Scalping And Scarcity: The Economics Of Live Music Reporter John Seabrook talks about the state of the live concert business, and how it got that way. His article on the topic, in this week's issue of The New Yorker, is "The Price of the Ticket."
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Scalping And Scarcity: The Economics Of Live Music

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Scalping And Scarcity: The Economics Of Live Music

Scalping And Scarcity: The Economics Of Live Music

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This is FRESH AIR. I'm Dave Davies filling in for Terry Gross.

Our next guest, John Seabrook, says just about everyone agrees that the live music business these days is dysfunctional. Much has changed since the '60s, when flower children crowded into the Fillmore to see Jefferson Airplane. Ticket sales and concert promotion are concentrated heavily in two big companies. Music lovers resent the extra charges they get when they buy from Ticketmaster, and artists, who need concert revenue now more than ever, see as much as half the cash their fans pay for tickets go to scalpers and Internet resale sites.

Seabrook explores the problems of the live music business in a piece in the current issue of The New Yorker titled: "The Price of the Ticket: What does it take to see your favorite band?" John Seabrook is a staff writer for the magazine and the author of three books including "Flash of Genius And Other True Stories of Invention."

Well John Seabrook, welcome back to FRESH AIR. It used to be when we wanted to go to a rock concert, if we were real fanatics we'd bring our lawn chairs or sleeping bags and camp out in front of the box office. Now it seems if we want to go to concert we have to deal with Ticketmaster - a lot of it's done online. How did we get to the point where Ticketmaster controls so much ticketing?

Mr. JOHN SEABROOK (Staff Writer, The New Yorker Magazine): Yeah, if you go back to the '70s, and if you started going to shows back then you remember waiting in line. You had to go to outlets and record stores to buy tickets or go to the box office and there was no central computer control pool of tickets, so it was sort of hit or miss as to where you went and where you lined up.

Some places sold out quickly, other places had tickets left over. And that, of course, presented this business opportunity for Ticketmaster, realizing that if you could pool all the tickets together and if you could exclusively sell all the tickets, then you could offer fans the best available seat no matter where they bought their tickets and then you could charge them a convenience fee for that.

So that was kind of Ticketmaster's business model. And as that has grown, and as the Internet has evolved along with it, you've gotten to the point where you stand a much better chance online in front of your computer at the moment the tickets go on sale than getting in line 12 hours or 24 hours ahead at a box office, because by the time you get to the front of the line the tickets are going to be sold to all the people who are in front of their computers.

DAVIES: All right, so now you go to Ticketmaster and you pay the ticket price and fees. How big are the fees?

Mr. SEABROOK: The fees have grown. Now there's three separate fees and together they amount to around 30 percent of the price of the ticket. Some of that money goes back to the promoter and to the owner of the venue where the show is taking place and then Ticketmaster keeps the rest. The reason the fees exist is because the face price of the ticket is often set low, in some cases far below market value, because the artist wants to maintain the sort of sense of common man with the fan and not charge what the market might bear for that ticket. And so Ticketmaster and LiveNation then use the fees to kind of supplement the price of the ticket, which is, in their view, too low for them to make enough money to do what they do. So that's why the fees exist.

DAVIES: But it really ticks people off doesn't it?

(Soundbite of laughter)

Mr. SEABROOK: Yeah, it makes people very, very angry. I mean the fees have been a source of fan outrage since they began. And in the mid '90s there was a big to-do because Pearl Jam, the band Pearl Jam, decided that they were sick and tired of fees and weren't going to take it anymore and announced that they were going to do their 1994 tour only playing in venues that did not have exclusive contracts with Ticketmaster and they urged other artists to join them in this. But as it turned out, the only venues...

(Soundbite of laughter)

Mr. SEABROOK: ...they could find to play in were, you know, racetracks and out-of-the-way places that the fans couldn't find. The shows were poorly attended. The tour was cancelled midway through. No other artist...

(Soundbite of laughter)

Mr. SEABROOK: ...joined them and that was the last time a major artist has publicly challenged Ticketmaster until this February when Bruce Springsteen did it.

DAVIES: Now there is this huge resale market for tickets, what we call scalping when it's done on the sidewalk in front of the concert hall. How has the Internet changed the resale of tickets?

