How Ronald Reagan kept you from getting Taylor Swift Eras Tour tickets

This particular episode of Decoder dives deep into Taylor Swift, Ticketmaster, and the way a handful of coverage modifications within the Eighties led to at least one agency so completely dominating the dwell occasions enterprise in america that Congress held a listening to in 2023 as a result of Taylor Swift followers had been upset about antitrust legislation. That sentence is wild. We’re going to unpack all of this with the assistance of some consultants.

And since it’s a particular episode, we’re attempting one thing new. We produced a video you can watch in this post or on YouTube. Tell us what you assume.

Okay, Ticketmaster and antitrust. Right here we go.

The next transcript has been evenly edited for readability.

Sen. Dick Durbin (D-IL): I’d now like to show to the topic of immediately’s hearings. The ticketing and dwell leisure markets lack competitors, and they’re dominated by a single entity, Stay Nation.

Sen. Amy Klobuchar (D-MN): To have a powerful capitalist system, it’s a must to have competitors. You possibly can’t have an excessive amount of consolidation, one thing that, sadly for this nation — as an ode to Taylor Swift — I’ll say we all know all too well.

Sen. Mike Lee (R-UT): I feel Swifties have figured one thing out. They’re excellent at getting their message throughout.

These quotes are from the Senate Commerce Committee listening to about Ticketmaster in January. Senators Durbin, Klobuchar, and Lee are speaking about what occurred to a lot of individuals, together with me. I mainly spent a whole day attempting to purchase tickets to Taylor Swift’s Eras Tour, and like tens of millions of different individuals, I had a horrible expertise doing it.

The Ticketmaster website wasn’t geared up to deal with all of the demand, and it simply saved crashing. Individuals waited within the presale queue all day, solely to get kicked out once more. A couple of fortunate individuals lastly received to the entrance of the road, had tickets of their cart, after which received kicked out and needed to begin over again. This occurred to me.

In the event you went by way of all this, you form of know that it was like taking part in the world’s worst online game. And the prize for successful was attending to pay outrageous Ticketmaster charges. Now, the bizarre factor is that that is removed from the primary time Ticketmaster has failed on this approach, and it’s actually not the primary time followers of a significant artist have been pissed on the firm. Individuals actually dislike Ticketmaster. They’ve low expectations, and in some way, the corporate nonetheless blew it.

Now, in any regular kind of enterprise scenario, being each costly and horrible on the factor you do, after which screwing up this badly on the most important doable stage, would have penalties. Artists like Taylor Swift would simply choose a distinct ticketing firm subsequent time, and a bunch of these firms would compete to supply probably the most dependable service with the most effective person expertise for the bottom charges — you realize, capitalism.

However Ticketmaster sucks, and it will get away with sucking time and again as a result of there’s basically no competitors for ticketing. You possibly can complain all you need, however there’s no actual different, so Ticketmaster can simply make a foul product and get away with it. Worse, as a result of there’s no competitors, Ticketmaster can suck and cost ever-higher charges for sucking, and that’s precisely what’s happening.

Everyone seems to be sad with Ticketmaster, nevertheless it nonetheless controls over 70 % of the marketplace for ticketing. In actual fact, it has had over 80 % of the marketplace for major ticketing — that’s the primary sale of tickets — since 1995. So how did Ticketmaster change into the dominant market chief when it’s irritating, loaded with exorbitant charges at finest, and totally incompetent at worst? The reply, in fact, is Ronald Reagan.

Sandeep Vaheesan: The Reaganite-Borkian counterrevolution in antitrust is a crucial cause why followers couldn’t get Taylor Swift tickets a month in the past.

That’s Sandeep Vaheesan, authorized director on the Open Markets Institute. To elucidate what he means, we have now to again up a bit. In 1890, Congress handed the Sherman Antitrust Act, and President Theodore Roosevelt ran round utilizing it to interrupt up a bunch of monopolies.  They known as outdated Teddy the Belief Buster. In 1914, Congress clarified the Sherman Act with the Clayton Act, which particularly prohibits anti-competitive mergers. Up till the ‘80s, this was all working. The federal government was fairly aggressive about breaking apart monopolies.

