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Ticketmaster gets in the artist management game

October 23, 2008 |  6:04 pm

Axlhammersteingeorgechin_2The turf war between the world's top ticketing company and the world's top concert promoter just got bloodier.

Ticketmaster Inc. announced today that it had acquired a controlling stake in Front Line Management Group Inc., the artist management company that's home to legacy acts like the Eagles and Journey along with divas and divos like Christina Aguilera and Axl Rose's Guns N' Roses.

The deal gives the much-maligned ticket giant a boost in a category in which it previously didn't have a chance against its former client, concert promoter Live Nation Inc.: sex appeal.

"Ticketmaster and Live Nation are walking closer and closer to each other. They're both encroaching on each other's territory to compete," says entertainment attorney Josh Hiller.

Ticketmaster, which had owned a piece of Front Line since last year, picked up Warner Music Group's minority stake for $123 million in cash. It also handed Front Line head Irving Azoff about 4.5% of Ticketmaster stock, worth at least $35 million, in exchange for part of Azoff's stake in Front Line. Azoff will head the new company, to be christened Ticketmaster Entertainment Inc.

Front Line's roster of 200 artists will give the new venture a major advantage as it tries to hang on to venues tempted by Live Nation's budding ticket business, set to launch next year.

Xtinadavehogangettyimages Live Nation, meanwhile, has far-reaching deals with five major stars, all made within the last 12 months or so. The company is betting big on them, and on its ability to enter the infrastructure-heavy ticketing business.

Live Nation also has smaller relationships with about 1,200 artists, and Front Line artists often play at Live Nation venues. That could create some conflict of interest, Hiller says, if Front Line artists were steered away from Live Nation venues, or if they had priority over other artists at Ticketmaster-contracted venues. (Azoff brushed off conflict-of-interest concerns in an interview with the Wall Street Journal.) Alternatively, the deal could prompt more competition among venue operators and promoters if Live Nation has to work harder to attract Front Line artists. 

In any case, Ticketmaster's latest move ups the ante as both companies try to position themselves as the key link between artists and their fans' wallets -- touring remains something of a bright spot in a music industry struck by declining CD sales and the movement toward free or low-priced digital music.

"Since 2000 the most vibrant part of the business has been live events, and they are not suffering from lack of attendance. There has been a tremendous resilience on the part of the consumer to accept increased attendance fees," says attorney Aydin Caginalp, a partner at Manatt, Phelps & Phillips. "This is a natural evolution and expansion of these businesses."

Companytown So what's the next step? If the two companies want to get deeper into each other's turfs, Live Nation could try artist management, or Ticketmaster could think about venue operation and concert promotion.

"We imagine that Live Nation and Ticketmaster should continue to trade actions and reactions with each other going forward," writes CL King & Associates analyst Jim Boyle in a note to investors, but he notes that Ticketmaster's refraining from signing 360-type deals has prevented "expensive bidding wars, for now."

Still, the companies might think twice before pursuing more expansion, at least if the stock price is signaling what investors think of the moves. Live Nation's stock has dropped by half in the months since it began signing its marquee artists. Today, Live Nation shares fell 7.92% to $9.30 on the New York Stock Exchange. And after its announcement, Ticketmaster shares fell 4.96% to $10.35 in trading on Nasdaq. They're down by about half since the company spun off from its parent IAC/Interactive in August.

-- Swati Pandey

Photo (top): Axl Rose. Credit: George Chin

Photo (middle): Christina Aguilera. Credit: Dave Hogan / Getty Images