Over the course of the last five years, numerous government agencies individual states have attempted to address anti-consumer practices involved in event ticket sales and concert promotion. While various states have enacted some consumer protection – most specifically making nontransferable tickets illegal – most of the issues identified are the problems of venues and primary ticket sellers in the concert space, and those remain unsolved.
In New York, Senator James Skoufis (D-39th) decided to do his own investigation, and solve the issues instead of pushing them off till the next session. As a result, Sen. Skoufis has introduced an omnibus tickets bill that attacks the issues at hand, which could substantially improve the ticketing landscape in New York, home to an enormous live event industry that is just now getting back on its feet following the lengthy pause brought on by the COVID pandemic.
Many of the issues that consumers face in event tickets have been well documented – many were identified several years ago by New York Attorney General Eric Schneiderman’s investigation. While Schneiderman identified many issues in the tickets industry, his campaign also reached out to the participants during the investigation to solicit donations.
New York Ticketing Entity Political Donation History
TicketNews previously reported on the donations of Robert Smith of Vista Equity Partners, as well as employees of Vista and their legal representatives, Kirkland and Ellis. These donations alone totaled $400,000. These donations were spread out in timing, ranging from before Vista’s purchase of Vivid Seats, the day that the deal closed, and after the deal. Most of the donations were $10,000 from Vista Employees. If Vista Employees or Kirkland and Ellis were reimbursed in any way for those donations, that would be in violation of New York State election laws. Both Smith, his wife, and partner donated more than $60,000 to Schneiderman during that that time. Such large donations from the husband and wife raised scrutiny, but NBC reporters Chris Glorioso and Ann Givens were not able to connect the donations to the Vivid Seats transaction.
Fast forward to October, 2020. News broke that Robert Smith entered into a deferred prosecution agreement regarding his participation in an enormous tax fraud scheme. As part of that agreement, he was required by the U.S. Attorney’s office to disclose of any other illegal activity that he was involved with. According to TicketNews sources, the US attorney has knowledge of the donations and the FBI was investigating the matter. Smith is current the chairman of Carnegie Hall’s Board of Trustees
With so much questionable behavior tied to just one company, we decided to dig deeper to determine if there was more to this pattern. Following Schneiderman’s report, his campaign received $50,000 from MSG-related entities, executives, and their families in a ten month span ranging from mid-May 2017 to mid-March, 2018. (Full timeline included at the bottom of this article)
Todd Boehly, owner of the Los Angeles Dodgers and the SPAC that is purchasing and bringing Vivid Seats public, donated $65,000 to the Schneiderman’s campaign on 1/16/2016. According to Vivid Seats investor presentation, Mr Boehly or a related entity made an investment in Vivid Seats in December of 2020. There was no mention of involvement with Vivid Seats that point.
TicketNetwork CEO Don Vaccaro told TicketNews that he and his company were being solicited for campaign donations from Schneiderman prior to his resignation amid scandal, but refused to pay based on his statements that he would not take campaign donations from businesses involved in markets he was investigating. The NFL and TicketNetwork – neither of which made donations to Schneiderman’s office while it scrutinized ticketing based on analysis of available public records, were the only two companies Schneiderman’s office took actions against in ticketing not directly related to the use of illegal “bot” programs.
Was it an illegal pay for play? We asked current New York Attorney General Letitia James, but her office declined to comment. Notably, during Sen. Skoufis’ hearing in April, many venues were invited to the hearing and more notably the Attorney General’s office did not appear.
Proposed Changes in the New York Ticketing law, the reasoning behind them, and who wins.
Ticket Bots
The proposed law has a requirement that any ticket exchange or resale platform that knows about sellers listing tickets for sale that procured them through bots as defined by state statute, will pay a penalty of $500 per ticket sold if they do not report that activity to the Attorney General’s office. Any person who reports the use of such programs will receive a whistleblower fee in the amount of 5% of any fine collected by the Attorney General.
If you believe that Ticketing BOTS are bad, this this is a big win. Here’s why: Any employee of a firm that uses bots will get a reward for tuning in their employer. This disincentivize anyone from using one.
Who may lose – Ticketmaster and Vivid Seats. Both companies offer software to ticket brokers that automatically downloads tickets from the primary seller. The Federal UCC code is clear that delivery is part of the sales process. However, we don’t know the stance of the NYAG.
If the state or anyone effected by it argues and wins, the penalties would be substantial.
A clearer definition of what is a ticket reseller.
The law will exempt sellers who sell up to 30 tickets a year from requiring them to have a ticket resale license if they originally purchased them for their own use. It also reduces the licensing fee from $5,000 to three different levels from $2,000 to $4,000.
