The great big secondary ticketing scandal

There was a time when a few shady ticket touts stood outside a venue pre-gig were a sign the artist had made it. Demand for a show was at such a level that a few wheeler-dealers have found a way to make an extra buck. Then, the internet arrived, and those street corner touts are now dwarfed by a huge online business that’s worth an estimated $8 billion a year worldwide.

The scale of growth for secondary websites like eBay’s StubHub and Ticketmaster brands Get Me In! and Seatwave, owned by Live Nation, is quite extraordinary. During the second quarter of this year, money that changed hands between buyers and sellers on StubHub’s online marketplace generated $225 million in net revenue for eBay, up 40% year-on-year, according to MBW. In the calendar year of 2015, Live Nation’s secondary ticketing operation hosted $1.2bn in gross transactional revenues — running in 13 countries and delivering 34% YoY growth. Business is booming.

All that cash doesn’t make its way back into the music industry, for the most part (more on that later), and some managers, artists, promoters and agents are understandably peeved. Customers are losing out too as it renders the ticket buying process on the primary market arduous for in-demand shows. Touts use computer programmes “bots” to snap up tonnes of tickets as soon as sale opens, leaving fans refreshing the page continuously in the hope of eventually reaching the front of the queue.

If the show sells out before they’ve made it, their only option is to pay the sometimes extortionate prices that touts ask for tickets on the secondary market, which are sometimes fraudulent. And, thanks to the big marketing budgets of the aforementioned companies, it’s those secondary tickets that appear at the top of Google search listings, directing any other potential customers straight into the lion’s den. High prices and a frustrating buying experience angers the consumer, and starts to damage the relationship that keeps the music industry buoyant: the one between the artist and their fan.

So what stands in the way of the music industry solving its secondary ticketing problem? Firstly, exclusive ticketing partnerships between venues and companies like Ticketmaster and Eventim prevent artists and managers having more control over where their tickets end up. Venues take payouts from those companies so that the majority of tickets from their shows are sold through that partner, leaving the artist and their team with around 10–20% of the tickets to sell themselves through whichever platform they chose. The remaining 80% is therefore controlled by the promoter, venue and ticketing company, who may or may not be motivated to make efforts that quell secondary sellers.

Said Pixies manager Richard Jones during an event organised by the Music Managers Forum in London last week: “It might be the elephant in the room, but some ticket promoters have relationships with the secondary ticketing websites and they move across a certain percentage of inventory straight onto the secondary market. They are not secondary tickets, they’ve never been for sale in the first place,” he explained. “We put tickets on sale, and can literally watch them appear on secondary websites one minute later. How on earth can those have been bought and resold during that time? It’s too impossible to happen. It’s technologically worked out through a deal. Everybody knows it’s going on but there’s a lot of fear around. If we are going to really address this [problem] then we have to come up with the facts and say this is happening.” Extra charges (for printing a ticket at home or simply booking) can also be a sign of kick-back fees, where promoters receive extra cash from ticketing companies in return for exclusivity.

There are lots of good eggs in the music industry who refuse to partake in such deals and are working hard to find ways of combating them. Strategies include paperless tickets that are hard to transfer, combing buying data to look for suspicious patterns and sending out tickets as late as possible so secondary sellers don’t have enough time to list and sell pre-show (although that risks empty seats). Dice, Songkick and WeGotTickets are all direct-to-fan companies that artists and managers have used to sell their 10–20+% allocation, which are all anti-secondary. There are also independent exchange platforms like Twickets and TicketSwap that allow fans to sell tickets at face value if they can’t attend a show. However, none of the above combat the heart of the issue.

In February 2015, the UK Government stepped in. Legally, consumers must now be provided with the precise details of the ticket they are purchasing (like seat number, face value and original seller), and reselling companies are required to report criminal activity. The legislation should help curb the practice of tickets moving straight from the primary to secondary market before they’ve been dispatched because resellers don’t have the ticket to hand, and therefore wouldn’t be able to list the seat number. However, questions have been raised over whether those rules are being adhered to and there’s evidence to suggest not.

In May, a report from economist Professor Waterson called for stricter Government regulation. He recommended tighter scrutiny of how ticketing services operate, greater transparency throughout the industry and that vendors undertake more steps to identify touts and take tougher enforcement action. The Government has yet to respond, and Waterson said he’s concerned the report “is being pushed into the long grass”. The big question is: would harsher laws push the practice further underground? Some say yes, others suggest the stigma associated with illegal activity would help educate consumers away from using secondary websites. In the US, questions have been raised over the effectiveness of a law before Senate called the Bots Act, which bans the use of those computer programmes.

As suggested by Arctic Monkeys and Royal Blood manager Ian McAndrew, legislation to break up underhand arrangements between venues, promoters and ticketing firms could prove a more effective long-term solution. There is one thing that would halt the practice overnight, however, and that power lies in the hands of consumers. Unless you have evidence the ticket is being sold from a fellow fan who can’t attend the gig, and lists seat information as well as their own personal details, it’s simple: stop buying tickets on StubHub, Get Me In!, Seatwave and Viagogo.

Written by

Freelance music industry journalist. London correspondent for US trade rag Hits and contributing editor at Music Business Worldwide.

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