CMU Trends Legal Live Business

Trends: As FanFair launches, where next for the touting debate?

By | Published on Tuesday 19 July 2016


When the resale of tickets via online auction sites first started to gain momentum over ten years ago, there was an interesting stand off between the music community and the political community in the UK. Both agreed that fans were being increasingly ripped off and something really ought to be done. Though no one was quite sure what to do.

Westminster thought the music industry should self-regulate and protect the fans. The music community thought Westminster should legislate and protect the fans. So in the end, no one did anything. Meanwhile, the secondary ticketing market boomed with the evolution of sites like Viagogo, StubHub, Seatwave and Get Me In! that are specifically set up to enable the resale of tickets for profit.

At various points since then secondary ticketing has become a talking point in the music community once again, both here in the UK – especially when Channel 4 aired its ‘Dispatches’ documentary on the ticket touting boom – and in the US – mainly when Bruce Springsteen got angry with Ticketmaster redirecting fans to its resale site.

Though after the 2010 General Election, it was assumed that a Conservative-led UK government wouldn’t seek to clamp down on the touts, who one-time Culture Secretary Sajid Javid once called “classic entrepreneurs”. This despite the fact the then Coalition government was obliged to keep tickets to the London 2012 Olympic Games off the secondary market.

But then Tory MP Mike Weatherley teamed up with Labour MP Sharon Hodgson, who had long campaigned for touting to be better regulated, and together they sought to sneak some regulation into law by making an amendment to the Consumer Rights Bill as it worked its way through Parliament. And – on second attempt – they succeeded, with some light regulation becoming law last year.

Though, perhaps more importantly, the Consumer Rights Act also obliged the government to commission a new review of the secondary ticketing market. That work was done by Professor Michael Waterson and his report was published in May, making a number of proposals.

Whether the government now chooses to do anything with Waterson’s finding’s remains to be seen; needless to say, Westminster and Whitehall may have other things on their minds in the coming months and years.

But having the government review so close to the parliamentary debates meant that the renewed interest within the music community on this issue instigated by the former was kept alive by the latter. And that momentum has resulted in the creation of a brand new industry-led collective to tackle the touts: the FanFair Alliance.

This comes as the UK’s Competition & Markets Authority also opens up a new investigation into the big four secondary ticketing platforms, Viagogo, eBay’s StubHub and Live Nation’s Seatwave and Get Me In!

Will all this activity really result in a crack down on the touts? And, while the FanFair Alliance brings together artists, managers, agents and independent promoters, is everyone in the music industry really committed to limiting the resale of tickets for profit via the secondary sites?

One interesting question to ponder in the touting debate is who is actually doing the reselling of tickets via the secondary sites. The operators of the resale platforms like to talk about the fans who buy tickets to a show, then can’t attend for one reason or another, and now have the opportunity to resell those tickets to other fans, making a little profit for their trouble.

This kind of re-selling does take place on these platforms, though the UK’s £1 billion a year secondary ticketing market doesn’t really rely on this kind of transaction. We know that there are industrial-level touts whose business is to prolifically buy and sell tickets to in-demand events for profit.

Such touts may use special software, often referred to as ‘bots’, to buy up large numbers of tickets as they go on sale on the primary ticketing sites – using different names and credit cards – so that they can feed the market with marked-up tickets if and when the primary seller sells out.

Though it’s not just the professional touts who are routinely reselling on the secondary market. It’s no secret that some artists, promoters, managers and booking agents also sell tickets to their own shows via the resale platforms, securing an extra profit margin in addition to whatever they were due to make on the face value of the original ticket.

Many of the people within the music community selling via the secondary sites will justify doing so with three excuses.

First, after government failed to clamp down on secondary ticketing ten years ago, the only option for artists and promoters was to join the party: “If you can’t beat them join then”.

Secondly, surely fans would prefer the mark-up on the resold ticket to go to the artist and their business partners rather than a shady tout?

And thirdly, by selling on both the primary and secondary markets, artists are providing fans with a choice: do the ‘refresh thing’ as tickets first go on sale to get tickets at one price, or show up last minute and pay a premium to buy a ticket via a resale platform.

All of which may be reasonable excuses, though most industry people reselling tickets to their own shows do so anonymously, which might suggest they don’t see this kind of touting as being an entirely legit or fan-friendly thing to do.

