America relents while Europe opens up. Is the secondary market an immoral anathema or the saviour of ticketing?

Secondary ticketing: touting to some, big business to others, a nuisance for politicians, and a term as likely to incite rage in any self-respecting promoter as ‘theft’, ‘fraud’ or ‘we’re going to need a bigger guest list’.

America relents while Europe opens up. Is the secondary market an immoral anathema or the saviour of ticketing?

Secondary ticketing: touting to some, big business to others, a nuisance for politicians, and a term as likely to incite rage in any self-respecting promoter as ‘theft’, ‘fraud’ or ‘we’re going to need a bigger guest list’.

The problem stems from that pesky Internet with all of its free-market ethos. It might have revolutionised communication and the spread of information for the better, but where once avid fans queued overnight outside their local box office, suffering rain and pavement for a chance to nab that hot ticket, now the fastest connection wins. Or the best Ticketmaster-busting computer programme launched by organised touts, who’re making a killing.

And it’s not just the new online incarnation of sheepskin-jacket-wearing, unshaven miscreants that traditionally greet gig-goers outside venues with their “buy or sell” chant, but the audience themselves, many of whom will now buy extra tickets and sell on the surplus in the hopes of covering their show costs.

With the value of the primary European market continuously elusive, so the estimates of the secondary market worth vary wildly. Online marketplace Seatwave place it at $3.5billion (€2.6b), while (with sport thrown in) competitor Viagogo cite $9b (€6.7b). But regardless of the true figure, no one’s denying that it’s big bucks, and the artist, manager, promoter, label and industry aren’t seeing a penny, while box offices and ticket agents are forced to deal with wrong, missing or fake tickets beyond their control.

Taking the High Ground

Over the last two years in the UK, the Concert Promoters Association (CPA) has weathered a series of talks with the government, hoping to persuade them to legislate against the secondary market and effectively outlaw the reselling of tickets for a profit. The culmination of their efforts was a Commons Select Committee hearing in June this year where politicians were presented with two very disparate views: the sporting bodies, promoters and venue owners versus the secondary operators – eBay and other online brokers.

“We’ve got to have faith in our parliamentary system,” says CPA chairman Rob Ballantine, who’s waiting for the verdict (due in October), but his optimism is not shared by many who attended.

“They’ve fundamentally missed the point and the scale of the problems out there,” says Chris Edmonds, MD of Ticketmaster UK. “It’s not about the huge events, it’s about The Killers at Brixton [Academy]. My instinct tells me it may be that 25% of tickets for those gigs are being offered above face value.”

Indicating which way the decision is likely to fall, Margaret Hodge (who was recently appointed as the new music minister in Prime Minister Gordon Brown’s cabinet reshuffle) openly stated, “We would take an enormous amount of convincing to think that we would want to contemplate…a ban on secondary ticketing.”

Throughout its ongoing lobbying of the government, the CPA has presented a largely united front of UK promoters (AEG Live broke ranks to begin auctioning front row seats earlier this year) and Ballantine warns that without legislation, “then it’s an open market for any of the promoters to do what they’d like to do.”

“If the government prefers the free market model that’s running at the moment, then someone along the line is going to say, ‘Actually, if the public want to pay that sort of money, then they can pay it, and pay it to the artist rather than the touts’.”

An American Lead

The somewhat cruel irony of the CPA’s efforts is that the time spent wading through governmental channels has allowed several secondary marketplaces to establish themselves. Viagogo and Seatwave are both based on US broker StubHub, which was sold to eBay earlier this year for $310million (€227m).

StubHub charges both buyers and sellers of tickets a percentage fee of the final sale price (10% and 15% respectively) in exchange for a guaranteed delivery service and insurance should anything go wrong. With heavyweight financial backing, the likes of Viagogo and Seatwave are hoping to weed out the disreputable resellers in a similar way. By providing a legitimate, secure market for secondary tickets, StubHub’s success speaks for itself: it shifted 3.3 million tickets last year at a value of over $400m (€293m).

And while there are intrinsic differences between the concert industry outside of North America and within, the US secondary market is over five years more developed than any other. To ignore its strength from a future international perspective, many believe, would be ignorant.

