The Price Is Not Right

Is Ticketmaster taking these people for a ride?

Pearl Jam, Ticket Master
Peter Still/Redferns
Pearl Jam in concert at Finsbury Park in London.
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Marla Hoicowitz sits in a cramped makeshift office in a Manhattan tower. All around her, construction crews are laying in wire and hanging drywall, enlarging the New York offices of Ticketmaster.

Hoicowitz, one of the company's vice presidents and a New York general manager, is used to expansion: She's been with Ticketmaster long enough to see it grow from a small firm into the leading national ticket distributor. And while Ticketmaster likes to portray itself as a relatively small company mining a tiny profit, it has become an outsize player in the rock & roll concert business.

Just how much power and influence Ticketmaster wields became an issue earlier this spring when Pearl Jam filed a memorandum with the Justice Department charging that the corporation has 'a virtually absolute monopoly on the distribution of tickets to concerts.' Pearl Jam's filing was the result of the band's inability to get Ticketmaster to agree to reduce its service charges frequently $5 or more for rock concerts – to a level where fans could purchase tickets for the group's proposed summer tour for less than $20. Pearl Jam further charged that when they tried to get arenas and promoters to sell tickets without Ticketmaster, they were effectively blackballed from the concert circuit by a 'group boycott' organized by Ticketmaster.

The New Immortals: Pearl Jam

Ticketmaster has vigorously denied Pearl Jam's charges, labeling the memorandum sent to the Justice Department "a work of fiction," but Ticketmaster has done little to endear itself to the public. While stung by the criticism that it is gouging ticket buyers, Ticketmaster has been anything but contrite. "Maybe we should shut down for a week or two," says Hoicowitz, reflecting Ticketmaster's stance that the concert-going public doesn't know how good they've got it.

While Ticketmaster – through its outlets and telephone ordering service – has made it easier for people to obtain concert tickets, the company's per-ticket charges are virtually never part of the advertised price of a ticket. Consequently, Ticketmaster's success has meant that unless you go directly to a venue's box office, buying tickets for a rock concert is like buying a new car: You can't really get it for the price advertised. Nor is Ticketmaster particularly consumer friendly: Despite prominent advertising that Ticketmaster accepts American Express and Discover cards, its outlets will take only cash. Anyone wishing to pay by credit card must make his or her purchase by telephone – and pay a second round of service and handling charges.

Additionally, Ticketmaster CEO and president Fred Rosen has been an outspoken proponent of higher ticket prices for rock shows, a trend that is sure to bulge his company's coffers, since Ticketmaster generally figures its fees on a percentage. Although the firm also handles tickets for sporting events and theme parks, for Ticketmaster and for Rosen, rock & roll is really bread and butter.

Last year, Ticketmaster sold about 51 million tickets – and more than 60 percent of those were for concerts. Despite reporting a surprisingly small after-tax profit last year – $1.4 million on revenues of $190 million – Ticketmaster looked like a good bet to Paul Allen, one of the country's savviest new-technology entrepreneurs. The co-founder of Microsoft paid $300 million in cash for a controlling interest in Ticketmaster.

Like Pearl Jam, Allen hails from Seattle. He is also a rock & roll devotee who takes his guitar with him when he travels on business by private jet. His Interval Research Corporation under-wrote the Electric Carnival, a $3 million video and computer exhibit that was part of the Lollapalooza tour. Back in Seattle, Allen is helping to finance a museum honoring hometown hero Jimi Hendrix. A major shareholder in the popular computer information network America Online, Allen seems poised to move Ticketmaster onto the home-shopping frontier. And when four record companies banded together last winter to announce plans for a new worldwide music-video network, Ticketmaster was the fifth partner. Allen, who has not commented on Pearl Jam's Justice Department memorandum or on subsequent congressional hearings focusing on Ticketmaster, declined through a spokesman to be interviewed.

