The following article is part 1 of 3 in an op-ed series by Dan Marcus, Founder of SeatSwap. As the son of a long-suffering New York Jets season ticket holder, Dan was raised on live events but after missing out on one too many great events without anything to show for it, he decided he wasn’t going to take it anymore. Since then, he’s been on a mission to help fans everywhere get to more of the events they love even when life gets in the way: one game, one ticket, and one fan at time. In a former life, he used to cover both the Jets and Yankees as a writer for SNY.tv and as a (sort of) lawyer is happy to offer his semi-professional legal opinion when called upon. Feel free to shoot him a line with comments, complaints, or Ernie Adams conspiracy theories to dan@seatswaptickets.com
This Scalped series is a deep-dive into the inner-workings of the event ticket industry attempting to shed light on why fans are the ones who constantly have to bear the cost, while the rich seemingly get richer. In Part I we took a look at how new technologies and market incentives have given rise to market manipulation by bad actors and why unless something dramatic happens, it’s unlikely to change anytime soon.
Although “ticket scalping” is by no means a new phenomenon, it has seen a mainstream resurgence brought about by rapid technological advances. The traditional image of the unkempt man standing at the foot of the stadium steps holding up a sign that reads “I need tickets” has been replaced by virtually anonymous entities hiding behind advanced computer programs or “bots” capable of buying huge swaths of inventory while Joe Shmo fan cranes his neck and adjusts his glasses to read fuzzy CAPTCHA codes. These days, we call these people “Ticket Brokers” and they are the proverbial men behind the curtain pulling the strings of the entire ticket market.
In fact, my own backyard, New York City, by virtue of its status as the unofficial “Live Events Capital of the World” has become “Ground Zero” for what is now a system-wide epidemic. So much so that lawmakers have begun to take notice. Legislators have pledged to take action against what they have dubbed “Illegal Ticket Scalping”. State Attorney General, Eric Schneiderman brought significant attention to the subject in a report published by his office earlier this year entitled “Obstructed View: What’s Blocking New Yorker’s From Getting Tickets,” in which he urged the state legislature to impose stricter fines and restrictions on ticket brokers employing unfair practices. Most recently, New York Senator, Chuck Schumer announced alongside the creator and star of the record-breaking Broadway hit “Hamilton”, Lin-Manuel Miranda, that he would spearhead efforts to curtail the use of ticket bots at the federal level.
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Although such undertakings are admirable, legislation aimed at cracking down and levying stricter penalties on brokers does not address heart of the issue. Brokers are merely opportunists taking advantage of a broken system that enables them to work in the shadows and profit off fans.
The ticket market is an oligopoly, controlled by a pair of brand-name monoliths. At the center of it all you have Ticketmaster, the primary ticketing giant that operates under the publicly-traded corporate flag of Live Nation Entertainment. The live entertainment behemoth enjoys a legal monopoly on the primary ticket market with an estimated 70% of the market share, which includes long-term contracts with three of the four major professional North American sports leagues in addition to a portfolio of iconic venues, many of which are also owned and/or managed by the Live Nation arm of the company. In addition to their stranglehold on retail ticket sales, Live Nation also uses their “A-List” roster of artists to leverage venues into using Ticketmaster as their primary ticketing platform out of fear that Live Nation won’t route their artists’ tours through their venues.
For as much as they trumpet their efforts to combat brokers and bots from gaming their platform and depriving fans of an opportunity to buy tickets at a reasonable price, the truth of the matter is that aside from the occasional piece of bad press they have no real incentive to do so. The presence of brokers and bots is good (and some would argue great) for Ticketmaster’s core business. It’s not complicated: when your goal is to sell as many tickets as possible, you don’t hamstring the people that buy the most tickets. Of course Ticketmaster has the resources to put a stop to the bots once and for all but they would rather spend that money on PR staff and lawyers.
A simpler solution that SeatGeek Co-Founder, Jack Groetzinger suggested in a recent blog post would be to move to a more open ticketing system that allows third parties to verify the validity and origin of tickets, which would root out fraud and give third party platforms the ability to easily identify scalper activity. Unfortunately, the chances of that happening are about the same as banks choosing to give away free money or the Browns winning a Super Bowl. The reason for that is because when it comes to making that sort of data available, Ticketmaster employs a “pay for play” model that entails comprehensive long-term contractual agreements and massive lump sum payments of money being forked over before a single ticket can be verified. They also choose to reserve such functionality for their own use as a selling point for their own secondary platforms such as the NFL, NBA, and NHL ticket exchanges, which have also come under scrutiny by the New York Attorney General’s office for their use of artificial price floors.
The secondary market is fraught with the same brand of indifference and willful blindness, as the primary market and is arguably more dependent on the business of ticket brokers. When it comes to the secondary ticket market, there’s StubHub and then there’s everyone else and they have the market share to prove it (an estimated 50%). Although StubHub likes to tout themselves as a “fan to fan marketplace”, it’s nothing more than rhetoric and clever marketing narrative. Not only is StubHub complicit in brokers’ ability to make and manipulate secondary market prices at will, they have an entire arm of their business dedicated to facilitating and maintaining relationships with brokers.
Artificially high secondary market prices are what enabled the Ebay subsidiary to pull in nearly three quarters of a billion dollars in gross revenue last year. When you take a 15 and 10% cut from the buyer and seller, respectively it benefits you to keep prices high. For a “hot” event like Hamilton, where tickets consistently sell well above face value and the cheapest ticket is selling for around $320, StubHub is assured that their commission is no less than $80 in fees. At the other end of that spectrum, where the most expensive tickets sell for $4639 apiece, StubHub stands to rake in $1,160 on a single transaction.
To be clear, I am by no means intimating that there is any level of collusion between StubHub and ticket brokers as to the maintenance of artificially high secondary market prices but by the same token, it’s clear that they aren’t taking any decisive action against the kind of activity that has so many fans up in arms. Then again, why should they? When Ticketmaster’s indifference creates market scarcity for fans looking to actually – you know- attend the event, it drives demand for secondary market tickets way up, which in turn creates higher sales prices, and of course higher commissions.
You see, despite what we’ve been led to believe, the problem is not brokers but the platforms that enable (and even encourage) them to conduct business the way they do. However, it shouldn’t come as a shock, these companies simply have no incentive to change. They have been making too much money for too long to make any sort of radical changes that might threaten their position atop their respective thrones of their fiefdoms built on service fees and commission. In fact, as subsidiaries of publicly traded companies (Live Nation and Ebay, respectively), both Ticketmaster and StubHub are under a legal obligation to make as much money as possible for their shareholders. The bottom line is that unless the incentives change, fans are going to continue to get screwed.