Over the last decade, as the recorded music industry contracted at a double-digit annual rate, the live concert touring business continued to grow, with worldwide ticket revenues rising from $1.5 billion in 1999 to $4.6 billion in 2009, according to Pollstar.

This growth played a large part in fueling the merger between Live Nation and Ticketmaster, which was approved by the U.S. Department of Justice in January 2010, creating a monolith that owns more than 140 concert venues around the world, sells approximately 140 million tickets and promotes 22,000 concerts every year.

And then in summer 2010, the other shoe dropped. The concert season was pockmarked by high-visibility tour cancellations by artists such as Christina Aguilera, the Eagles and U2. Seeing a predicament on the horizon, in June 2010 Live Nation provided discounts of up to 25 percent on 8 million tickets to 700 concerts, and eliminated all service fees for reserved and lawn seats purchased for shows at its 50 amphitheaters.

By the end of the fiscal year, the merged company, Live Nation Entertainment, reported a net loss of $228 million, more than tripling the previous year's loss.

"I know the merger made a lot of people nervous, but it's been far from a disaster for the business," says Pollstar Editor-In-Chief Gary Bongiovanni. "The impact has largely been marginal at this point. But Live Nation is still faced with the fact they're losing money."

Concert figures were down across the board in 2010. Total ticket sales declined 12 percent in North America to 26.2 million from 29.9 million in 2009, and 7 percent worldwide to 38.3 million from 45.3 million in 2009. And while Bon Jovi scored the No. 1 North American tour with $108.2 million in revenue, it was a drop-off compared to the Rolling Stones' record-high North American tour in 2005, which grossed $162 million.

Looking ahead to a 2011 summer slate that includes high-visibility tours by Lady Gaga, U2, Taylor Swift, and Roger Waters, and a possible Rolling Stones jaunt in the fall, Bongiovanni is cautiously optimistic.

"Last summer was about people pushing the envelope," he says. "Promoters tend to be their own worst enemies. If they say no to artist demands, they lose the show; if they say yes, they can lose their shirts. There needs to be some realism."

"I don't know if last summer was an aberration," says Jeff Varner, a veteran manager at Los Angeles-based firm the Collective whose clients include Godsmack, Slash and Plain White T's. "Like many things in this economy, it's the new norm. It's like dominoes…if Joe Public from Detroit is out of a job, he's not going to blow his money on a concert. [And] there are so many other ways to spend that disposable income today. Kids can check out bands on YouTube or Facebook. It used to be the only way to find out about a band was to go see them."

With heavyweights AEG, which recently announced a partnership with Outbox Technology to sell tickets at its venues, and Live Nation Entertainment dominating concert promotion, the competition for talent is down to two very huge players. And with the traditional local promoter system largely usurped by these corporate monoliths, the long-cultivated relationships among managers, agents and those few individual promoters left has largely been frayed, making it extremely difficult for bands to systematically climb the ladder to bigger venues.

"I feel like those promoters knew their regions better, marketed better, generally did a more effective job," says Varner, pointing to how Live Nation has centralized much of its operations by taking away the power from local promoters. "A promoter promoting dates is an art form. It's not just, 'Buy the strip ad, put on the radio spots.' It's become lazy, and I think that's been reflected in lower ticket sales."

Of course, newer artists can still graduate to larger venues. Lady Gaga and Justin Bieber have emerged as arena attractions in the last two years. Over the past 18 months, UK folk group Mumford & Sons went from playing the 200-person Hotel Cafe in Los Angeles to the 500-capacity Troubadour, the 1,500-seat Music Box and the 4,000-capacity Hollywood Palladium, to performing before millions on the recent 53rd Annual GRAMMY Awards telecast.

"The instant ability to go from complete unknowns to headlining arenas hasn't allowed these new stars the time to hone their craft and stage show," says Bongiovanni, who also points to the curious lack of hip-hop acts that can headline arenas. "Not enough [artists] have been able to duplicate what they do in the recording studio and bring it onto the stage."

Bruce Wheeler, a veteran road manager who has worked with Cage The Elephant and Rufus Wainwright, says it is still possible for acts to make money on the road.

"It's not easy," says Wheeler. "But it can be done. You have to get the band into the right room, one they're able to fill without under or overselling it. But there are so many variables. The live show depends on radio airplay, which relies on print and how many records are selling. It takes a well-coordinated effort on the part of management, the agent and the team in order to survive."

Another big piece of the puzzle is ticket prices. Bands concerned about leaving money on the table have come up with any number of alternatives to keep the best tickets out of scalpers' hands, from VIP packages to paperless ticketing. Is there a way to please both diehard fans willing to pay top dollar for front-row seats and the casual concertgoers looking for good seats at a reasonable price?

Finally, what of the acts themselves? When statured warhorses who helped build the modern touring business and continue to drive successful tours — AC/DC, Bon Jovi, the Rolling Stones, Paul McCartney, Metallica, Pink Floyd, and Elton John, among others — retire, who will be left to take their places?

The solution to this puzzle may well determine whether the multibillion-dollar concert touring industry rebounds or continues to shrink.

"The concert business is difficult to quantify because everyone prices themselves individually," says Bongiovanni. "Not just at the high-end, but at all points in between, which means there's a wide margin for error. People pushed the envelope last summer, and got burned by overreaching. We need to take these risks out of the equation."

(Roy Trakin has been senior editor at HITS magazine since he still had hair, and has written for every defunct rock publication that did and didn't matter. He is also the author of biographies on Jim Carrey, Tom Hanks and Sting.)