In 1978, legislation college professor Robert Bork wrote a ebook known as The Antitrust Paradox, which basically says we’ve been doing antitrust all mistaken. Principally, all Congress actually cared about in 1890 and 1914 was defending customers, and stopping huge firms from getting actually huge prevents one thing he known as financial effectivity. His argument is that huge firms usually change into huge as a result of they’re good at what they do, and since being so huge makes them environment friendly, meaning individuals will ultimately pay decrease costs.

Now, right here in 2023, I feel everyone knows how nicely that labored out, however put your thoughts again to 1978. This concept was thrilling and recent. Bork says an organization shouldn’t be damaged up simply because it’s huge, and antitrust legislation ought to really defend firms who win out there and change into huge primarily based on their superior potential.

So Bork proposed a brand new method to antitrust legislation, which he known as the buyer welfare customary. He stated that courts and federal businesses, just like the Division of Justice and the Federal Commerce Fee, ought to look out for shopper welfare, which he largely measured by costs. What meaning for us is that until a monopoly causes a rise in costs, it’s okay. That’s the Bork philosophy. Let the large companies get huge and keep huge, so long as they don’t hurt shopper welfare.

Now, Bork was a professor at Yale Legislation College when he wrote The Antitrust Paradox, however as a result of he went to undergrad on the College of Chicago, he will get lumped in with a bunch of different legislation students and economists from Chicago with comparable concepts. All of those theories come to be generally known as the Chicago College. A pair years later in 1980, Ronald Reagan was elected president. Reagan and his group had been huge followers of Robert Bork and the Chicago College. Why does that matter?

SV: President Reagan was actually a key determine within the historical past of antitrust, and he remade antitrust in some main methods by doing two issues. First, he appointed Chicago College legal professionals and economists to steer the Division of Justice and Federal Commerce Fee, that are the 2 principal public enforcers of federal antitrust legislation. These officers had a really completely different view of antitrust than their predecessors.

They believed antitrust must be completely about shopper welfare, which they described as low costs, excessive output — so extra stuff, the higher — and practices that restrict the supply of stuff are dangerous. In order that they remade the philosophy of antitrust legislation. 

Second, they stated, “Truly, mergers are usually good. Mergers are how companies get bigger, attain economies of scale, and probably even decrease costs for customers.” And so, they significantly reduce merger enforcement and adopted a set of pointers that had been extraordinarily tolerant of mergers and acquisitions.

By this level, the Supreme Courtroom has already began adopting Bork’s concepts, too.

SV: I ought to point out that a number of the modifications had been occurring even earlier than Reagan took workplace in 1981. 

Sandeep advised us extra about this.

SV: Presidents Nixon and Ford appointed 5 justices between them to the Supreme Courtroom, and so they successfully remade the Supreme Courtroom of their two-plus phrases within the White Home. In the event you have a look at Supreme Courtroom selections within the late Nineteen Seventies, there’s a lot higher emphasis on effectivity and the advantages of scale, and far much less curiosity in preserving alternatives for small companies and permitting small companies to flourish and thrive within the financial system. 

In 1979, the Supreme Courtroom determined Reiter v. Sonotone Corp. In that call, the court docket formally endorsed Bork’s declare that Congress had really supposed to undertake the buyer welfare customary when it wrote the primary antitrust legislation within the nineteenth century. Once more, the buyer welfare customary shouldn’t be in these legal guidelines. Bork simply managed to persuade everybody he might learn Teddy Roosevelt’s thoughts, and that that is what outdated Teddy Bear wished. It’s form of unimaginable.

A facet observe: Bork forged such a spell on Reagan that Reagan nominated him to be on the Supreme Courtroom. That nomination failed partly as a result of Bork’s videotape rental historical past was leaked to the press, which ultimately led to a federal legislation making your video rental historical past personal. That is true. It’s additionally the place the time period “borked” comes from — the ‘80s.

