Concert Industry Deep Dive
Concert Industry Deep Dive |
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Intro |
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As the Covid emergency officially ends, America is ready to celebrate with a bang, courtesy of the Taylor Swift Eras Tour. Taylor's remarkable 20-city tour is not only breaking attendance records but also poised to make history as the highest-grossing tour of all time. |
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Wherever Taylor Swift goes, she brings forth an economic frenzy in each new city she graces. Take Houston, for instance, where her recent performance sent hotel occupancy rates soaring higher than even the NCAA men's Final Four just weeks earlier. |
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There’s undoubtedly a lot of fanfare and excitement. And it almost seems like Swifties already forgot how they broke the internet just a mere six months ago. |
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When the sheer demand for her concert overwhelmed the internet the platform of choice, Ticketmaster, was pushed beyond its limits. This left fans with no choice but to resort to the resale market where ticket prices reached staggering amounts in the tens of thousands of dollars. |
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Hundreds of thousands of disgruntled Taylor Swift fans placed the blame squarely on Ticketmaster, the dominant ticket sales company that virtually monopolizes the industry. |
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For many Gen-Z and millennial Swifties, Ticketmaster has become a symbol of everything wrong with profit-driven corporations. The frustration ran so deep that some members of Congress launched a full-fledged investigation into the matter, driven by angry parents who witnessed their daughters' disappointment. |
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Despite the optics and ethical concerns, Ticketmaster remains largely unfazed by the anger of consumers. Why? Because, when it comes down to it, there are simply no viable alternatives for fans to turn to. |
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This raises a critical question: how did a modest startup from the 1970s, initially focused on computerized ticket systems, manage to devour its competitors and build a colossal $20 billion empire, often criticized as a monopoly within the ticket sales industry? |
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Ticketmaster |
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Founded in 1976, Ticketmaster introduced the first computerized ticketing system in 1977, revolutionizing the ticketing industry by automating the process and paving the way for its remarkable growth. |
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Ticketmaster's ascent to power can be attributed, in part, to a series of transformative megamergers. These strategic moves have granted Ticketmaster a vertical monopoly over the entire digital ticketing system, positioning it as an unrivaled force in the industry. Despite recent challenges from startups like SeatGeek and StubHub, which are still in their early stages, Ticketmaster continues to dominate. |
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In the 1990s, Ticketmaster merged with Ticketron and CitySearch, two of its largest competitors at the time. However, Ticketmaster's appetite for expansion was insatiable, as it relentlessly sought to acquire prime competition. |
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The pivotal moment came in 2010 when Ticketmaster Entertainment, Inc. merged with Live Nation, a global entertainment leader. This landmark merger birthed Live Nation Entertainment, Inc., establishing Ticketmaster as its prominent subsidiary. By combining ticketing services with event promotion and production capabilities, the merger created an integrated platform for the live entertainment industry, solidifying Ticketmaster's dominance. |
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Live Nation and Ticketmaster’s merger promotes virtual integration as they operate in complementary areas of the live entertainment industry. Live Nation is primarily involved in event promotion, artist management, and venue operations, while Ticketmaster specializes in ticketing services. |
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Yet, the Live Nation merger did not come without controversy. Ticketmaster experienced consistent revenue growth from 2010 until the pandemic struck, leading the Department of Justice to sue, alleging that Ticketmaster had deceived the American public. |
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Business Overview |
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Ticketmaster’s partnership with Live Nation provides multiple complimentary revenue streams. |
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Competitors |
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Ticketmaster’s biggest competitors have some catching up to do. All three companies are relatively early-stage, and two haven’t even gone public yet. |
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Post-Covid Rebound |
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In the first quarter of 2023, Ticketmaster achieved an astonishing record of $3.1 billion in revenue, a staggering 73% increase compared to the previous year. |
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The triumphant revival of Ticketmaster can be attributed to more than 19 million people who attended events across 45 countries last quarter. |
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Undeniably, the pandemic was a trying time for Ticketmaster, as its revenue plummeted by a staggering 85%. However, the company exhibited an extraordinary rebound by achieving an unprecedented 237% revenue growth in 2021. Building upon this remarkable recovery, Ticketmaster continued its remarkable trajectory with a substantial 166% revenue surge in 2022. |
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Remarkably, Ticketmaster's revenue in 2022 surpassed even its pre-pandemic highs of 2019, soaring by an impressive 45%. |
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Regulatory Concerns |
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The Taylor Swift fiasco is only the latest in a series of anti-competitive accusations levied against the company. Critics argue the company’s vertical integration from the Live Nation merger enables the company to manipulate ticket prices, control access to tickets, and restrict competition from other ticketing platforms. |
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Ticketmaster's pricing structure, particularly the imposition of substantial service fees on ticket sales, has also drawn regulatory attention. Critics argue that these fees, which often significantly inflate the ticket price, can harm consumers and discourage competition. They can also make it challenging for new or smaller ticketing companies to enter the market and compete effectively. |
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Ticketmaster, therefore, faces several regulatory risks, such as fines, penalties, forced divestitures, and altered pricing practices. |
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Bulls: |
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Conclusion |
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There’s no doubt that Ticketmaster is poised to rake in some serious dough, and investors should prepare for a spectacle of revenue as Ticketmaster takes the stage this summer. The company’s potential for financial triumph is undeniable, and its ability to sustain record growth post-Covid has surprised even the company’s most ardent supporters. |
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But don’t be so sure Ticketmaster can sustain its firm grip on the online ticketing industry. We cannot overlook the genuine concerns posed by regulatory risks, such as the ongoing investigation by the Department of Justice. As prudent investors, it would be wise to exercise caution and refrain from purchasing Ticketmaster shares until the investigation reaches its conclusion. |
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It’s also important to consider whether the robust concert demand persists, even in the face of a potential recession. While fans are enthusiastic about going to concerts in 2023 coming off the pandemic, that could change in 2024 or 2025 if unemployment rises and consumers feel the inflation pinch even more. |
