Ticketmaster is turning out to be an expensive ticket for Live Nation’s (NYSE:LYV) concert empire

Ticketmaster is often blamed for soaring concert prices worldwide, but its parent company, Live Nation (NYSE:LYV), may pay the steepest price yet. This vertically integrated giant, which also leads in concert promotion and venue operation, could soon face a courtroom showdown with the US Department of Justice, which has been investigating allegations of growing monopoly power and anti-competitive behavior for years.

An expected lawsuit from the DOJ would mark a significant reversal for the agency, which in 2010 decided not to block the merger of Live Nation and Ticketmaster after extracting concessions it said would preserve some competition in the market for primary ticket sales. Since then, the combined company has turned into a live entertainment powerhouse, producing 44,000 concerts and selling 550 million tickets a year in more than 35 countries. But customers haven’t always been happy along the way, with the average cost of a concert ticket more than doubling over the past 14 years. Some of those prices can appear to have gone to the Moon, with a front row seat at an upcoming Shakira concert in Miami currently on sale for $2,450. 

Investors should closely watch the upcoming case to see which aspects of Live Nation’s business the DOJ will target. A series of broad allegations across multiple business segments might raise fears of an eventual breakup of the company, while a targeted, narrower approach could lead to hopes for a settlement that allows Live Nation to resolve the matter and focus on the music again. It’s worth noting that the government has a mixed record of winning antitrust cases.

Live Nation’s latest regulatory troubles hit a fever pitch two years ago after it was accused of botching ticket presales for a Taylor Swift tour. The ordeal eventually prompted a hearing at the US Senate Committee on the Judiciary, which was called to investigate how to better protect consumers and promote competition in live entertainment. The scrutiny has dragged down the company’s shares, which have declined 27% from an all-time high just before the latest regulatory concerns began. Most recently, the shares suffered an immediate 9% decline following a report that the DOJ lawsuit was finally imminent. That’s all come as the company just reported its biggest year ever, with revenue rising 36% in 2023 to $22.7 billion. After saying profit also rose 46% last year to more than $1 billion, the company promised additional “compounding by double-digits” over the next several years.

Live Nation tried to preemptively defend itself in a blog post last month penned by executive VP for corporate and regulatory affairs Dan Wall in which he wrote that “statements to the effect that Live Nation and Ticketmaster ‘keep ticket prices high’ are just flat wrong.”

“Tickets are actually priced by artists and teams,” he wrote, pointing to changing economics in the music industry that have caused artists to rely on live events to make money instead of selling recorded albums. “It’s their show, they get to decide what it costs to get in.”

The defense, however, glossed over the fact that Live Nation is much more than just a ticket seller. Besides event promotion, the company also owns famed music franchises such as the House of Blues and stakes in festivals like Brazil’s Rock in Rio, and it even operates a majority of the top grossing amphitheaters in the US. That all gives it substantial power at every level of the multi-billion dollar touring industry, which now accounts for about 95% of money that artists make. Critics say the company can use its power at multiple levels of the business to its advantage. 

“Ticketmaster’s control of the primary ticketing market has been heavily scrutinized, but that is just one piece of the puzzle,” the American Economic Liberties Project said in a report last year. “Live Nation uses its promoter and artist management business lines as bargaining chips to gain exclusive contracts with venues.”

The American Antitrust Institute argues that only a complete divestiture of Ticketmaster would eliminate Live Nation’s “ability and incentive to throttle independent venues,” but the organization noted that any eventual outcome is far from certain. “Any monopolization case under Section 2 of the Sherman Act could take years to litigate to resolution, and could be snagged in a transition to a different administration,” it wrote. “This would be reminiscent of the government’s 2001 case against Microsoft when, in the hand-off from the Clinton to Bush II administrations, DOJ caved on the remedy and agreed to a handful of ineffective concessions.”

Live Nation’s president and CFO, Joe Berchtold, told investors on a recent earnings call that the company is cooperating with investigators. “We continue to answer any questions they have,” he said. “They control the timing, and we’ll watch it play out.”

While no company wants scrutiny from antitrust regulators, Live Nation investors may be set to benefit from whatever ends up happening. The company has been a leader in the transition to the so-called “experience economy,” but uncertainty surrounding the antitrust investigation has so far not allowed it to turn rising revenue and profits into significant gains for shareholders. A resolution to the matter will let the company get back to business and allow the market to more appropriately value the company. The coming lawsuit will be the first step in that process.