Eric Baker, StubHub co-founder and CEO of Viagogo is one such proponent. “We’ve seen the story before,” he says. “It’s already happened in the US, and the concert industry has been thriving. Secondary ticketing drives down prices and creates more access to the market.”

Viagogo launched in the UK and Germany in January, and claims to have sold more tickets in June than in the first 15 months of StubHub’s existence. “We’re off to a tremendously quicker start, partly because it’s the second time we’ve done this,” Baker says. “We’ve been selling millions of pounds worth of tickets.” This autumn, Viagogo plans to roll out into Spain, France, Italy and the Netherlands.

About Turn

At the moment, the levels of maturity between the US and European secondary markets are very different. While UK promoters are rallying for legislation, in the US, only a handful of states are left to repeal laws governing the resale of tickets. New York overturned such a law two months ago, and when Connecticut and Pennsylvania followed in July, it just left five states to go. Aside from the majority of online brokers ignoring state law, existing legislation is extremely difficult to police, and as a result, nobody does.

“The climate in the US is going from ‘why should we regulate this?’ to ‘we’re going to let you do it, but we’re going to start taxing you’,” says Jeff Lapin at American online reseller RazorGator.”

If the US government does begin to tax the considerable sums of money being made, it would add further authenticity to a market that the concert industry largely abhors. Although, perhaps not as much legitimacy as artists working directly with the resellers and cutting out the promoters entirely.

“A lot of bands have seen the activity of their tickets on the secondary market and realise that it’s going to happen with or without their involvement,” says Sean Pate at StubHub. “Some acts put up their best tickets, either by auction, or we will offer them exclusively on our site.”

Beyoncé, Hank Williams Junior, Lynyrd Skynyrd and INXS have all recently posted artist holds directly on StubHub. “They want to put this in a place where people are used to coming to get the hardest to find tickets and the best seats,” Pate says.

And as if that wasn’t enough to weaken the primary’s industry case, the managers are also hopping on board the secondary train. Tixdaq is a UK start up company affiliated to the Music Managers Forum whose board includes manager Marc Marot and Swedish promoter/manager Petri Lundén. The company aims to monitor the secondary market and establish discourse between all parties involved.

Tixdaq’s Charlie Marshall firmly believes that legislation is not the way forward. “It’s optimistic and fairly short-sighted,” he says. “This market is not going to die; it’s driven out of new technology and new consumer behaviour.

“…in the majority of cases the consumers love the secondary market. It gives choice and value. People abuse it, and in the margins there are some bad practices, but why not work to eliminate the bad practices and let the market flourish?”

The Download Debate

If the music industry has learned anything from the internet over the last few years, it’s that consumer pressure can display unshakeable and resolute willpower. There’s a strong parallel to be drawn with record companies suing consumers over illegal downloading: by resisting the advent of peer-to-peer sharing, labels resisted both technology and consumer demand, and have paid a very dear price for it.

So is secondary ticketing the live music industry’s ‘downloading’? The content owners – promoters and venues – are undeniably trying to resist what many audience members want and are willing to pay for: access to tickets.

“Fighting what consumers want is never the way to go,” says Vito Iaia, senior director of music services for Ticketmaster Europe. “What we as an industry need to do is try to find a business model that enables that market, lets consumers do what they want to do, and find a way to get all that money that currently goes into tout’s pockets back into the gross of the show and for the benefit of the artist.”

Regardless of the fact that – in the UK at least – promoters are effectively trying to save the public from themselves, and in doing so keep ticket prices affordable for the next generation of audiences, the lessons learned in the US and the force of pressure from consumers and big business touting operations is leaving them little room to manoeuvre.

So what options are there? Just how does the industry fight back against a secondary market where established protocols guarantee anonymity for the vast majority of resellers who can only be touting operations masquerading as genuine fans with poor calendar skills?

“One of the biggest problems with the live music industry from a ticketing perspective is that we’re priced far more inefficiently than other live events such as sport,” says Iaia.

“If you look at the typical pricing for a concert in an arena in most countries, you’ll typically see somewhere between two and five price levels at the max, in comparison to say a professional basketball game or boxing match in the US where you can have anywhere between 10 and 20 different levels, priced from $10 for a seat in the upper bowl, to $2,000 or more for a courtside seat. Both consumers had a great experience for the price they paid, but they are two very different types of consumers, having two different experiences.

