MU50167E Agency & Promoters Session 9

Secondary ticketing - a brief history

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Brokers

Brokers were a US phenomenon, centred around theatre tickets initially. Show promoters
gave tickets straight to venues and brokers for maximum coverage, state by state.
Audiences went either to the venue to buy the tickets, or applied by mail order for a voucher
that would then be exchanged at the theatre for a ticket. Ticket agencies ran these
operations and charged a fee on top. They ‘brokered’ a deal – hence brokers. The voucher
system was open to abuse and paved the way for early 'touting ' of tickets – it was not
uncommon for the box office staff to give you bad seats in exchange for your voucher, as
they had already sold your good seats to walk-up customers for a mark-up.

Tickets brokers still exist in the USA. This is from their web site:

“Today with the greatest demand for many sporting events, concerts, and theater
events, ticket services now serve the public in three ways. First we provide tickets to
events that are sold out through the primary market. Second, we provide premium
upfront seats which are the most desirable. Third, we provide ticket holders a place
to sell their unwanted, or unneeded or extra tickets.

Ticket Services/Ticket Brokers have been in existence since the turn of the century.
Ticket services then took the place of today's computerized ticket centers serving as
remote outlets for the theaters and ballparks. Using a ticket service in the early
1900's meant for as little as a twenty five to fifty cent service fee, a patron no longer
had to get across town to buy seats in advance. Tickets were provided by the venues
and ticket services served the public as a primary market seller. Any unsold tickets
would simply be returned to the box office and payment rendered to the venue for
tickets sold. Since there were no costs above face value to obtain tickets they were
sold with very small service charges.” National Association of Ticket Brokers.

Computers

The 60’s and 70’s saw computerised mainframe ticketing systems being developed. The
TRS (Ticket Reservation System), and COMPUTICKET, allowed national allocation and
distribution of tickets, a huge step forward. Ticket selling was not limited by geography.

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Ticketmaster (formed 1976) and others, entered into exclusive ticketing arrangements with
venues, and some regional promoters. The 1977 Electric Light Orchestra show at the
University of New Mexico was the first show supplied with tickets through Ticketmaster.
Remember, there was no such thing as a national promoter yet. Ticketmaster acted as
distributors and charged a 'service fee' per ticket. The public began to see some
convenience from these computerised system, especially when it came to finding out if a
show had nearly sold out.

In 1981 Ticketmaster UK was established, whist Ticketmaster in the US introduced

increasingly higher service charges. Fred Rosen, CEO of Ticketmaster from 1988 – 1998,
said at the time, “Ticket sellers are for profit, not a public service.”

Consolidation

There were also lots of acquisitions by Ticketmaster of competing ticketing companies under
Fred Rosen, giving the company major control of ticketing in the US. For example, the 1991
acquisition of Ticketron meant buying a ticket in the 1980s and 1990s’s was either through
Ticketmaster (mail order or from the venue), or from a broker – who were probably supplied
by Ticketmaster.

Now, importantly, a number of these tickets were always pre-allocated by promoters, as part
of the deal struck with the artist and their booking agents. These pre-allocations usually
honoured long-held arrangements with venues and brokers.

Examples of where these tickets went include:

 Season ticket holders

 Ticket buying clubs
 Fan clubs
 Venue holds
 'Production' holds

So, some of the griefs associated with the secondary market of today were already
beginning to manifest themselves – namely scarcity and high prices.

There was another development that would become significant. Robert FX Sillerman started
a concert promotion Company, SFX Concerts in 1997. Clear Channel (a provider of
billboards for advertising, as well as owner of radio stations), bought SFX Concerts in 2000
to form Channel Entertainment. In 2005, the concert promotion division of Channel
Entertainment was spun out in an MBO, and Live Nation was formed.

Computers - part 2

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By the 2000’s there was widespread use of the internet and personal computing, and
ticketing was utilising both to create a better experience for customers. (In fact,
Ticketmaster.com's first-ever Internet ticket sale occurred in 1996, for a Seattle Mariners
game). In 1998, the UK's first real-time ticketing web site, www.ticketmaster.co.uk, was
launched.

But there was still little online completion. That was about to change though. In 1995 a web-
programmer by the name of Pierre Omidyar started named AuctionWeb. Later renamed
eBay, the company went public in 1998.

So, using Ticketmaster you could buy a ticket online – if it was available. You could sell a
ticket online using eBay – if you needed to OR if you had access to lots of tickets for a high
demand event. Scalpers and touts have always done this – now they could do it online.

To make matters ‘worse’ (depending on your place in the ticketing eco-system),

Masterbroker was introduced in 2004. This was an online system which allowed the bulk
uploading of tickets. Initially conceived as a way of promoters being able to talk to the online
existing ticketing services (i.e. Ticketmaster), it was quickly bought (a licence) by start-up
competitors – RazorGator and LiquidSeats (later StubHub). This enabled them to not only
offer a re-seller service to the public but to other brokers – for a fee.

Competition

LiquidSeats/Stubhub used Google Adwords to fill demand for hard to get tickets using a
Google process called Dynamic Keyword Insertion. This function within Adwords allows
sellers to bid on search terms, customised to the search query. If you were searching for
‘Bum Gravy’ tickets, Stubhub (via Google) would serve you an ad, saying ‘Bum Gravy
Tickets – buy here’ and the ad would lead you to Stubhubs page. If you then searched for
Farry Kisher tickets, StubHub/Google would show the same ad, with ‘Farry Kisher’, instead
of ‘Bum Gravy’, with the ad again clicking through again to Stubhub. By end of 2005 Stubhub
sold $40 million worth of tickets using this technique – legitimately. (One of the founders of
Stubhub, Eric Baker, formed Viagogo in Europe after being fired from the board.)