Some might agree with Javid that those who have built businesses buying and selling tickets are just “classic entrepreneurs”. They might also adopt one of the excuses used by the self-touting artists above: that the secondary market is about offering fans the option to buy late at a premium. Some might even agree with US-based economics professor Mark J Perry who recently said that the secondary market only exists because artists play venues smaller and/or charge ticket prices lower than their fanbase and status requires.

For their part, the secondary ticketing platforms usually focus on the protection for consumers their involvement guarantees. Which is to say, if it turns out a seller doesn’t actually have the ticket he or she has sold, the secondary site will refund the buyer and take the matter up with the seller, who might then be kicked off the platform. Move the reselling over to less legitimate message boards, or sites based outside the jurisdiction of the UK courts, and that protection may be lost.

As for the case against the touts – and the touting platforms – the boss of direct-to-fan firm Music Glue, Mark Meharry, outlined the key issues in his submission to Professor Waterson’s review. Explaining why artists may be playing smaller venues or charging lower prices than they need to, he wrote: “The first rule of sustainable touring is ‘sell out, create future demand and return soon’. To ensure a sell-out and avoid market saturation, it is important to play in venues that are perhaps too small and with a ticket price that is perhaps too low”.

He went on: “Today, when demand outstrips supply, tickets become available on the secondary market for inflated prices. Disappointed fans are presented with a choice: ‘wait until next time or pay a premium now’. Many choose the ‘pay now’ option and are effectively draining money from the artist, into the pockets of ticket touts”. Which means less money to spend with the artist on recordings, merch and future shows.

Meanwhile, those who can’t afford the premium option may well be the key super-fans new artists rely on to grow their fanbase. Meharry goes on: “In the modern, online, connected world, loyal fans are the new marketing department. The ‘super-fan’ is highly engaged and typically has a broad network of early adopters that thrive on the newest and coolest music. And they are usually not very rich. When tickets for their favourite artists go on sale and instantly shift to secondary sites, the super-fan is priced out of the market. They cannot attend and cannot spread the word to their network and the modern marketing mechanism breaks”.

And finally, there is the lost data issue. “Artists [also] rely on data from their fan networks to decide where to tour next; if a proportion of their ‘customer list’ is invalid because the email addresses provided came from [ticket-buying bots used by touts], this is undermined”.

The Consumer Rights Act did introduce some light regulation of the secondary ticketing market in the UK. It mainly obliges sellers to provide some minimum information about the tickets that they are selling: including the face value price of the ticket, any restrictions in the terms and conditions, and any allocated seat number.

The latter is perhaps most important for one simple reason. While those pro the secondary market insist that it’s entirely legitimate for people to buy and sell tickets, just like you might buy and sell any other products, those on the other side of the argument point out that a ticket isn’t technically a product, it’s a contract between promoter and buyer. And the terms of most tickets say the contract is non-transferable, meaning a resale voids the contract, and therefore the ticket.

This means that a promoter can usually cancel a resold ticket if they so wish, if they happen to know that a specific ticket has been resold. If the seller publishes a seat number that makes it easier for a promoter to identify a touted ticket and cancel it.

Though the problem with taking that approach is that the buyer won’t necessarily know about the cancellation, which means on the night of the gig you are left with a pissed off and/or upset fan and stressed door staff. The cancellation approach only really works, therefore, if a promoter endeavours to cancel as many touted ticket as possible, so that it becomes common knowledge that tickets bought on the secondary market are unlikely to get you into a show.

There are at least three problems with the regulations introduced by the CRA: enforcement, seller identity and bots.

Regulations are pointless if nobody enforces them. In its declaration last week, citing both its own research and that conducted by Which?, the FanFair Alliance said that “measures implemented in last year’s Consumer Rights Act to regulate ticket resales online are being systematically breached”.

One issue that has been raised since the CRA rules became law is whether the secondary ticketing sites – as well as the seller – have an obligation to ensure the minimum required information is provided. Waterson was of the opinion that they do, though he also called for some clarification from government as to the grey areas surrounding the rules contained within the CRA.

Even if the secondary sites did accept more liabilities in this domain, Waterson also said that state enforcement of the rules was necessary for the CRA to have any impact. Police should mainly focus on ticket fraud, the professor reckoned, but an organisation like National Trading Standards could monitor the key resale sites to ensure compliance with the law.

FanFair agrees: “We support Professor Michael Waterson’s recommendation in his recent government review for a properly funded National Trading Standards investigation into secondary ticketing practices, with co-ordinated police action, and for strict penalties to be enforced if resale sites are found to be breaking the law”.

