Latin Grammys 2018
Adele and Bruce Springsteen Tours Spark Battle Behind Jacked-Up 'Spec Pricing'
Red-hot tour onsales by Adele and Bruce Springsteen sparked renewed furor around ticket reselling in late 2015, challenging the primary industry to even the playing field and frustrating fans who found themselves faced with much higher prices on the secondary market as their only option.
Ironically, often it is the artists’ attempts to keep prices reasonable that create an environment that makes reselling tickets such an attractive arbitrage opportunity in the first place. The upside is such that highly motivated ticket brokers invest heavily in technology that allows them to outmaneuver primary market ticketing companies by using automated "bots" that repeatedly purchase tickets at on-sale or at the pre-sale. Combined with other channels resellers use to acquire inventory, brokers are so confident in their ability to acquire tickets that they’ll post them on secondary sites like StubHub, Ticket Liquidator or Vivid Seats before they even have the tickets in hand or, in some cases, before tickets have even gone on sale.
Such was the case on Springsteen’s River tour, which was announced Dec. 4. Tickets immediately went up on the secondary sites, despite the fact the official onsale wasn’t until a week later. In a practice known as "spec" or "speculative" selling, brokers were banking on their ability to procure good tickets when they did go on sale, a tactic that has become "too common," according to one old-school ticket broker who spoke with Billboard on the condition of anonymity. "It’s almost like shorting the market with stocks, selling an option that you don’t have."
Ticketmaster has come out against spec selling, telling Billboard "we don’t allow it on any of our sites," says Jared Smith, president of North America for Ticketmaster, who calls the practice, "one of the leading contributors to fan confusion in the market."
The broker who spoke with Billboard says that even if a fan bought a ticket that did not exist and can’t be procured by the original seller, that fan will likely still get a ticket if it was purchased on StubHub, which "has people in their employment whose job it is to fill a busted order," says the broker. He says that StubHub will make good the order at whatever price, then "they’ll charge the guy who put up a price that he couldn’t cover the difference. So, if the ticket was sold for $200 and [StubHub] has to go pay $700 each to fulfill the order, the original person who put them up owes [StubHub] that difference, at least -- and they get a heated warning letter saying they’re not looking for you to do that to them. They get pretty pissed off about it."
A quick scan of Adele tickets available on StubHub shows a wealth of tickets but few specific seat locations, indicative of spec selling (or an attempt to cover an illicit purchase: "If I don’t post an actual seat location, they can’t i.d. me as a broker and cancel my tickets," says one insider). StubHub president Scott Cutler concurs that a seller is held liable for the tickets they try to sell, "as we take their billing information upon posting and hold them responsible if there are any issues with the tickets themselves, or problems fulfilling the tickets," he says. (A Stubhub spokesman says no Adele spec seats are currently on the site and the only reason seat and row are obscured is to "preserve the integrity of the transaction. In other words we were fearful that the primaries would potentially void barcodes if they saw them sold on our site.")
Spec selling also serves as a way for brokers to gauge interest in a show, much in the way the primary market sometimes uses a presale. "A presale is really just gauging the market so they can figure out where the dividing line is between a $150 seat versus a $190 seat," the broker offers.
In the case of both Springsteen and Adele, near-instant sellouts most likely sent those spec sellers into panic mode. "When it sells out in five minutes, all those spec tickets will come down," the broker says, "because everybody knows they can’t cover ‘em."
NO ROBOT LOVE
Botting -- automated ticket-buying "bots" that repeatedly attempt to buy tickets and utilize computer code to jump to the front of the virtual queue -- has been a scourge of the primary industry for years, despite the best efforts of primary sellers. As soon as technology catches up with an automated tactic, the bots come at it a different way in what ticketing exec refers to as a "cat and mouse game."
That game goes on. Paperless ticketing (where the i.d. and/or credit card of the purchaser must be shown for admittance) "slows down" reselling, according to our scalper source, and the primary industry continues to look for ways to insure a ticket purchaser is human. Songkick, which handled fan club pre-sales for Adele, successfully kicked out thousands of bot purchase attempts, most successfully in North America, by flagging suspected resellers and sending legit fans a unique code allowing them to purchase -- or attempt to purchase -- tickets.
