DOJ sues Live Nation: What could happen to ticket prices?

US Department of Justice (DOJ) officials filed an antitrust lawsuit against concert promoter and ticket seller Live Nation (LYV) on Thursday, making the case that Live Nation created a monopoly through its ownership of Ticketmaster that ultimately resulted in inflated ticket prices. Live Nation has refuted these claims in a statement, saying Ticketmaster's service fees are no higher — if not lower — than on competing ticketing websites.

Citi Managing Director Jason Bazinet focuses on the DOJ's antitrust crackdown in recent years and whether a breakup outcome would ultimately affect concert and event ticket prices.

"This administration is trying to go back to structuralism, that's what's underpinning a lot of the antitrust actions that they're pursuing," Bazinet outlines. "And so that that's difficult, I think, for the judges to understand because they now have 40-plus years of case law that says this is really all about price. And that's why you see Live Nation in their response, focusing on price."

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This post was written by Luke Carberry Mogan.

Video transcript

The US government has filed a sweeping lawsuit against a live nation.

The parent company of Ticketmaster, now the DOJ along with 30 state and district attorneys general, alleged Live Nation has an unlawful dominance over the industry.

The company controls about 70% of the ticketing for live events.

Now, Live Nation responded to the suit saying, quote, the defining feature of a monopolist is monopoly profits derived from monopoly pricing.

Live live Nation in no way fits the profile for more.

We want to bring in Jason Bazinet, he's the city's managing director covering Live Nation's Stock and Jason, when we talk about this suit that we have from the doj against Live Nation.

How strong do you think this antitrust lawsuit is?

I don't think it's particularly strong.

Um I guess I would, I would make two points.

The first is there is sort of a bigger picture, almost ideological thing that's going on here that has nothing to do with the companies.

And that is for um most of the thirties, 19 forties, fifties, sixties, um, antitrust law is really governed by a mindset that was underpinned by what, what lawyers would call structuralism, which is big firms are bad.

Why?

Because they're big.

And what happened in the eighties nineties, you know, until today really has really been the price theory of competition, which says that unless a firm causes consumer prices to rise, it's not really anti competitive.

And this administration is trying to go back to structuralism, that's what's underpinning a lot of the antitrust actions that they're pursuing.

Um, and so that, that, that's difficult, I think for the judges to understand because they now have 40 plus years of case law that says this is really all about price and that's why you see Live Nation in their response focusing on price if they are forced to break up with this really have any material impact on prices paid.

Let me just, uh, I don't think so.

Um, let me just start with just some basics.

I'm just gonna say a hypothetical ticket.

Let's say that, um, costs $100.

Um, Live Nation, um, makes about $1 for promoting that show.

Um, the artist would get $99.

And then when you, when you check out, when you actually buy the ticket, you're gonna see all of these fees.

And those are typically about, for $100 ticket would be about $30.

And what most of that money goes to is the, the rental fee for the venue.

And then Ticketmaster on the ticketing side is going to get about 20% of that $30 or $6.

So at the end of the day, you check out you're going to pay as a consumer, 100 and $40 live Nation's total revenue is a dollar for promoting the concert and about $6 for ticketing the concert.

So they're gonna get $7.

Um So no matter what you do to live Nation, I'm not sure that you're going to see a demonstrable change in the price consumers pay to go to a concert.

Jason does this suit though?

How much of an overhang do you expect this to be on the stock or do you think it's gonna at least add a little bit of volatility to the stock price?

At least here in the short term?

I think the volatility has already happened.

Um We've gone through the math of what a breakup would imply and it suggests something in the high eighties.

And so what you saw is the market was very confident that the doj was going to file this lawsuit.

And so it's been putting pressure on Live Nation's share price.

Um And now, uh I, I think at least based on the conversations we've had with clients, um, what it's going to go back to the fundamentals, this is going to be stuck on the court for years and years and years.

If the stock price does well at Live Nation, it's because the fundamentals are good.

If the stock does poorly, it's really more because the fundamentals are bad, but I think the market is baked in as we sit here today.

Very high probability that the suit is successful.

Jason, thanks so much for hopping on with us here today.

Jason Bazinet City managing director, talking all things live nation Ticketmaster.

We're gonna be tracking this DJ DOJ suit and everything to come around it.

Jason.

Appreciate it.