Hamsard and Academy Music A report on the proposed acquisition of a controlling interest in Academy Music Holdings Limited by Hamsard 2786 Limited 23 January 2007 © Competition Commission 2007 Website: www.competition-commission.org.uk Members of the Competition Commission who conducted this inquiry Diana Guy (Chairman of the Group) Christopher Goodall Professor David Parker Anthony Stern Chief Executive and Secretary of the Competition Commission Martin Stanley The Competition Commission has excluded from this report information which the inquiry group considers should be excluded having regard to the three considerations set out in section 244 of the Enterprise Act 2002 (specified information: considerations relevant to disclosure). The omissions are indicated by []. Proposed acquisition of a controlling interest in Academy Music Holdings Limited by Hamsard 2786 Limited Summary................................................................................................................................ 5 The reference.......................................................................................................................... 5 The parties and the transaction .............................................................................................. 5 The relevant markets .............................................................................................................. 6 Venues.................................................................................................................................... 6 Promotion services ................................................................................................................. 6 Venue by venue competition................................................................................................... 7 Outside London................................................................................................................ 7 Inside London .................................................................................................................. 7 Competitive constraints on venues ......................................................................................... 8 Negotiating strength of agents and promoters................................................................. 8 Entry and expansion ........................................................................................................ 8 Effects of the proposed merger............................................................................................... 9 Horizontal effects in relation to venues ............................................................................ 9 Portfolio effects ................................................................................................................ 9 Horizontal effects in relation to promotion services, coordinated effects in relation to promotion services and vertical effects............................................................................ 9 Efficiency gains ..................................................................................................................... 10 Conclusion ............................................................................................................................ 10 Remedies.............................................................................................................................. 10 Findings ............................................................................................................................... 11 1. The reference................................................................................................................. 11 2. Industry background and the companies....................................................................... 11 The popular live music industry ..................................................................................... 11 The principal participants............................................................................................... 12 Artists...................................................................................................................... 12 Managers................................................................................................................ 13 Agents..................................................................................................................... 13 Promoters ............................................................................................................... 13 Ticket agents .......................................................................................................... 14 Venue operators ..................................................................................................... 14 The stages in negotiations between the main types of participant ................................ 14 Briefing the agent and initial discussions................................................................ 14 The promoter of record makes provisional bookings and costs the tour ................ 15 The agent and the promoter of record negotiate a guaranteed fee ........................ 15 The agent submits an offer for approval by the artist and the manager ................. 15 The promoter confirms bookings with the venues .................................................. 16 The promoter starts marketing the performances................................................... 16 The parties.....................................................................................................................16 Live Nation.............................................................................................................. 16 Gaiety ..................................................................................................................... 17 Hamsard/Mean Fiddler ........................................................................................... 18 Academy................................................................................................................. 18 3. The proposed merger .................................................................................................... 20 History of RJD’s investment in Academy ....................................................................... 20 The transaction .............................................................................................................. 20 Rationale for the proposed merger ................................................................................ 21 Jurisdiction..................................................................................................................... 22 4. Market definition............................................................................................................. 22 Product market for live music venues ............................................................................ 23 Indoor and outdoor venues..................................................................................... 24 2 Venues showing different music types or different types of live entertainment ...... 25 Venues of different sizes......................................................................................... 26 Geographic market for live music venues...................................................................... 26 Conclusions on market definition for live music venues ................................................ 27 Product market for live music promotion services ......................................................... 27 Geographic market for live music promotion services ................................................... 28 Conclusions on market definition for live music promotion services.............................. 29 5. Assessment of competition ............................................................................................ 29 Venue by venue competition: venues outside London .................................................. 29 Venue by venue competition: venues in London ........................................................... 31 Actual and potential substitutability of venues ........................................................ 31 Recent and planned entry, expansion and exit....................................................... 33 Competitive constraints on venues: price and non-price competition............................ 35 Negotiating strength of venue operators, promoters and agents................................... 36 Ease of entry.................................................................................................................. 38 Recent examples of entry ....................................................................................... 38 Cost of entry or expansion...................................................................................... 38 Business relations with promoters and agents ....................................................... 39 Availability of sites and regulatory requirements..................................................... 40 Prospects for entry.................................................................................................. 41 Entry and expansion in relation to the five venues ................................................. 41 Conclusions on competition between venues................................................................ 41 Competition in provision of live music promotion services............................................