Ticketmaster, too, continues to devote resources to a robust data science team targeting the issue. "We’ve made tremendous investments in our data science team and have become very effective at combating automated programs," says Smith. "For the Adele on-sales alone, we blocked more than 1 million [bot] attempts. But there’s a tremendous amount of money to be made reselling tickets, so we work with all our artist partners to use a variety of strategies from better pricing to better products to help them get tickets into the hands of their fans."
StubHub also says it is anti-botting, and Cutler says the problem isn’t exclusive to the primary industry. "We shut down bot use on our site on a daily basis," he says. "As far as bot inventory on our site, we have no way of knowing, unless we are notified by the primary, which to date has never happened."
Eric Church's team puts great effort into cancelling ticket orders from those identified as resellers. "There is a reseller based in North Carolina that, through his syndicate, has purchased over 20,000 tickets to Eric Church shows since the beginning of 2012," says Fielding Logan from QPrime South, management team for Eric Church (an outspoken critic of ticket scalping). "We started cancelling every purchase [from] he and his associates during the Outsiders tour in 2014. Do you know what happened? They stopped buying Eric Church tickets."
Numerous anti-scalping laws are already in place and more are being proposed, Logan says the biggest problem is enforcing laws already on the books. He says his team i.d.'d a scalper in Colorado using a bot to buy tickets to a show in Tennessee to sell to a resident of Alabama. "He's broken a law in Tennessee by using a bot, but what law enforcement agency is going to go after him? Who is going to prosecute him?" he wonders. "Federal legislation introduced this year by Congressman Marsha Blackburn and Senator Charles Schumer could streamline Balkanized state laws, but there has to be a good mechanism for enforcing the law and punishing offenders."
By and large, anti-botting measures "don’t work," an admitted scalper tells Billboard. "Tell me this: if somebody’s account every Saturday gets the best seats and never buys a ticket for the rest of the week, is that Ray the Fan or Danny the Ticket Bot?," he asks rhetorically.
Like the rest of the world, the reselling business has moved away from the physical purchase and into the digital realm. Where 30 years ago an enterprising ticket broker might pay 20 fraternity brothers to stand in line at the box office for a hot show, "now the same smart college kid hires somebody to write a little program," points out the veteran broker, adding that the upside is significant, even with limited inventory to resell. "Once you take something you bought or $60-$70 and sell it for $300, and you have four of them, that’s pretty easy, fast money."
Traditionally, brokers obtained their product through such channels as season ticket holders, suite owners, and connections at radio, labels, the promoter, media, sponsors, and the venue box office. While those avenues are still common, the broker interviewed by Billboard knows he’s facing technologically advanced competition, and says StubHub’s lack of transparency for its sellers supports that contention. "They’re trying to make you believe it’s the fans selling these tickets," he says. "[To identify the sellers] would [require] just one more field on the screen, then you could look at it and say, ‘how does this one guy have 80 percent of the tickets?’ That’s a transparency [StubHub] would never do."
But StubHub’s Cutler says the ranks of StubHub sellers are a "relatively even split between professional resellers and fans, in terms of listings." In terms of sales, "that probably skews 60 percent -- 40 percent to fans, as they more often price their tickets to move."
Ticketmaster is heavily vested in the secondary market (though not in the Adele tour, which used paperless ticketing) with its TM+ operation, a secondary marketplace where spec selling isn’t a factor because, given it’s a TM ticket in the first place, one must actually buy it (and its bar code) before they can resell it. TM is highly incentivized to be a player in secondary, and to strictly protect its inventory from unscrupulous brokers, because, if resellers purchases the bulk of primary tickets, then TM becomes a de facto wholesaler for secondary sites, leaving StubHub and others to be the consumer-facing ticket business. In short, consumers will go where the product is.
