MICHELE NORRIS, host:

Last week, we heard about the rough road many touring musicians face this summer. According to a new report, gross revenues in North America are down 17 percent over the first half of 2009. The dip in ticket sales has hit the country's biggest promoter of live music, Live Nation, particularly hard.

After its merger with Ticketmaster was approved earlier this year by the Justice Department, many thought Live Nation will become even more powerful. But some in the industry say the company's own business model has caused it to stumble.

Jacob Ganz reports.

JACOB GANZ: Seth Hurwitz is a competitor of Live Nation. Hurwitz is a promoter, too. He owns Washington, D.C.'s 9:30 Club and IMP Productions. He says he's not surprised that some of this summer's tours are flailing.

Mr. SETH HURWITZ (Owner, 9:30 Club and IMP Productions): Sales are down in bad situations, like they should be, but talking about the concert business as a whole, as it relates to the large companies that try to run the whole industry is a little like asking BP how's the oil business these days.

GANZ: Those large companies that run the concert industry would be Live Nation and AEG, the promoters who, between them, sold nearly two-thirds of all the concert tickets American audiences bought in 2009.

A promoter's job is to take care of everything that doesn't happen on stage - from booking a venue, to hiring local labor, to taking out ads, to making sure all the tickets sell.

Traditionally, promoters were middle men. They'd rent venues and pay touring musicians a percentage of ticket sales.

Live Nation, the world's largest promoter, declined to comment for the story.

Louis Messina has been a promoter for over 35 years, both as an independent and at large corporations like AEG, which owns his current company, the Messina Group.

Mr. LOUIS MESSINA (President and CEO, Messina Group): You know, I guess if anything, I was the bad guy.

GANZ: Messina takes credit for an innovation that changed the promotions business.

Mr. MESSINA: We made a decision a long time ago, because profit margins are so small promoting concerts, that we had to get into the building business.

GANZ: By getting into the building business, Messina means he and his partners began to build amphitheatres. Why? So they wouldn't have to rent someone else's venue, and so they'd pocket all the money concertgoers spend that doesn't show up on a ticket stub.

Mr. KELLY CURTIS (Manager, Pearl Jam): Whatever they charge for beer, 10 or $15, and parking and, oh, that's really where they're making their money. And so they can almost afford to pay an artist more than what they're getting for ticket sales.

GANZ: That's Kelly Curtis, the longtime manager of the band Pearl Jam. He says promoters know they'll bring in extra cash from beer and parking plus advertising and sponsorships at venues they own, so they can pay musicians in advance before a single ticket is sold, and, yes, sometimes at a rate higher than what they bring in, even if they sold every seat.

Mr. GARY BONGIOVANNI (Editor in Chief, Pollstar): The concert promotion business is more voodoo art than it is science.

GANZ: Gary Bongiovanni is the editor in chief of Pollstar, a publication that tracks the concert industry.

Mr. BONGIOVANNI: There is a substantial chance in every case that you're going to lose money potentially, and the bigger the star, the more money you're having to guarantee, thus the greater risk you're taking.

GANZ: Expand to a huge scale and you've got the Live Nation model. It owns a majority share of Front Line, a company that manages many major artists, and it also owns most of the amphitheaters around the country. That means when summer rolls around, it can set up entire tours where its artists play exclusively in its venues. The problem is it's built a nationwide string of beach houses and it has to keep them filled all summer.

Mr. BONGIOVANNI: The temptation during the summer months is to buy as many shows as possible to keep that activity level up in their venues, and they may well be buying some shows that they should have passed on.

GANZ: Shows that this summer aren't selling, says Bongiovanni. When this happens, promoters can cut their losses and cancel concerts. Last week, dates on the Rihanna and Lilith Fair tours, joint shows by the Eagles and Jonas Brothers along with entire tours by Christina Aguilera and Limp Bizkit on this summer's chopping block. They can also reduce ticket prices to try and put bodies in seats, hoping that beer sales will help make up for some of the shortfall.

Louis Messina, who put together two of the top five tours of the year so far, according to Pollstar's mid-year report, says that's bad business.

Mr. MESSINA: Whenever you have to back into a ticket price because you pay too much for an artist, it's a broken model.

GANZ: For promoters and fans, says Gary Bongiovanni.

Mr. BONGIOVANNI: Nothing makes a fan more disappointed than to have bought a ticket when they first went on sale at full price to find out other people were getting in for 10 bucks.

GANZ: All of this, says Seth Hurwitz, takes the fun out of the concertgoing experience.

Mr. HURWITZ: Buying a band for the entire country is treating it like it's product. And although it's product in that, you know, yeah, we're all trying to make money at this, you know, if you treat the country and if you treat everyone like it's product, well, that's how they're going to treat you.

GANZ: Hurwitz, who is an independent promoter unaffiliated with either AEG or Live Nation, says that everyone involved from promoters to venues, to bands and their managers is responsible for making sure that going to a concert is a good experience for the fan, even if that means making a little less money.

Louis Messina booked Taylor Swift's tour last year. He says that's exactly what she did.

Mr. MESSINA: We could have sold tickets for $150 and sold out everywhere across the country. Our first tour, the Fearless One tour, ticket price was 49.50.

GANZ: Unless ticket sales start to turn around, that's a reality that everyone in the industry might have to get used to.

For NPR News, I'm Jacob Ganz.

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