Recently I purchased a ticket to go see Sebastian Maniscalco and was surprised how much I made in "ticket fees" when I ordered the tickets. I was curious to see what caused the high ticket price and decided as a result to write this blog post.
Recently the U.S. Department of Justice sued Live Nation (Ticketmaster is a subsidiary of Live Nation as a result of a merger back in 2009). The central claim is that Live Nation has monopoly power over people who would like to see a live event and therefore should be broken and as a result to create more competition to potentially lower ticket prices.
According to the Justice Department Live Nation controls about 80% of ticketing for major events and 60% of concert promotions 60% of concert promotions at major concert venues. The CEO of Live Nation disputes the percentages given how the Justice Department has a more narrow definition of what a major concert venue is. Live Nation President Joe Burchtold went on CNBC to explain when you look at potential comparable venues their market share is only 50-60%.
Part of the issue is a lack of understanding how the business works. You have multiple groups in the mix. First you actually have the actual artist, then you have the business team for the artist, then you have the promoter, then you have the actual venue, and then you have the ticketing company. The artist and their business team have to decide what the financials for the tour look like and select a promoter they would like to use. Live Nation and AEG Presents are the two largest promoters in the industry. The promoter can offer cash guarantees for the tour (the guarantee will depend on tour expenses and how popular the artist is the guarantee will depend on tour expenses and how popular the artist is). In addition to the cash guarantees the artist may get a percentage of ticket sales depending on how successful the show is. The promoter has all the financial risk as they have to ensure the tour is financial successful and have to work the logistics of obtaining the venue, transportation, and have to work with the business team of the artist to price the tickets at a reasonable level. Live Nation in 2023 paid artists $13 billion. Live Nation for 2023 had revenue of $22.75 billion. In addition to this Ticketmaster has spent over $1 billion since the merger with Live Nation to improve the technology. During COVID Live Nation had to borrow $1.2 billion to borrow $1.2 billion
Taylor Swift's Eras Tour grossed $1 billion in revenue, with each show grossing $17 million, the average ticket price was $238, and 4.3 million tickets being sold. The cost of the logistics and transportation was $30 million. In addition to this Taylor paid the crew $55 million in bonuses as the tour had 50 production truck drivers. So just the transportation and logistics was $85 million. Also the tour had 131 different performers . Forbes put some pencil to paper and estimated for the first 22 performances roughly $300 million of revenue for the tour was earned, Taylor and her team earned $110 million from performance (after touring/production costs) and Taylor earning $30 million (after expenses, taxes, agent, and publicist). The Eras Tour ended up having 152 shows so doing some math would say Taylor made $207 million after expenses and fees from the tour. Ticket prices for the same show varied by each city. The highest ticket price in Kansas City was going for $450,000 while in Seattle were going for a little over $4,000 (for essentially the same show). The artist usually makes 90% of the ticket fee. LiveNation keeps around 6% of the ticket price and the profit margin (given LiveNation has their own costs) and has a profit margin of 2% on tickets. So if the average ticket price for Taylor Swift was $238 Live Nation made less than $5 per ticket. AEG was the promoter for the Eras Tour and their profit on promoting is 2% so add another $5 per ticket. So on a $238 ticket Live Nation made $5 per ticket so $21.5 million (on 4.3 million ticket sold) and AEG the promoter made $21.5 million of profit during the Taylor Swift Eras tour compared to $207 million Taylor Swift made after expenses (closest thing to a profit margin for an apples to apples comparison). Part of the reason why ticket prices for Taylor Swift were so expensive is two fold. One is she had not toured in at least 3-4 years and post COVID there was pent up demand to see in person concerts which fueled over 14 million people trying to obtain 2.4 million tickets which caused the Live Nation site to crash. The demand was so high that Taylor in order to meet the demand would have had to play 900 concerts (20 times the concerts she performed or over 3,000 shows which would have added another 2.5 years to her tour-assuming she performed every single night).
Most people are upset (including myself) about the service fees for the price of one ticket. However, the venue determines what the service fees are and Live Nation or the ticketing company passes these fees along to the consumer. The venue gets about 67% of the service fee and the ticketing company only earns 7% of the service fee. For all the venues that Live Nation owns they have moved to all-in-pricing since Fall 2023 and actually have seen an 8% increase in ticket sales as a result. Also the venue gets to decide if the all in price is displayed or if the service fees are charged. The profit margin on this part is only roughly 2%. Also it is important to remember that Live Nation has 50,000 concerts or events. Ultimately only the top 5-10% of artists are able to command high prices as the demand for their performances exceed the supply of available tickets.
The reason for high ticket prices is multi-faceted. Given consumers during COVID weren't able to see live concerts drove up demand for these services. In addition also the cost to produce the actual show increased since COVID. Additionally artists use to make money from album sales or music sales however the artists now have to give the music away and tour in order to make their money back. If anything some artists are underpricing their ticket prices since secondary markets like StubHub and SeatGeek exist. Given that the secondary market for tickets is roughly over $2 billion says that this is precisely how much artists are undercharging. Artists and their management teams have to walk a fine line between being able to make money, while not enraging the fan base of the artist.
