If you’ve tried buying a ticket online lately, chances are the process was swift and convenient. Chances are it also included a fee. Or two. Or three.
Online ticketing fees come in a variety of flavors—convenience fees, handling fees, facility fees—and in some cases, can amount to 50 percent or more of the face value of the ticket.
When you think of all that goes into a live show—the artists’ time and talent, the work of ushers and technicians and bouncers, the costs of lights, sound, seating—you might well ask yourself: How on earth is it possible that mere ticket delivery can account for a third of the cost? What is it about obtaining a ticket over the internet that is so ungodly expensive? What exactly is going on here?
The story is both old and new, involving the time-honored art of price gouging and new complications created by internet technology—which may also provide the way out.
In their book Ticket Masters: The Rise of the Concert Industry and How the Public Got Scalped, co-authors Dean Budnick and Josh Baron offer a thorough history of the modern ticketing industry. Decades ago, they write, people had three main ways to obtain a ticket to a show. They could walk up to the box office and purchase one from an attendant, mail in a request and have a voucher mailed back, or buy a ticket from a broker. These brokers operated out of convenient locations across major cities, saving customers the trip to the box office. Like the online ticketing agencies of today, these middle men charged a fee for their service—up to $1.50 per ticket in New York.
Avoiding fees was easier in this pre-computer era, but the process was less convenient and inside-job scalping plagued popular shows. Unscrupulous box office managers were known to secret away tickets for the secondary market—a difficult action to track without computerized sales—and these shows would prematurely “sell out.”
When the first computerized ticketing system launched in 1967, it was hailed as a solution to scalping. The system worked much as the human brokers had; computer terminals conveniently located across New York City (and connected via landlines to a central computer) could process orders and dispense tickets to the public. In the original business model, customers who used the terminals were charged a service fee of 25 to 50 cents. The profits from these fees were split between the ticketing agency and the site (often a store) that agreed to host the terminal. Notably, the theaters on whose behalf the tickets were being sold paid the ticketing agency for its service. (This crucial component will flip on its head later on.)
Through the 1970s and 1980s, a number of different ticketing agencies entered the field, dispersing tickets through computer terminals and, as credit cards became popular, through phone orders. Ticketmaster was just another of these companies until 1982, when Fred Rosen became CEO and pioneered a new business model that would change the ticketing industry. Before Rosen came along, ticketing agencies contracted to sell only a limited portion of the total number of tickets for an event. The remainder were kept on hand in the venue box office to be sold there. Rosen struck a new deal with venues and promoters. (Promoters are sometimes financially responsible for a concert and its tickets; other times, it’s the venues themselves.) He demanded that Ticketmaster be given the entire inventory of tickets for an event, thus becoming the sole gatekeeper to the show. In return, he raised service fees and split the profits with the venues and/or promoters.
In that single stroke, services fees started their upward trend, venues and promoters became invested in maintaining the new status quo, and show-goers lost alternative methods for ticket purchasing. (Ticketmaster did ultimately allow venues to sell through their box offices, although remote ticketing remained the preferred method for fans to obtain tickets.)
It didn’t take long for customers to notice they were being fleeced. By 1994—before Ticketmaster even had a website—Pearl Jam decided to take a stand against the ticketing giant. The band tried touring without playing in Ticketmaster-contracted venues and testified against the company in Congressional anti-trust hearings. But ultimately, the U.S. Department of Justice and Pearl Jam both caved: Ticketmaster was allowed to continue its practices and Pearl Jam reluctantly came back on board the Ticketmaster circuit.
Dean Budnick, co-author of Ticket Masters, points out that the fees that so outraged Pearl Jam were then only around two dollars.
“You consider the fees of today,” Budnick said, “and it’s almost quaint.”
With the popularization of the Internet, fees were about to explode astronomically. The connection, Budnick said, was an indirect one: the internet gave people a forum for selling their previously purchased tickets, rendering their “true value” widely visible for the first time.
“Because of the Internet, you get secondary sales markets like StubHub,” Budnick explained. “Once you have StubHub, there’s a national market for people to sell seats—amateurs, hockey dads, hockey moms—not just brokers. Suddenly, people could see these tickets were underpriced. It gave everyone the idea there was more money to be made.”
From 1996, when Ticketmaster first started selling tickets online, to 2003, the average price of a concert ticket rose 82 percent. This increase was driven not just by the effect of secondary sales, but by other market forces unique to the music industry. For one, musicians started charging more to play live shows to compensate for lost revenue from illegal downloading. As venues and promoters had to pay more to attract artists, they were only too happy to countenance raised ticket fees (from which they profited).
Another issue was that the entertainment company SFX (now LiveNation) consolidated a number of different concert promoters into a single conglomerate. Rather than negotiate with many different promoters, Ticketmaster could now make sweeping deals with SFX. Flush with cash, Ticketmaster was able to offer SFX and remaining independent venues and promoters tempting artist advances and signing bonuses if they would enter into long-term contracts.
The runaway fees of the music industry have since plagued ticketed events of all kinds. In movie ticketing, for example, agencies such as Fandango and MovieTickets.com have followed Ticketmaster’s lead in charging and splitting fees with theaters. Meanwhile, customers have fewer ways to bypass ubiquitous online ticket fees. Budnick and Josh Baron (his co-author on Ticket Masters) suspect physical box offices have likely reduced their hours over the years, although hard data is difficult to come by. (The International Association of Venue Managers did not respond to questions about box office hours.) And as ticket fees become the norm, cash-strapped arts organizations are tacking fees onto phone orders placed to box offices.
