Bands that scalp their own tickets and other true tales from the world of live music.

Bands that scalp their own tickets and other true tales from the world of live music.

Bands that scalp their own tickets and other true tales from the world of live music.

Moneybox
Commentary about business and finance.
March 3 2011 4:25 PM

Tickets To Hide

Bands that scalp their own tickets and other true tales from the world of live music.

Neil Diamond. Click image to expand.
Neil Diamond

It seems so simple. Learn of concert. Find out when tickets to said concert go on sale. Purchase tickets. Use tickets to gain entry to concert venue. Enjoy music. Sometimes, it is that simple. But sometimes, the world of modern concert-going seems a veritable dystopia, with corporate behemoths wringing people for every last dollar, bedraggled fans paying scalpers hundreds for seats, and 13,000 tickets evaporating as soon as they go on sale, only to be posted on reselling sites like StubHub seconds later.

That last scenario seemed to happen when punk-disco band LCD Soundsystem announced its last-ever show at Madison Square Garden in New York. When I wrote about the ticketing fiasco, I got a number of responses. Ordinary fans said, This happened to me, too! Performers said, Can you believe this ridiculous system? People who know the business said, Of course that happened! And a few people said, What the hell is going on? Consider this my response to the last crowd—a field guide to the exasperating, opaque world of concert ticketing.

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Foremost, fans should understand that underlying the ticket economy is an essential contradiction. While bands and promoters want to sell out every seat to every show, they also sell tickets at a set price, often a low one. That means, if a show is popular, there is "excess demand": More people want to go than can go, meaning tickets are worth more than face value. Bands don't want to up prices. And they cannot readily add more shows. Thus, the excess demand problem persists, and fans have reason to sell and seek tickets on a secondary market—in the old days, in newspaper advertisements or school bulletin boards, today, online. A ticket's market value sometimes works out to dozens of times its face value.

But before the secondary market, and before even the primary market, is something called the "presale," an increasingly common way for bands and their management to move seats. For the LCD Soundsystem goodbye show, for instance, industry analyst Bob Lefsetz, author of the Lefsetz Letter, estimated that as few as 1,000 seats actually went on general sale.

Where do all those other tickets go? Some seats get distributed to fan clubs during special presale events. Others go to other special groups—American Express cardholders, for example. Then there are the so-called "holdbacks." These are tickets not put on general sale but given to the record label, promoter, agent, venue, band, or management—and sometimes all of them. In some cases, they get passed out to friends, family, and assorted bigwigs. But, in many cases, they get resold on the secondary market, sometimes even before the presale starts.

The practice of band members scalping their own tickets came to light thanks in part to Trent Reznor, Nine Inch Nails frontman and newly minted Oscar winner. In a much-forwarded, much-commented-on March 2009 blog post on how the band chose where to play and how it chose to divvy up tickets, he wrote: "[Bands and their management] take tickets from the pool of available seats and feed them directly to the re-seller (which from this point on will be referred to by their true name: SCALPER). … This is a very common practice that happens more often than not."

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Good luck, however, trying to get a band or its management to say exactly how pervasive the practice is, or who is doing it. ("Everyone!" is the most common answer, for what it is worth.) A few cases have come to light, though. Most famously, or infamously, Neil Diamond marked up and put on sale about 160 "premium" Neil Diamond tickets in 2008—a story that came to light in a great Wall Street Journal piece. There's more garden-variety mischief as well: A band has tickets and needs beer money, so sells them anonymously on any of the many online ticket sites. In their defense, bands and their management say they hate to see the best seats get so expensive—and the reseller get all the profits. They argue that at the very least, the artist should see some of that cash—even if they don't want to be entirely up front about it.

One way or another, by the time the tickets to a hot show are made available to the general public, there are fewer seats going on sale than one might think. Fans vie for them, as do more opportunistic sorts, the ones looking to flip their tickets. Such capitalists have always existed. They waited in line at venues back in the 1960s and worked the phones to Ticketmaster in the 1980s. Now they sit at their laptops, sometimes using "bots," computer systems that submit thousands of requests for seats as soon as tickets go on sale.

These resellers can drive the price of tickets very high: For the LCD Soundsystem show, for instance, $50 tickets were going for more than $1,000. Ticketmaster has an on-again, off-again war with them, but there is a technical problem: It is not always easy to tell a bot from a fan from a legitimate ticket broker. There is also a more basic economic problem: Ticketmaster itself profits from the secondary market. It owns two resellers, TicketExchange and TicketsNow, as well as a ticket auction site.

Bands or promoters could easily marginalize (if not eliminate) the secondary market, of course. They could make tickets nontransferable. They could make them harder to buy—Bob Dylan, for instance, held a show for which individuals needed to show up at the box office to buy a ticket—in cash, no less. They could create ticket lotteries, as Phish does. They could simply raise ticket prices, lowering demand and closing the gap between face and market value. On top of that, legislators could pass or reinstate laws outlawing the resale of tickets for higher than face value. Consumers could also just refuse to participate in it. But consumers, like almost everyone else, are ambivalent about the secondary market: On one hand, it allows them to sell their tickets at true market value. On the other, it sometimes requires them to pay true market value for their tickets.

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There is one change on the horizon that could kill the resellers' business: paperless ticketing. Ticketmaster is now rolling out an alternative system in which the ticket's purchaser needs to show her ID and credit card to get into a concert. That means it is difficult, and sometimes impossible, to resell seats, particularly outside of the Ticketmaster universe.

The system is popular with fans and with performers from Miley Cyrus to Radiohead. And it is what LCD Soundsystem is doing with some added final shows. But it is controversial—especially, predictably, among resellers. In the past week or two, secondary sellers and some consumer groups have started to question its benefits, and even legality. On Feb. 22, something called the Fan Freedom Project launched, reportedly with the backing of the National Association of Ticket Brokers, arguing that paperless ticketing abrogates concertgoers' rights.

StubHub chimed in: "As you read this, companies like Ticketmaster are working to implement a restrictive paperless ticketing system that could deprive you of your essential rights as a fan," the company said in an email to its users. "With restrictive paperless ticketing, you pay for your ticket—but you don't own it. The transfer of your ticket is controlled by the company you bought it from. This means you may not be able to give your extra tickets to a friend, sell them to another fan, or even donate them to a charity."

To which Ticketmaster CEO Nathan Hubbard responded, via Twitter: "StubHub thx for coming clean—you stand with scalpers to take tix from soccer moms and kids and sell them back to them at 5x face value." Later that day he tweeted, "Did u know 94% of fans would rather have access to good seats than transfer their ticket?" and arguing that all options can coexist peacefully.

So who's right? Both sides have a point. Paperless ticketing would bring some predictability and transparency to the ticket market—no more "sellouts" in which nobody seems to get seats, a hurdle for a secondary market becoming increasingly primary. But the system is purposefully restrictive. Consumers cannot always transfer tickets, and it is not always simple to purchase tickets for other people.

But for fans tired of watching tickets evaporate and tired of rent-seeking scalpers wielding bots, a little transparency—a little simplicity—might be a very good thing.

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