world until they travel out and see what the best really is.

Steven Pearlstein: No actually, its not opinion. McKinsey did a very extensive study a few years ago and it showed that the biggest reason (and almost the only reason) why the U.S. economy is more efficient than the European one is that their retail sector is so inefficient.

As for the value added tax, it is very big -- much bigger than the US sales taxes. I'm not saying it is a bad idea -- it is how they finance a good chunk of their social services and health care. But it does explain why retail prices for a lot of things seem so high.

_______________________

RE: The Live Nation Deal: At these ticket prices, you have to assume that demand will track with the overall economy. Hey, I care whether or not my favorites can make a living, but I'm not gonna drop $150 for a couple of cheap seats when I could feed the family for a week.

Steven Pearlstein: The pricing of rock music tickets is a real interesting topic. Some bands leave money on the table because they don't like to charge too much and because they think it important to keep their fan base as big as possible so they can sell other stuff, like CDs. So they don't charge as much as they could (while still filling the hall). Others figure its better to work less hard, play less dates and figure that people will splurge on seeing them and won't have money for other concerts. What we do notice is that ticket prices haven't come down much but they aren't rising as fast as they were a couple of years ago. But this probably reflects the fact that bands are playing more dates to make up for lost CD sales, which means that increased supply is having an effect on price.

_______________________

Arlington, Va.: I'm the kind of person who calls a spade a spade, so naturally it grinds my gears when people talk about "fears we'll slip into a recession." In my opinion, we already ARE in a recession. The housing market has crashed, the credit market has crashed, oil and food prices are through the roof, people's budgets are strained so badly that they can't even afford to breathe and sleep (okay, I'm being a bit dramatic there, but you get the point).

So my question is, why be so overly optimistic and not call our economic situation what it really is? I think all this optimism is unfounded, and that most people are smart enough to realize that times are tough and that yes, we are indeed in a recession. To not call it otherwise is really insulting to the average intelligence.

Steven Pearlstein: Don't get too hung up on the recession call. You're right -- we're in a recession and it is going to get worse. The people who are now quibbling about whether we are technically in a recession right now are the same people who were saying, only a few months ago, that there would be a nice rebound in the economy in the second half of the year. You don't hear them saying that now, do you? They were wrong then, and they are wrong now.

_______________________

Rockville, Md.: Recession or not?

If you have a definition, why not stick to it and make up a term for what you want. There ought to be a way to say the economy is not good that is not "recession." How about "fiasco?" As a retired librarian I want to use words as they are meant to be used. This whole "we are in a recession and it will last forever" is just propaganda in my mind.

Why not say "It is so hot. Let's call this the 'fourth of July.'" Who cares what the calendar says. Those who say it is not hot were wrong about global warming, too.

Steven Pearlstein: My guess is that, when all the data has been collected and corrected, it will show we entered into a recession in the first quarter of 2008. So far, it doesn't show that and I'm not sure why. But if it turns out that the economy grew by 0.2 percent in the first quarter, and shrank 0.2 percent in the second, I'm not sure that matters a whole lot. Its not like its a cliff that you fall off of.

_______________________

James, Arlington Va.: RE: "You don't hear them saying that now, do you? They were wrong then, and they are wrong now." One of those people is Mr. Ben himself. I don't see us coming out of this recession anytime soon.

Steven Pearlstein: Yes, Dr. Bernanke was one of those. And he should have known better, frankly.

_______________________

New York, N.Y.:"Our children will pay..." as if. Have you seen or spoken with this entitled pampered generation. They will do anything not to pay or have to work harder... what a joke.

Steven Pearlstein: Well, they could borrow to pay off the borrowing, and just keep passing it on.

_______________________

Helsinki, Finland: Do you think Madonna can perform numerous stadium dates, charge $350 dollars and not perform her greatest hits as she has claimed?

Steven Pearlstein: You're asking the wrong guy. I wouldn't even know what her greatest hits are. But I'd say if she's charging $350 a ticket and selling out, she can pretty well do whatever she wants to at the moment.

Thanks everyone. See you next week.

_______________________

Editor's Note: washingtonpost.com moderators retain editorial control over Discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions. washingtonpost.com is not responsible for any content posted by third parties.