Who wins – the licensed professional broker with a lower fee
Who loses – Exchanges that sell tickets for unlicensed people,such as eBay, Craigslist, Etc. Also, Season Ticket Holders who resell their tickets may be considered unlicensed brokers and C2C exchanges. However for the license is a $25,000 bond that often is disenfranchising to lower income folks without credit histories who are stating in the business .
Refunds to cancelled and postponed events
The proposed legislation will give specific guidelines to refunds of cancelled events. This was not an issue before Covid but was exacerbated by Ticketmaster’s initial refusal to refund money for many shows including the cancelled shows at Nassau Coliseum.
There are now numerous class action suits for non-refunds of tickets. Vivid Seats agreed to settle one for $7.5MN with a stipulation that it will give partial refunds if the claims hit a certain level. The court held in the Live Nation/Ticketmaster class action that the customer agreed to binding arbitration even though Ticketmaster allegedly changed their terms and service after the purchase. StubHub is involved with a class action as well. The irony in the Ticketmaster decision is that Judge Edward Chen is a super speed reader and thinks it is possible to read and understand the terms of service of over 6,000 words in under 3 minutes, the time you have to make your purchase. I wish I was as smart as him.
However, if you purchased your tickets with an American Express card you can still dispute the transaction. American Express had a pre Covid policy of no limit on a time to charge back. Additionally, 14 others states mandate refunds for cancelled events by law.
Who are the winners – Ticket buying consumers, primary sellers like Tickets.com and the Shubert organization which we believe gave full refunds, and secondary market sellers like TicketNetwork, SeatGeek and TickPick which give consumers these refunds on cancelled events if asked.
Who are the losers – Ticketmaster – Stubhub – Vivid Seats and any entertainment event, artist, act team that knowingly can not play the date and doesn’t provide notice to the sellers in a timely manor or did provide notice to the primary sellers yet the primary sellers did not cancel the event.
Face value of tickets to be printed on ticket sites.
The state will have face value requirements on exchanges that resell tickets. The face value definition of New York differs with that of the FTC determination which may cause some confusion.
Consumers – win – they have more information to make an educated decision.
Most Dynamic Pricing will be illegal in New York
New York will place limits on dynamic pricing of most tickets. This means that a venue must state the ticket price and won’t be able to raise the price because an event is selling well, or in high demand. This dynamic trend is a product of venue ticket holdbacks, which distort consumer perception regarding the availability of tickets. Legislatures found out the venues and promoters were holding back a large portion on the tickets to mislead consumers on ticket availability, creating an artificial sense of urgency to buy tickets which moved the supply curve to the left and artificially raising the equilibrium ticket price. Venues then exploit this perceived scarcity by moving their price up despite substantial inventory remaining on the primary market, just hidden.
When consumers look at primary sellers the floor plans usually show multiple legends for tickets, available for sale, resale tickets, and grayed out tickets. A reasonable consumer would think that means those tickets are sold. It doesn’t mean that at all. Many of those tickets are simple not being sold at the time to create an artificial scarcity.
The losers are primary ticket sellers and artists who try to mislead consumers.
The big winner is consumers and venues who don’t partake of these unscrupulous actions.
Primary sellers’ restriction on double dipping consumers.
Consumers who purchase tickets from a primary seller, can’t make the event, and wish to resell them cannot be charged an additioal fee to do so by the primary seller (if that primary seller also operates resale).
That a big win for consumers. Primary Sellers who double-dip on fees will be violating state law in New York if this is passed.
Service Charges limited to 20%
Primary Sellers will have to limit the service charge to 20% of the face value of the tickets. This was brought on by multiple factors.
First, on lower priced tickets there are instances of the service charge being almost as much as the face value of the ticket. This is substnatially harmful to lower income consumers, who are disproportionatly harmed by the high fees being charged. Second, Attorney General Eric Schneiderman found out during his investigation that primary sellers of tickets and venues conspired to overcharge consumers by labeling fees as service charges that were really payments to venues artist and promoters. The CEO of Live Nation openly disclosed the process in an interview with Goldman Sachs. These fees, which are specifically prohibited by New York law and amount to over $100 Million dollars that New York consumers are owed. In March of 2016, Anthony Dreyer from Skadden Arps pointed out in a letter to clients that they may be subject to litigation for violating that law.
Third, as Rapino stated in his Goldman Sachs meeting, that many of those rebates – in general between $4-7 a ticket, are paid to the artist. That payment may be subject to New York income tax, but could be construed as tax fraud if it is not disclosed as such.
Forth, many venues contractually don’t sell tickets to in-person consumers at the box office on the day the event goes on sale. These rebates are the primary reason why. If a 6,000 seat venue forced all customers to buy using a primary seller and was getting a $5 rebate back for tickets it means $30,000 more in revenue.