Mr. SEABROOK: Well, basically, with the Internet you no longer have to actually be physically present at the venue to scalp tickets. You can buy season tickets to the Anaheim Angels from Atlanta, Georgia, and sell them to people in California over the Internet and you never have to actually be physically present at the venue and you don't have to bear the stigma of, you know, being perceived as a scalper and standing there on the sidewalk and actually selling tickets. And so that's made it possible for practically everybody to be a scalper. And over the last few years there's been a lot of money made by college students and housewives and, you know, every other kind of person who decides to - oh, I'm going to buy two tickets to this hot show. I'm not going to go but I think the show's going to sell out and I'm going to resell them on Craigslist or eBay or StubHub or TicketsNow and make some money.

DAVIES: You have to tell the story of this woman, Amy Stevens, that you write about in the piece and her entry into that world.

Mr. SEABROOK: Yeah, Amy Stevens was a young woman from Atlanta. She's a mother of three. And she came to New York in 2001 with two tickets to see "The Producers" which cost her $200 each. And then it turned out she wasn't able to use those tickets and so she put them on eBay and she listed them at $400 each and they promptly sold. And she said wow, you know, I just made $400. So she went back to the theater and bought some more tickets and put those on eBay and they sold for $400 too. And then she realized wow, this is kind of a good way to make money. And then she went back home and bought season tickets, actually to the Anaheim Angels, and the tickets guaranteed the ticketholder a right to a seat at a playoff game, and that was the year that the Angels went all the way to the World Series, and she sold those tickets for $1,500 each.

And by that point she was kind of in a business. And she called it Amy's Tickets and started buying college football games and she bought season tickets to Atlanta Falcons, other shows and, you know, within a few years she was grossing a million dollars a year.

DAVIES: A million a year. Wow. Now with this many tickets being resold, I mean, what that tells us is that clearly the face prices of the ticket aren't capturing their market value and that there's a lot of revenue that's not going to either the artists who are performing at live concerts, or the promoters who have, after all, taken some risk in hiring a venue and hiring security and buying insurance and all. Do we have any idea how much revenue the industry is losing to folks who are reselling their tickets?

Mr. SEABROOK: Well there's never been a systematic measurement of the entire industry. There are estimates that there's almost, if there's three billion dollars worth of money being made on face value tickets, there's another three billion being made on - the secondary market - on above face value prices. But the only actual studies that have been done have been on specific concerts.

And in the piece I talk about one that a Princeton economist named Alan Krueger did at a Springsteen show in 2002, where he and 12 Princeton students went around the floor before the show started and asked people where they had gotten their tickets and how much they paid for them. And they found that a quarter of the people had bought them on the secondary market and paid - the face price of the ticket was $75 and they paid an average of $250 for those tickets. And so, by adding all those numbers together they calculated that Springsteen's loss in not charging market value for the tickets was about the same amount of money as he made from selling the face value tickets at the box office. So it does seem to - it correlates about one to one.

DAVIES: So in other words, they're essentially about half of the revenue...

(Soundbite of laughter)

DAVIES: ...from these performances are going to people who were smart enough to buy up tickets and resell them.

Mr. SEABROOK: It's the only business where the value of the commodity goes up as soon as it leaves the store.

DAVIES: It seems clear that the reason this happens is that the performers and the promoters don't charge what they could get for the tickets in the first place. Why don't they? Or are there some acts that do?

Mr. SEABROOK: Well, artists get to set the ticket prices and particularly if you're a superstar band and - you know, like the Eagles or Neil Diamond or the Rolling Stones - you basically control all the pricing decisions. And a lot of artists don't want to charge market value for the best seats for a couple different reasons. One is, is that they don't want their fans getting mad at them - saying hey, I've been your fan for 20 years, I used to pay $40, now you're asking me for $250. That's one reason. Another reason is artists want shows to sell out because sellouts are good not only for promotion value but because they make the show better for everyone, including the musicians. I mean, what you definitely would never want to have happen if you're an artist is have, you know, thousand-dollar seats up front that nobody buys and everybody's sitting in the back.

