By: Eric Fuller
Yesterday, February 26, 2020 there was yet another ticket hearing on Capitol Hill. Congress is looking into whether the ways in which live event tickets are sold disadvantage consumers. The answer is not complex. It’s yes.
There to be questioned were representatives from six big ticketing companies: Ticketmaster, AXS, StubHub, Vivid Seats, Tickets.com and TicketNetwork. These companies didn’t send their flacks, they sent their assassins.
I watched the entire hearing on the live stream, having learned my lesson the hard way attending the FTC hearings last year. Here’s my quick takeaway:
We will see a concerted effort to require everyone selling tickets to disclose the all-in final sales price early in the transaction. We are in the final days of either a surprise add on fee at the last point before checkout or the artificially suppressed list price followed by an extraordinary large add on fee at check-out.
We will also see an effort to restrain speculative ticket sales. These are the tickets listed by people who neither own them nor have any sort of an arrangement in place which entitles them to acquire the tickets listed.
Here’s one more key observation: when you allot each Congressperson five minutes to question six people they learn nothing. That’s why, in all trials with the occasional exception of Presidential impeachment, the lawyers get time to fully explore the witness’ testimony.
Watching the interplay between the six people tasked by their companies to testify made me think of a Scorsese movie. There were the two women, each of whom was there like a consigliere on behalf of a giant company which was not particularly thrilled with the behavior of the other. Amy Howe, President, North America for Ticketmaster to the left, Stephanie Burns, V.P and general counsel for StubHub (now owned by Viagogo) to the right. That’s McKinsey v. Amazon — two women who earned their stripes in gladiator school and whose companies dominate the ticketing space.
Next, there were the three Captains: Bryan Perez of AXS, Ryan Fitts of Vivid Seats and Joe Choti of Tickets.com. They were asked courtesy questions by the inquisitors, and although they all handled themselves very well, nobody really cared they were there.
Finally, there was the O.G., the founder of much of what has become the modern secondary market: Don Vaccaro. You…never…know…what…he…might…say. And, he said it. Don pointed out that big markets aren’t just taking money, they’re taking data. He pointed his fingers at data being the true underlying reason ticket transfer is getting so convoluted and also helped to differentiate between how various “white label sites” (sites which appear to be a primary market but in fact are a secondary market) operate.
What jumped out at me was the way various jargon was flung around, without any sense there was a common understanding of what the words mean. So, as a public service, here’s my dictionary of ticket terms:
The market which sells the face value tickets as directed by the promoter, team or artist for a particular event. These are such firms as Ticketmaster, AXS, Telecharge, Eventbrite and most major sports teams.
The secondary market sites are those which aggregate listings from both individual and professional resellers who are selling tickets at whatever the market may bear, whether that is above or below the original face value. These are sites such as StubHub, Vivid Seats, SeatGeek, TicketNetwork, TickPick and most white label sites operated by individual ticket resellers.
Bots are computer code routines which are either helpful or unlawful. Software routines which are run to change QR codes every 20 seconds or to assist in the transfer of tickets are lawful. Under the BOTS (Better Online Tickets Sales) Act bots used to purchase tickets may be unlawful.
Ticketmaster’s testimony repeatedly covered the idea that they block 30 billion bots. That’s nearly 5 bots for every person on earth. I think what they meant was they block 30 billion attempts by a bot, often the same few bots, to make a purchase. In their earnings report today, Live Nation said they sold 487 million tickets in 2019. 30 billion bot hits is a lot. That’s more than 60 times the number of individual tickets sold, and tickets are usually sold in multiples of two to eight.
In reality, there’s little difference between a bot, and a buying farm of people sitting at high speed computers. Either way, those tickets are getting bought. Anytime there’s an opportunity to arbitrage something, it will get bought and resold. This applies to houses, baseball cards, sneakers, Funko dolls, currencies and tickets.
This is not behavior unique to ticketing. Just today an article moved across the wires about how a reddit subgroup of options speculators are manipulating prices on the major stock exchanges:
A pre-sale is a sale only for people in possession of a certain code such as an artist fan club code, verified fan code or sponsored code such as that from the venue or corporate partner. It could also be a sale for people with a specific credit card, commonly Citibank, American Express, Chase or Capital One.
Often there are multiple pre-sales, in which one day it’s the fan codes, then credit card codes the next day and the more generic sponsor based codes the day after that.
This is when the remaining tickets are made available to anyone who goes to the primary ticketing site. You don’t need a code, only the will to fight the crowds and the money to pay for the ticket.
Dynamic pricing is a software program (like a bot) which measures demand against prices and starts moving the prices of the underlying tickets up or down to sustain the desired pace of ticket sales. If every person who gets tickets into a cart buys them, that suggests there might be the ability to raise prices and keep the sales flowing. Dynamic pricing software raises the prices and then monitors whether the velocity of ticket sales remains steady or slows down. Similarly, if demand is thin, dynamic pricing may reduce the prices of tickets until they begin to move at the rate the promoter requires.