“Many promoters will tell you that it’s not the best, more expensive seats they have a problem moving, but the tickets at the back of the house,” he says.”

This argument certainly holds true for many of the online brokers, the majority of whose inventory is for well placed seats. It’s these first few rows that also consistently generate news headlines about the astronomical sums being asked (TicketsNow made headlines by offering an orchestra seat for The Police’s Madison Square Garden show on 1 August at $11,500 (€8,426), 4,500% above face value!).

“I say to promoters that it’s because of your inefficiencies that we exist,” says RazorGator’s Lapin. “If you price your tickets correctly and take the chance on pricing the first row at $1,000 instead of $100, you’ll capture that market but you don’t want to take that risk, so we buy the ticket and take the risk. We’re getting rewarded for the risk that you’re not taking.”

Tixdaq’s Marshall concurs, saying: “In a real market environment, each seat has a different value, based on the principles of supply and demand: the time it goes to market, the guy who wants it etc. We see the secondary market as a more advanced market, leading the way in terms of how tickets should be sold.”

Ultimately, Ticketmaster’s Chris Edmonds believes that the primary market will respond with more dynamic pricing, but says, “It’s getting the balance right so you’re still achieving reasonable access to all consumers to all tickets.

Does that mean that every front row ticket then has a higher value attached to it, or does a smart promoter price a percentage of the front row at whatever value the market dictates and hold a percentage back for the fan club?”

Ballantine too, predicts this eventual response to the secondary market if left unchecked. “I don’t think it will continue long term,” he says. “The primary market will decide to dampen the secondary market by closing the gap that exists between [them], and it’s going to be to the detriment of the public.”

But, if true dynamic pricing is applied, where the best seats in the house are used to subsidise the worst, is there not a solution where acts can still play to packed-out venues, and ticket prices could rise but also fall?

“It would be fairer for seats with poor sightlines and it may encourage people to come to a show that they wouldn’t have otherwise,” admits Edmonds.

Techno Battle

As technology gave rise to the secondary market, so it may be the very same force which suffocates the illegitimate secondary operations. With mobile and, kiosk ticketing and a raft of other second generation solutions currently in the ticketing pipeline, customers can be tied to their ticket, making reselling the ticket on unauthorised sites far more difficult.

“I look forward to the time, hopefully this year, when we can put them out of business,” says Jerry Mickelson of Jam Productions in the US. “As technology advances, ticketing will become paperless. Just as you show some form of ID when you get on an airplane, you’ll show some form of ID such as a credit card. Only you can purchase that ticket and get into that seat you’ve purchased.

“All of the investment companies that have made money from the ticket scalpers are going to get scalped themselves,” he continues. “It’s the ultimate scalp – a scalper taking money from a venture capitalist fund.”

The recent introduction of Glastonbury Festival’s photo-ticket entirely eliminated touts, and while promoters are loathed to introduce such costly, and distinctly unenjoyable processes to ticket buying, it may become a necessary evil.

In the US, the Rolling Stones, Bruce Springsteen and Pearl Jam have all trialled tying fans to their ticket, despite the high costs involved. However, as future techno-centric solutions become available, these costs could be borne by booking fees.

Ticketmaster’s TicketExchange programme is an attempt to enter the secondary market, but with the consent of its partner organisations. It’s concert strand launched in the US in 2005, and it has teamed up with several venues and T in the Park festival in the UK, but it’s limited to authorised events and venues, whereas online resellers work ubiquitously. Last year it sold 600,000 tickets through the service – a small dent in an already established and aggressive market.

In many ways, the future of the secondary market is the future of ticketing itself. Not disadvantaging or restricting fans, but simultaneously ensuring that profits made by the industry return to the industry is a fine line to walk, but one which all involved must tread. With the StubHubs of the world attracting a more cash rich and time poor demographic, perhaps there’s even room for the entrepreneurial start-ups, albeit somehow sanctioned or authorised.

Many insiders predict a ticketing future where prices fluctuate over time to match supply and demand, an increase in auctions and a more sophisticated sales approach. And while ticket prices are almost certain to rise, as long as they also fall, then perhaps there’s a price point for everyone and in years to come we won’t be looking back on this current period of packed venues with “I remember when…” nostalgia.

Greg Parmley