It would be a bit like the Yankees this year who tried to charge three thousand dollars for the best seats at the new stadium, nobody bought them. There was an embarrassing lack of people sitting right behind, you know, the infield and so they ended up lowering the prices. So that's another reason.

And thirdly, sellouts also help, you know, they sell more beer that way. The parking fees are better. So even though you're losing a little bit - or a lot of money on the face value of the ticket, you know, you can make some of it back on the parking and the beer sales and the merchandise sales and that sort of stuff.

So, but I mean I think culturally rock concerts began in the '60s as sort of quasi-social/political movements and there was a certain amount of sort of anti-capitalist sentiment floating around when rock concerts were born and now they have kind of grown out of that. And now with the decline of the record business, they've had to shoulder the moneymaking that the record business used to do, but they still haven't quite shed their roots as these '60s happenings. And that's why you see a lot of below-market-value tickets because, you know, even though it may be a commodity and it may be an economic transaction, most of the stakeholders are invested in maintaining the illusion that it is not, that it is a party that they're throwing for people. And if you charge people too much for the party, it kind of ruins the party.

(Soundbite of laughter)

Mr. SEABROOK: So that's why ticket prices are low.

DAVIES: John Seabrook is a staff writer for The New Yorker. We'll talk more after a break. This is FRESH AIR.

(Soundbite of music)

DAVIES: If you're just joining us, our guest is John Seabrook. He's a staff writer for The New Yorker. He has a piece in the current edition about tickets and the live music industry.

Now there are these ticket exchanges where people can get resold tickets and pay a premium for them, you know, StubHub and others.

Mr. SEABROOK: Right.

DAVIES: Ticketmaster can only charge face value, although they do add on these fees. But they recently acquired a secondary ticket-marketing company called TicketsNow. So you got them charging the face value, controlling all the tickets, but they also have this associated company which then resells unsold tickets for much, much higher prices. It would seem to present a potential for a great conflict. And, of course, this became the big issue in the Springsteen concerts in May that you write about. What happened there that created such controversy?

Mr. SEABROOK: Yeah. So TicketsNow is the company that Ticketmaster bought in 2008, and TicketsNow is a secondary market company, the second largest -StubHub is the largest. And they are an auction house for reselling tickets. TicketsNow doesn't actually own the tickets but they charge commissions from buyers and sellers and guarantee the transaction. So they, in effect, function like an eBay of tickets.

So on February the 2nd, the Bruce Springsteen tickets went on sale for the first leg of his Working On A Dream Tour. There were 26 dates on the first leg. All of them went on sale the same day and that day was one day after his appearance at the Super Bowl. So, you know, there's a lot of interest and particularly in New Jersey which, of course, is Springsteen's home and where he was doing only two shows at the IZOD Center so, of course, there's going to be a giant amount of demand. So when the tickets went on sale, there was a technical problem caused perhaps by the enormous demand. Ticketmaster hasn't been totally clear about it. But it made it impossible for a lot of people who were trying to buy tickets at nine in the morning to buy those tickets and instead, those people were directed - redirected to TicketsNow, which has been Ticketmaster's policy when shows sell out to redirect people to TicketsNow. But they're not supposed to do it...

(Soundbite of laughter)

Mr. SEABROOK: ...if the shows aren't sold out yet and yet that was what was happening on the morning of February 2nd. And so it appeared to a lot of people that Ticketmaster was purposely pushing people to TicketsNow, even though tickets were still available because they can make much more money reselling tickets and charging the commissions on TicketsNow than they were making selling on a face value on the Ticketmaster, say.

DAVIES: But so the expression of hand was somebody sitting at their - poised over their keyboard at 9 AM and the tickets go on sale. And they start, you know, placing their order and they're just about to complete the order. And then they get a message on the screen of a technical problem. They lose the order and it says by the way, you can go to TicketsNow where tickets may be available, in which case you are going to pay two or three times what you would have paid. So it looked to the fans like they were just dumping tickets onto their electronic scalper partner, right?