A holdback is when a certain number of tickets are not put on sale. These tickets are “held-back” for a number of reasons:
1. The act, show or team wants to keep tickets available for friends, family, sponsors and VIPS.
2. The artist or promoter thinks tickets will be more valuable later, so they hold them back to sell later for higher prices as demand spikes.
Drip pricing correlates with holdbacks. Sometimes, the seating map appears to have no unsold seats. Then, slowly, from the inventory of tickets held back, seats are released. These releases may be two or four seats at a time, in hopes that someone will feel “lucky” that a pair showed up and have less price sensitivity because they believe this is their one chance to get into the show. In fact, there may be thousands of tickets left, which are slowly “dripped” into the market so as to protect the prices asked.
Artificial scarcity is the result of holdbacks and drip pricing. The consumer believes that all the tickets are sold, when in fact they are not. Displaying seat maps with no seats available, when in fact there are unsold seats creates the misleading impression that tickets are scarce. If there are still lots of tickets to sell, that is a false impression designed to motivate behavior of a consumer who might otherwise elect to watch ticket prices until the show date approaches hoping for a price reduction but for the sense that these tickets now available may just be the last ones left.
Platinum tickets are a device used by Ticketmaster to sell ordinary tickets for higher than the regular face value. Tickets in certain sections of the venue are designated Platinum even though tickets absolutely equivalent and adjacent are sold for much lower prices. I’ve seen Platinum ticket indicators on mid balcony seats. It’s really a free pass past the waiting rooms, technology blocks and other impediments to ticket buying. Here’s your choice: be number 2,000+ waiting your turn to get into the page where you can search for tickets, at risk of being blocked by your IP address, credit card or whether anyone on WiFi within your same area has already bought a ticket or just pay the extra money and get right through.
When you list a ticket for sale on any of the markets, whether it’s StubHub, Vivid Seats, SeatGeek or others, they charge you a fee when the tickets sell, because their platform delivered the buyer. The seller’s fee used to be typically 10% of the price at which you listed the ticket. So, if you were asking $100 for your ticket and it sold, you would receive $90 and the market would keep $10 plus the buying fee. In the past year the seller’s fee has risen 50% to 15% for infrequent sellers. Large scale sellers can negotiate their fees almost to zero.
There is a fee paid by buyers added onto the price of tickets in almost every secondary market. That fee might range from 10% to 35% depending on the scarcity of the ticket and the structure of the market. Many markets manipulate their pricing and subsidize that act by increasing their buy fee — see markdown.
When a ticket is made to appear less expensive than on a competing market by using software to adjust the apparent price of the ticket down, only to recover that reduction by increasing the sell fee. If a ticket is listed for $100, it can appear as $90 with an additional $10 added to the sell fee. Net result is the same for the seller, but the buyer was misled the price was lower than the price may have been at a competing market which showed the price at its true $100 pre-fee price.
Freely Transferable ticket
A ticket which can be transferred to another user by sending the bar code or QR code, handing over the paper ticket or PDF, or by simply emailing the ticket to the ultimate user.
Conditionally Transferable ticket
A ticket which can only be transferred by working through the transfer protocol of the primary market such as Flash Seats or Ticketmaster, in which the seller of the ticket has to direct the buyer to register an account on the marketplace which sold the account in order to move the ticket from the buyer’s account to the seller.
A ticket which cannot be transferred under any circumstance. In this case, the buyer who cannot use the ticket forfeits its value as it cannot be resold. This leads to problems like buying tickets for the 2020 summer Olympics in Tokyo and deciding not to go because of the threat from the Corona virus. Those non-transferable tickets are then lost.
White Label site
A website which appears to be the official box office or primary market, but is not. These sites purchase domain names similar to that of the venue, so as to trick consumers who search the name of the venue or the event in order to find the primary market and wind up paying resale markups because they did not have enough experience to know that www.ahmansontheatre.net is a resale site operated by Pure Tonic Marketing, while the official site for the Ahmanson theater is www.centertheatergroup.org.
There’s always going to be a place for the primary and the secondary markets to interact. No one can sell all the tickets in the world alone. Most of the events which go on sale have little chance of selling out. You won’t need a bot to buy those tickets, you’ll barely need a rotary phone. As someone who once sold a Paul McCartney ticket for $3 because that was the market price, I know there’s no such thing as a sure thing. Some people have the time and energy to fight the presale/on-sale crowd. Some just want a ticket now. Some people don’t know what they want until the day of show. We all just have to work to make sure that pricing is transparent and consumers understand exactly what they’re buying. If, collectively we do that, we won’t need Congress to intervene. They’ll keep coming back.
Let me know what you think.
This post was originally published at Medium. It is republished here with the author’s permission.
About the Author
Eric Fuller is an $895/hour consultant advising leading companies in the live event space. If you are an investor, artist, promoter, team, producer, venue operator, primary or secondary market of ticketed events or have comments on this article, please don’t hesitate to contact me: firstname.lastname@example.org