Rosen also declined to speak. According to a Ticketmaster spokesman, Rosen has been instructed not to comment by the firm's lawyers. Normally brash and talkative, Rosen – a lawyer himself – is the prime architect of Ticketmaster's success and reportedly holds 5 percent of the company's stock.

In 1982, Rosen became chairman and CEO of Ticketmaster when he persuaded billionaire investor and Hyatt Hotel Corporation owner Jay Pritzker to plunk down $4 million for the then foundering ticket service. Begun in 1978 by two Arizona State University computer students, the money-losing Ticketmaster sold $1 million worth of tickets in 1981, while Ticketron, then the industry leader, chalked up $100 million in sales.

Under Rosen, Ticketmaster aggressively went after the concert market with a twofold strategy: Raise the $1 surcharge that Ticketmaster collected on each transaction and split it with the venues and promoters. By combining a well-run service with deep pockets, Ticketmaster was able, in market after market, to win exclusive contracts with key arenas and rock promoters. In 1991, Ticketmaster absorbed many of the assets of what remained of Ticketron.

Ticketmaster and other automated ticket services have been a huge advance for the concert business from the old method of selling and accounting for pre-printed tickets. But while touting itself as "providing an inventory-control system for the use of our clients," Ticketmaster is now much more than that to the rock & roll concert business: It has become a de facto bank. In the New York metropolitan area, for example, its five-year exclusive deal with the New Jersey Sports and Exposition Authority guarantees the Meadowlands venue about $6.5 million – including $1 million for signing. In New England, Ticketmaster's arrangement with the area's dominant concert promoter, Don Law, reportedly pays Law $500,000 a year in ticket fees.

Despite revenue gathered from high prices for concert tickets, services like Ticketmaster's are extremely important to promoters and venues. That's because the vast majority of the money from tickets goes to the performer – in most instances, an established rock headliner commands 90 percent or more of the gate. In the case of pop singer Barbra Streisand, who was able to command $350 per ticket, promoters were rumored to receive no percentage of the ticket sales.

Photos: Pearl Jam Through the Years

While promoters have traditionally fought for their piece of the ticket pie by charging acts for such in-house services as security and catering, they have also developed new streams of revenue by building and owning their own facilities, where they are able to make money on such accommodations as parking or concessions. Ticketmaster, which reportedly pays back as much as 30 percent of its surcharge to the venues and promoters, represents a way for them to earn significant amounts of money on ticket sales.

As a result, the concert business is extremely protective of the money it produces and its contracts with Ticketmaster. For its part, Ticketmaster has aggressively defended itself, both behind the scenes – a letter from the North American Concert Promoters Association to its members intimated that Ticketmaster would sue any promoter or venue that violated Ticketmaster's exclusive ticket-distribution deal and helped Pearl Jam – and in public. Larry Solters, a spokesman for Ticketmaster, characterizes Pearl Jam's action as "a brilliant marketing ploy" aimed at promoting the band's next album. "I don't understand how Eddie Vedder and Pearl Jam can factually challenge a price or service charge without knowledge or regard to what it costs to provide that service," says Solters. "If they're so concerned with the public and what it costs to hear Pearl Jam, I don't know why they can't just go to Sony and lower the price of their next CD."

Ticketmaster has taken particular umbrage at the way Pearl Jam's lawyers have characterized their payments to arenas and promoters as "kickbacks." In defending the propriety of Ticketmaster's arrangements, Rosen repeatedly testified before Congress that the corporation's contract with the Meadowlands, for example, is a public document. John Samerjan, director of public affairs for the New Jersey Sports and Exposition Authority, says, however, that the facility would not release its contract with Ticketmaster for the perusal of Rolling Stone. "Our lawyers say that if Mr. Rosen thinks it's public, he can release it to you," says Samerjan. Ticketmaster did not respond to repeated requests to see the contract.

This story is from the October 6th, 1994 issue of Rolling Stone.

From The Archives Issue 692: October 6, 1994
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