Also at issue is a skewed supply/demand ratio, especially for a massive superstar like Adele. Unlike Adele's recorded content in 25, tickets are a limited resource. Adele put 50 arena shows up for sale in the U.S. in December, which means a total inventory of roughly 750,000 manifested tickets. But, given the realities of the modern concert industry, probably less than one third of those tickets were available at on-sale, with the rest being accounted for by pre-sales, VIP, and various ticket holds for a wide range of constituents, all of which puts Joe Consumer in a "win the lottery" position when the virtual box office opened.
When the lightning-fast selling technology that marks the contemporary ticketing industry kicks in, all available inventory can disappear in a matter of minutes, leaving fans fuming. "What has changed is not just the number of holds, but the technology that allows a show to sell its capacity in minutes -- hell, seconds," observes industry consultant Russ Simons, managing partner at Venue Solutions Group. "Ticket buyers have trouble understanding the math on that, so they have no choice but feel that they are getting screwed."
Don Vaccaro, CEO of ticket aggregator TicketNetwork, whose company has an estimated 10 percent of the secondary market, believes that artists and the primary industry are getting a free pass while directing consumer outrage toward ticket brokers. "What the public does not know is that hundreds of thousands of tickets were held back by both Springsteen’s and Adele’s concerts from the public, and those are mostly the best tickets," says Vaccaro. "Adele was brazen enough to resell some of those $150 tickets for $700, and at the same time trash the secondary ticket market."
Vaccaro is referring to the common bundling and VIP packages offered by Adele and other artists, which cater to the upscale and most devoted fans. "VIP packages and bundling [are] scalping in my book," Vaccaro asserts. "You can’t say tickets are $150 then sell them for $700. Those are the best tickets, withheld from public sale, then sold into these packages -- which are worthless -- at four to five times the face price, then [they] blame the shortage of good seats on brokers. So if Adele is saying it is an issue to charge her fans $700 for a $150 ticket, then she has issues with herself and entourage."
One thing premium-priced tickets do get right is they more appropriately assess the actual market value of tickets, thus making the risk/reward ratio less appealing to resellers. The trick is finding "sweet spot" of what the market will bear without being cost-prohibitive. Concerts West took that approach with their "flex pricing" of the Rolling Stones’ 2015 Zip Code stadium tour, when promoters scrutinized sales patterns in a given market, calculated which price levels moved fastest and slowest, and then tweaked accordingly, pricing the best seats high enough that the risk was greater and the reward less for secondary market profiteers. The Stones ended up with the highest per-show gross of the year at $7.3 million per show. "We manage it in a way that the money goes to the artists, not to the brokers," says John Meglen, co-president of Concerts West, calling the strategy, "better for our industry, better for the artist, better for the audience."
The broker who spoke with Billboard calls the Stones stragegy, "very smart of them. At least they’re getting the money." The industry has been moving -- slowly -- toward a more dynamic pricing model, similar to airlines and other businesses. And Logan admits that the fact that the secondary market exists at all supports the notion that tickets are under-priced. Given that resellers are "better at buying the best tickets to shows than normal fans," Logan says, "when they insert themselves in between an artist and his or her fans, it disrupts that special relationship, wrecks the value proposition, and generally leaves a bad taste in everyone’s mouth."
Some artists will be forever resistant to pricing at market value, as they want to be inclusive and never perceived as greedy. While StubHub Stubhub, TM+ and others can prove that an Eric Church ticket priced at $75 is actually worth $175, "some artists just aren’t going to budge on underpricing their tickets," says Loga., "But for artists that want to eliminate scalping, this is great info to have and to use on future tours."
The primary industry can continue to dent the arbitrage opportunity through diligence and technology, until that equilibrium between price and value is achieved, ticket reselling will remain a problem -- for those that perceive it as a problem. By and large, consumers have embraced the secondary market, as evidenced by StubHub’s claimed 20 million unique visitors per month. But the primary market is taking a hit, as more and more consumers feel like they don’t have a fair shot at good seats when they hit the virtual queue at 10 a.m. on a Saturday morning.
A version of this article was originally published in the Jan. 16 issue of Billboard.