Ticket Masters, page 21
So the Justice Department’s initial hurdle was to establish the “relevant market” that it believed Ticketmaster was operating in illegally. If the market were defined broadly, for instance as all live event ticketing in the United States, then Ticketmaster certainly did not possess monopoly power, given that the company sold only three percent of the total available inventory.
By contrast, if the relevant market were defined more narrowly, the government would have a better chance of success. While 1.5 billion tickets were sold the previous year, if one looked only at professional sports (minus season tickets) and events that took place at arenas, auditoriums and theaters, the number dwindled to approximately 178 million. What’s more, if the relevant market were further circumscribed, and a court examined the company’s position in the live concert space, then Ticketmaster just might be vulnerable.
Pollstar, the concert industry’s respected trade publication, estimated that a total of 9.9 million concert tickets existed in the United States in 1994. Ticketmaster, it reported, had exclusive contracts with 63.2 percent of the halls and arenas that were part of the 9.9 million total. It also, on a non-exclusive basis, handled part of the remaining 36.8 percent.
Rosen testified that Ticketmaster sold about twenty percent of the tickets in any major arena where it held an exclusive contract. However, the company typically handled 100 percent of an arena’s concert ticketing (it did a far lesser percentage of its sporting events, which make up the majority of any arena’s event calendar).
When one looked at the major concert markets in North America — New York, Los Angeles, Chicago, Boston, Philadelphia and Detroit — Ticketmaster unquestionably had exclusive contracts with the majority of venues that hosted large-scale concerts by such artists as Pearl Jam, U2, the Grateful Dead, Bruce Springsteen, Madonna and the Rolling Stones. Take New York and Los Angeles alone: Ticketmaster controlled all of the arenas in both cities. Did they control all the stadiums and theaters in those markets? No, but stadium plays for a single band were relatively uncommon, and theaters were far too small for bands like those listed above. It was arenas and amphitheaters that were the sweet spot for big rock or pop acts, and Ticketmaster had a firm grasp on the most coveted ones.
The very title of the hearing identified an intent to explore “questions about concert, sports, and theater handling charges.” However, as Rosen and his legal team began their dialogue with congressional aides in anticipation of the proceedings, it became clear that the forum would focus almost exclusively on live music. If the Department of Justice were to take a similar position and define the relevant market solely as rock concert ticketing, then there was a chance that Ticketmaster could find itself on the losing end of an antitrust prosecution.
REPRESENTATIVE HORN THEN HAD A few questions about service fees. “How does it work” — he asked in response to Rosen’s acknowledgement that all service fees are discussed — that Ticketmaster was never in a position to unilaterally decide the amounts levied?
“You define contracts by the type of event,” replied Rosen. “Different events have different service charges that are negotiated, and revenue streams are determined based on the service charge.”
Still, Horn asked, “Aren’t you performing the same task for every type of ticket that crosses your box office, whatever it is?”
No,” said Rosen evenly. “This business was built on choice. If you don’t want to pay a service charge, you go to the box office. If you want a lesser service charge, you drive to an outlet. And if you don’t want to leave your home, you can pick up the phone and call.”
Representative Woolsey still wanted to know how service fees, in general, had gotten so high. “Service charges have risen to the level that they have because there is competition,” relayed Rosen. “Because the buildings require you as concessionaire to pay them for the rights to sell the tickets, competition among concessionaires leads to higher concession fees, which leads to higher service charges.”
It was one of the industry’s unique dynamics that was counterintuitive: competition drove ticket prices up, not down. There, in a nutshell, was one of the key principles that nobody outside the industry seemed to understand. In turning ticketing into a concession — into a highly profitable Pandora’s box — Rosen proved the theorem time and again.
Four hours after it began, the hearing came to a close at one o’clock.
