ALBANY It’s long been suspected, but now it’s been quantified – there truly is a method behind the madness of acquiring that hot concert ticket.
New York state Attorney General Eric Schneiderman released details of a multi-year probe into the ticket industry after receiving complaints from residents. The probe allegedly uncovered “practices and abuses” which prevented consumers from obtaining tickets at affordable prices.
The probe confirmed how many tickets are placed on hold before having the opportunity to be sold to the general public. These tickets are held or reserved for various parties that include venues, artists and promoters. Other tickets are reserved for “pre-sale” to consumers who hold particular credit cards, for example. What the Attorney General’s probe found was that, on average, more than half of all tickets – 54 percent – were reserved to such insiders, never available to the general public.
“I just assumed they were raping us,” said local musician Matt Willey. “Glad someone is poking into it. I mean it’s been pretty obvious that it’s always happened.”
Exacerbating the limited supply available to consumers buying tickets from box offices and online, is the practice of some third-party brokers using illegal “ticket bots,” buying tickets at bulk to be turned around and sold through sites like StubHub and TicketsNow at an average profit margin of 49 percent above the ticket’s face value.
The report highlighted one example involving a U2 concert at New York City’s Madison Square Garden last year. One broker successfully purchased more than a 1,000 tickets within the first minute. When compared to the 20,000 seats available for concerts at Madison Square Garden, that broker impacted 5 percent of total sales. But, to factor in that usually 46 percent, or only 9,200 seats, are available to the general public, that same broker took away 11 percent of seats hopeful fans were looking to buy by camping outside or sitting at their computers.
“Ticketing is a fixed game,” said Schneiderman in a statement released Thursday, Jan. 28. “My office will continue to crack down on those who break our laws, prey on ordinary consumers, and deny New Yorkers affordable access to the concerts and sporting events they love.
This investigation is just the beginning of our efforts to create a level playing field in the ticket industry.”
Two such ticket brokers, MSMSS, LLC and Extra Base Tickets, LLC, each reached settlement agreements with the Attorney General’s office after illegally operating without a ticket reseller license. The settlements require each company, and its principals, to maintain ticket reseller licenses, and pay penalties for past transgressions. MSMSS will pay $80,000 in penalties, while Extra Base Tickets is to pay $65,000.
The penalties associated with MSMSS and Extra Base Tickets would be a mere slap on the wrist compared to profits earned by larger brokers. Schneiderman’s report shared figures, but concealed the names of three brokers used as examples to identify the current ticket broker environment.
Up until 2007, New York state had a long standing practice of outlawing the resale of tickets at outlandish prices. A cap limit of 20 to 45 percent profit existed, but a similar investigation from the state’s attorney general’s office revealed the cap was too difficult to enforce. By 2007, caps were lifted and the resale market was treated like a regulated industry based on the familiar premise of supply and demand.
At face value, the ticket industry looks similar in structure to the New York Stock Exchange. Ticket vendors, such as Ticketmaster, offer tickets to a primary market. Fans and brokers alike rush to purchase the best seats available. Tickets purchased by brokers are done so to resell at a profit within a secondary market. In stocks, that secondary market would be Wall Street. With tickets, that market is maintained through websites like StubHub, Vivid Seats and TicketsNow – which is owned by Ticketmaster.
Over the years, ticket vendors have developed safeguards to prevent bots from purchasing tickets. CAPTCHA programs used at the time of purchase require a user to type in a keyword displayed within a picture before proceeding on to the actual purchase. Hiding a keyword within an image is meant to prevent bots from being able to read the keyword, thus keeping them from continuing towards the next step. Savvy brokers use employees and hire software developers to program bots to thwart this effort.
As an example of a broker operating under the letter of the law, one broker reported $25.4 million in revenue in 2013. That broker employed 25 full-time employees, each with the task of purchasing tickets. Unlike MSMSS and Extra Base Tickets, this broker maintained its state license and remained compliant with state regulations. In doing so, it reported a gross profit of $4.8 million that year.
On the other hand, a broker with an unabashed policy of illegal bot use, raked in $42 million in revenue in 2013, according to the attorney general’s report. The broker was not licensed, outsourced typing duties to employees overseas and hired a software developer to bypass CAPTCHA programs. That developer, Schneiderman reports, later bought a $4 million home and a Bentley.
“Maybe reselling tickets should just not be a thing.” added Willey. “It’s not like they are providing any valuable service. [As a] matter of fact, they make it more difficult to buy the tickets.”
Within Schneiderman’s 44-page report lie recommendations, putting much of the onus on ticket vendors to comply with present-day laws. Vendors need to insure they are not selling tickets to bots, and must require that brokers provide the license number to confirm a lawful transaction. The state attorney general also calls for an increase in overall transparency.
The State also stands to impose criminal charges on those brokers who use illegal bots. Schneiderman also suggests going back to placing caps on resell profits, as was the practice prior to 2007.