Ticket Scalping Today: Assessing the Challenge

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When you think of a ticket scalper, the image of a character standing on the street corner outside of a sports arena repeatedly bellowing the word “Tickets!” might come to mind. However, chances are that if you have ever been to any sort of live event requiring a ticket, you have encountered a ticket on the secondary market along the way. Reselling tickets at prices above face value on the secondary market, otherwise known as ticket scalping, is a common practice in the United States. In fact, the ticket resale market in the United States recently swelled to $5 billion dollars, indicating the financial success of the industry, even if it is controversial.

Unfortunately, ticket scalping is nothing new in America. Although the modes through which consumers purchase tickets on the secondary market have changed with the times, the driving forces behind the secondary market have not. Age old factors contributing to secondary market sales include the absence of available tickets on the primary market, the lack of preventative federal law, and the ongoing debate regarding whether or not ticket scalping is actually doing more harm than good.

Dating back to as early as the 1800s, disgruntled theatergoers often had to purchase their tickets through “theater speculators,” who would buy tickets for an entire show and resell them at a higher price. It was up to each state – not the federal government – to enact laws to protect customers from getting ripped off. It took quite some time to enact these laws, but by the late 1800s and early 1900s, various states put initial restrictions in place that meant to thwart scalping to various degrees.

Today, the continued reliance on often outdated and murky state laws and the lack of a federal law prohibiting ticket resale drives the alarming prevalence of this practice. The degree to which states allow ticket scalping activity to occur within state boundaries varies from almost completely prohibiting the practice (15 states) to having minimal regulations. Furthermore, many states have not updated their legislation around this topic for decades. For instance, current Indiana state law states that it is illegal to charge above face value for tickets to any “sparring match.” Part of the problem in enacting updated legislation around ticket resale is that the law is ultimately meant to favor the consumer. Depending on the situation, however, it could be in the consumer’s best interest to have the freedom to either buy or sell a ticket. In fact, in order to remove consumer restrictions, Minnesota repealed their scalping laws in 2006 that were previously in place for almost 50 years, making the majority of scalping activity officially legal.

Today, the demand for tickets remains strong, whether the consumer purchases through a second party or not. This is in part driven by the internet, which has expedited access to tickets for both buyers and sellers alike, removing the lag in shipping time, phone conversations, and extensive payment exchange. Popular sites such as StubHub, Ticketmaster, and SeatGeak are large online enterprises that offer a wide variety of tickets to events ranging from major sports games and popular entertainment to smaller plays and concerts at performing arts venues. Such online options are popular because they are convenient for consumers.

At first glance, however, it might be unclear to an online consumer if they are purchasing through the primary or secondary market. Some companies, such as Ticketmaster’s original business model, operate as primary agents and essentially contract directly with client teams, bands, or venues a platform on which to sell their own tickets. Others, such as StubHub and a growing portion of Ticketmaster’s business, act as “ticket exchanges,” operating as online secondary markets where sellers choose the price at which they will resell their tickets. Both kinds of companies have received scrutiny for the seemingly never-ending series of fees tacked on at the end of the purchasing process, listed as “order processing fees”. These additional charges can sometimes add as much as 40-50% more to the original price that attracted the customer to the ticket in the first place. In fact, Ticketmaster finally settled claims in 2013 from a lawsuit filed in 2003, giving over 400 million dollars in credit to 50 million customers who were charged these “order processing fees." While the title and fine print of these “order processing fees” has been updated with the intention of adding more clarity, additional charges continue to plague customers at the end of the buying process. Companies continue to add these extra charges, no matter how they are disguised, because they contribute significantly to the profitability of the online ticket marketplace.

 

 "Service Fee" on Live Nation's website adds almost $170 dollars in extra fees at the end of the purchasing process.

"Service Fee" on Live Nation's website adds almost $170 dollars in extra fees at the end of the purchasing process.

In a short-lived attempt to create more price transparency than competitors, StubHub enacted an “all-in” pricing model, where the original price of the ticket shown included all additional fees, extracting the mystery out of the end purchase price. However, StubHub quickly reversed their decision after taking a hit to sales figures.

While most online purchasers are familiar with these large national online ticket shops, they may be unfamiliar with a whole other side market of websites that look nearly identical to a venue’s official site, but are set up by a third party posing to dupe unsuspecting customers. Individuals set up these websites and often markup tickets two or three fold in addition to other processing or printing fees. One would think that this would be common among commercial events in high demand, such as major sports championships or concerts of popular recording artists, but unfortunately, even smaller budget and non-profit enterprises around the country have been greatly affected by this concerning trend. These stealthy individuals have figured out how to leverage the power of Search Engine Optimization to their advantage and have such well-oiled business models that they are often able to actually surpass the real organizations themselves in the Google search ranking.

In Pittsburgh, PA, this practice has hit local non-profit arts organizations hard in recent years, negatively impacting years of public relations efforts and causing a plethora of customer service headaches. The conundrum: combating this issue comes at the expense of valuable time and resources, which could be better spent furthering each organization’s core artistic mission.

Coming soon – how much would you pay for a ticket to the Nutcracker? AMT-Lab Contributor Katie Grennan uncovers how the Pittsburgh Ballet Theater has been the direct target of some unscrupulous third party online vendors and how they are combating it.