Who wins – Box office employees. There is now less incentive to force consumer to buy tickets from a primary vendor, smaller artists, and smaller promoters who don’t have the clout to demand that that rebate is shared with them. New York State will get more taxes from artists. The Shubert organization, whose service fees are low. Venues will in turn raise their rental prices so it should have no effect on them. Consumers will, in all likelihood, pay lower prices.
Banning Floor Pricing.
On Nov 15, 2016 Schneiderman announced a settlement with the NFL that banned the coordination of “floor” prices on ticket marketplaces. Such policies make it impossible to sell a ticket for below a specific “floor” number, which artificially inflates prices charged by consumers looking for tickets to events. While many would assume that would be the end of floor pricing in the state, it wasn’t. The Buffalo Bills admitted to Senators in written testimony that they still have floor pricing for buffalo Bills on their resale marketplace.
Floor pricing is akin to a Jim Crow tactic that is sometimes used to keep lower income consumers out of venues. Recall the Yankees saying that “those” fans don’t look right sitting in premium tickets for a Yankees game, as a reason for floor pricing. Most venues in New York has some state or federal funding to create entertainment for the citizens.
Everybody wins – more people at events.
Limitations and Disclosure on Hold Backs.
Venues must now tell the public how many tickets they are going to hold back, and have to limit it to 10%.
Consumers are misled, to say the least, thinking there are more tickets going on sale then there are. Worse, venues put aside tickets for certain credit card companies that cater to exclusive cliental that only make it harder for regular consumers to get tickets.
Winners – consumers.
Losers – Wealthy consumers who lose special access, companies like American Express and Citibank.
New York has addressed ticketing legislation before – why is this year different?
While there is simpler legislation being considered by the assembly to just extend the current legislation, the stars appear aligned in favor of a deeper change in favor of consumers for numerous reasons.
Prominent venues refused to participate in the Legislature hearing. They are in a tough spot. Eric Schneiderman is no longer in office and the donations made to him during prior investigations are worthless now. Venues have a lot to lose by the attorney general or class action lawyers trying to recoup the money they were overcharged as Attorney Dreyer laid out in his memo. Other venues like the Shubert Organization may be very supportive of these updates to the law, as well as other non-profits who are not bad actors and don’t hold back many tickets and charge low service charges.
Live Nation also has to worry about the ramifications of their deferred prosecution agreement with the DOJ over hacking a rival company and using that information to help drive it into insolvency before purchasing it for pennies on the dollar. They have agreed to cooperate fully with the DOJ. It would be very easy if the NYAG suspected something to reach out to the DOJ to get the information. The DOJ refused to comment on their investigations.
Admitting to this crime, Live Nation has arguably violated the NBA Vendor Ethics Policy, which may allow some teams to get out of long term contracts. The driving factor in the NBA may be the players association who take the stance that you go after the players for lesser issues but not after a corporation that admitted to doing what Live Nation does then we have issues. Most municipally owned venues have a similar ethics policy. In states where other primary ticketers have not gotten a ticketing contract, they may be able to force the hand of the municipality to void Ticketmaster’s contract if those ethic clauses do apply to this behavior. Especially in New York.
Ticketmaster may also have other issues as Senator Skoufis Said “ (Ticketmaster) sort of thru the venues under the bus).” Now it may be the time that the Venues throw Ticketmaster under the bus. All these problems make it very hard to press the issue when there is so much more at stake.
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Entertainment industry donations Timeline.
2014 New York Attorney General investigation begins
10/15/2014 $10,000.00 Casey Wasserman
07/07/2015 $12,500.00 Sterling Equities Associates, Llc
07/07/2015 $12,500.00 Sterling Mets, Lp
07/15/2016 $10,000.00 Sterling Equities Associates,
05/08/2017 $5,000.00 Casey Wasserman
05/18/2017 $5,000.00 Carole Bayer Sager
05/18/2017 $15,000.00 Msg Sports And Entertainment, Llc
5/23/2017 $5,000.00 Full Stop Management Llc
05/23/2017 $5,000.00 Azoff Msg Entertainment, Llc
05/23/2017 $15,000.00 Msg Sports And Entertainment, Llc
06/05/2017 $5,000.00 Rochelle Azoff
7/17/2017 $5,000.00 Irving Azoff
10/31/2017 $5,000.00 Ariel Emanuel WME
01/16/2018 $5,000.00 Mo Ostin
01/22/2018 $10,000.00 Sterling Equities Associates
01/25/2018 $5,000.00 Elaine Wynn
02/06/2018 $5,000.00 Bette Midler
03/15/2018 $5,000.00 Tao Group Llc – owned by MSG