“I think people charge fees when they can. It’s just the Ticketmaster model,” said David Fink, a theater owner who refuses to charge ticket fees himself.
As a show-goer, Fink said he deliberately buys tickets from an actual box office whenever he can: “I resent Ticketmaster, I resent the fees, I resent that way of doing business.”
The American public clearly shares the sentiment. Ticketmaster routinely ranks in the annual “Worst Company in America” contest run by the consumer advocacy website The Consumerist, and Facebook boasts multiple “I Hate Ticketmaster” pages.
Catching this wave of resentment, a number of ticketing startups have begun to offer alternatives. One of these many companies is ThunderTix, a ticketing service that allows venues to set their own fees or opt for none at all. Stacy Chapman, an account manager at ThunderTix, said the Austin-based company started as a customized software programming shop and gradually found itself doing ticketing as demand increased.
“Venues were looking for a solution where customers didn’t have to pay a fee,” she said. “At first, people didn’t believe it was possible.”
But ThunderTix could provide no-fee ticketing by returning to the original, pre-Ticketmaster business model: the company charges venues a flat rate for its services. Using ThunderTix’s software, venues can then decide whether or not to add a fee for consumers.
Although a fee would seem an effective way to offset the costs of the ticketing service, Chapman said many venues seek to eliminate fees as a matter of good customer relations.
“[Customers’] first introduction to the venue is the ticketing process—before they see the brick and mortar building, before they get inside, see what it’s like,” she said.
She doesn’t claim that these lower fees necessarily lead to increased ticket sales. But in traditional online retail, research has shown that the majority of consumer who abandon their carts just before purchase do so because of unexpected costs, such as fees. Whether this reaction is due to the nasty surprise or to a general distaste for fees remains unclear.
One might think that to err on the safe side, ticketing agencies and venues would have preferred to absorb fees into the face value of the ticket all along. But Chapman pointed out that in the profit-sharing model of ticket fees, itemized fees are helpful for accounting purposes. When profit-sharing is removed from the equation, venues are freer to roll ticketing costs into the ticket’s face value.
As an example, Chapman noted that ThunderTix’s clients could effectively recoup ticketing costs by raising ticket prices by 40 cents. And in fact, that’s what many appear to do: 53 percent of the company’s clients charge no fee, while another 25 percent charge less than $2.
Still, one might wonder why venues need a third-party ticketing agency at all. If venues once ran their own physical fee-free box offices, what’s preventing them from running their own virtual ones?
Chapman contends that online ticketing remains a costly proposition for venues that cannot afford to drop $300,000 for their own customized ticketing software. Plus, a surge of buyers visiting a site all at once for hot-item tickets could crash a typical server.
“For us, it’s a round-the-clock job for a full team of programmers,” she said. “There’s so much involved: creating a customer database, creating coupons if you want them, the ability to generate bar codes on tickets and the ability to scan those bar codes to prevent fraud. Whenever someone considers undertaking building that themselves, they might get a base version but they lose the flexibility of adjusting for their needs over time.”
Yet some small independent venue owners like David Fink, who co-owns the Acorn Theater in Three Oaks, Mich., are nevertheless determined to do online ticketing on their own. For the past eight years, the Acorn Theater has managed to sell tickets online without a vendor’s software. At 250 seats, the theater does not attract the kind of online buying surges that larger venues must worry about. Patrons are admitted not by bar-coded tickets, but by printed reservations, as ticket fraud has not yet been a problem or concern. The theater’s webmaster is inexpensive and reliable (and performs at the theater himself). And crucially, the theater only sells general admission tickets. Assigned seating would almost certainly require more sophisticated software, Fink said.
At the moment, the Acorn Theater—which charges no fees at the box office, over the phone, or online—remains the exception rather than the rule.
“Computerized ticketing is a devilishly hard thing to do correctly and efficiently, 365 days a year,” said Josh Baron, who also works for CrowdSurge, a company that helps musicians sell tickets directly to fans. “Just because we’re in an age of technology does not mean every Joe Schmo can do their own ticketing. But I do believe we’ll see a trend of venues doing more and more of their own ticketing in the future.”
At the particular technological moment, those would seem to be small entities like the Acorn that can keep the process simple, and large entities that can afford more versatile ticketing software. While most major arenas remain invested in their lucrative contracts with Ticketmaster, top-drawing acts can opt to do their own ticketing, as Louis CK famously did in 2012.
For all those venues in between, the new crop of low-fee/no-fee ticketing agencies are jockeying for position. When he was writing Ticket Masters, Budnick was convinced these startups would be the future of the industry.
“But part of the way Ticketmaster rose to success was that it could offer advances and signing bonuses,” he said. “They had the deep pockets. Ticketmaster will always have that.”
In 2010, Ticketmaster merged with LiveNation (formerly SFX), formalizing their lock on the mainstream concert industry. Simultaneously, Ticketmaster announced a new policy of revealing all ticket fees upfront in the purchasing process, purportedly in response to fan unrest.
“You just want to know upfront in the buying process how much of your hard-earned money you are being asked to pay for a given seat,” CEO Nathan Hubbard said in the announcement.
Ticketmaster’s dominance, and the future of online ticketing, may well depend on whether Hubbard is right—whether consumers simply hate the surprise or will reject the notion of online fees altogether.