Ticket Brokers Make it Tougher for Concert Fans

7/9/05 (Reuters)

NASHVILLE (Billboard) - Despite technological advances that have brought the box office literally into consumers' homes, getting a good seat at a hot show is tougher than ever for most fans.

In fact, Internet sales enable ticket brokers to gobble up a significant number of choice concert seats for resale -- often at several times face value.

For the most part, this "secondary ticket market" contributes nothing to those who invest in the shows. But it does leave promoters, venues and artists to deal with frustrated fans who cannot get the tickets they want.

"The Internet has created the potential for everybody to be a scalper," says TNA International president Arthur Fogel, producer of U2's white-hot Vertigo tour.

As the touring business enters its most superstar-laden summer in more than a decade, the industry is torn between connecting with consumers via marketing tools like Internet pre-sales and falling prey to the exploding secondary market.

"This summer there are special acts touring, and when the McCartneys, U2s and the Stones of the world go out, there is no question that demand is going to far exceed supply," Ticketmaster president/CEO John Pleasants says.

Supply can disappear quickly in the digital age. About 55% of Ticketmaster's sales now come from the Internet, up from single digits in 1998, Pleasants says. And while the act of buying a ticket is easier than ever, the process is open to millions who can all try to tap in at once.

"Now that everybody's bedroom or office is essentially an outlet, you've got more people pounding, and your transaction processing is faster," Pleasants says. "So a show that would sell out in an hour or 45 minutes 10 years ago can literally sell out in two or three minutes now."

Those who have built businesses around the secondary market claim they offer an essential service. Many operate Web sites, where tickets are sold at a fixed rate above face value, based on what the secondary market will likely support. At other sites, such as eBay, tickets are auctioned to the highest bidder.

Jeff Fluhr, co-founder of online ticket reselling portal http://www.stubhub.com, maintains tickets are always available. "You can get any seat you want for any concert in this country. Just go to stubhub.com," he says. "And you will get a fair market price." Stubhub, like most online ticket brokers, serves as a middleman between buyers and sellers, deriving revenue from commissions on ticket sales.

Clearly, many consumers are using these services. Dell Furano, CEO of merchandising firm Signatures Network, says his company conducts research on the secondary ticket market. "There is a very large and active secondary ticket market out there," Furano says. His in-house research shows that nearly 50% of the first 15 rows of seats ends up in the hands of secondary ticket brokers.

"It's very simple: The premium seats, the 15%-20% of seats at the best locations, are empirically worth more than their face value," Furano says. "What has happened is the ticket brokers have gone in and rescaled the house, so to speak."

Some view such secondary ticketing sites as Ticketsnow, RazorGator, Stubhub and newcomer Mailstorm as platforms for profiteering. And they fear the practice is growing.

"I see a proliferation of (U2) tickets on these various sites, well beyond what we saw on Elevation" in 2001, TNA's Fogel says. "I know that there are people out there whose livelihood is about figuring out how to get their hands on these tickets. But at the same time, the Joe Public everybody's worried about is also profiteering."

HOLDING BACK

Making matters even worse for the average fan is the common practice of holding back 10%-40% of a given venue's tickets for most shows. These "holds" serve such constituencies as the band and management, promoters, sponsors, radio stations, suite holders, sports tenants, record labels and fan clubs.

"That whole segment has taken away some of the inventory that normally would have gone on sale to the public," Fogel says. "But people tend to forget those who join fan clubs or have American Express cards, they are the public, as well."

Most agree that a sizable portion of seats that are held back end up on secondary sales sites. "A lot of the (Stubhub) tickets are coming from those holds, from the corporate sponsors, the band themselves who are holding back inventory, from the season ticketholders who have tickets," Fluhr says of Stubhub. "We don't care who the buyer or seller is, we want to create as many buyers and sellers in the marketplace as we can, so that competition is optimized."

Ticketsnow founder Mike Domek says he doubts much of his inventory comes from industry holds.

"Our inventory is representative of what is made available to the general public," he says. "As far as promoter holds or things like that, there is a misconception that brokers have access to that."

The fan clubs in particular, which often take up about 10% of the available tickets, "are just another form of marketing" in the eyes of Peter Luukko, president of Philadelphia-based arena management firm Comcast-Spectacor Ventures.

And while scalpers may crack the system, "if you look at the majority of people in the fan clubs, it's really fans of that band, and you're marketing directly to them and selling them a ticket," Luukko maintains. "Sure there are scalpers intermingled in, but 99.9% are fans."

Concert producers love the cost-effective nature of e-marketing direct to specific fan groups through Internet presales. However, the strategy can leave out the casual fan.

"Unless you're on one of those lists, you may not get the first notification of when those tickets are available," says Brad Wavra, senior VP of Clear Channel Entertainment touring, producer of half the dates on the upcoming sold-out Paul McCartney tour.

As for industry holds ending up in secondary hands, Furano thinks that artists will begin seeking greater control of these tickets.

"We believe the artists will impose more controls over the distribution of their tickets so that they don't end up in the hands of brokers," Furano says. "And the artists will continue to run affinity ticketing programs off their Web sites, because they can control the price (and) who gets the tickets."

Ever since phone outlets became a big ticket-selling mechanism nearly 20 years ago, scalpers have tried to beat the system by slamming the phone banks with thousands of calls. With the Internet, brokers devise programs that attempt the same thing, trying to lock up presales, steal passwords and devour as much inventory as possible.

"This game has been going on forever," Ticketmaster's Pleasants says. "Fighting fraud is a huge, time-consuming effort that we do constantly, and I think we're pretty good at it. But it's a real cat-and-mouse game; there are thousands of people trying to get around the system every day."

According to Fluhr, "There are over 1,000 ticket brokers in the country -- businesses that buy and sell tickets for a living. And they're playing an important role in the market, in my opinion, because they're taking inventory off the hands of the promoters."

'WE DON'T LIKE SCALPERS'

Others take a much dimmer view. "We don't like scalpers," Comcast-Spectacor's Luukko says. "They don't invest in the tour, in the venue. They don't have any of the risk associated and the capital needed to build buildings and put on tours. So I don't know why they deserve to make any money off that ticket."

Few issues raise the ire of concert professionals like scalpers. "We all work hard to try and find a fair price point for an artist, and we all hate seeing the fan get screwed," says Marty Diamond, agent for Coldplay at Little Big Man. "The scalping business is nothing more than organized crime."

But Ticketsnow's Domek says there is a risk for his sellers. "They are giving the promoter an immediate return on their investment, and they are taking the risk that that ticket will sell or not sell," he says. "There are millions of dollars of tickets every year that go unsold."

As for the artists, "they got their asking price," Domek says. "They set the price, they got their price, they got paid. I don't see where there's any room to accept criticism from them."

Stubhub's Fluhr realizes some people will never accept ticket reselling. "There are people who don't like the resale of tickets, but frankly I think those people are living in the past," he says. "This is a different age from the street scalper."

Clear Channel's Wavra says when he hears reports of fans paying thousands of dollars for McCartney tickets, "it makes me sick. But this is the environment we live in, perpetuated by the customers that pay the money."

Article source:
Reuters/Billboard