“Testifying was the greatest disappointment of my life,” laments former Los Angeles Forum general manager Claire Rothman. “I thought, ‘I’m going to see my government at work. I am going to be part of something that is history.’ The congressmen only stayed when the stars were testifying because that’s when they got photographed. As soon as we lay people testified, even though our testimony was in many respects more important to the outcome of the case, they left their staff to listen and make notes.” Indeed, by the hearing’s end only three congressmen remained.
“It was very clear to me walking out that day that this thing was over from the point of view of further hearings or anything because it didn’t do what it was supposed to do,” says Dave Marsh. “It didn’t either excite the pundits or galvanize the public.”
PEARL JAM’S VITALOGY WENT INTO wide release on December 6, 1994. Once again the response was overwhelming: in its first week the album sold more than 877,000 copies. At the time it became the second fastest selling CD in history behind the group’s previous record, Vs.
The Justice Department continued with its investigation that month, speaking to representatives for Soundgarden, Alice in Chains, Phish and the Indigo Girls, among others. It had already conducted interviews with promoters, venue operators and managers from several states. As Pearl Jam began plotting its 1995 summer tour that would circumvent Ticketmaster, the ticketing agent supported the move as it “validates the idea that Pearl Jam has always had, and will always have, the ability to tour whenever they want.”
As the year came to a close, the band announced two benefit shows in Washington, DC, that January to support the abortion rights group Voters for Choice. They would be held at historic Constitution Hall — built in 1929 by the Daughters of the American Revolution — a Ticketmaster venue in the heart of the nation’s capital, equidistant between the White House and the Washington Monument. “Pearl Jam doesn’t just sing about issues they care about,” said Voters for Choice cofounder and president Gloria Steinem. “These guys walk it like they talk it.”
The band had again called upon David Cooper to orchestrate a means of working around Ticketmaster, this time utilizing the second loophole in the company’s exclusive contracts: benefits can be ticketed in any way the promoter or venue wants. The 3,700-odd tickets for each night would be sold via a mail-order lottery system. Tickets were $25 each and had no surcharge. Estimates for the number of requests received ranged from 167,000 to 175,000.
Despite being off the road for nearly a year, the band was in top form. The shows confirmed that the benefit loophole within Ticketmaster’s contracts could be effectively exploited. Cooper acknowledges the idea of a national benefit tour was discussed — “I could do Madison Square Garden, the Spectrum in Philly or the Centrum in Boston. I can go anywhere I want” — but that ultimately the band’s “lawyers weren’t quite ready yet to do a national benefit tour and really take on what it would have meant. I think if they wanted to they could have carried on that way, but the cost of the litigation of doing this kind of shit was humungous. This was all about politics.”
That spring a group calling itself Consumers Against Unfair Ticketing (CAUT) formed in Seattle. Made up of student groups and members of the entertainment industry, it struck an alliance with the U.S. Public Interest Research Group and the Consumer Interest Research Group to help advocate ticketing reform.
Seattle PR executive John Hoyt was one of CAUT’s founders and his company, Pyramid Communications, had worked with Pearl Jam on several occasions — notably Nicole Vandenberg, who oversaw the company’s arts and entertainment division. (Vandenberg would start her own PR firm in 1998 and remains the band’s publicist today.) Hoyt, who acknowledged that there was a “certain Pearl Jam impetus to starting the organization,” also rented CAUT space at the company’s offices.
One of CAUT’s first actions was to send a public service announcement about its concerns to fifty-seven radio stations around the country. In addition, Hoyt was able to get the group’s ticketing reform initiatives in front of his brother, New York assemblyman Sam Hoyt, who sponsored a bill in his state. (In February Representative John Dingell (D–MI) along with Condit and two others introduced the “Ticket Fee Disclosure Act of 1995” to the House of Representatives, to little avail.)
The three-group CAUT alliance officially kicked off their joint campaign on March 21, 1995, at the National Press Club in Washington, DC. Executive director Maura Brueger declared, “The entertainment ticketing industry is one of the least consumer-friendly industries in the country, providing consumers with no choice, no information and unreasonable charges.” Mary Ellen Fise of the Consumer Federation of America was even more succinct in her attack against Ticketmaster: “The ticketing situation can be summed up in just four words: Monopoly power hurts consumers.”