Ebay then bought Stubhub in 2007 to eliminate competition and to increase revenues; EBay
used to get 6-8% of the sale of tickets sold on ebay, and StubHub charged 25% per sale!

The Hannah Montana incident.

Then, in 2007, the Hannah Montana (Miley Cyrus) ticket scramble happened (Search
YouTube: “Parents Peeved By Hannah Montana Ticket Prices”). This was the first time it
really struck fans that, although the tickets had just gone on sale, the show was sold out –

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yet tickets were already available for stupid prices on the secondary market. How could this
be? The incident was a PR disaster for Ticketmaster, but did not affect sales so much as the
tour sold out. It was great for StubHub and eBay - parents could not buy tickets but could
use Google and find tickets selling for 10 times the face value within minutes.

“The secondary market flourished with tickets to those shows. The tickets, whose
face value ranged from $21 to $66, were resold on StubHub for an average of $258,
plus StubHub’s 25% commission (10% paid by the buyer, 15% by the seller).
StubHub reported that ticket sales for Hannah Montana accounted for $10 million of
its sales in 2007, the most for a single act in the company’s history.” (Loewenstein,
2007)

So where had the tickets gone? The most probable explanation is that people using sniping
software had obtained the tickets and then immediately posted them for re-sale using
Masterbroker.

The sniping software’s capabilities were astonishing. Ticket scalper Chris Kovach, using
such software, made more than 600,000 ticket requests in a single day, and purchased
24,000 tickets over a several year period. Ticketmaster reports that on some days, 80% of
its ticket requests are generated by bots. After the Hannah Montana debacle, a variety of
legal actions and technological advancements have attempted to solve the problem of ticket
sniping. For instance, Ticketmaster sued RMG Technologies (RMG), a company that
developed and marketed sniping software specifically aimed at Ticketmaster.

One must not rule out the availability of tickets from the dispersions listed above (production
holds, fan clubs etc.) for the non-availability of tickets to ‘genuine’ fans.

The String Cheese Incident, incident.

‘Jam bands’ such as String Cheese Incident (SCI), Dave Matthews & Phish, traditionally sold
concert tickets directly to their fans as much as possible. String Cheese Incident even
formed their own ticketing company, SCI Ticketing, in 2001. However, this did not please the
mighty Ticketmaster (TM), and so, in 2002, TM advised promoters and venues they would
not provide direct-to-fan tickets for other acts. Many venues had exclusive ticketing
arrangements with TM, and so if you wanted to book SCI into your arena, you had to use TM
to sell the tickets – even though SCI wanted to sell directly to the fans. SCI went on tour in
spring 2002 and felt singled out by TM and so took them to court. Unfortunately, as if often
the case, the suit was settled beforehand, and so no precedent was set.

As a result of this action, and other involving jam bands, TM began to lose a lot of ticketing
revenue and the goodwill of artists.

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TM needed to work directly with artists.

Mergers & acquisitions

By 2008, TM had acquired TicketsNow, GetmeIn! (a secondary site) and Front Line
management. Run by Irving Azoff, Frontline had 330 artist clients and approx. 100
managers. Following the aquistion, artists such as Christina Aguilera, the Eagles, Joe
Walsh, Van Halen, Kings of Leon, Gwen Stefani, No Doubt, Thirty Seconds to Mars, Steely
Dan, Chelsea Handler and Lindsey Buckingham of Fleetwood Mac were now all managed
by TM. Azoff then became CEO of Ticketmaster.

Live Nation (LN), the concert promoter, was by now TM’s biggest client, and able to
negotiate good deals with TM on service charges. TM thought LN was their customer – LN
thought TM was their customer. This led to arguments, disagreements, and accusations of
anti-competitive business practices between the two. Something had to give

LN & TM merged in 2009 - only after congressional hearings into the possibility of a
monopoly of the concert business.

VIP & straight to resellers

Ticketmaster had sent thousands of ‘cease & desist’ letters to ebay/Stunhub et al before the
merger, but local and state laws would not/could not enforce these requests to stop selling
tickets on the secondary market.

So why not join them?

Azoff apparently always used to take management ticket allocations and sell them to brokers
– now he could legitimately allocate tickets to the secondary market via Ticketmaster/LN.
This all came out in the congressional hearings. He also admitted that many tickets for an
event were not available to the public, because they have been directly placed on the
secondary market as VIP or ‘Platinum’ (Azoff’s words) tickets. (TM has a ‘Platinum Seating’
division). He also admitted that various holds (venue, sponsor, band, record company) go
straight to brokers, with any profit from the re-sale going back to the band, management and
promoter – if the promoter is LN.

Conclusion

In most businesses, competition dictates that participants match or lower prices. Concert
ticketing has demonstrated the reverse – the highest bidder wins. Michael Rapino, head of
LN at time of congressional hearing into the merger, said ‘The true monopoly, is the artist.
An agent will call a bunch of promoters and say who’s going to bid the most for my tour?’

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It was alleged that LN always got the tour, because they bid so much above other
promoters. In fact, the congressional hearings showed that LN were (still are?) doing deals
with 100% guarantees for the band – 100 of the gross potential is offered to the band.

Rapino says, ‘Say we do 1000 concerts at out 50 amphitheatres. That is 10 million tickets
sold and we lose $70 million – that means the price of the talent versus the ticket price. We
should add $7 a ticket more to cover our costs but we don’t. The artist gets the door and we
end up making our money on the peanuts, popcorn, parking and coat check.’

So, what does LN offering 100% artist guarantees have to do with you not being able to buy
a concert ticket?

Loewenstein, A. (2010). Ticket sniping. Journal on Telecommunications and High

Technology Law, Boulder. 243-276.

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