Is It Time To Regulate Ticket Sales?

NY Attorney General Schneiderman’s recent report on the reasons why it is difficult for ordinary fans to buy concert tickets provided credible evidence, finally, on what most everyone in the live events industry already knew — ticketing is just a big game, and borders on outright consumer fraud.

For the past few years, my company, Upriise, has been working on a solution that would make ticketing fair and transparent for fans and eliminate the ability for purchasers to scalp tickets. It’s a unique technology that would be a win-win for fans and those whose business it is to produce live events — including artists, promoters, venues, and yes, even ticketing companies. For example, we can offer them better data and advanced demand metrics while shutting down the problems associated with scalping.

Only there’s one problem. Your frustration with getting tickets or paying scalpers huge sums above face value is, by and large, of little concern to the aforementioned live events constituents. Why? Because the current system benefits them. Greatly.

Here’s why: promoters, venues, artists — their primary goal is to sell as many tickets as fast as possible. In finance terms, we might call this liquidity — the ease and speed with which you can buy and sell something. And because scalping tickets is so easy today, it has created a ready army of liquidity providers…ticket brokers. Ticket brokers are actually pretty useful to the live event industry because they ensure a liquid market for tickets — and not just for big sell-outs like Adele, but other shows where the actual demand is less certain. I believe many insiders, therefore, view scalping as a necessary evil and thus put little effort into curbing it.

Even those artists who complain publicly about scalping are not entirely forthcoming about their role in all of this. Artists today demand large payouts from promoters up-front, months before the actual events, and this puts tremendous pressure on promoters to figure out how to limit their financial risk. One way promoters can limit risk is to sell tickets months in advance (a result of artists asking for up-front paydays). They can also pressure artists to agree to higher ticket prices and VIP experiences, and one other way they can limit their financial risk is to skim a little off the top by scalping the most desirable seats. The more egregious examples are where the artists also get in on the scalping. It happens.

But where does this leave the consumer — the actual fan who plans to attend the concert? She is still the lowest priority and is still being misled into believing she has an actual shot at getting great seats at the advertised price (face value). In no other industry would we tolerate this — a company that advertises to consumers that they can buy something at a specified price, and instead sell most of the inventory to a middle man who inevitably and aggressively marks up the price? Really?

At least if you are going to use a network of brokers to sell your tickets, be transparent about it and regulate these brokers and the marketplaces that facilitate so called fan-to-fan transactions. Bad things happen in the dark when money is involved. It can’t be avoided.

I hold out hope that technology and business innovations can solve much of the problems that consumers face and make it FUN to buy a ticket again. But the further I go down the rabbit hole, the more I realize we may need to regulate the ticket market in a similar way that the securities markets are regulated.

Fortunately there is already a model. FINRA is a self-regulatory organization (SRO) made up of securities brokers that has successfully policed themselves for years. It establishes rules of engagement for brokers and marketplaces to ensure that markets are orderly, transparent, and fair. It doesn’t mean fraud never occurs, but at least there is a watchdog preventing the same bad actors from perpetrating the same bad deeds over and over again.

The tradeoff of such regulation is greater trust from investors, which creates a more active and vibrant marketplace. And yes, more liquidity. Everybody wins, except the bad guys. Could the concert industry also benefit from a fan base that actually trusts what they are buying? Maybe it’s time consider regulating the ticket market.

Tim Ryan is President of Upriise. Prior to founding Upriise, he spent most of his career in the financial services industry at NASDAQ and OTC Markets Group.