Bork and the Chicago College had been in vogue from the Eighties on, and actually, they’re nonetheless how we consider antitrust legislation immediately. I went to the College of Chicago within the late ‘90s and early 2000s, and everybody knew the Chicago College was the winner. It was form of wild, really. Nobody cared concerning the soccer group, however we had rockstar economists. I beloved it there. Anyway, all of that is the context wherein Ticketmaster grew into the monopoly it’s immediately. 

Ticketmaster was began in 1976, however the trendy period of Ticketmaster kicked off in 1982. That’s when the Pritzker household acquires a dominant stake in Ticketmaster.  The Pritzkers herald a brand new CEO named Fred Rosen, and the corporate focuses on software program for the computerized ticket enterprise. Rosen additionally began aggressively courting venues to signal unique contracts. His pitch is easy: “We’ll make more cash.”

Right here’s Dean Budnick, co-author of the ebook Ticket Masters: The Rise of the Live performance Trade and How the Public Acquired Scalped.

Dean Budnick: He noticed a chance, and so what he did is he went round, or his gross sales group went round, to all the venues and stated to them, “What would you assume if we doubled the service charges?” They stated, “Properly, that looks like a fairly dangerous concept. Why would we wish to try this? It’s going to discourage individuals from shopping for tickets.” What Ticketmaster stated was, “Properly, if we do it, we’ll share the revenues from this new elevated service charge.”

In trade for the additional cash that venues obtained from splitting ticketing charges, they agreed to completely use Ticketmaster to promote their tickets, and people charges are actually how Ticketmaster makes its cash. This fee-sharing association is how Ticketmaster is ready to compete with its principal competitor on the time, an organization known as Ticketron. It began poaching Ticketron’s venue purchasers, and by 1991, Ticketmaster simply went forward and bought Ticketron.

Right here’s Yale College of Administration economist Florian Ederer to clarify extra.

Florian Ederer: They had been direct opponents. So when Ticketmaster acquired Ticketron, they had been direct opponents, they had been in the identical trade, and therefore, that could be a type of horizontal integration. Each time two firms which can be direct opponents, each time they’re merging, there’s a powerful concern about abuse of market energy. Does this remove competitors? Each time we have now elimination of competitors, which will hurt customers, as a result of instantly there’s not one other competitor round who might decrease costs, who might supply higher service, who might supply higher high quality.

Did you hear that idea? When an organization buys a direct competitor, that’s known as horizontal integration. That is vital, as a result of later Ticketmaster goes to do some vertical integration as nicely, however we’ll get to that.

Okay, so now it’s the mid-’90s. In 1995, Ticketmaster.com launched, and all through the remainder of the ‘90s and early 2000s, Ticketmaster slowly gained increasingly more energy. It launched in an rising variety of nations world wide and inked partnerships for ticket resale with the NFL, the NHL, and the NBA. It even ticketed the Olympics. 

In 2001, Ticketmaster struck a cope with Clear Channel Leisure, which is now known as Stay Nation, to ticket their occasions. Clear Channel, or Stay Nation, by this time was changing into America’s largest live performance promoter. That’s the advertising for a live performance, mainly filling seats. However Stay Nation additionally owns and manages the live performance venues, so it actually owns the entire dwell occasion pipeline.

Within the 2000s, as music piracy upended the trade, huge artists began signing huge unique offers with Stay Nation. Jay-Z is a Stay Nation artist. So are U2, Madonna, and Miley Cyrus. By 2007, Stay Nation had a bunch of unique offers with big artists, possession of most main venues, and a lock on the live performance promotion enterprise. So then they did the following pure factor: they began engaged on a ticketing enterprise to compete with Ticketmaster to which Ticketmaster responded, “Why don’t you simply purchase us and allow us to try this for you?”