Mr. SEABROOK: It looked exactly like that. And that combine with the history of the fans' relationship with Ticketmaster, which has been fraught to say the least, it didn't take much for people to suspect Ticketmaster of, you know, evil doings. And when Bruce Springsteen heard about it, he got outraged. And then he posted a letter on his Web site two days later, basically accusing Ticketmaster of running a bait and switch and saying he was furious and then calling upon people to go to their local representatives and protest. And of course in New Jersey, if you are a politician, it doesn't take a whole lot of persuasion to get out there and fight for the fans' right to achieve Springsteen tickets.

So in fact, a number of politicians did get involved. And it became by the end of the week, you know, the biggest political cause in New Jersey. And Ticketmaster, like I say, came out and said actually this was just a technical problem. It was a little piece of code in the verification of the credit card holder's identity that messed up. And, you know, it redirected people to TicketsNow when tickets were still available. But regardless of whether that's true or not, it's the public relations disaster certainly was real. And I should say that this happened within the context, and even on the very same day, that Ticketmaster and LiveNation's merger - the news of their merger broke in the Wall Street Journal.

So, you've got not only this outrage and all these angry fans, but you've got also the news of the two largest companies in the business merging together into one unprecedentedly large company that could seemingly do this kind of thing every day if they wanted to. So, you know, that really created a giant, perfect storm of hatred toward Ticketmaster.

DAVIES: Now the state attorney general of New Jersey got involved and as you say, many, many other politicians. And Ticketmaster explained that it was essentially a computer problem, that there was really no hanky-panky. Did anybody ever - could anybody ever check on that and decide whether that explanation was credible?

Mr. SEABROOK: You really have to take Ticketmaster's word for it. There's no way of kind of going in to Ticketmaster and looking at their, you know, computer records. And although there was a class action suit filed against Ticketmaster by the attorney general, the settlement terms did not require Ticketmaster to prove that assertion. It did require Ticketmaster to: A. Pay a fine of 250,000. B. Reimburse all the people who bought tickets on TicketsNow, thinking they were buying primary market tickets, which cost Ticketmaster 350,000. And C. Promise to stop their practice of redirecting people to TicketsNow when shows sell out. So, sort of putting up kind of a firewall between Ticketmaster and TicketsNow.

DAVIES: And you said Bruce Springsteen weighed in with a public statement. What effect did that have on this potential merger between Ticketmaster and the concert promoter LiveNation?

Mr. SEABROOK: Yeah, well Springsteen specifically said in his statement, after saying he was outraged and furious with Ticketmaster, he went on to say that the only thing that could make the current situation worse for the fan would be if Ticketmaster and LiveNation were allowed to merge. And he urged people to get in contact with their local representatives and let their opinion of the merger be known. And then later that month, when there was a one-day hearing held at Washington in front of the judiciary committee about the merger, Springsteen's remarks were quoted by virtually everyone. All of the senators, the speakers, it was as though Bruce were right there in the room. And, you know, it's still I think now the merger and Springsteen are going to be associated forever in people's minds.

DAVIES: Now Ticketmaster still owns TicketsNow right?

Mr. SEABROOK: Ticketmaster still owns TicketsNow. The current CEO of Ticketmaster is Irving Azoff, was not the CEO when Ticketmaster bought TicketsNow. And he has made it clear that he would never have bought TicketsNow had he been the CEO. And he's also made it pretty clear that he'd like to sell it. And I wouldn't be surprised if you see Ticketmaster selling TicketsNow in the near future.

DAVIES: John Seabrook is a staff writer for The New Yorker. More after a break. This is FRESH AIR.

(Soundbite of music)

DAVIES: Our guest is writer John Seabrook. He writes about the live music business in the current issue of The New Yorker and says many concert fans are getting tickets at big markups in the secondary market from scalpers and Internet sites. A lot of sports teams will have a marketing relationship with a secondary ticket supplier, like StubHub. But, you also had situations where a few seasons back, the Washington Redskins took to looking on eBay and discovering that some of their season ticket holders were selling their tickets on eBay and they - because they could tell which seat and section number they were - they revoked the season ticketholders' tickets. In effect saying, we're not going to let you scalp our tickets. Do sports teams and promoters have a clear sense of what they want to do about this?