Yet when asked about Pearl Jam and John Hoyt’s involvement in the group, Brueger deflected questions, stating that CAUT is not “in any way connected” with Pearl Jam.
The same day, Ticketmaster issued a press release entitled “Let’s Let the Facts Catch Up with CAUT.”
In it Ticketmaster vice president Alan Citron — once a business editor at the Los Angeles Times — chastised the group for “disseminating false and misleading information about Ticketmaster and the ticket service industry. Employing half-truths and innuendo, the group seeks to blame Ticketmaster for everything from high ticket prices to bad seat locations.
“If tickets cost a lot of money, it is because some performers like to earn a lot of money,” wrote Citron. “You don’t need an advanced degree in economics to recognize the reality of the marketplace. To pretend otherwise, as CAUT does, is to stand the truth on its head.”
For all of Ticketmaster’s outrage, there seemed to be little sympathy. The Consumer Federation of America’s spokesman, Bradley Stillman, saw no issue with CAUT or wrongdoing with John Hoyt asking his brother to support a ticketing reform bill.
“The principle is right, and it really doesn’t matter whose brother or sister is involved,” he offered. “You think the other side wouldn’t have pursued access to a lawmaker? That’s why Ticketmaster has hired all those lobbyists — to gain access.”
Indeed, in response to the various consumer groups rallying against Ticketmaster and what he felt was a general misunderstanding of the company’s practices by the government and the press, Ticketmaster CEO Fred Rosen fortified the company’s defenses by hiring some of best lobbyists in the business.
Judy Black was hired by Ticketmaster as senior vice president, governmental affairs, on March 1, 1995, for an annual salary of $250,000. Black was the wife of Charlie Black, whom Edgell describes as “the preeminent Republican corporate lobbyist” and someone whom Rosen had previously worked with.
“Most industries have associations that deal with lobbyists, and there was legislation introduced in a lot of states about us, so ultimately you needed to get lobbyists in those states, and you became more sophisticated over time,” Rosen relays now. “Charlie Black’s firm was one of the firms we used in the early ’90s, and then ultimately I hired Judy. She was our lobbyist because until you had someone as an advocate, you had young [congressional] staffers sitting there saying service charges were high and it looked like a great consumer issue — but it wasn’t. When you sat and explained what you did to most congressmen and congresswomen, they agreed.”
At the time, Charlie Black was the chairman of BKSH & Associates (he left in 2008 to help run John McCain’s presidential campaign). He had served as a senior adviser to presidents Ronald Reagan and George H.W. Bush in addition to serving as a political director for the Republican National Committee.4
Judy was no slouch herself. From 1978 to 1986 she served as the vice president of the Tobacco Institute. The following two years she served as special assistant to Ronald Reagan for Intergovernmental Affairs. And from 1989 until she joined Ticketmaster in 1995, she was the lobbyist for the International Council of Shopping Centers, a global industry trade association, with more than twenty-five national and regional shopping center councils in more than eighty countries.
Today Citron says, “The only thing that was crystal clear was that defending Ticketmaster was virtually impossible.” He pauses. “The more accurate way to say it is that it wasn’t easy, and the likelihood of success was pretty low, just because there was no obvious constituency for Ticketmaster in this battle. Anyone who paid a service charge had some sympathy about the high price of service charges, or the perceived high price. It wasn’t easy to find that constituency that was going to be on our side, so my main point of view was that the best we could do was tell our story as effectively as possible and just hope for the best.”
ON APRIL 10, 1995, AFTER approximately nine months of planning, Pearl Jam announced its U.S. summer tour dates. “Pearl Jam is back and we’re trying something brand new,” announced the band’s manager, Kelly Curtis. “I hope the fans will be patient, because we’re bound to have a few hiccups with this new ticketing system as the tour unfolds. But if things work out the way we plan, we’ll probably announce more shows before the summer is over.”