That brings us to 2010, and now it’s time to speak about vertical integration, which will get even much less scrutiny than horizontal integration.

FE: Vertical monopolies, or vertical integration, actually, which is kind of an intermediate step to this, is when the gamers in a single explicit trade then combine up or down the worth chain into different inputs or potential patrons of the merchandise that they’re promoting. Then the acute case, in fact, is a vertical monopoly, the place in any respect factors of the worth chain, there’s solely a single supplier. So that may, in fact, give that participant an amazing quantity of market energy, as a result of not solely are they the one vendor, however they’re additionally the one purchaser, and so they’re controlling all the inputs which can be occurring alongside this worth chain.

In 2010, Ticketmaster and Stay Nation determined to merge and kind Stay Nation Leisure. So Ticketmaster, which sells tickets, determined to merge with Stay Nation, which owns venues and places on and promotes concert events. After all, promoters get a reduce of that ticket income, so mainly each facet of a live performance is merged into one firm, and that firm makes cash at just about each stage of the stack. Lots of people assume this created an unfair vertical monopoly, and the deal ought to have been stopped by the Obama administration.

Right here’s Jack Groetzinger, CEO of SeatGeek, certainly one of Ticketmaster’s few opponents, at that congressional listening to earlier this 12 months.

Jack Groetzinger: Stay Nation controls the most well-liked entertainers on this planet, routes a lot of the giant excursions, operates the ticketing techniques, and even owns most of the venues. This energy over your entire dwell leisure trade permits Stay Nation to keep up its monopolistic affect over the first ticketing market.

A handful of states really sued over the Ticketmaster-Stay Nation deal, as did the Justice Division. Senator Durbin talked about this on the listening to.

Sen. Durbin: The Justice Division and attorneys basic from many states, together with Illinois, sued to dam the merger. The plaintiffs in the end allowed the merger to undergo, however put in place a consent decree with a set of circumstances and divestitures designed to make sure competitors.

To ensure that the deal to undergo, Ticketmaster promised the Division of Justice it wouldn’t do something anti-competitive. It was mainly only a pinky swear — it’s fairly onerous to implement. The corporate was compelled to promote certainly one of its holdings, one other ticketing firm, to a rival agency, and it promised to license its ticketing software program to a different rival known as AEG, which is a giant promoter and competitor to Stay Nation.

Right here’s Sandeep on how bizarre all of this was.

SV: In hindsight, it’s unimaginable that the Obama administration allowed Ticketmaster to accumulate Stay Nation. They had been each dominant of their respective markets, and beneath pre-Eighties understanding of anti-merger legislation, the DOJ would have actually sued to cease that acquisition. Truly, in all probability, the events wouldn’t have even proposed the merger as a result of they’d’ve recognized they’d face authorized motion.

The phrases of the Stay Nation merger established by the DOJ lasted till 2019 once they had been reviewed. We talked about that with Dean Budnick.

Dean Budnick: In 2019, the Division of Justice once more seemed on the query of the merger between Stay Nation and Ticketmaster, as a result of a consent decree had been issued beforehand. In 2019, the federal government determined to resume that consent decree, basically giving permission to this merger of those two firms till 2025.

There hadn’t been a dramatic change by way of market dominance by Ticketmaster between these two intervals of time. So at the least the Division of Justice has examined this problem twice and determined, “Properly, it looks like Ticketmaster does have traction right here and is actually the dominant participant within the ticketing realm,” however on two separate events, the federal government has opted to not step in and do something.

That brings us to immediately. Ticketmaster and its mum or dad firm, Stay Nation Leisure, dominate the marketplace for dwell concert events.

DB: In 2022, if an artist did wish to circumvent Ticketmaster, I feel primary, it might be actually onerous if that artist had been taking part in stadiums. Basically most, however not all, of the stadiums have relationships with Ticketmaster.

