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October 04, 2006

TicketBastards (TicketMaster Sucks)

While reading the Big Picture Blog's Linkfest, I saw a headline "Concert Giant Sees Cutting prices as Ticket to Success" (LA Times, 9/26/2006).

Right on. (Well, maybe; it doesn't look quite as good as you keep reading)

The article notes that average concert prices are now $57 per ticket, and some people feel this is causing people to attend fewer concerts or skip them all together. LiveNation, Inc CEO Rapino wants to lower prices and is battling TicketMaster to do that.  

But to make good on his promise, Rapino must wrest power from Ticketmaster, a near-monopoly that built its empire locking up exclusive rights to sell admissions to major concerts and other live events. Last year, Ticketmaster reaped nearly $1 billion in fees and surcharges. (emphasis mine)

Like anone who has bought through TicketMaster - just about everyone since they have a near monopoly - I've found the fees painful. Yes, we've also decided to not drive into Detroit for some shows that were a bit on the pricey side before the TicketBastard fees, and prohibitively expensive after figuring them in. Now there's a $2.50 fee to print the tickets off yourself! They email them to you, and print them on your paper, with your ink, and still pay a convenience fee? That's a sure sign of a monopoly abusing its power.

I was playing around in some Securities and Exchange Commission Documents as part of some private prison research, and looked up InterActiveCorp, which owns TicketMaster.  Their 2005 Annual Report has a few items of interest:

Revenues.  Ticketing revenue is generated primarily from convenience charges and order processing fees received by Ticketmaster for each ticket sold by Ticketmaster on behalf of its clients. These charges are negotiated and included in Ticketmaster's contracts with its clients. Pursuant to its contracts with clients, Ticketmaster is granted the right to collect from ticket purchasers a per ticket convenience charge on all tickets sold through www.ticketmaster.com , by telephone and through retail sales outlets and other media. There is an additional per order "order processing" fee on all ticket orders sold by Ticketmaster, other than at retail sales outlets. Generally, the amount of the convenience charge is determined during the contract negotiation process, and typically varies based upon numerous factors, including the services to be rendered to the client, the amount and cost of equipment to be installed at the client's box office and the amount of advertising and/or promotional allowances to be provided, as well as the type of event and whether the ticket is purchased through www.ticketmaster.com , by telephone, through a remote sales outlet or other media. Any deviations from those amounts for any event are negotiated and agreed upon by Ticketmaster and its client prior to the commencement of ticket sales. Generally, the agreement between Ticketmaster and a client will also establish the amounts and frequency of any increases in the convenience charge and order processing fees during the term of the agreement. In many cases, clients participate in the convenience charges and/or order processing fees paid by ticket purchasers for tickets bought through Ticketmaster for their events. The amount of such participation, if any, is determined by negotiation between Ticketmaster and the client. In some cases, maximum charges on tickets are established and regulated by state and local law. See "Item 1A—Risk Factors—Changing Laws, Rules and Regulations." (2005, form 10-k, p 8)

So, while TicketMaster is part of the problem, all the local venues where we see concerts have to sign off on the 'convenience fees.' That mean, you can lodge complaints with the management of where you see the concert. If they try to tell you they don't have any control over, you'll know better. Refer them to the SEC filing and continue to give them hell.

More from the filing: 

Other companies compete with Ticketmaster by selling stand-alone automated ticketing systems to enable facilities to do their own ticketing. Several of Ticketmaster's competitors have operations in multiple locations, while others compete principally in one specific geographic location. Ticketmaster experiences substantial competition for potential client accounts and renewals of contracts on a regular basis. See "Item 1A—Risk Factors—Third Party Relationships—Services—Ticketing." Ticketmaster competes on the basis of products and services provided, capability of its ticketing system and distribution network, reliability and price.  (emphasis added, p 9)

Competition is where the original article came in, with the attempt to break some of TicketMaster's exclusive contracts.  Earlier, TicketMaster gave promoters and concert venues "a powerful network of retail stores and phone banks that were too expensive for any one promoter to replicate. Last year, Ticketmaster sold tickets worth about $6 billion through the company's Internet sites, 3,500 retail outlets and 19 international call centers."

