More consolidation seen in concert ticketing

LOS ANGELES (Reuters) - Ticketmaster Inc's (TKTM.O) purchase of a big stake in a powerful artist-management company on Thursday signals more industry consolidation as it vies with Live Nation Inc for dominance in live entertainment.

Buying control of Front Line Management Inc -- which manages stars like Christina Aguilera and the Eagles -- and installing its head, music veteran Irving Azoff, as chief executive of the combined company, positions Ticketmaster to compete with rival Live Nation Inc (LYV.N) both in ticket sales and personal management of top music artists.

Live Nation's moves to sign several high profile artists like Madonna, U2 and Jay-Z to merchandising, touring and in some cases recording contracts in the past year has ruffled feathers in the music business, pitting itself against former partners like labels, merchandisers and ticketing companies.

Some analysts wondered if Ticketmaster, which will pay $123 million to Warner Music Group (WMG.N) for its stake in Front Line, will also ruffle some feathers.

Ticketmaster previously inherited a minority stake in Front Line in its spin off from IAC/InterActiveCorp (IACI.O) in August, but will now have a majority stake.

The goal is to strengthen Ticketmaster's connection to artists as Live Nation tries to persuade venues to switch ticketing service providers based on its influence on artists.

But analysts said Ticketmaster's move involves a risky tradeoff -- shifting its focus away from its core high-margin ticketing business.

"Ticketmaster has historically been a monopoly business and I think it suggests the future for Ticketmaster will look quite different," said Scott Devitt, analyst with Stifel Nicolaus.

"When you have to start giving away your business to sustain your business, it's not a good thing. It's a race to the bottom," he said, noting a potential long-term scenario may be that both companies "put their weapons down and consolidate."

Analysts David Joyce with Miller Tabak agreed that Ticketmaster was essentially buying Front Line Management to gain negotiating leverage.

"But Live Nation is still on a ... margin expansion path, and it is Ticketmaster that is losing the high-margin ticket fee market share," he said.

MISSING PIECE

Joyce and others also noted the big piece that Ticketmaster lacks in this developing race is its own venues.

"The piece of the business model that Ticketmaster does not have is venue ownership and/or management," said Joyce.

Talks broke down in March between Ticketmaster, then a unit of IAC/InterActiveCorp (IACI.O), and Cablevision Systems Corp (CVC.N) to buy a 49 percent stake in AEG Live, Anschutz Corp's concert-promotion and live venue operating business.

Some believe Ticketmaster may now approach AEG again.

"Everyone's talking with everyone. Live entertainment is in such a state of flux right now," said Gary Biongiovanni, editor of concert magazine Pollstar.

"This is just the tip of the iceberg. The entire music business is struggling to find a new model and we may be seeing the start of what is going to replace it. This is really a transformational deal," he said.

Randy Phillips, president and chief executive of AEG Live, called Ticketmaster's investment in Front Line a brilliant strategic move given the nature of the looming ticketing wars.

He said AEG has a ticketing contract with Ticketmaster through mid-2011, and as an independent third party concert promoter that owns and operates venues, competes with Live Nation for tours.

Asked if talk of a combination with Ticketmaster has resurfaced recently, he said: "We haven't discussed that internally other than when we tried to put a merger together with Cablevision, IAC and Ticketmaster but we never got there."

However, "you can never say never," he added. "Anything is possible."

(Reporting by Sue Zeidler, editing by Richard Chang)