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Could Spotify’s New Ticketing Venture Backfire?

Supporters say the streaming giant could help grow concert audiences, but there are questions about whether its model is sustainable.

Spotify’s entry into the ticketing market has generated significant interest among independent venue owners and managers, but the way the streaming giant plans to acquire the tickets it will sell may not be sustainable over the long term.

On Aug. 10, executives at the streaming platform announced it would start testing Spotify Tickets, a concert ticket sales engine that will allow it to sell pre-sale tickets directly to consumers.

For artists and promoters alike, Spotify’s interest in the live music space is welcome news, given the potential for the company to leverage both its marketing reach and its data about listeners to help reach larger audiences.

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The way the company is procuring tickets has raised eyebrows, however. While Spotify has marketed pre-sale tickets for a few years, what’s different now is that the company is cutting the ticketing firms out of these sales — as well as the resulting revenue.

Under typical agreements between venues and ticketing companies, the latter have exclusive sales rights, with the exception of a carve-out made for fan clubs, most of which are granted a maximum of 10% of tickets to sell directly in pre-sales. The tickets Spotify plans to sell will be taken from these allotments, according to managers at the venues involved.

It’s not clear whether the carve-out in exclusive ticketing agreements would apply to a venture like Spotify’s, however, since the tickets would not be sold to fan-club members, or even directly by an act. And in some cases, the carve-out is more of a tradition than a matter of contractual terms. (The system has its roots in the mid-2000s, when The String Cheese Incident and other bands were trying to find ways to keep their tickets out of the hands of scalpers — and String Cheese manager Michael Luba took the lead in setting aside the best 10% of tickets. Eventually, what started as a jam-band long-shot became an industry standard.)

The seven venues for which Spotify is selling tickets work with one of four ticketing companies: AXS (7th Street Entry in Minneapolis), Tixr (Ventura Music Hall), Etix (Sleeping Village in Chicago, the UC Theatre in Berkeley and the Catalyst in Santa Cruz) and See Tickets (Rebel Lounge in Phoenix and Cornerstone in Berkeley). (So far, Spotify is not working with any Live Nation venues that use Ticketmaster.)

Spotify has executives who understand how the ticketing business works. The company just hired Greg Patterson, who co-founded fan club ticketing and services company Wonderful Union, worked as head of music at Eventbrite and most recently served as a vp at livestreaming company VEEPS. Patterson just started, but he joins a team that includes Spotify head of partnerships and live events Ryan O’Connor, formerly with Big Neon (which was co-founded was former Ticketfly CTO Dan Teree); former Bandsintown chief revenue officer Jon Ostrow, who is now serving as Spotify’s head of strategic partnerships, live events; and Patrick Wilson, who most recently worked as head of artist relations at the National Independent Venue Association and booked the Save Our Stages festival.

Asked for comment on whether its source of tickets was sustainable, Thomas Cussins of Ineffable, which owns or manages three venues participating in the program, told Billboard that Spotify Tickets has the potential to bring about long-term improvements in how tickets are marketed and sold.

Spotify’s test of Spotify Tickets will eventually come to an end, another source tells Billboard, and the company could eventually roll out a ticketing venture that works alongside companies like See Tickets or Ticketmaster to help venues sell more tickets.

“As it becomes harder to reach fans via digital ads and on social media,” Cussins says, “having direct access to the fans that are most likely to want to buy a ticket is the best way we can help support these bands.”