As Dean advised us, Stay Nation’s dominance of ticketing and promotion has allowed it to close out opponents. Jack Groetzinger, the CEO of SeatGeek, talked about this on the January listening to as nicely. He claimed that when venues change to SeatGeek or one other Ticketmaster competitor for his or her ticketing, Stay Nation, which controls the artists and their promotion, stops giving concert events to these venues.

Jack Groetzinger: I’d observe that the DOJ report in 2019 discovered quite a few cases of Stay Nation threatening and retaliating in opposition to venues as soon as that they had moved away from Ticketmaster. In a single case, the Stay Nation president advised the venue that they’d, quote-unquote, “go nuclear” in the event that they left, so the risk is actual. It’s been documented. It occurs throughout many venues.

With Ticketmaster’s rising dominance and lack of significant competitors, ticket costs and the charges that accompany them have drastically elevated. Prospects are compelled to pay these costs as a result of so many venues have unique contracts with Ticketmaster or are owned by Stay Nation outright.

The place this will get even deeper is that a lot of individuals resell their tickets, and Ticketmaster has a giant chunk of that market too. In the event you attempt to use one other service like StubHub to purchase a ticket that Ticketmaster initially bought, you continue to must have a Ticketmaster account and enter their ecosystem. So now they’ve your information, even should you didn’t wish to work together with them within the first place.

Right here’s Senator Josh Hawley speaking about that on the listening to.

Sen. Josh Hawley (R-MO): When you consider it, it’s actually one thing. You’re forcing all people who simply needs to get this ticket on the resale market, who hasn’t purchased from you to start with, to change into your buyer as a way to take possession of this ticket. I imply, that’s actually one thing. Hats off to you, I suppose, for being revolutionary and utilizing your monopoly. However I’ve to let you know, from a contest standpoint, this actually, actually worries me, as a result of this appears to be like like a approach to, once more, additional leverage your market energy in a single market to increase it into different markets, and I simply don’t see how customers win out of this trade.

I’ve to be trustworthy, it’s uncommon that I agree with Josh Hawley, however he’s proper — customers don’t win. Ticketmaster opponents have provide you with some higher alternate options although. 

We’ve talked so much about what’s mistaken with Ticketmaster. The actually irritating factor about all that is that the dangerous Ticketmaster expertise that’s loaded with charges is simply not the way it needs to be. There are many methods to create higher ticketing experiences for individuals, even for large artists with big demand like Taylor Swift. Ticketmaster tried to handle the demand for Taylor Swift tickets with verified fan codes, however that went horribly mistaken.

Right here’s Dean Budnick once more.

DB: Ticketmaster gave out roughly 1.5 million codes, after which in the end, it obtained roughly 14 million requests, however not all of these requests got here from people who had codes. Numerous these had been individuals who had been attempting to avoid the truth that they didn’t have codes and had been sneaking in. I imply, in the end, the explanation the on-sale kind of tanked because it did was as a result of there have been so many individuals who didn’t have codes who had been looking for their approach into the system in an effort to buy tickets.

By saying all 52 dates directly, Ticketmaster created untenable demand that crashed its web site.

DB: It will’ve been completely different if that they had unfold these out over the course of per week, which is usually what occurs. I feel perhaps on some stage they had been attempting to push again in opposition to scalpers, as a result of in any other case you may have individuals who wish to resell the tickets all targeted on a handful of reveals. Then should you unfold them out, you might have those self same individuals who wish to get these tickets to these few reveals coming in day-after-day over the course of per week. But it surely simply appeared a bit like a cluster-F to me by way of what was going to occur and what the calls for on the system had been going to be.

So, Dean Budnick has concepts for a way Ticketmaster might have finished higher. However he’s not the one one. A few senators on the listening to additionally had some concepts about how one can regulate Ticketmaster into working higher — which is mainly the federal government redesigning how Ticketmaster works to make it friendlier to customers.

That’s one approach to do it. I suppose. The opposite approach is extra competitors. 

