Thursday, December 08, 2005

Ripping-off Round the Clock

Adam Smith railed against monopoly practices and motivations among ‘merchants and manufacturers’, legislatures that gave private joint stock companies legal cover in Royal Charters and laws that prohibited imports or free trade.

The Daily Cardinal, Maddison, Wisconsin (USA) carries a column on a practice that appears to be a clear breach of Adam Smith’s views on monopoly. Perfectly legal, I am sure, otherwise in the ever litigious US somebody would have taken the companies concerned, ‘Clear Channel’ and ‘Ticketmaster’ to their day in court by now.

Matt Hunziker, 8 December, (The Daily Cardinal) write under the heading, "Clear Channel ruins concerts, lives":

To summarize the late 18th century, the newly independent United States had a run-in with a British invasion (not to be confused with Beatlemania), there was an awful pun about France losing its heads of state and, of course, Adam Smith published “The Wealth of Nations.” The book’s central focus on an “invisible hand” was ahead of its time for science fiction, but Smith’s ideas about the principles of supply and demand and competition have shaped our modern capitalist economy.According to capitalism, competition should insure good service and prices. When an industry is under the control of a monopoly, however, these principles no longer apply, due to the large companies’ complete market domination and doubled rents.

A fair summary for a journalist (I resist the temptation to nit-pick when the author’s point is quite apposite and worthy of wide reading).

Hunziker continues:

"Such is the current system governing the live music industry, where the average price for a concert ticket has doubled in the last eight years to around $54 and musicians’ freedoms are deteriorating.While one can hardly blame music venues for having monopolized the live performance market (YOU try getting the Rolling Stones to play in your walk-in closet), music fans everywhere have­—for years now—found a more deserving target for their pathos in the duo of media-giant Clear Channel Communications and Ticketmaster, which, for the uninformed, is a kind of automated service that takes your money in exchange for causing you physical pain.These two companies have played a large role over the last decade in bleeding concert-goers dry through a certain kind of underhanded corporate bastardry known as exclusivity agreements.”

The monopoly (really with two of them, probably a duopoly) comes from the companies having pre-booked on an exclusive basis the most suitable US venues for live music. Any music promoter wishing to book her live bands and top singers must book through the exclusive intermediaries and not direct with the venues. Of course, the venues receive a guaranteed income from their exclusive agreements with the intermediaries, and also, of course, the promoters pay an enhanced price for their booking of the venues, but the promoters pass these increased rental charges onto the concert-going public in higher ticket prices.

The venues, the intermediaries and the promoters gain (or do not lose), but the consumers lose out in the difference between the monopoly-induced ticket prices and what the ticket prices would be if there was competition involved in the chain of transactions. Consumers already pay top prices for top events; monopoly adds another layer of cost to the already top prices.

We can be sure, Adam Smith would not have approved of these arrangements. Neither, Is suspect do the fans.

Read the whole column by Matt Hunziker in the Daily Cardinal at:(


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