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Ticketmaster and LiveNation to merge: is the music industry in more trouble than we thought?

By on February 11, 2009
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Tickemaster and LiveNations are to combine in a $2.5 billion merger.

Ticketmaster (NASDAQ: TKTM) is the largest ticketing service in the US while Live Nation (NYSE: LYV) provides artist management, venue ownership and event promotion, and is the “record label” for artists such as Madonna and Jay-Z.

Most analysts seem to describe the merger as “defensive”, shoring up Ticketmaster’s declining business with the hopes of future revenue from LiveNation. Financially, LiveNation has $600 million of debt, and has been investing heavily in artist promotion, while Ticketmaster has $550 million of cash and annual free cash flow of around $200 million.

But until recently, the growth of “experiences” was seen as the salvation of the music industry, and Madonna’s switch of record label to LiveNation from Warner Bros as a guide to the future of music. The argument goes that if the cost of content trends towards the cost of distribution over time (with a margin), then music will shortly be completely free. Experiences such as seeing in the New Year at the O2 centre with Elton John, can’t be distributed digitally and hence will keep their value, or even go up. Similarly, the defensibility of World of Warcraft’s gaming position is the experience of online play, raids and guilds, not the content itself.

So that is why the idea that this deal is defensive is so surprising. LiveNation was touted as the future, and now it needed this merger just to survive? If that is true, and consumers really aren’t paying for events and experiences, then the future of the music industry is in even more jeopardy than we all thought. (Read more about the implications of this at The games industry should learn from the music industry’s mistakes)

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com