You’ve already heard from a number of the opponents on this episode: SeatGeek is one other major ticketing website that has struggled to compete with Ticketmaster. Ditto for Eventbrite and StubHub. In our reporting for this story, we additionally talked to Russ Tannen, president of DICE. DICE is a enterprise backed startup that’s made its tickets are nontransferrable — a QR code together with your ticket seems proper earlier than the occasion to forestall scalping.

In a purposeful market, some artists would select to make use of DICE’s system that doesn’t permit resale, some would use SeatGeek, and a few would nonetheless use Ticketmaster — and all of them would compete to construct a good system that made followers the happiest. With out that competitors, a number of the issues that Ticketmaster must do to not suck require the corporate to make selections that no publicly traded firm with a duty to its shareholders might fairly make.

Ticketmaster must enhance the price of app growth and servers whereas limiting the earnings from all these charges, and that’s simply not going to occur until one thing makes it occur. It’s actually one choice or the opposite.

We will settle for that Ticketmaster is a monopoly and have a bunch of weirdos in Congress attempt to regulate it instantly, or we are able to work out how one can inject some extra competitors into the market so Ticketmaster makes higher decisions simply to remain within the sport. See, what Bork and Reagan didn’t take into consideration once they rewrote antitrust legislation, is that when firms get so huge they haven’t any competitors, they haven’t any extra incentive to be good at what they do. They haven’t any extra incentives to be environment friendly.

Just lately, there was a number of pushback in opposition to the Chicago College and Bork’s concepts particularly. The brand new chair of the Federal Commerce Fee is known as Lina Khan, and she or he’s written at size about the issue with Bork’s method. 

I really talked to Lina on The Vergecast about her Yale Legislation Journal article “Amazon’s Antitrust Paradox.”

Lina Khan: The present framework in antitrust, the buyer welfare framework, actually fails to seize types of market energy and types of dominance that must be related to antitrust and do elevate competitors issues.

It makes me optimistic that an individual who thinks that’s now operating the FTC. There are different glimmers of hope beneath the Biden administration. Sandeep actually thinks so.

SV: I’m hopeful. President Biden has made antitrust reform a key a part of his administrative agenda and has appointed numerous progressives to the DOJ and the FTC, so the appointments have been optimistic. I feel progress has occurred just a little bit slower than all of us anticipated, however we’re seeing some optimistic indicators. I feel the Division of Justice has made reining in employer energy a key a part of its enforcement program. They’ve gone after many managers and corporations for participating in wage fixing, no-hire agreements, no-poach agreements.

However all that’s simpler stated than finished. Beneath Commissioner Kahn, the FTC has aggressively gone after huge tech, however its first makes an attempt at lawsuits have been busts. The court docket retains knocking them down as a result of they’re simply not agreeing with Kahn’s new model of antitrust. They’re caught within the shopper welfare customary.

There’s one other prong of assault happening over on the Biden Justice Division, which is investigating Ticketmaster and Stay Nation, seemingly asking whether or not Stay Nation Leisure is a monopoly in any respect. Senator Klobuchar nudged the Justice Division to take motion on the listening to.

Sen. Klobuchar: I do know you, Ms. Bradish, talked about this concept of spinning off firms. We’ve all seen that as a treatment that may most probably be coming from the Justice Division. So all we are able to do right here is put ahead the proof, and these are sworn testimonies forwards and backwards beneath legislation, in order that the Justice Division can have a look at this dialogue.

Look, it looks like all this strain compelled Ticketmaster to at the least perform a little higher with Beyoncé’s upcoming tour, however the underlying issues are all nonetheless there. We’ll see if the Swifties can push the Division of Justice into breaking apart Ticketmaster and Stay Nation. Something is feasible.

And we’ll see if Congress does something to replace our antitrust legal guidelines. Senator Klobuchar has been pushing to do precisely that for some time now. Within the meantime, the query we should always all be asking ourselves is, can we wish to dwell within the Bork-Reagan world of bizarre, regulated monopolies, or do we wish these firms to really compete?