“The Bigger the Promoter, the Bigger the Ticketmaster Kickback…”

Ticketmaster defends charging its customers a service fee (also called a booking fee) by saying it covers the company’s costs.  It’s understandable that Ticketmaster needs to pay staff and cover credit card processing costs and the technology used to process purchases — as well as make a reasonable profit — yet concertgoers may ask themselves why these booking fees fluctuate so much.

As these costs tend to be static, how come the cost to the customer can range from $2 to $20 per ticket?  Why does it cost four times as much to process the purchase of four tickets than to purchase one?  And why does the fee vary for different artists playing the same venue?

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Testimony during an ongoing court case in Ireland over who controls local music festival Electric Picnic confirmed what artists and their managers have known for ages: part of the fee is used to pay promoters, in the form of rebates.  In return, Ticketmaster remains the “preferred” ticket solution.

Rates are all over the place.  According to the Irish edition of the Sunday Times, Electric Picnic founder John Reynolds claimed he could get a [Ticketmaster] rebate of 75 euro cents ($1) per ticket on his own.  Together with promoter Festival Republic Dublin, despite its “financial might”, he could only get a €1 ($1.30) rebate.  “He argues that previously the total rebate was €1.75 [$2.30] at a time when tickets were a third of the price,” said the newspaper.

Comments by Denis Desmond, another promoter involved with the festival, illustrated how the size of a promoter can sway the size of these rebates.  “[My companies] sell 1.2m tickets in Ireland.  When [Reynolds] sells 1.2m tickets in Ireland, he will get the same Ticketmaster rebate we get.”

But it’s not just promoters that get a slice of the booking fee. Though Ticketmaster won’t comment on the specifics of its deals, according to the talent agents and artist managers I’ve spoken to the company was rumoured to pay at least £1 million ($1.5 million) a year to be the preferred ticket agency of London’s O2 arena.  AEG, the promoter that owns the O2, recently launched its own ticketing service late last year, which is of course the new “company of choice” for the venue.

The £1 million may not have been a straight fee — some believe such payments could be made in other forms, such as contributions to the venue’s marketing costs.  Considering that the O2 arena has been crowned the world’s number one music venue five years in a row, selling over 1.9 million tickets in 2011 alone, it’s easy to see it could be deemed worth it.

One manager of an arena-filling artist voiced his frustration with not being able to keep the cost of tickets down for the fans.

“Ticketmaster can charge whatever they want for booking and transaction fees, and since they’ve got pretty much all the arenas locked up, my artist and I have to accept it or not tour at all.”

A UK talent agent claimed that Ticketmaster often makes more money than the artist from a concert, once the act’s management has paid for the venue, promotion, sound and lights, road crew, transport, hotels etc.  And, he pointed out, unlike the artist, Ticketmaster doesn’t lose money if the gig doesn’t sell out.

This is of course not unique to Ireland and the UK.  Last year the New York Times reported on how String Cheese Incident went to incredible lengths to help their fans bypass Ticketmaster’s hefty booking fees.  That included sending 50 fans and friends with $20,000 in cash to the Greek Theatre in LA to buy eight tickets each.  The group then put the tickets on sale on their website at face value.

A couple of weeks ago, the UK government introduced new guidelines alongside regulations to combat excessive booking fees (not exclusively in regards to concert tickets).  A new set of Consumer Protection Payment Surcharge Regulations declared it “unlawful for businesses to charge consumers fees for using a particular payment method that are higher than the costs to the trader of accepting that payment method” (a particular favourite among certain budget airlines).

The Department of Business, Innovation and Skill (BIS) guidelines declare that “indirect” costs are not eligible as a cost to be considered in the pricing of consumer fees.  “The Department does not consider that indirect costs, such as general administrative overheads or staff training, should be included in the calculation of costs borne by the trader.  Indirect costs should be reflected in the headline price of goods and services, as they ought to be for any general cost categories.

“Operating costs could be included only where they can be shown to result directly from processing the method of payments; in such cases, the appropriate cost would likely be the marginal cost.”

The question is how much these guidelines will affect the size of the booking fees concertgoers are forced to pay.  I guess it depends on if the government will require ticketing agents to show complete transparency in regards to where the fees really go — and if promoter “rebates” are considered direct or indirect costs.

 

Image by kc7fys@flickr, licensed under Creative Commons Attribution 2.0 Generic.

9 Responses

  1. Humperdinker
    Humperdinker

    This is really, really, really simple.
    If customers don’t like fees then don’t pay them. Until that happens, fees will remain.

    Reply
    • Farley Grainger
      Farley Grainger

      So, the point I get is that what Ticketmaster does (high fee to customers, payment to promoters) is legal, but uses Tickmaster market power in a way that hurts fans and artists. What to do? Consumer boycott? A powerful company can make more money with higher prices, so long as it doesn’t lose too many customers. Regulation? Complicated –Hard to make it work. Stop Ticketmaster from becoming too big by blocking the merger with Live Nation?. Writer Gil Kaufman write in 2010:The two biggest names in the concert business are about to become one gigantic one. The U.S. Justice Department on Monday approved the merger of ticketing giant Ticketmaster and concert promoter Live Nation, creating a live entertainment conglomerate the likes of which has never been seen before in the music industry. . . .[E]xperts predict that the combined forces of the two companies could alter the live music landscape. According to the Los Angeles Times, the controversial $889 million merger, in the works for nearly a year, came with a number of major concessions to address concerns that the combined companies would possibly have an unfair near-monopoly on ticket sales. . . .OK, so now that the prediction of near monopoly and the attendant rip-offs have come true, what then? For a small start, complain to State and federal antitrust enforcers, and complain to politicians. That’s not a new idea for artist advocates, of course.

      Reply
  2. Curious
    Curious

    Just what exactly would need to happen for venues to become independent and agnostic once again?
    and when does that shift happen?

    Reply
  3. mike corcoran
    mike corcoran

    Right, what’s up with Ticketfly, or any other ticketing competitor, for that matter? For the life of me, i cannot figure out why this segment in the music industry has only 1 dominant player…

    ..on the flip side, it’s possible ticketing isnt as profitable as it may seem, and the “exorbitant fees” charged by Ticketmaster are really just the cost of doing business. Seen another way, what if Ticketmaster didn’t bust out the line-item fees, and just charged a full $46 for 2 tickets, or $23 apiece instead of $14.50 + fees? Then pay the band the same rate for their performance. Everyone makes the same amount, but now the band would be taking crap from their fans for the high ticket prices, instead of Ticketmaster. By breaking out the line-item fees, it’s Ticketmaster who gets to take the heat for the high price of tickets.
    ..but they are used being the villian, and by now probably don’t mind at all.
    Still, it would be nice to see at least one more big player in the ticketing business. The article mentions AEG has a new ticketing system…so i guess we’ll see.

    Reply

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