Concert Promoters Buy The Right to Name Their Own Price

Ever since the Internet made ticket scalping  a business to enjoy in the comfort of your own home, we have seen a parade of legit businesses get involved, from startups like  StubHub to mainstays such as Ticketmaster.
Live Nation, which is implementing its own ticketing system in 2009 to replace its Ticketmaster agreements, is no fool and intends to jump in the resale arena, pledging to share  its extra  revenue with the artists themselves.
The idea: Evil or genius? Or is it both?
Live Nation says its research shows that the average StubHub sale is two-times face value. So let's say Bruce Springsteen is still touring when LN's system goes into place and is still charging about $100 a ticket. We'll be generous and say the fees on the ticket are $10. The initial purchaser lists, and sells the ticket for 200 bucks a pop so he's happy with his profit.
Now then, will Live Nation do the double dip the way StubHub does, charging the seller and the buyer a commission? On StubHub, the seller would receive a check for $170; the buyer, who gets the ticket FedEx'd to him, is probably sending about $230.
Live Nation will have the benefit of canceling the bar code on one ticket and creating a new one, eliminating the need for physical delivery. The promoter could therefore look very competitive charging a 10% fee on both ends of the transaction.
But will they? And when a performer such as Springsteen, who has kept his prices reasonable for decades, or any other performer receives a statement showing the percentage of fees they receive from the secondary market, will they be satisfied with the amount? Or will they see this as  case of leaving money on the table?
Concert tickets are pretty much like fine wine: They have the ability to appreciate overnight based on supply and demand. Winemakers and visual artists don't participate in the secondary market, but if Live Nation finds an equitable way to compensate artists who appear to not be greedy when they initially sell their tickets, they may create a groundbreaking pact with musicians.
The flip side, of course, is an even-more out of control ticket-scalping marketplace. 
The Variety news story on Live Nation's ticketing plans follows.      

Concert promoter Live Nation is forecasting a $25 million increase in EBITDA once it installs its own ticketing system and calculates that through sponsorships that figure will double.
The truly unknown world, however, is the secondary market, in which Live Nation expects to become an active participant. The company will essentially be in line to profit from the initial sale of a ticket and then its resale once its ticketing system goes online in 2009. 
"The fundamental strategy is that we need to control out tickets, control the allocation," Michael Rapino, CEO of Live Nation,  said in a  conference call Friday with analysts and investors. "To date we don't have a lot of flexibility."
Live Nation struck a deal last month with the German ticket company CTS  to create an inhouse ticketing service that would replace the promoter's deal with Ticketmaster, which expires at the end of the year.
The deal is for 10 years and CTS, which handles all of the software and ticketing infrastructure, will receive a licensing fee for every ticket sold in North America. In Europe, deals are structured slightly differently in each country; CTS and Live Nation expect to take their ticketing operation into Mexico and South America in the near future.
Rapino, joined on the call by CTS Eventim CEO Klaus-Peter Schulenberg and other Live Nation execs, said the new ticketing operation will increase profit margins on individual concerts, open new sponsorship opportunities and will allow the possibility of dynamic pricing, a strategy used by airlines and hotels. The promoter, in the new system, will be able to alter ticket prices up until showtime.
It also puts more consumer information in the hands of the promoter and Rapino projects a time when Internet marketing and advertising will the dominant source of information about concerts. That will most likely cut into radio and print advertising.
A major change for the consumer, beyond a bank of tickets for various prices on a single website, may actually  become the point of purchase. While Live Nation intends to sell a significant number of tickets from its website, which currently specializes in premium packages, and over the phone, it will also be able to put  tickets in the hands of outlets sponsoring a tour or artist.
If Wal-mart, for example, sponsored a tour, it is quite possible tickets could be sold at the chain; Verizon, to use a viral option, could sell tickets to its phone customers on an exclusive basis.
To implement the system, Live Nation is budgeting $20 million in capital expenditures, mostly on IT, and projecting a $15 million drag on 2008 revenue and a rise of $15 million in 2009, followed by at least a $25 million spike in 2010. Company based its projections on the current Ticketmaster setup in which the company pockets between $2 and $2.25 per ticket in service fees.
The company believes there is between $75 million and $125 million in fee opportunities based on the number of tickets it controlled in 2006:  about 14 million in North America and 7 million internationally.
Beyond that, Live Nation hopes to parlay its concert relationships in buildings it does not control into bulking up its ticketing business, adding them as clients for non-concert events when existing agreements expire.
CTS, founded in 1989 had $500 million in revenue in 2006 and sold 60 million tickets. Its client base is about 1,000 promoters and 600 venues plus 200 theater and opera houses plus sports teams. In addition, it sold 4 million tickets to the World Cup last year.   

Comments

[amber]

i think concert tickets should be $40.00. its too much money for like $90.00 thats crazy

[TicketVail]

I think this is another case of deceiving the public. IN the case of Live Nation and StubHub (Madonna), it seems as though the promoter (Live Nation) is putting inventory directly on StubHub or StubHub paid "marketing dollars" to acquire inventory which they are selling on their site directly to fans at marked up prices. The "fan to fan" marketplace is a vail for selling acquired "sponsorship inventory" tickets at marked up prices.

There has been a few fan club presales for Madonna at the time and date of me writing this comment and yet StubHub is full of inventory at inflated prices. No other ticket website is...fishy, fishy.

It just so happens that Mr. Ebay Ticket, Greg Bettinelli who "architected" the Ebay acquisition of StubHub left Ebay & StubHub to go to Live Nation as EVP of Tickets earlier this year. ON his way out, he probably whispered a sweet nothing into Chris Tsakalakis's ear about making them the "OFFICIAL" vail of concert promoters. Which abandons StubHub's whole philosphiy as a FAN to FAN exhange. StubHub and Live Nation are in bed together and they are screwing the fan! No more cheap good seats. If you were trying to get a decent seat at a fair price before you had a chance of beating a ticketbroker with a presale. Now, you have no chance because the presales are shenanigans and they will lead you straight to stubhub.

[sheldon begby]

The real question should be who is "Southside Johnny and The Asbury Jukes"? Like anyone is going to sit in 6x side orch row L for that show... And in 1994? Funny thats the ticket stub they choose to use for this article.