Seller identities
The one key rule that Weatherley and Hodgson failed to get into the CRA was that which would demand all sellers of tickets reveal their actual identities on the web page where tickets are advertised. This requirement would make it even easier for promoters monitoring the secondary market to cancel tickets bought for resale via a touting platform, if they were pursuing an ‘all touted tickets will be void’ policy.

This extra regulation is one of the objectives of the FanFair Alliance, though they reckon another amendment to the CRA may not be necessary. In his report, Waterson noted that industrial-level touts are likely already subject to extra consumer rights legislation, if only you could identify said touts on the resale sites.

Says FanFair: “Professional traders are currently able to operate anonymously on secondary ticketing sites. This lack of transparency only benefits touts, and we believe their identities should be made clear to buyers. This is already a condition of existing legislation such as the Consumer Contracts Regulations 2013 – and is standard practice on true online markets such as eBay and Amazon Marketplace”.

This is actually the one area of regulation that some of the secondary ticketing sites have said they would support: the banning of the use of special software to hoover up large numbers of tickets from primary sites, technology that will routinely push in front of actual fans trying to buy tickets as they first go on sale.

Waterson urged the primary ticketing sites to do more to block the bots from buying tickets on their platforms. While FanFair says: “Touts frequently hack into primary ticketing systems to buy up inventory for re-sale. Government should clarify that such actions are breaking the Computer Misuse Act, and attach appropriate penalties”.

Of course, any crackdown on bots – whether as a result of new law, or under existing legislation – would also require an enforcer.

In the US ticketing regulations operate at a state level, and the New York District Attorney Eric T Schneiderman has put regulating secondary ticketing very much on his agenda. He recently went after six ticket resellers, and while that was principally for selling tickets without the licence that is required in the state, his settlements with the firms included a commitment to stop using bots to access tickets.

Tackling the bot users in the UK would almost certainly need police or trading standards to likewise identify and go after any offenders.

What is perhaps most interesting about both Waterson’s report and the FanFair agenda is that – while most would agree that the CRA rules didn’t go as far as some in the music community would have liked – the next stage of tackling the touts doesn’t necessarily need new legislation, but instead clarification of the current rules, and then some kind of organised enforcement.

The aforementioned secondary ticketing review by the Competition & Markets Authority may be an opportunity to push for such action, even while the political community gets all distracted with Brexit and the total revamp of government the referendum has caused.

Though, of course, even better enforced and – possibly, through one tactic or another – extended regulation won’t necessarily stop the rampant reselling of tickets on the secondary market, even if tickets get bought up less quickly by the touts, and sellers get better at providing information to buyers. A significant crackdown would still rely on promoters being willing to go through and cancel every resold ticket, risking upset punters on the door, and it’s not clear how many would actually be willing to pursue such a resource-eating and PR-challenging policy on a regular basis.

And, of course, there is the issue of the music industry touting its own tickets. FanFair hopes that it can persuade those touting their own tickets to stop doing so, partly by demonstrating that the anti-tout brigade is now the majority of music community, and partly by convincing them further regulation is now possible, so the “if you can’t beat them join them” approach is no longer required.

But some artists and promoters might now be relying on the extra revenue secondary sales bring in. And anonymously selling tickets on the secondary market also has the extra added benefit of allowing promoters to sell-off unsold tickets at less than face value on the day of the show, without having to admit that [a] sales haven’t gone so well and [b] super-fans ended up paying more than they needed to.

And then there’s Live Nation, the world’s biggest live music firm, with its tour promotion and venue operations, significant artist management division, and its ticketing company Ticketmaster.

The latter is a big player in secondary ticketing, owning both Seatwave and GetMeIn in the UK, which puts it in an interesting position. A number of the wider company’s promoters and managers are almost certainly anti touting, yet Live Nation – alongside StubHub owner eBay – has probably been most vocal in trying to persuade government that resale sites don’t need regulating.

FanFair has been instigated by some high profile British artist managers with the full support of some of their high profile British artists. The latter are probably key here. If big name artists – and especially American artists – start to get ever more vocal on this issue, that might make it ever more tricky for Live Nation to be leading the lobbying efforts against secondary ticketing regulation.

It would require a major shift in direction for Ticketmaster to start championing the anti-tout cause, but – given the power of it and Live Nation in the market – it’s possible that would need to happen for any major crackdown on touting to really succeed. Whether the firm can be persuaded to join the wider artist and management community on this crusade remains to be seen.

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