Steve Machin of Stormcrowd argues that whilst Channel 4’s Great Ticket Scandal raised some interesting points, it also missed out large chunks of the bigger picture…
Bringing an arsenal of investigative techniques to bear, Dispatches sought to expose what it had clearly predetermined was the dark side of the hitherto opaque and mysterious world of the concert industry - ticket sales and resales. The sense of entitlement and expectation that fans can show, rightly or wrongly, regarding an act and their tickets is startling and Dispatches exploited this highly-charged topic to create what it portrayed as a sensational scandal. But while the programme did uncover what appeared to be genuine legal concerns around some aspects of the descriptions of the resale market, I would argue that the sensationalist approach that it took overall failed to give an accurate representation of the complex economics of the 21st century ticketing market.
Rockonomics - In order to understand this, we first need a quick (and simplified) overview of rockonomics. Economists talk of supply and demand, yield management and mitigation of risk - do these principles apply to the sale of tickets? Absolutely. The promoter acts as an initial speculator, buying the performances (and related services such as venue hire) hoping that they can make a profit on the total cost of the gig or tour, by selling sufficient tickets at the right prices. The promoter assumes risk from the performers.
The perceived demand impacts upon supply variables - ticket pricing, the number of tickets made available, and the size of the venues. The better the tour can predict demand, and price tickets accurately against fans expectation of value, the more effective the yield will be in returning a profit on the risked capital.
What risk? A question asked by the programme was “how hard is it to predict how successful a comeback tour by Take That might be?” It was raised precisely to undermine the notion that there is any risk in promoting concerts. While some tours are inherently more risky than others, one only has to look at the annual returns filed by Live Nation to see razor thin margins where even a small amount of increased risk could significantly impact upon the business.
Risky Business
So how do the promoters reduce their risk? By selling tickets at prices that are low enough to ensure that sufficient attendees provide a return on investment, and that price, for some of the tickets is below market value, while for others is above market value.
It is a common complaint that “music or concerts cannot be reduced to a commodity and traded” - I am no apologist for the areas of the resale market that were exposed as legally challenging from a consumer protection viewpoint, nor do I make any claims as to whether it is right or wrong to trade tickets - that is not the subject of this piece – but what is clear is that tickets ARE traded like commodities. That is in part because there continues to be a consistent disparity between the market price of a ticket and the published face value at which it is first sold. Not all tickets are created equal, and over time the value of each ticket will vary - see a recent article by PRS for Music for a good review of the economics of ticket discounting - the “front rows” get traded while there are still seats available "at the back"
The internet has simply made it much easier to buy and sell most products, everything from iPods to insurance and all points in between. Tickets are no different and with arbitrage opportunity available the internet allows buyers and sellers to easily connect and transact at market price - leading to the creation of an additional layer of speculation - fans who buy more than they need, and professional brokers investing in buying tickets purely to resell - the cold harvesting of tickets.
The whole truth
The Dispatches investigation wanted to ensure that this programme was car-crash television of the highest order. In doing so they did not tell the whole story about many of the points that they covered.
1 - Fans learned that a significant proportion of tickets sold on ViaGoGo and Seatwave are not sourced from individual fans looking to sell tickets that can no longer be used - the notion of being exclusively fan-to-fan is a misnomer as many tickets come from brokers and box-offices. It is worth noting, as Dispatches failed to mention, that Seatwave states clearly on its website when tickets have been made available directly by the box office.
2 - We also heard that on some tours, ViaGoGo and Seatwave are provided tickets directly by the promoter to sell at the best price possible. The presumption was that tickets are always sold at astronomical prices above face-value. In reality, tickets are often sold on exchanges, or other discount channel sites at significantly below face value. The cold truth is that exchanges can provide access to a cohort of demonstrably price insensitive customers who are willing to pay a premium to acquire tickets closer to the event date.
3 - More surprising was the evidence that staff at ViaGoGo has purchased tickets from primary vendors such as Ticketmaster to resell using the company’s own “internal seller” accounts. There is a significant difference between market clearing price (which is generally considered a good thing economically) and an exchange making the market under false pretenses.
The public rage on twitter during the broadcast was aimed squarely at the exchanges and promoters, and assumed (as Dispatches suggested) that artists or their management are not aware that tickets are allocated to exchanges. Speaking to Pollstar reporter John Gammon following the broadcast, Live Nation’s Paul Latham stated that Live Nation has never allocated tickets without the knowledge and consent of the artists’ management. The Concert Promoters Association issued a statement to the effect that placing tickets into the secondary market reduces prices by increasing supply, and ensures that additional value is captured within the industry.
Dispatches also failed to mention that there are already mechanisms available that make ticket reselling more difficult should a tour choose to. These include paperless tickets that require the purchasing credit card to be present or photo-ticket schemes such as that used by Glastonbury festival. Removing speculators however exposes the tour to true demand, a point made eloquently earlier this week by Bob Lefsetz in his industry blog (www.lefsetz.com/) and this is not always good news for the artists or promoters.
The fans pay the bills
The wider impact of price sensitivity on the concert business must be considered for everyone competing for the same share of the fan wallet. Do fans who decide to not spend money on a ticket spend it on other concerts or other music entertainment products, or do they spend it on computer games or fashion or some other category? Do fans who spend high sums of money on concert tickets spend less at the venue on F&B or on merchandise? Will dynamic pricing be a reality and provide genuine real-time market pricing for concerts and would that be embraced by the industry and fans alike as a fair solution?
Ultimately in such a complex market there are a lot more questions than answers - while emotions clearly run high when discussing entertainment tickets, does it mean the government should legislate and introduce price regulation into efficient markets? After all, the face value is an arbitrary price that could have been set much higher or much lower. And anyhow, now that these markets exist, can the genie be put back in the bottle? Would it be helpful, and to whom? Dispatches successfully demonstrated that some fans care a lot about ticket pricing but that even more care about transparency.
Built in part on largely one-sided questioning designed to elicit highly emotional responses from disgruntled fans who chose to purchase tickets (and similarly grief stricken tales from disappointed fans who chose not to) the programme failed to make a balanced representation of issues affecting the ticket business. All the primary stakeholders in the concert industry that I speak to are concerned with how to get more fans, to habitually attend more shows, more often. That is the wider challenge that frames this debate.
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Steve Machin (@stevemachin) runs Stormcrowd (@stormcrowd) - an entertainment consultancy specializing in ticketing and social commerce - www.stormcrowd.com/
Further reading:
Bob Lefsetz (@lefsetz) on ticket scalping
Pollstar review of Dispatches
PRS article on ticket discounting
PRS article on Secondary Market Analysis