There's a hope that technology will lower barriers to entry and more venues or  regional firms will be able to distribute tickets. One LiveNation exec commentd: "There is an impression that Ticketmaster has gotten too comfortable and arrogant. You have to be more responsive to fans nowadays." While that sounds encouraging, the article notes: "People close to Ticketmaster say that other concert companies have made similar comments about the ticketing company, only to sign new Ticketmaster deals once they got the terms and upfront payments they demanded." [More upfront payments to promoters and venues that need to be recouped from those convenience fees. Guess everyone has a hand in the trough.]

In the end, there are many caveats. It will be two years before the Livenation contract with TicketMaster ends, and LiveNation (a spinoff from the evil corporate radion behemoth ClearChannel) may want to keep for itself all the fees instead of having them go to TicketMaster.  

There's also a disturbing discussion of information that these places like to keep:  "'When a fan buys a ticket, we learn an enormous amount about them: What bands they like, where they live, how much they are willing to spend,' Rapino said.'Someday, a fan will be sitting in a bar and his cellphone will text message 'Sonic Youth are playing tonight. Do you want to go?' He'll buy his ticket over the phone and walk to the concert.'" Convenient maybe, scary also. But then I'm not very trusting of big companies making it convenient for me to open my wallet.

One more faint glimmer of hope: 

For example, Ticketmaster has structured its business, operations and client relationships in ways to ensure compliance with certain state and local regulations in several states that establish maximum charges on tickets. Other legislation that could further regulate convenience charges and order-processing fees is introduced from time to time in federal, state and local legislative bodies in the United States and abroad. Changes in existing, or the promulgation of new, laws, rules and regulations of this nature could require Ticketmaster to change certain aspects of its business, operations and client relationships to ensure compliance. Ticketmaster is unable to predict whether any such legislation will be adopted and, if so, the effect on its business and results of operations (p 25-6, emphasis added)

In this day and age, the chance of real consumer-interest legislation passing in opposition to lobbying by industry is small. It's almost quaint to believe that Congress people will do the right thing by us and ignore big$ from lobbyists. But for the pissed off activists out there, maybe there's a way to build on the model from other states?

It was also good to see in the Annual Report a long list of pending class action suits against TicketMaster (see p 29-30).

For those looking for some additional history, check out Trash City's Why TicketMaster Sucks, which has the history from Pearl Jam's battle with Ticketmaster on.  They also have some good additional reading links at the bottom of the page.

For more, just Google "TicketMaster Sucks"

UPDATE:  Steve Pearlstein of the Washington Post writes a column today "Internet Relaigns Market for Tickets" (Oct 6, 2006, p D1). He talsk about new forms of ticket pricing (dynamic and auction models) as well as secondary markets for reselling tickets. His conclusion:

While it's unclear how all this will shake out, my guess is that sports teams, promoters and venues will wind up the winners. Without the old constraints, they will be able to sell the best tickets to the hottest events for many times the old fixed price, both directly and through the secondary market. This windfall should be more than enough to cover the inevitable decline in the average price for less desirable tickets.

For consumers, the change will be a mixed blessing. Less desirable tickets will be cheaper, while hot ones will be more expensive but easier to come by if you're willing to pay the price. Season and series ticket-holders will find it easier to unload the tickets they never wanted anyway, or find someone to buy their ticket when the Yo-Yo Ma concert turns out to conflict with back-to-school night.

But the biggest winner of all may turn out to be Ticketmaster. That giant already boasts operating margins of 25 percent from the original sale of tickets. Now it will have the opportunity to take another, even-more-profitable bite of the apple when tickets change hands. Not surprisingly, Ticketmaster is pushing legislation to make it illegal to buy or sell a ticket through any online marketplace not authorized by the original seller. Even without such legislation, Ticketmaster has begun to "turn off" tickets resold elsewhere by invalidating the bar codes.


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