ETM ticketing principal Peter Schniedermeier, the very same Peter Schniedermeier who had moved from TRS to Select-A-Seat to BASS before leaving the business in the 1980s to provide in-house inventory systems for auto dealers, had been drawn back in by an investor seeking to fund a new start-up. Soon afterward, Schniedermeier met with Pearl Jam accountant Mike McGinley in ETM’s new Irvine, California office.
“I have a band who wants to try to tour without Ticketmaster,” said McGinley.
“Who?” asked Schniedermeier out of curiosity.
“I can’t tell you,” he responded. “But there’s another guy back in Philly I want you to meet — you two should work together on this — David Cooper.”
Cooper led the system design, overhauling an inventory control system that he had created in 1985 that was designed to run venue box offices and outlets utilizing a manned phone room, and customized it to the band’s needs.
After extensive work on it, McGinley brought Vedder out to meet the ETM team and hear the plan. “We laid it out for him, and I remember Eddie got up and started jumping around and getting excited that it would work,” Schniedermeier recalls. “[Vedder] had been trying to figure out if we could compete with all of Ticketmaster’s outlets and call centers. He said, ‘Let’s do this,’ and that was his stamp of approval.”
Among the band’s needs were equal access for its fans when it came time for ticket on-sales, payment options that included checks or money orders, anti-scalping measures and the assurance that the system could handle significant queue volume in short periods of time. Cooper also gave fans the ability to buy tickets over the Internet via the band’s website.
Pearl Jam’s fan club members were offered tickets first, which were typically $18 with a $2 service charge plus an additional forty-five cent handling fee (a mere nickel less than Ticketmaster’s rebuffed offer).
“The band has fought long and hard to come up with an alternative to the existing system — and in the process, I believe we’ve succeeded in changing some things for the better,” said Curtis at the time. “Pearl Jam is finally ready to get this tour out and get back up onstage where they belong.” However, he noted somewhat prophetically, “because of [Ticketmaster’s] exclusive contracts, we are going to have to play at weird places like a ski resort in Lake Tahoe and a fairground in San Diego.” As time would tell, the band would not perform at either venue. In fact, nine out of the fourteen dates initially announced were either canceled or moved locations. And the biggest show of the tour, it turned out, was hardly even a Pearl Jam show.
In mid-April the band canceled its first gig on June 16 at the Boise State Pavilion. Curtis, citing that ETM could not get local government approval before the needed on-sale, moved the performance to the Event Center in Casper, Wyoming. In actuality, the Boise State Pavilion had an exclusive contract with Select-A-Seat and therefore could not accommodate ETM. They were happy to ticket the show — and in fact were only charging $1.50, nearly a $1 cheaper than ETM — but the band was not willing to work with them. (A similar situation arose for the band’s New Mexico date at the Pan American Center, though the building’s exclusive ticketer, Dillard’s, was willing to allow the band to use ETM, albeit at a higher service fee.)
“We’re frustrated and disappointed,” said Pavilion assistant director Charlie Spencer. “Long before Pearl Jam made affordable tickets fashionable, we’ve worked hard to bring [concertgoers] the lowest ticket price possible. I’m surprised that [Pearl Jam] professed a certain ideology and then veered off that stance.”
More accurately, as one promoter pointed out at the time, “I don’t think Pearl Jam anticipated some of the ramifications that would occur when it decided to use ETM. I don’t think the band wanted to start making exceptions out of the box, so it moved to a more amenable facility.” Once it got the green light, however, ETM lived up to its promises.
In its first on-sale for the show in Casper, Wyoming, it sold all 7,500 tickets in twenty-four hours. For the second on-sale, the 13,000-seat Wolf Mountain amphitheater in Salt Lake City, it took only seven minutes to sell out. Next up, two nights at Colorado’s famed Red Rocks: 19,000 tickets in thirteen minutes. The system — selling all tickets via phone — was firing on all pistons without a hiccup. It was ready for its ultimate test: the June 24 show at Golden Gate Park.
