(This story was updated on Tuesday, April 27, 2010, at 4:14pm to add details about the Golden Tickets/TicketNetwork dispute and clarify the percentages major...

(This story was updated on Tuesday, April 27, 2010, at 4:14pm to add details about the Golden Tickets/TicketNetwork dispute and clarify the percentages major exchanges charge.)

Golden Tickets, one of TicketNetwork’s larger broker-clients, recently pulled all of its tickets from the exchange following a fee dispute, and the Plano, TX-based reseller is now spearheading a movement to create a new ticket exchange owned by fellow brokers.

The as-yet unnamed endeavor is seeking to raise $2 million from about 200 brokers, at $10,000 each, which would go into development and marketing costs, and after five years the organizers hope to return a dividend to the charter investors.

“We have discussed this idea for many years however, our dispute with the TicketNetwork fees triggered us to move on it,” Ram Silverman, one of the principals of Golden Tickets, told TicketNews. He added he hopes the new exchange is up and running “within the next 18 months.” The dispute involving Golden Tickets and TicketNetwork arose when TicketNetwork raised the percentage Golden Tickets paid the exchange from 6.5 percent to 10.5 percent. Under a proprietary measurement system, TicketNetwork believed that Golden Tickets was not meeting certain sales incentives and decided to raise the percentage amount, a move that Golden Tickets vehemently disputed.

The percentage was comparable or less than what other exchanges charge brokers, but depending on criteria like sales volume and fill rates, some brokers pay exchanges considerably less. For example, StubHub, TicketsNow and RazorGator all charge resellers a 15 percent commission, but that percentage can drop to 10 percent or 12 percent, or fall well into the single digit range, if the reseller is in good standing and meets certain sales and performance incentives. All four of the major exchanges give different brokers different rates based on their performance.

Silverman and his business partner Steve Parry sent out emails to dozens of brokers last week outlining the general ideas of the proposed exchange, including a plan to not allow the sale of “speculative tickets” on the site, which are tickets that a broker does not have in hand. But Silverman backed off that commitment today, April 26.

“We are not completely ruling out spec pricing,” he said. “This will be determined later.”

Customers of the proposed exchange would be charged a flat, 10 percent transaction fee at check out to help cover expenses.

In addition, Silverman and Parry recommend brokers on the new exchange agree to incrementally lower or raise ticket prices in amounts of $5, $10 or $25, depending on how much the ticket is selling for. The two proposed that plan to help avoid brokers undercutting each other, but the move could result in charges of collusion. Silverman denies this and calls the characterization “not applicable.”

The proposal has received positive response from brokers, the duo said, and “a majority” of those who have responded have pledged money to the effort, but Silverman and Parry did not disclose exact figures.

“We welcome any competition that ultimately leads to a better fan experience,” Glenn Lehrman, spokesperson for StubHub, which owns the point-of-sale system Ticket Technology, said about the new endeavor.

Spokespersons from exchanges RazorGator and TicketsNow did not return messages seeking comment.

Parry, who was instrumental in the creation of the ticket retail Web site launched by the National Association of Ticket Brokers (NATB) in 2008, does not believe the new exchange would affect that site. In addition, Parry, who sits on the Board of Directors of the NATB, plans to remain on the board following the launch of the new exchange. No other principals of ticket exchanges are currently members of the NATB board.

Ken Solky, owner of Las Vegas Tickets and president of the NATB, said that he had not yet seen the proposal but thought it might have some merit.

“Broker participation at the highest levels with the exchanges and aggregators is a good thing,” Solky said, adding that while he was not taking sides on the Golden Tickets/TicketNetwork dispute, fee increases on brokers often “makes it necessary to raise prices and that gets passed onto the customer.”

Solky was quick to add that the proposed exchange’s plan to structure incremental price changes is something he would not favor.

“The market makes the market,” he said. “I’m in favor of free-market supply and demand.”

The text of the email from Parry and Silverman outlining the general components of the proposed ticket exchange:

Dear Fellow Brokers,

We wanted to say thanks to all of the brokers who responded to our e-mail regarding us leaving Ticket Network. Your support has been amazing and well appreciated.