Mr. SEABROOK: Well, it does seem that sports teams are kind of leading the way. They really have gone from, you know, if you can't beat him, join him. The Yankees used to do the same thing. They used to confiscate people's season tickets if they found they have been resold. And now the Yankees actually have a StubHub window at the new stadium. They, you know, assist you in reselling tickets. But, you know, most of the sports teams have now, you know, realized it's, you know, it's let's get a piece of this, let's become part of the secondary market.

And in fact that has cut down a lot on scalping of sports tickets. You still see Super Bowl tickets and stuff like that are getting scalped. But, you don't really see it that much for, you know, big games, like you do for big concerts. But, that's partly because teams control their own ticketing and, so they can set prices and change things without having to go to an artist, or in fact, it would be like going to, you know, the players and saying, hey can we charge more for our tickets. But that's what you have to do in the concert world, you have to go to, you know, the players and say hey, would you mind, you know, raising the prices. And the players usually say no. So, that's the problem for the concert industry.

DAVIES: You know, there are one kind of ticket that you don't see resold at a big markup and those are cheap airline tickets. And that's because, when you go to the airport, you got to show your ID and your ticket and they have to match. Is there any thought in the concert or the sports world that, you go to a similar system where you have paperless tickets and you have to show your ID, so that you really can't resell them?

Mr. SEABROOK: In fact, that is the cutting edge where the concert industry is right now, paperless ticketing. All of the Miley Cyrus concerts this fall are going to be paperless tickets. And that means, that, you know, you call up Tickermaster, use a credit card, you buy up to four tickets, but you don't get the tickets until you show up at the venue on the day of the show. And in order to get the tickets, you have to produce the credit card you bought them with and a matching ID.

And if you buy four tickets on one credit card, all four of those people have to be there outside the venue before you can be admitted. And obviously this is an attempt to cut down on scalping. And in fact, it has radically reduced scalping. But, it's also unclear whether there's going to be logistical problems at the shows. I mean, is there gonna be long lines? Those shows didn't actually sell that well, and some people think that the reason they didn't sell that well is because people were leery about the whole paperless ticket thing.

And, you know, once artists get that feeling, then they're going to say hey, I don't want paperless tickets because it's going to mean we can't sell as many tickets. Our shows won't sell out. So, it still kind of remains to be seen how that's all going to work out. But certainly it has radically reduced the amount of tickets on the secondary market for paperless shows.

DAVIES: You know, I confess, I bought a quite a few baseball tickets over the years from scalpers and I've always been grateful that that institution was there. Because sometimes, you know, you want to go and if the thing is sold out and you didn't plan ahead. And if you're willing to pay an extra 20 or 40 bucks, it's great to find somebody out there, who can take care of you. I have never gotten sold a counterfeit ticket. Is there a constituency that says let it be?

Mr. SEABROOK: Oh yeah, sure, sure there's a big constituency. And I think even the people that get angry about all the scalped tickets probably scalp a few themselves, when they really need to go. I mean, the fact is that for rock concerts, the shows go on sale months before the actual date. And unless you're really good at kind of planning ahead and can predict where you going to be, a lot of people don't even bother to buy on the day of the sale because they don't know if they're going to be around or be able to go. And then the show gets near and they realize they do want to go and they're going to be around.

And so, yeah, they can turn to the secondary market and scalp a ticket. And that's a great service for them. Otherwise they wouldn't be going to the show. The other thing I'll say about scalping is the price that you're paying is not always above the face value of the ticket. It can be below the face value of the ticket too. If you wait till half an hour before the show and stand outside the venue, or the theatre or wherever it is, or the stadium, you will find that the value of the tickets sometime goes below, in fact sometimes way below the face value. And you can get a real deal. So, you know, it can work that way too.

DAVIES: Well, John Seabrook, thanks so much for speaking with us.

Mr. SEABROOK: Thanks Dave, nice to be here.

DAVIES: John Seabrook is a staff writer for The New Yorker. His piece in the current issue about the live music business is called "The Price of the Ticket."

For Terry Gross, I'm Dave Davies.

(Soundbite of song "You're My Lucky Day")

Mr. BRUCE SPRINGSTEEN (Singer/Songwriter): (Singing) Honey, you're my lucky day. Baby, you're my lucky day. Well I lost all the other bets I made. Honey, you're my lucky day.

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