After talking to so many of you by phone and e-mail, it has occurred to us that now, more than ever ticket brokers need an exchange of our own. An exchange that can be used to our benefit where we are no longer being held hostage to fees we can no longer absorb.

We would be interested to know how many brokers out there are interested in being involved with a “broker owned exchange”, not a [Point-of-Sale].

Here are some of our initial thoughts of getting this started. Brokers would buy-in to this exchange for somewhere ranging from $10,000-$20,000. This fee is to go towards the construction of the exchange and the initial marketing of the company. If we were to get 200 brokers at a buy in of $10,000, we can generate $2,000,000 to get this started. If we are only able to get 100 brokers, we would ask for a buy- in of $20,000. It’s our thoughts that we should be able to get at least 200 brokers involved.

Once the site is built, the remaining funds would go towards a national marketing campaign. Here is the nice part for the brokers participating…no fees! You might ask how we will raise money to keep this going?

-We will charge a 10% check out fee to the consumer.

-This fee will be in plain sight as we do not want any of our consumers to be able to come back to us and say they were upset about a hidden check out fee. We believe full disclosure is the best way to go.

-This fee will include the credit card processing charges that would be attached to each order, roughly 3%. This will net us 7%. We are guessing that this website should easily be able to achieve $100,000,000 (projections can vary greatly) in online sales within a couple of years. Using that number we would be able to generate a net profit of $7,000,000 that would go back into the marketing and IT fund.

-After 5 years, a dividend check would be paid to the participating brokers provided the company is making money and has substantial resources to maintain the site.

-This company would be run by a board of directors that would be voted in by the membership.

-The exchange would have a sister site similar to EI so that brokers can see who’s listing what inventory.

-The participating brokers will have to go through an approval procedure as not all brokers will be welcome.

-No spec orders will be allowed on this site, strictly contractual tickets as well as tickets in hand. This will practically eliminate all potential problems regarding fulfillment.

This site will not allow for brokers to undercut each other by $1.00. In fact, all tickets will have to be raised and lowered in increments to be determined later. Our thought would be something like this; all tickets under $200 would have to be lowered in increments of $5.00. Above $200 would be increments of $10 and over $300 would be in increments of $25. We feel strongly that when we are constantly undercutting each other it only hurts all of the listing brokers.

From reading your e-mails, it is clear to us that there is certainly a lot of discontent within the industry right now. Let’s do something about it and make our entire futures look bright!

Please send us an e-mail letting us know if you’re interested in participating and adding any suggestions to the framework of this new entity. We’re open to new ideas.

Look forward to hearing from you!

Steve & Ram

Text of the email Silverman sent to fellow brokers concerning Golden Tickets’ decision to pull its tickets from the TicketNetwork exchange:

Dear Fellow Brokers,

This is to inform you that Golden Tickets will no longer be posting our inventory on Ticket Network. This is the result of their decision to increase our percentage fee from 6.5% to an outrageous 10.5%. This increase in our fee is based on their claim that we have too much inventory that is not moving fast enough to meet some made up Matrix formula they’ve concocted. Our inventory appears to be taking up too much space on their system at 6.5%, but at 10.5% they’ll find room for us.

We don’t mind sharing with you that we sold approximately $400,000 worth of inventory on Ticket Network this year which probably is not the greatest amount, but in these trying times, not shabby either. This amount resulted in a net profit to Ticket Network of somewhere in the neighborhood of $72,000. This percentage allows them a greater profit than we make on our own tickets!!

The fact that our company was not informed of any impending new Matrix system that was being implemented and give our company a chance to at least retain the high percentage we were already paying, should speak volumes on the business practices of Donnie Vaccaro and his company.

It appears that they would rather have over 500 non-inventory stocking entities on their system rather than reputable, ethical brokers.

Although our tickets will no longer be posted on Ticket Network, they will be sold on all of the other ticket exchanges. Please view our inventory on the following sites; goldentickets.com, EI, Stub Hub, Ticket Trader, FanSnap, Ebay, Zigabid, Bargain Tix or call us direct, especially during major events. For the major events, we may have inventory not posted available, so please call.

If you would like to share any comments or thoughts on this topic, do not hesitate to send me an e-mail at ram@goldentickets.com or call me at 972-424-2377.

When is enough, enough?

Ram

(TicketNetwork is the parent company of TicketNews.)